What has lured me back today is the way in which my state and federal government, and many of my friends, are talking about the Second Amendment.  Two weeks ago, my governor, Andrew Cuomo, argued that gun ownership had gone too far in respect of the rights afforded to the citizens.  He passionately argued that no one needs a 10-round magazine to kill a deer.  It is true that no one should need 10 bullets to kill a deer, but the Second Amendment does not restrict my rights to deer hunting or even personal safety.  Moreover, it is facetious to argue that an average citizen could effectively protect themselves with less than 10 bullets when two well-trained and seasoned NYPD officers needed 16 bullets to stop one man in broad daylight at the Empire State Building.

More importantly, my rights to bear arms are not limited to deer hunting or preventing violent crime.  The Second Amendment does not even limit my rights to “bearing guns” or “bearing rifles,” but “arms” of any kind.  My right to bear arms is fundamentally linked to my duty to put down a government that becomes tyrannical.  For that, we need a lot more than 10 bullets.  I would argue I need tanks, fighters, bombers, ships, missiles and a whole host of other arms.

The Bill of Rights was passed after a long, brutal war of independence brought on by abuses and violations of a tyrannical king who governed through a distant bureaucracy that infringed the rights of the people.   (Does that sound familiar, at all?)  The Constitution gave more power to the central government than many of the founders would have liked, so to ensure our own government would not remake the mistakes of King George, the Founding Fathers created the Bill of Rights.  The other 9 amendments say:

1. You (the central government) cannot prevent me (the citizen) from speaking, meeting, publishing or worshiping how or with whom I choose.

3. You cannot keep soldiers in my home.

4. You cannot search me or my property or arrest me without reason.

5. You cannot deprive me of life, liberty or property without due process of law and you cannot compel me to testify against myself.

6. If I am tried for a crime, you must do it quickly and you must give me a chance to confront my accuser.

7. If I have a dispute with someone over substantial value, you must decided it by jury, not by judges subject to whim or favoritism.

8. You cannot impose cruel or unusually punishment.

9. You cannot do anything unless it is specifically listed in here.

10. Anything not permitted to you or prohibited to the local government is the responsibility of the local government.

That is a list “9 ways not to be abused by your government.” It addresses specific tactics that King George used to impair the freedom and rights of the American colonies.  I find it hard to believe that intelligent people can honestly read that list, in full historical context, and say the Second Amendment is nothing more than “2. We like hunting.”  That would have been a non-sequitur, tantamount to the Founding Fathers throwing in “Martha Washington makes the best pies.”

I will take, as a limitation to the Second Amendment, that the phrase “a well-regulated militia, being necessary to the security of a free state,” means that gun ownership should be conditioned on training, regular meetings, and some form of (non-government) organization.  That would probably be a good thing, and could be a far better way to ensure that guns do not get into the hands of people battling mental illness.  But hunting, and protection from criminals, has got nothing to do with it.

Different Bargains:
In a simplified model of a corporation, there are four different roles, each with their own risk and reward profile:

1. Shareholder
2. Director
3. Management
4. Employee

Shareholders
Shareholders invest their capital to form the company (or, in companies that already exist, to grow the company or provide liquidity for exiting shareholders).  Their bargain is simple: I will put in my money, and I expect a return on my investment.  That return can come as dividends (profits paid to shareholders) or increased share price (i.e., the company becomes more valuable).  Their reward is based on the value of the company, and their risk is limited to the amount of money they paid for their shares.  (If they invest $10, they can only lose $10–the company cannot force them to invest more.)  Their incentive is to make the company as profitable as possible to maximize the return on their investment.

Directors
Directors have an unusual bargain–not one you should take without legal advice.  They are hired by the shareholders to oversee the strategic development of the company and select and oversee management.  Their reward is usually cash compensation and/or stock awards.  Their risk is that the company, the shareholders, the government or other directors will sue them, and they will be personally liable for the Company’s conduct.  (Most companies indemnify (agree to defend and reimburse) their boards for this, but certain conduct, if later deemed illegal is not covered.  The point is that the director can be liable for the company’s conduct, not just their own.)  Their reward is based on the value of the company and their risk is unlimited (i.e., incarceration).  Their incentive, therefore is to make the company as profitable as possible, within the known bounds of the law.

