2019年11月26日 星期二

When outrage loses its grip

Trump and the Ukrainification of everything.
Walt Disney C.E.O. Bob Iger poses on the red carpet at the European premiere of 'The Lion King' in London in July.Vickie Flores/EPA, via Shutterstock
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By Paul Krugman

Opinion Columnist

Programming note: I’m back in your inbox earlier than I anticipated with something worth talking about over your Thanksgiving dinner.

When writing today’s column, I found myself thinking about a seemingly unrelated subject: executive pay, and why it rose from around 20 times average salaries in the 1960s to more than 200 times nowadays.

As people who studied the issue noted, it isn’t especially hard to understand why 21st-century C.E.O.s are paid so much, and why their pay doesn’t seem related to their performance. After all, their compensation is determined by committees that, in effect, they choose themselves. Naturally such committees decide that the man (it’s almost always a man) they report to needs to be lavishly rewarded for his unique contribution.

The question instead was why executive pay used to be so much more modest. The answer, according to the analyses I found most persuasive, was that in the first few decades after World War II corporate paychecks were subject to an “outrage constraint”: a C.E.O. who seemed too greedy would face a backlash from unions, crusading politicians and the press.

What happened after 1970 or so was that the outrage constraint gradually vanished. C.E.O. self-dealing had always been possible, but unwritten rules kept it on a leash, until they didn’t.

Which brings me to the corruption of policy I describe in the column.

Way back in the 1930s, FDR enacted legislation that took detailed tariff-making out of the hands of Congress, where special interests had historically played a destructive role. Instead, the president would negotiate trade deals, and Congress would vote the whole package up or down. Everyone realized, however, that this system needed some flexibility. So the executive branch was empowered to impose temporary tariffs under certain criteria — sudden import surges, threats to national security, etc.

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But who would determine when these criteria applied? People reporting to the president. So there was always the potential for abuse — for the spurious application of tariffs and the granting of tariff exemptions to hurt the president’s political rivals and reward his allies. What kept this kind of thing in check was the expectation that naked abuse of the process would create outrage; and in fact trade policy was fairly clean over the course of several generations.

You can still see faint echoes of that old outrage constraint. Even in the Trump era, tariff exemptions for Putin-linked oligarchs seem to have been a bit too much. But by and large Trump, unlike previous presidents, is backed by a party that sees and hears no evil whatever he does. So he’s free to impose tariffs on self-evidently spurious grounds — blocking imports from Canada in the name of national security? Really? And he’s also free to grant exemptions via a process everyone knows is highly politicized.

So tariff policy — and, probably, federal contracting — are like executive pay. The possibility of self-dealing and corruption was always there, but used to be held in check by unwritten rules. Now blind partisan loyalty has taken down the guardrails.

Put it this way: A party that has rallied behind Trump as he solicits or extorts political aid from foreign powers isn’t going to rebel over his abuse of tariff-setting authority. It’s Ukrainification all the way, and it’s ultimately a story about the G.O.P. rather than Trump himself.

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Quick Hits

On how the death of the “outrage constraint” affected CEO pay.

Trump trade policy has relied heavily on Sections 232 and 301. What? Here’s a brief explanation.

The Peterson Institute’s invaluable Chad Bown pointed out a while back that the obvious politicization of tariff exemptions was stifling criticism.

A lot of Trump trade actions originate in Commerce, where Wilbur Ross, the secretary, is startlingly corrupt.

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Facing the Music

Oh the cuckoo, she’s a pretty birdYouTube

Another updated version of traditional music from Rising Appalachia, who will be at New York’s Bowery Ballroom Friday.

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