In a little over two months since the inauguration of President Barack Obama, the United States has become a different nation. It is not merely the transfer of trillions of taxpayer dollars from the government to designated industries. It is not only the deleveraging in the private sector and the re-leveraging in the public sector. It is not solely the dramatic increase in aggregate debt. The primary issue, as I see it, is the method employed to achieve these goals and the disregard for personal liberty and the Constitutional. Atlas is getting ready to shrug.
Let me cite an example. On March 24th, 2009 House Financial Services Committee Chairman Rep. Barney Frank’s committee passed a bill giving Treasury Secretary Timothy Geithner extensive control over the salaries of employees working at companies receiving bailout funds. This bill goes well beyond the removal of Richard Wagoner as President of General Motors. The “Pay for Performance Act of 2009” would impose government control on the salary of all employees — not just senior executives — of every company receiving a capital investment from the government.
Presumably the legislation is designed to prohibit “excessive compensation” — a somewhat obscure standard to say the least, but one to be adjudicated by Mr. Geithner. This legislation will soon be coming before the full House of Representatives for a vote at a time when the populist tocsin of anti-elitism is in the air we breathe.
Yet it is interesting that Article One, Section Eight of the Constitution — which enumerates the powers of Congress — does not mention the power to determine salaries in the private sector, nor does it mention bailouts and the extra-Constitutional authority these bailouts confer. It is remarkable that the Democratic-led Congress and the Obama administration consider it appropriate to assume such power and equally remarkable that no one, to my knowledge, has pointed out the unconstitutional nature of this decision.
This, of course, is not the only example. The Obama administration, through TARP allocations, permitted bonuses at AIG in those divisions that generated a profit. In fact, contracts were signed to this effect. However, when the story leaked that $150 million would be allocated to AIG executives in the company that had received billions in bailout funds, an outcry arose from the public so shrill the White House was obliged to respond.
Rather than note that our Constitution prohibits ex post facto laws and bills of attainder (the so-called “bonus tax” being one of the latter) and that the bonuses were given with forethought from the administration, Obama joined the chorus of angry citizens and demanded a return of the money. Surely this president, who has taught Constitutional Law at the University of Chicago, must know that such bills of attainder provisions are illegal. If our Constitution means anything, contracts that are conducted legally and in good faith require an obligation by both parties to meet the terms of the agreement. The Fifth Amendment states clearly that “No person shall…be deprived of life, liberty or property with the due process of law, nor shall private property be taken for public use without just compensation.”
Yet here is America in Constitutional denial as the Obama administration marches blithely into a Brave New World of expansive government control over the private sector. Whether socialism has come to this land of the free or whether this is an invasion of European leveling is too early to say. But it is already clear that the change Mr. Obama discussed during the course of his presidential campaign is here, and it is transformative.
Moreover, despite the claim that this is a temporary shift of priorities in order to ameliorate the meltdown in the credit markets, it is instructive to recall Milton Friedman’s admonition that there is nothing more permanent than a temporary government decision. My great grandchildren will be dealing with the changes initiated today a century from now. And even though I hope my prediction is wrong, these actions taken in haste by the President and the Congress are altering the foundational principles of our nation into the indefinite future. No wonder I see tears flowing down the cheeks of the Statue of Liberty. She doesn’t recognize her country.