Management
Management is a hybrid of Employees and Directors: they are charged with conducting the day-to-day management of the company, but are also focused on growing the company long-term.  Like directors, they can be held personally, criminally liable for conduct that is later determined illegal.  Their rewards are their salary, as well as stock-based compensation (which usually vests over a period of 3 to 5 years) and bonuses based on performance metrics (like increase revenue, increased margins, etc.).  Their risks are (a) being incarcerated; (b) being fired (not laid off, fired) if the company does poorly, and (c) their stock grants being either taken away or being worthless (an option to purchase the stock granted at $10 is worthless if the stock price is $9.99).  Their incentive, then, is to maximize the profitability of the company within the bounds of the law over both the short (bonus and not being fired) and long (stock award) time frames.

Employees
Employees have the simplest bargain: they perform a job and are compensated whether the company does well or poorly.  In many companies, employees receive stock grants and bonuses, but the overwhelming majority of their compensation is a fixed salary or hourly wage.  Their reward is compensation for their work, their risk is limited to being terminate if they or their company performs poorly.

So among the four actors, from most risky to least is, Management, Directors, Shareholders then Employees.  Management can lose their job, their investments and their personal liberty.  Directors, similarly can lose their liberty and their directorship, but it is not usually their only source of income.  Shareholders have their capital at stake, and Employees, generally are only responsible for their own conduct, but can be laid off if the company performs poorly.

So the question is, should those who have the most to risk be compensated more than those who have relatively little?  Or, put another way, should reward be linked to risk? I will address that in Part 3.

The CEO Pay Ratio
You may have seen this chart:

Politifact looked into the chart, and its source is a student paper from 2005, which contained no source or citation for the 475:1 ratio.  So, unless you’re the type of person to rely on the unchecked accuracy of students, it’s not a reliable source of information.

The far-left Institute for Policy Studies (IPS), in 2010, did, however, claim that the average CEO pay ratio was 325:1 (see page 2, above the cartoon).  There are few issues with the ratio:

1. CEO Pay is inflated:  IPS says the average CEO pay they use is $10.8 million.
1. Included in that number is the value of stock options and restricted stock, valued at grant, along with bonuses and other compensation.  In the trade, this is known as “proxy comp,” the (often over-estimated) amount of compensation a publicly traded company is required to disclose by the SEC in its annual proxy statement to shareholders.
2. This is an overstatement because, at the time of grant, the shares are not vested (the executive may or may not actually receive them), and if the stock price goes down, they may be worthless (or worth a lot less).
3. This is also unfair, because well run companies will intentionally tie CEO pay to stock price.  The criteria on which public company’s CEO are (rightfully) measured, is improvement in stock price, earnings and profit margin.  This translates into equity and bonus-heavy compensation.  In other words, if the board wants to keep the CEO focused on what is good for the company, they will pay less in salary (less guaranteed), and more in stock grants and year-end bonus (more incentive-based).  More on this in part 2.
4. It is unclear whether it is included in the $10.8 million number, but proxy comp must, under SEC regulations, include fringe benefits, like retirement plans, healthcare benefits, etc.  You can argue about whether or not this is compensation, but it is not cash handed over for pay.
2. Worker Pay is understated: The IPS paper cites “average worker pay” of $33,121.
   1. Unlike with CEO pay, the “average workers pay” does not include benefits, like stock options, 401(k) contributions, medical, dental and vision insurance premiums paid by the employer, or even bonuses.  Any other compensation received by the employee is excluded.  As noted in the IPS paper (page 37, endnote 3), “worker pay” is simply an average hourly rate for “production workers” ($19 per hour) multiplied by 33.4 hours over 52 weeks.  Why 33.4 hours?  I suppose the proletariat get 90 minutes a day for lunch, and the evil cleptocrats don’t pay them for it.
   2. In contrast, according to the federal government, the average wage index (most recent year available is 2009) was $40,711.62.  That would yield a ratio of  265:1, not 325:1. Again, even this larger number does not include bonuses, retirement contributions, medical, dental or other benefits paid by the company.
3. The CEO compensation study only looked at S&P 500 companies. There are thousands of very sizable US companies not on that list.  The S&P 500 only represents about $325 billion in earnings ($10.16T/31.3), globally (about 0.6% of global GDP) and only employs a total of 25.6 million people–globally.  (In contrast, there are over 130 million total people employed by all employers in the US alone–5 times what the S&P 500 employs globally.)  These are the largest and most powerful international public companies in the world–not a place to look for modestly compensated executives.
4. Finally, “production workers,” the basis for the low-ball $33,121 number, are not the sort of workers employed by most S&P 500 companies.  Companies like Google, Apple, Microsoft, GE, McDonalds (the franchisor company, not the burger restaurants–there’s a difference), Visa, MasterCard, Pepsi (again, franchisor, not bottler), etc., do not employ a lot of production-line workers, much less workers paid hourly.  Most of these companies employ salaried workers in the fields of finance, sales, legal, engineering, computer technology–most are college entry level companies.  So most of these “overpaid” CEOs are not leading companies full of “production workers.”

