Economy & Business

Mrs. Clinton’s Blame Game

(Jason Miczek/Reuters)
Politics is all about identifying villains — the wrong ones.

The politics of blame are a funny thing. We will blame anybody and everybody for any and all imaginable problems — except the people who actually have blame coming.

Nobody really cares very much about evidence, reason, argument, etc. What they care about is telling a story with good guys and bad guys, and that the right people are cast in each role.

For the left, that shapes everything from economic thinking to foreign policy.

For example, we hear a great deal about economic “inequality,” a term that, in an open and dynamic society, means almost nothing. What the Left wants it to mean is that the poor are poor because the rich are rich, and that the middle class is struggling because corporate profits are high and billionaire playboys forget how many yachts they have. But that simply is not the case, as anybody who has even a passing familiarity with the actual economics literature on the subject can tell you. A $10-an-hour job pays $10 an hour because $10 an hour gets you somebody who can do that job. If both Bob and Sam can do the job and Bob wants $12 an hour while Sam will do it for $10 an hour, it’s a $10-an-hour job, and Sam has it.

It’s not the case that it would have been a $12-an-hour job if only the CEO made $500,000 a year instead of $700,000. (The average salary for a U.S. CEO is in fact a little less than $200,000 a year; those wild numbers you see in the news are for the CEOs of a relatively small number of very large global firms; in the same way, the compensation figures for the category “basketball coaches” can go very different ways depending on whether you’re talking only about the NBA or including high-school coaches.) It is true that costs get shifted around within and between companies, and it’s probably true that they get shifted more onto lower-wage workers than higher-wage workers, because those workers are, generally speaking, less in demand. (That’s why they are lower-wage workers.) But CEO pay usually isn’t a real big chunk of a corporation’s financial picture. In 2011, Apple’s chief executive, Tim Cook, was the highest-paid CEO on God’s green Earth, and his paycheck, large though it was ($376 million), amounted to about three-tenths of 1 percent of Apple’s revenue that year. The groundskeepers and secretaries in Cupertino don’t get paid what they get paid because of fluctuations within an approximately 0.3-percent-of-revenue outlay.

You might see some compensation-rejiggering effects from a proportionally much larger outlay, such as the 24.2 percent of its profit Apple paid in taxes that year.

RELATED: Why We’re Never Moving Away from Income Inequality

Because we have a free market in labor, it isn’t always clear or straightforward how changes in companies’ expenses affect workers’ compensation.  It’s not like Apple or Walmart or GE can simply declare a wage and expect programmers, warehousemen, and engineers to just show up. Workers have choices, too, though some have more choices than others. But if you think that paying the CEO a lot drives down workers’ wages, wouldn’t you also think that other expenses would put downward pressure on wages, too? And which would produce the heavier pressure: $376 million for the CEO or $8.3 billion for the IRS?

Never mind the numbers: Corporate executives have to be the bad guys. Anything else is unthinkable. And if the math and the economics say you’re nuts, then you can always start giving speeches about “economic patriotism.”

#share#This produces some interesting — here meaning stupid, but stupid in an interesting way — thinking. Hillary Rodham Clinton, embracing the Left’s current fervor for Hugo Chávez–style economic populism and nationalism (weirdly, “the Left” includes the Republican presidential nominee, for purposes of this discussion — bang-up job, Republicans!), complains about inequality, and offers as a partial solution higher corporate taxes. Businesses respond to changes in their expenses in different ways. But who do you think is likely to take it in the shorts if you jack up Apple’s tax bill? The designers and programmers who are being offered new six-figure jobs eight times a week at companies all over the country and all over the world, or the parking-garage attendant? If you’re a company that relies on Walmart for 80 percent of your sales, what do you imagine a negotiation looks like when Darth Arkansas decides to alter the deal?

If you lead with blame instead of leading with reason, the world’s a simpler place.

Sometimes businesses go so far as to relocate their headquarters in response to taxes and other burdens; one way of doing that is the dreaded “corporate inversion,” in which a U.S. company uses a merger to relocate its legal domicile to some sweaty, exploitive, relatively low-tax Third World crap-hole . . . like Canada, the United Kingdom, or Ireland. Mrs. Clinton proposes to put a stop to that by enacting an “exit tax,” which is a really nice way of saying “ransom.” That might cause some trouble for existing businesses considering relocation, but what effect might it have ten or 20 years down the road? Do we really think the people who are smart, creative, and energetic enough to build the powerhouse corporations of tomorrow are going to be too stupid to figure out how to incorporate in Switzerland instead of Delaware? Why do you think that 75 percent of the U.S. corporations making initial public stock offerings are based in Delaware to begin with, instead of New York or California?

RELATED: The High Cost of Stupidity

If you lead with blame instead of leading with reason, the world’s a simpler place. Government creates perverse economic incentives, and if the people who run businesses respond to those incentives, it isn’t because of any complicated economic or financial consideration; it’s because they’re bad, bad, men, most naughty indeed.

#related#Once you’ve settled on a villain, everything else is just plot elaboration. Everybody knows one old hippie who believes that every bad thing that ever has happened in Latin America can be explained by the interests of the United Fruit Company in Guatemala. I know a young lady who sincerely believes that every unhappy event in the world is the work of “Zionists,” though I’m not entirely sure she knows what a Zionist is — if the price of a loaf of bread goes up a nickel, it’s a Zionist plot. Or it’s corporations, or bankers, or illegal immigrants, or blacks, or Christian fundamentalists — take your pick, and you can treat current affairs as a Choose Your Own Adventure book.

But here’s the thing: Hillary Rodham Clinton and Donald Trump are both economically illiterate megalomaniacs who will tell you any story you like if they think you will give them power in return. They know that you like stories in which the bad guys who have messed up your life are Chinese or Mexicans or shadowy billionaires instead of . . . well, not to put too fine a point on it, you.

Whom do we blame? Anybody but the guilty party.


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