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On November 3rd, the president of the United States spoke at the Hotel Lowry in St. Paul, Minnesota, in what was billed repeatedly as a bi-partisan address. The president ridiculed reactionaries in Congress who he claimed represented the wealthy and the powerful, and whose “theory seems to be that if these groups are prosperous, they will pass along some of their prosperity to the rest of us.” The president drew a direct line between prosperity and increased “fairness” in the distribution of wealth: “We know that the country will achieve economic stability and progress only if the benefits of our production are widely distributed among all its citizens.” The president then laid out an ambitious agenda focused on creating jobs, improving education, expanding health care, and ensuring equal rights for all.

Addressing his opponents in Congress, the president said “[t]here are people who contend that . . . programs for the general welfare will cost too much,” but argued “[t]he expenditures which we make today for the education, health, and security of our citizens are investments in the future of our country . . . .” Giving a specific, and favorite, example, the president argued that government investments in the areas of energy are “good investments in the future of this great country.” Building on the meme about great countries doing great national projects, he praised the Louisiana Purchase, which brought Minnesota into the Union, and compared congressional critics of his past and proposed spending to those who argued President Jefferson should not have been allowed to borrow to buy “Louisiana” from Napoleon.

The speech was given on November 3, 1949, and the president was Harry Truman. But it could just as easily have come from the mouth of our current president, despite the fact that President Obama’s December 2011 speech in Osawatomie, Kansas was allegedly invoking President Teddy Roosevelt. In fact, we could play a game – call it, “Harry or Barry?” (as the president was called for most of his life) – to see how little has changed since 1949:

Continue Reading…

Goodbye my friend

Todd Henderson —  24 December 2011

It is impossible to put into words the loss I feel today. Larry was a beloved mentor and friend, he was the first person I turned to shoot down my random musings, and he always surprised me with the facility of his mind and the passion he had for ideas. Larry was an iconoclast, and that is what I admired the most about him. There were no sacred cows for him, and he was absolutely dogged in his pursuit of truth about the world. He was also kind of spirit, generous with his time, and understanding of others. I will miss our battles, our chats, and our time together. I will miss him beyond words. I will consider it a life well lived if when I die there is at least one person left behind who feels as I do about Larry.

Time to go

Todd Henderson —  21 September 2010

This episode has had a profoundly negative impact on me. To be sure, I deserved and even welcomed criticism of my remarks. But the firestorm this created was completely unanticipated. Lies and misinformation, like that our family earns $450,000, spread uncontrollably. One of the perpetrators, Henry Blodget, has graciously agreed to correct this mistake. (Thank you, Henry.) I cannot begin to undo the problems this has caused. So I will stop and let the fire burn out. I don’t want or need pity from anyone. As bad as things are in this for me, many have it far worse. A wise and dear friend sent me a Yiddish saying: for a worm in horseradish, the whole world is horseradish. This worm is caught in a horseradish, but I can see beyond it.

The reason for this note is because I’ve decided to hang up my blogging hat. I was a fool, and I didn’t anticipate how this kind of thing could happen. As many of our readers and my students know, I’m opinionated and willing to push boundaries. This is what I think is the role of a professor, and blogging allowed me to do it in an informal and diverse manner. But I misunderstood the technology, and the consequences are devastating for me personally. I wish I had just stuck to blogging about corporate law and such, but I couldn’t help myself. Self restraint would have been the better course. Perhaps someday I will return and limit my commentary to my academic areas of interest. For now though, I have to say good bye. I’ve enjoyed the experience and the interactions I’ve had with readers and, of course, my co-bloggers. I am sad to leave, but my family has to come first, and my blogging has caused them incalculable damage.

A final note: I am especially saddened that my post was misconstrued as being about anything other than the impact that tax increases will have on people at the lower end of the high-income bracket. Agree or disagree, certainly questions like this need to be part of the equation. I understand the suffering of the world and the good fortune I have. The debate is not, or should not, be about whether we should try to improve the well being of everyone in our neighborhoods, our country, and around the world, but how. I have different ideas about this than many of our readers and my critics, but my motives are the same as theirs. I’ve never made up stuff about them, distorted their arguments, or questioned their good intentions. I would expect the same in return.