To give a concrete example of proxy comp versus reality, the 2010 proxy statement for Google shows that, in 2009 their CFO received a (relatively modest) salary of $450,000 (see summary compensation table at page 59).  This would put him in the 10:1 range for (relatively well compensated) Google employees.  (The CEO received only $1 in direct compensation).  When you include his bonus, stock and option awards (awards that may never vest, and may be worthless when they do), he received $24.7M.  Now, no one should feel sorry for Mr. Pichette–he took home over $3 million in cash, which even after taxes, is a nice living wage.  But his “proxy comp” is inflated 12 times larger than what he actually took home.  Similarly, the evil Goldman Sachs CEO, Lloyd Blankfein had a salary of $600,000 in 2010, but his proxy comp number was over $14 million (page 29), the bulk of which is in stock awards.

In sum, the oft-cited ratio is based on false premises and comparing narrowly selected groups to inflate and understate, respectively, both sides of the equation.  It is like comparing apples to apple pies.

The core argument is that lower income Americans (the 47% who pay no income tax today) would end up paying more in taxes, and the taxes on goods and services would unfairly be placed on them.  The logic being that lower income Americans have less disposable income, and therefore have less choice in whether and what to buy.  A tax on goods would therefore be borne by these currently untaxed Americans.

Although Cain hinted at it, he fails to make the most compelling counter argument to the regressive tax charge: All Americans are already paying indirect taxes through the taxes embedded in the price of goods and services they buy.  To be fair, Cain mentioned embedded taxes On Meet the Press, but only to argue that prices will drop under his plan (a fair point, as well).  He has not yet argued that the tax is not regressive because the high corporate tax rate is already embedded in the cost of goods and services.

For example, if a grocery store sells a loaf of bread for $3, embedded in that price, is the following costs:

1. farming and transporting the wheat, eggs and milk used to make the bread;
2. milling and re-transporting the wheat to make flour;
3. baking and packaging the bread;
4. warehousing and transporting the bread to the store; and
5. stocking the shelves, paying the cashier and the cart guy, and the night janitor, etc., who all work at the store.

At every level, from farmer to mill to baker to wholesaler to store, the relevant business has to pay a 7.65% payroll tax on all employee wages, plus a 35% tax on the business’s profits.  As many conservatives have pointed out, those taxes are only paid by the companies in a technical sense.  In a real sense, they are passed on to the consumer in the form of higher prices.

If it costs $1.00 to produce the bread, the baker will sell it to the wholesaler for about $1.30, making a 30% margin.  That margin covers the profit the baker needs to make, net of taxes.  At a 35% tax rate, the baker would pay 10.5 cents on each loaf of bread, meaning the baker nets a profit of $.195 per loaf.  (If the taxes are reduced from 35% to 9%, the baker could sell the same loaf for $1.21 and make the same profit after taxes–this does not count the cost of employer paid employment taxes.)

That tax effect is multiplied at each level of exchange.  The baker already takes on the farmer’s and mill’s taxes and grosses up his price to include those costs in his own profit margin.  So each merchant’s margin includes some multiplier of the taxes already paid at each prior level.  If we assume a profit margin of about 20% for the store, 10% for the wholesaler, 30% for the baker, and 10% for the mill and the farmer, the embedded taxes will add up to over $1.00. (Even if you assume an across the board 10% margin, $.62 of the $3 is due to taxing of profits at each level.)  Put another way, if the corporate tax rate were 0%, bread would cost about $1 less.

While it may be true that some Americans will pay more taxes directly to the U.S. Treasury, the critics who make this argument are not considering the indirect taxes those Americans are already paying.  The proper counter argument for Mr. Cain is that Americans already pay consumption tax, they just don’t realize it.  Under 9-9-9, Americans would have a more transparent view into their real tax burden.

Of course, as the Wall Street Journal points out, the real problem with 9-9-9 is that it will soon become 15-15-15.

