TNR vs. Obama (And UPS vs. Fed Ex)

12Feb/100

TNR vs. Obama (And UPS vs. Fed Ex)

The New Republic is in high dudgeon about Obama's turn-about on executive compensation at banks. Obama's inconsistency is shocking, but then again he promised not to raise taxes "a dime" on Americans earning less than $250k/annum (though I'm not as shocked as Ace is). The arguments, though, are a little ridiculous. Is TNR main street America? I don't think so.

Take for example writer John Judis' rebuke to one of Obama's arguments:

Then Obama is asked about Dimon’s bonus:

BBW: Seventeen million is a lot for Main Street to stomach.

Obama: Listen. $17 million is an extraordinary amount of money. Of course, there are some baseball players who are making more than that and don’t get to the World Series either, so I am shocked by that as well.

If you have ever had an argument about excessive executive salaries with a rich Republican—I can recall one, for instance, with a downtown corporate tax lawyer—he will invariably compare CEO salaries to those that athletes and entertainers make. And here we have a Democratic president using this spurious ploy.

Is it necessary to make the obvious points? That the athletes who make $17 million have spent most of their waking life since they were four years old practicing their sport (if you don’t believe it, read Andre Agassi’s autobiography, Open); that they possess unusual skill at what they do; that in some cases—like those among professional football players or prize fighters—they risk life and longevity; that their earning cycle, often only a few years, is very sharply limited compared to that of a banker; and that what they contribute to society—after all, athletics and entertainment have been an essential part of human life for thousands of years—is as valuable as, and probably more valuable than, what many a banker or trader contributes.

Obama's deploying a populist argument against a populist argument. Go to any sports bar where the hometown baseball team is sucking ass, and you'll hear people complaining about some veteran who's getting paid way more than he's worth and goldbricking, because his contract's not up at the end of the year. When a cash-strapped family of four can't go to the ballpark for a game without dropping $150 bucks, and they're paying taxes for the new stadium, the feel pretty strongly the conviction that they're getting a raw deal, and they're not too pleased with those salaries. I'd say main street feels just about the same regarding athletes' salaries and bankers' salaries: they're overpaid. Hell, there's a bus driver in Madison, WI, who made $160k last year. I'm pretty sure the locals feel that he was somewhat extravagantly rewarded, even though he put in long hours.

Anyway, I'm sure that the news that Wall Street has turned dramatically against him has nothing to do with his change of heart.

The writer then goes on to excoriate Obama's praise for Fed Ex CEO Fred Smith:

BBW: Do you want to weigh in on a specific CEO you admire?

Obama: There are a bunch of them. You know who I really enjoyed talking to at our last lunch was Fred Smith of FedEx (FDX). Very thoughtful. He’s an example of somebody who is thinking long-term. His industry is deeply sensitive to energy prices, and he’s the first one to say that if we don’t start getting an energy policy that’s smart, we’re going to lose. He’s also very thoughtful about trade and talks about the difficulties they’ve had in some cases with partners around the world...

What’s wrong with this? Well, Fred Smith is an odd choice for a Democratic president to make. He’s a well-known Republican, one of John McCain’s chief backers and a member of his kitchen cabinet. Between June 2006 and July 2009, he gave $82,100 to the National Republican Senatorial Committee. Moreover, he has a longtime record and reputation as an anti-union executive.

Most recently, Smith’s company threatened to cancel an order of planes from Boeing if Congress voted to include his company under the National Labor Relations Act, which would allow unions to organize individual FedEx plants, rather than the Railway Labor Act, which requires a union to organize all FedEx workers across the country at once—a near-impossible task. FedEx’s unionized rival, UPS, falls under the NLRA. When McCain was rumored to be considering Smith to be his running mate, Change to Win issued a statement about Smith that pretty much sums up labor’s attitude toward him:

In the 35 years that Fred Smith has been the CEO of FedEx he has repeatedly fought against workers joining together to have a voice on the job, openly stating that he 'doesn't intend to recognize any unions at Federal Express.' Less than 2% of the 200,000 American workers at FedEx are in a union. In contrast, UPS unionized workers make nearly 30 percent more than they non-union counterparts at FedEx. Despite organizing efforts, FedEx has filed appeal after appeal to deny their workers the right to bargain collectively, and has sought national legislation to thwart union organizing.

Is this a guy a Democratic president should hold up as a model CEO? Again, if you were talking to a class at Harvard Business School, and pointing out which CEOs had brought a good return to their stockholders, then Smith would be high on the list. But for a Democratic president to hold him up as a model reveals a shocking ignorance of what the party, and one of its most important constituencies, has stood for.

Sure, there are some in the labor movement whom he's alienating, but the unions and Obama misoverestimated their power, and Obama's belatedly coming around to the conclusion that maybe his special interest coalition isn't quite as broad-based as he'd thought. Keep on plucking that chicken, Judis.

If the question is, which company's employees have it better---I assume that that's what Judis is on about, right?---then the comments section from this article might be informative. It seems that a lot of Fed Ex employees like working for the company.