Wall Street Bonuses Decline But Still Dwarf Worker Pay Increases Since 2008 Crash
Since 2008, growth in the average Wall Street bonus has far outstripped wage growth for ordinary U.S. workers.
Rather than answering a senator’s legitimate question about taxpayer subsidies for executive compensation, the Treasury nominee did a crafty dodge.
In response to questions from senators who will be voting soon on his Treasury Secretary nomination, Steven Mnuchin pulled an old trick on the issue of CEO pay.
I’m well familiar with this maneuver after having spent a couple decades pushing for reforms to rein in excessive executive compensation. Overpaid CEOs make everybody’s blood boil. But the minute you suggest there might be a responsible role for policymakers in addressing the problem, watch out. The CEO pay defenders will immediately accuse you of trying to erect an iron ceiling on what somebody can earn. “And what,” they hyperventilate, “could be more un-American than that?!”
Here’s how this played out in Mnuchin’s written response to a question from Senator Ron Wyden of Oregon, the ranking Democrat on the Senate Finance Committee.
Wyden: One area where I see a lot of unfairness in our tax system is executive compensation. According to the Economic Policy Institute, top CEOs were paid 276 times more than the typical worker in 2015. Do you think that’s fair? In many ways, the Tax Code encourages employers to pay their employees large sums of money on a tax-preferred basis. Do you agree? Do you commit to working with me to shut down executive compensation loopholes?
Mnuchin: I am committed to work with Congress to ensure that the tax code is fair. I believe these issues need to be addressed in the context of broad tax reform. As to the issue of what executives are paid, I believe this is for shareholders to determine. I don’t think it is the proper role of the federal government to prescribe limitations.
You see how Wyden asked about eliminating tax loopholes that favor CEOs and Mnuchin responded as if the Senator had proposed a firm limit on executive compensation?
Not that the idea of a wage cap isn’t worth discussing in our current era of extreme wealth and income concentration. British Labour Party leader Jeremy Corbyn recently called for a ceiling on individual income, as one of several options for addressing his own country’s widening divide. And as my colleague Sam Pizzigati pointed out last week, Corbyn’s proposal echoed one initiated by an American president – Franklin Delano Roosevelt. In 1942, FDR called for a limit on income after taxes of more than $25,000, about $370,000 today.
But wage cap proposals are nowhere near the table in today’s U.S. policy discussions. What Mnuchin was doing in response to Wyden’s legitimate question was simply setting up a straw man. It’s much easier to shoot down a non-existent proposal for a compensation ceiling than it is to defend taxpayer subsidies for excessive CEO pay.
Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies and is a co-editor of Inequality.org.