But the hypocrisy is flowing deep and rich on the Left.  For years the Left has been calling the Tea Party a mob, racists, snidely referring to them with a derogatory term, and even a sitting Speaker of the House comparing them to Nazis.  Now, they are reacting with umbrage when GOP politicians  and conservative pundits refer to as a “mob” a group of unemployed, disenfranchised (and miseducated) twenty-somethings who are violating laws, picking fights with cops and reporters and getting arrested. ThinkProgress (two misrepresentations in one name), even called it a “smear.” Calling 700 people who are arrested for disorderly conduct a mob is not a smear.  It’s the textbook definition of a mob: “a disorderly or riotous crowd of people.”

The Left seems to swim in hypocrisy, so it’s not surprising that they are feigning outrage.  Earlier, we pointed out liberal hypocrisy in savaging Governor Christie over his weight, then rushing to criticize Senator Scott Brown for implying no one wants to see Elizabeth Warren naked.  Similarly with OWS, liberal elites are rushing in to defend their own side when they perpetrated much worse attacks on their opponents.

The reality, of course, is that the OWS protestors have a right to protest, just as the Tea Party does.  Just because you may disagree with, or, frankly have no idea, what they want, does not mean they don’t have the right to speak. There are some telling differences, however. The Tea Party protests are usually organized, rarely is anyone arrested, and perhaps most importantly, there is a consensus demand: keep the government out of our way.

In contrast, the OWS seems to be protesting the mere existence of corporations and has trouble articulating any coherent policies they support, or even why they are there at all.  The organizer of a similar protest in California couldn’t even answer the question: “Why are we here?  We have a team working on that, and should have an answer for you tomorrow.” I’m sure that, now that Van Jones and the unions are involved, the message will crystallize.  Though I doubt many of the protestors will appreciate the help.

In the normal rough and tumble world of politics, this should be nothing more than a Grapevine vignette on Special Report.  But Brown is a Republican, and Warren, in the eyes of her liberal defenders, is a poor, helpless woman who’s fragile self image cannot stand receiving the type of teasing that she dishes out.

For weeks the same liberal outlets have been mercilessly criticizing and piling on Governor Chris Christie for being “too fat to be president,” even making thinly veiled use of adjectives.  Christie even had to say in a press conference that “it’s not news to me that I’m overweight.”  Liberals now have the gall to tsk tsk over Brown’s response?

Really?  Does Elizabeth Warren, an attorney, a Harvard Law professor, a published author, a Sunday school teacher and a mother of two, have such a low self image and is so frail, that she can’t take a little ribbing from her opponent?  (Not to mention this was in a spat that she started.) If Elizabeth Warren cannot take a little ribbing, how will she stand up against the Vast Right Wing Conspiracy® and protect the rights of Bay Staters in the Senate?

More importantly, why is it okay for someone, without provocation, to openly, even cruelly criticize a man’s appearance, but not even hint at a woman’s?  Why is it that liberal elites don’t believe women are strong enough to stand up to so slight a criticism?  If I was Elizabeth Warren, I would be offended that they think I need to be defended.

Two other facts you might find interest: (1) the company is in an industry that struggles to break even and (2) the company’s auditors cannot honestly say the company will be in business next year.  Investors have put in $1 billion, and the company is now desperate for cash.  Would you be willing to loan the company $535 million–more than half of its equity investment?

To put that in perspective, assume someone you know put up $100,000 for a Subway franchise.  He has lost money for four years straight, sells sandwiches for $5 when they cost him $15 to make, his bank and his accountant say he has no chance of staying in business.  Would you loan him $53,500 to open another store across town?

If you think this is a “good bet,” please contact me for a great deal on a slightly used, but historic bridge in lower Manhattan. This company (in case you’re wondering, it is the infamous Solyndra, circa 2010) is a stinker. But even with the benefit of hindsight, President Obama has no regrets over Solyndra. Obama, even now, defends the $535 million loan guaranty as a “good bet.”

This is why central planning will always fail.  Not only are politicians not equipped to pick winners and losers, their hindsight is 20/2000–qualifying for legal blindness.

If you think this is an isolated incident, think again.  Dick Durbin was warned repeatedly that his amendment to the Dodd-Frank bill would lead to increased costs for consumers.  When those predictions become reality, he impotently tells consumers to bank elsewhere.  As if the country’s smaller banks are less susceptible to his cost shifting than Bank of America.

Ignorance may be bliss, but it’s also the Democratic Party’s economic platform.

Late on Friday night in June, 1998, James Byrd Jr.,  was at his niece’s bridal shower in Jasper Texas.  He was disabled and could not afford a car of his own, so he walked home, as he did almost everywhere.  At around 2:30 a.m., three men, Shawn Allen Berry, John William King, and Lawrence Russell Brewer offered him a ride in their pick up truck.

