Log Cabin Chronicles

It's time for the Stupidity Tax

CHRIS BRAITHWAITE
Publisher, The Chronicle
Barton, Vermont

POSTED: 06.06.08

"Ford Stumble Signals Rising Risks" warned a recent headline in the Wall Street Journal. Then in the second line of the "stacked" headline the Businessman's Bible still favors: "Pickup, SUV Sales Take Surprisingly Steep Fall." Now who, we wonder, could possibly be surprised? Nobody around here has talked about anything but the price of gas for months. Hillary and old John have made it a major part of the presidential debate.

But, the Journal would have us believe, the people who run one of the world's largest auto manufacturing concerns are surprised that people are responding to runaway gas prices by buying cars that burn less gas.

It may be similar to the surprise they displayed when they discovered that people prefer well-built cars to cars that fall apart before the odometer "turns over." But that was years ago.

It probably wouldn't bother us to know that "in 2007, the CEO of a Standard & Poor's 500 company received, on average, $14.2 million in total compensation," if we didn't also know that a lot of that money goes to stupid people.

And, this being of course a free-market system, the handsome premiums it awards to stupidity wouldn't bother us so much if so many underpaid people of normal intelligence didn't suffer the results.

Ford Motors' blunder in ignoring the possibility that, at $4 a gallon, people might turn to smaller, fuel efficient vehicles probably won't cost the company's executives very much. But shareholders are suffering as the value of their Ford stock shrinks, and workers will suffer as Ford plants close and parts suppliers lose their business. Dealers will suffer, of course, and so, alas, will the blameless newspapers that carry their advertising.

The people who have really damaged the economy recently are the executives of the mortgage lenders that pushed sub-prime loans to unqualified home buyers, and the financial institutions that invested in the nicely packaged "collateralized debt obligations" that made risky mortgages look like solid investments.

The people who devised and sold the mortgages were just run-of-the-mill sleazes out to take advantage of people who couldn't quite realize the American dream of owning their own home. But the people who bought all those mortgages for the portfolios of their very large and important financial institutions were truly, magnificently, almost unbelievably stupid.

Here's why. When people found they could not meet the terms of these new cutthroat mortgages, they stopped making their payments, which of course cut the income on these fancy new packages of flimsy mortgages. But when the institutions foreclosed on the hapless homeowners, the sudden flush of "For Sale" signs ruined the housing market, and with it the security underlying these instruments.

It was a perfectly predictable double whammy. It hurt, and will continue to hurt, an awful lot of people. Yet when he announced a $5.9-billion write- down of Citigroup's mortgage portfolio, along with his own resignation, last November, CEO Charles Prince slouched away with a 2007 compensation package of about $25-million.

And James Cayne, who directed the mighty Bear Stearns Cos. Inc. to near oblivion before he resigned in January, pulled down about $40- million in 2006. (These executive salary figures come from the AFL-CIO, which has an understandable interest in them.)

So here's an idea: Let's let executives earn as much money as they can squeeze out of their deluded stockholders. But we'll only let them spend a reasonable amount. Say $1-million a year.

The rest would go into something like an escrow account, collectable upon honorable retirement. But when they hold press conferences to announce that they have just kicked another cornerstone out from under the US economy, and are therefore resigning, they'd have to give it all back.

That would be the Stupidity Tax.

The funds would be divided fairly, by the Stupidity Commission, among all of us innocents who will pay the price of their stupidity. Then we'll all be able to feel a little better, and buy a little more gasoline.


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Copyright © 2008 Chris Braithwaite/Barton Chronicle/06.08