I’m sorry

Todd Henderson —  20 September 2010

The posts that generated an unintended blogocane have been deleted. I stand by the posts, the facts in them, and the points they were making. The reason I took the very unusual step of deleting them is because my wife, who did not approve of my original post and disagrees vehemently with my opinion, did not consent to the publication of personal details about our family. In retrospect, it was a highly effective but incredibly stupid thing to do. The electronic lynch mob that has attacked and harassed me — you should see the emails sent to me personally! — has made my family feel threatened and insecure. We recently had a very early preemie, and this was a quite inopportune time to bring this on my family. For the record, I still think the planned tax increases will negatively impact my family and my country, but that is basically all I should have said. To my wife, my three children, and to anyone who was offended by my remarks, please accept my apologies. To those with pitchforks trying to attack me instead of my message, I feel sorry for you. You have caused untold damage to me personally. I may be wrong, even stupid, but I don’t think I deserved that.

Sometimes words escape me

Todd Henderson —  14 September 2010

In a reply to a comment on my post about the proposed burning of the Koran, I condescendingly lectured someone about their claim that the First Amendment might not protect Koran burning because it was akin to shouting “fire” in a crowded theater. Turns out, the commentator has company on the Supreme Court. In an excerpt from an interview, George Stephanopolous quotes Justice Breyer as calling into question the protection of Koran burning under the First Amendment. See here. Of course, one big difference between screaming “fire” and burning a Koran, is that in the former case, even sane and rational people might panic and cause injuries or death, but in the latter case, only crazy people will kill people if someone burns a book. Are we really going to change our society because someone somewhere might go totally mental because of our penchant for burning Korans, watching scantily clad women on Baywatch, eating BLTs, and getting loaded on moonshine? It can’t be sensible public policy to let the least common denominator crazy in the world determine the scope of our rights. So in Breyer’s world, pole dancing, virtual child pornography, and flag burning are clearly protected speech, while Koran burning is on the bubble. If only American patriots strapped bombs to themselves, screamed “Semper Fi,” and blew themselves up in head shops in San Francisco whenever a flag was torched at a Code Pink rally, we would then have protection for Old Glory. I’m joking, and in fact I am thinking about taking down the flag flying in front of my house and burning it, along with a Koran, the Lord of the Rings series, a complete DVD set of the Sopranos, and a bunch of other stuff that some nuts might find “sacred.” If the Nazi’s can march in Skokie, if the New York Times can publish the Pentagon Papers, and I can call Jesus Christ a dumb carpenter with delusions of grandeur, then Koran burning must be protected. If not, we are really letting the terrorists win.

UPDATE: My colleague points out that the Stephanopolous reporting misconstrues Justice Breyer’s words. I watched the embedded video and I agree that the comments the justice made were more generally about the challenges of First Amendment law in the modern world of the Internet. I don’t see how the game changes that much with better communication technology, but that is a matter of some debate. It was unfortunate that the justice juxtaposed his remarks with a question about the Koran-burning pastor. It leaves an unfortunate ambiguity in the remarks. I don’t know what Justice Breyer really thinks about Koran burning, but given his penchant for balancing everything, I wouldn’t be surprised if he thought this too was a matter for balancing of interests.

I’ve resisted posting about this, since everything that could be said has been said. But I can’t abide the views expressed everywhere, even among my friends and colleagues, that I’m a bigot or ignorant or anti-Muslim or xenophobic for thinking the proposed Park51 project (nee Cordoba House) should be voluntarily moved by its backers. Continue Reading…

There are hundreds and hundreds of academic articles in law, finance, economics, business, and other social sciences discussing the issue of executive compensation broadly and down to the smallest detail. There are none — actually, one working paper in draft form on one issue — that I can find on the issue of how much and how union bosses are paid. There are scattered news reports here and there, but nothing systematic. This is shocking. The problems are the same — agency costs and the potential for self-serving behavior — as in the corporate context. Although the amounts are likely lower than for CEOs, the agency costs may be higher. I’m working on trying to make some progress on these issues, but the lack of data may make them tough to get at.

Part of the problem may be a lack of disclosure. Although CEOs (and the other top corporate managers) must disclose every penny of pay, the same is generally not true for union chiefs. The Department of Labor collects some data — although a recent Obama Administration order reduces the amount unions must disclose — but it pales in comparison with what we know about CEO pay. There are occasionally news stories describing allegedly exorbitant union pay, but it is hard to know whether these are outliers or part of a troubling pattern. In addition, if we don’t know how much leaders are paid, how are union members supposed to know or get answers to these questions?

Are union bosses paid for performance? How much do they make compared with the average union worker? How much do they make compared with foreign equivalents? (I had two librarians in law and business scour libraries and online sources for two days, and they couldn’t find any data on foreign union pay. If anyone knows any sources, please let me know.) Is the way union leaders are paid efficient or better explained by agency costs?

Stay tuned for some preliminary answers. For now, if anyone has recommendations on where I can find good data for foreign union leaders or has ideas on how to approach these issues, let me know. I’m eager to hear what you have to say.