Instead of taking him home, they took Byrd to a remote country road and savagely beat him unconscious.  They urinated on him to revive him, and then tied his ankles to a 24.5 foot chain, and dragged him for over three miles.  A subsequent autopsy revealed that Byrd was alive during the heinous dragging.  Trying desperately to keep his head up, he sheared the flesh from his elbows, exposing the bone.  The coroner testified that Byrd was killed at the end of the torture, when he slammed into a culvert and was decapitated.

Berry, King and Brewer were tried and convicted in 1999.  Berry, who maintains his innocence, is serving life in prison and spends 23 hours a day in an 8×6 foot cell. King and Brewer were sentenced to death. On Tuesday, 13 years later, Brewer again confirmed his guilt, saying he had no regrets, and would do it all again.  Last night, the State of Texas carried out its solemn duty, did humanity a favor and rid the world of Lawrence Russell Brewer.

The case, understandably, shocked the world.  There were immediate calls for hate crimes legislation.  George W. Bush, then governor of Texas and a candidate for president, was criticized for not backing the subsequent James Byrd Jr. Hate Crimes Act. The criticism followed Mr. Bush into his presidency, where he was criticized by Brian Williams and others for his “record on race,” including failure to support hate crimes legislation.  Bush’s response to these critics was that first, a murder is no less heinous because it’s not motivated by race, color or creed of the victim; and second, when you commit murder in Texas, you frequently get the death penalty or life in prison.  What enhanced penalties could there be? State required excommunication? 

Nonetheless, the James Byrd Jr. Hate Crimes Act, which provides resources for prosecution and enhanced penalties for “hate crimes,” was in fact signed into law in 2001 by Bush’s successor, Rick Perry.  You may have heard that name before in connection with Brian Williams.  Earlier this month, Rick Perry was asked by the same Brian Williams if he can sleep at night know that he has put 234 people to death–more than any other governor.  The audience applauded, confounding Williams and undermining his liberal premise. 

So which is it–support more stringent sentences for people who commit hate crimes, or stop short of the death penalty.  In Texas, a state that takes every crime very seriously, you cannot have both.  The two questions, then that I would ask Mr. Williams and those like him, who support hate crimes legislation, but not the death penalty are:

1. What do you propose to do to Lawrence Brewer’s corpse to punish him for his hate crime?
2. Would you sleep better at night if Brewer, King and Berry walk free? 

That’s not hyperbole, King’s sentence is on appeal, and Berry is up for parole in 2038.

You’ll no doubt recall that Senator Durbin’s misplaced arrogance led to price fixing on debit card transaction, a move that costs banks and consumers dearly, but will benefit the bottom line of his big box retail donors. Dick believes it is inappropriate for the GOP to pressure the Fed on monetary policy.  Of course, he should know, this is the exact same thing he did seven months ago.  Dick, who’s never had a real job outside of politics, also believes he knows how to allocate risk in an insanely complex system that safely processes over $1.3 trillion a year better than people who have done it for decades.  So maybe we should take the crazy things he believes with a grain of salt.

Liberals love to throw money at things, especially when it’s someone else’s money.

There is no reason why the GOP, or anyone, cannot send a letter, an email, a video, a dead fish or a horses head (subject to local law, some exclusions apply), to the Fed.  The Fed is an independent central bank, and is designed to shrug off political criticism.  If Ben Bernanke cannot handle a few angry politicians, he is not the right man for the job.

To the substantive point of the criticism, though, discouraging the Fed from printing more money is not sabotage, or even evidence of some Vast, Right Wing Conspiracy™ to bring down President Obama.  Governing is choosing, and there is a clear choice here:

1. Do we print more money (a THIRD try at quantitative easing) and hope against experience that this time, the banks begin to lend to companies and investors that don’t want to borrow and people begin to spend on things they don’t need; or
2. Do we reform our tax and regulatory process and encourage people to invest and spend the money they already have.

Liberals love to throw money at things, especially when it’s someone else’s money.  But there are real consequences to quantitative easing (a fancy phrase for printing more money to throw at stuff).  When you print more money, each dollar becomes less valuable.  This is great if you’re a debtor, because it’s cheaper to pay off $14 trillion when the dollar is not worth as much as when you borrowed it.

They see capitalism as an incomprehensible dark art involving incantations read from the Wall Street Journal over mahogany altars.

