Don’t blame just CEOs
CEOs and investment bankers have come under fire for their hefty multi-million-dollar compensation packages. Amid the confusion of their companies’ collapses, they have apparently been trying to swindle employees and shareholders out of the spoils.
Greedy CEOs, corporations, and investors are being blamed for the economic crisis. They’re about to experience some backlash as an Obama administration threatens to raise taxes on the wealthy as well as raise corporate taxes and taxes on investment income (whether by new taxes or letting the Bush administration’s taxes expire).
However, for all their mistakes, CEOs are the real movers and shakers of the global economy. They boldly set strategies for global expansion, opening up new plants and brokering deals. They make the plans that pay off big. Raising taxes on CEOs and corporations lowers the incentives for brokering these large deals. Penalizing these people will hinder the economy, not help it.
Obama’s promises of cutting taxes for the middle class won’t help create new jobs. Accountants, analysts, customers service representatives, and factory workers are crucial to a company, but their view is narrow.
It’s bizarre that the government gave out stimulus checks to the middle class earlier this year. Average Americans needed that money — they were getting pummeled at the pumps — but it should have been called an assistance package rather than a stimulus package. The main beneficiary of that stimulus package was Wal-Mart, not the overall economy. Some people, like my parents, used their check to do the unthinkable: pay down some of their debt.
This country runs on debt. Americans spend more money than they have. When people ran out of money and maxed out their credit cards; they ran out of not just money, but access to debt as well. Then, those with poor credit and low incomes were allowed to invest in houses so that they could mortgage them and have more access to credit.
And that’s what created the credit crisis that has crippled our economy.
Right now, CEOs are facing an image crisis. They’re being blamed for messing up the economy. And while many CEOs made bad decisions, those who have were fired and replaced. But CEOs are not all to blame for the economy.
The noble intention of the federal government to give every American a house had dire consequences. Now, banks are cutting their entire investment divisions, and thousands of financial services employees have lost their jobs. But Obama doesn’t care about them. To him, those employees are getting what was coming to them.
Moreover, many try to paint a picture of investors as distant CEOs and the super rich as those just trying to get richer. If dividends are taxed more, they’ll be cut. That will hurt Carnegie Mellon, which has hundreds of millions invested, as well as do thousands of other nonprofits. Many people’s retirement funds are invested in mutual funds. So, before calling for more taxes on investment income, check out your own finances — you may be surprised to find you’ll take a hit too.
As we move forward, it will be interesting to see if an Obama administration will raise taxes on the wealthy and on corporations and investment income in the middle of a recession, or if it will help these CEOs pull us all through these trying times.