In this morning’s New York Times, Professor Paul Krugman laments the state of America, and, as a remedy, proposes . . . surprise! . . .  more government spending. He writes: “When we save a schoolteacher’s job, that unambiguously aids employment; when we give millionaires more money instead, there’s a good chance that most of that money will just sit idle.” I’m not an economist, but this sentence seems horribly flawed for someone who is. I agree that in a world with zero interest rates and 10 percent unemployment, some government priming of the pump might make sense. Macro-economic conditions need to be changed, and the government is uniquely positioned to do this. After all, it sets the rules, prints the money, sets the level of taxes, and determines through public policy where investment will flow. But the question is how and where to act. Krugman believes taxing us to raise money to pay teachers is part of the answer. I doubt it, for several reasons. Continue Reading…

The biggest and most important issue for the next few months won’t be immigration, the New Black Panthers, or even the war in Afghanistan. Huge tax increases are headed our way, and it raises tough questions. On the one hand, signaling we are serious about deficits is likely a good thing. But, since politicians haven’t been able to reduce spending additional income, assuming more taxes brings more income, cutting spending would be a better course. Having locked ourselves into huge spending, maybe some tax increases are inevitable.

On the other hand, raising taxes in a recession is not a good idea. Taking money out of the economy, routing it through Washington, and then hoping politicians can spend it wisely sounds like the triumph of hope over experience.

Take me. I just calculated my family tax increase at a useful website from the Tax Foundation. If the president and Congress raise taxes as expected, my family will have to pay an additional $10,000 in taxes next year.

To come up with the extra $800 per month, we can cut back on some things. The recent (legal) immigrant from Mexico who cuts our grass will suffer, as will the recent (legal) immigrant from Poland who cleans our house a few times a month. We can cancel our cell phones and some cable channels, as well as take our daughter from her art class at the community art center, but these are only a few hundred dollars per month in total. We’ll have to go to skip going to the movies and eat out less, and think about skipping that vacation to Disney World. What is the theory under which collecting this money in taxes and deciding in Washington how to spend it is superior to our decisions? Maybe we should ask the entrepreneurs we employ and the new arrivals they employ in turn whether they prefer to work for us or get a government handout.

In the world of competitive markets, if one does a bad job, the typical result is less resources, less power, and more oversight by interested parties. If a firm makes a bad product, there will be fewer profits, lost market share, and additional attention from Consumer Reports, plaintiffs’ lawyers, and regulators.

In the world of government, however, the opposite is often true. The SEC, one of the most highly regarded agencies in Washington, did a terrible job over the past decade. One could cite innumerable examples, but two stand out: the SEC failed to detect the Madoff fraud despite countless audits and investigations; and the SEC’s “Consolidated Supervised Entities” program, which allowed investment banks to increase leverage ratios to more than 30 to 1, was a root cause of the financial crisis.

What is the SEC’s reward for consistently bungling its job? The financial reform legislation recently signed by the president gives the SEC vast new powers, which the SEC says it needs 800 new employees to implement. In addition, the SEC is now claiming that the law exempts it from the Freedom of Information Act.

Failure = more resources and less transparency. That is an equation one would only find in government.

In a recent speech at the Netroots Nation, Senator Al Franken tried to frighten the crowd by trotting out the corporate bogeyman that greedily makes decisions without regard to anything other than profit. Franken told them: “it is literally malfeasance for a corporation not to do everything it legally can to maximize its profits.” Individuals across the political spectrum share this common canard. Those on the right, like Milton Friedman, argue that the shareholder-wealth-maximization requirement prohibits firms from acting in ways that benefit, say, local communities or the environment, at the expense of the bottom line. Those on the left, like Franken, argue that the duty to shareholders makes corporations untrustworthy and dangerous. They are both wrong. Continue Reading…

Toy Story 3

Todd Henderson —  15 May 2010

I just attended the world premiere of “Toy Story 3.” No, I’m not in Cannes, New York, London, or Tokyo. I’m here in Chicago, where Pixar graciously screened the movie at the great new Icon Theater to raise money for Comer Children’s Hospital. (Full disclosure: my wife is a pediatric oncologist at Comer.) I’d love to tell you all about the movie, but alas they made us sign a confidentiality agreement requiring us to abstain from discussing anything about the movie. They also searched us with metal detectors to ensure we weren’t bringing cell phones or other recording devices into the theater. I can say that the movie was spectacular. It was clearly the best of the three, but had homages to it predecessors that were clever and respectful. In a lot of ways it reminded me of “Return of the Jedi.” All in all, a tremendous film. I can’t wait to see it in 3D and to own it for many years of viewing. Pixar strikes gold again!