But if you already have money, inflation is a silent thief.  Warren Buffett, Obama’s best buddy, has said for years that inflation is more confiscatory than any tax increase.  And if we show a willingness to pay off our enormous debt by devaluing the dollar, we may find that the dollar is no longer the world’s reserve currency (see artists renderings).

More importantly, the purpose of printing money is to make it cheaper for people to borrow.  Interest rates are already ridiculously low.  No matter how low they go, no one can force unwilling capital to invest.  Obama has made it clear that he is no friend of capitalism, and his regulatory promiscuity and demagoguery is impairing expansion and investment.  The CEO of Euro Pacific Capital testified today that he was fined for hiring too many people, and had to spend half a million dollars to fight off regulators.  Regulators have run amok, and the uncertainty is undermining expansion.

They beat on the fuselage of the gleaming, silver jet of capitalism and grunt “make fly now!”

It’s not just hiring and expansion, either.  Investor confidence is almost as low today as it was right after the Lehman collapse.  Ask yourself, if you came into money tomorrow, would you buy a second home, or would you hold on to the money until the housing market hits bottom?  Would you invest in the stock market, or wait until the ups start outnumbering the downs on a more regular basis?  Would you invest in a business, hire new workers and expand, or would uncertainty–not just in your product–but in the regulatory and economic landscape make you guard your nest egg?

Unless an investor believes prices are more likely to go up than down, investing is a fool’s errand.  And a fool and his money are soon invested in Solyndra.   People are spooked, and until the world starts to make sense again, they will keep their money under their mattress–no matter how cheap Bernanke makes it to borrow more.

Liberals may understand this, or they may not.  It is tempting to believe that our liberal friends see capitalism as black magic voodoo; an incomprehensible dark art involving incantations read from the Wall Street Journal over mahogany altars..  Like an anachronistic caveman, they beat on the fuselage of the gleaming, silver jet of capitalism and grunt “make fly now!”  All the while, damaging the sensitive avionics with their thorny, regulatory clubs.  Occasionally, Warren Buffett shouts “beat harder!”

We have to decide if we’re going to make life easier for ourselves now and harder for our children later, or vice versa.  It’s a choice, and it has consequences.  So the next time someone you are part of the “let him die” party, or want to subsidize corporate jets at the expense of children’s safety, or that you’re trying to balance the budget on the backs of seniors, children and the middle class, ask them if they’d rather deficit spend and print money on the backs of their unborn grandchildren.

*Fair disclosure: I work in the credit card industry, though not for a bank.  I know these issues well, but I also have a (very indirect and slight) financial stake in the outcome.

Total investment in just renewable energy (a subsector of the green industry) was $211 billion in 2010 (see also, here at page 35). To give you a sense of size, the entire US pharmaceutical industry R&D budget for new medicines and vaccines in the same period was $67.4 billion.  For every $1 a US company spends trying to cure cancer, Parkinsons, Alzheimer’s, heart disease, and diabetes, the world spends $3.10 inventing, manufacturing and selling panda-shit burners, solar panels, corn-based gasoline and wind farms.

Not enough money is not the problem in the green industry.  For one thing, you cannot sell something for $3 when it costs $6 to make and expect to continue for long.  Talk about unsustainable.  Natural economic failure, the lack of a real threat, bad science and politicians trying to pick winners is the problem in the green industry.  Moreover, less than half of Americans believe that Global Warming™ is caused by man, if at all.

But this reflex response is not limited to the green industry.  Liberals have the same reaction when it comes to spending money on education. But there is no evidence that simply increasing the budget will improve results.  Even the uber liberal Center for American Progress, in their exhaustive, district by district review of educational spending, had to admit that “without clear controls on how additional school dollars are spent, more education spending will not automatically improve student outcomes.”  Not a ringing endorsement for more spending.

Indeed, increasing investment in a company, an industry or even a school can have unintended consequences.  When a budget is tightened, management has to make harder choices.  If you run a business and have an unlimited budget, you will never need to decide whether it’s better to send your account manager, Mark to Denver or your business development lead, Kim to San Diego.  You can send them both.

But when spending is limited, choices have to be made.  An effective manager (with accurate information) is one who can make the right choice and put every dollar spent to the most productive use.  If you think this is all theoretical, it’s not.  No well run company will invest in a start up until it is big enough to know what to do with the money.  In addition, a company with a tightened belt will comb its expenses reports, accounts payable and accounts receivable and ferret out fraud, waste and abuse.  All of these factors will increase the productivity of every dollar invested.  In other words, more money doesn’t buy better results.  Just ask the Philadelphia Eagles.