USA Today: Trust public sector more than private to spend your money

In a letter to the editor, USA Today, dated April 9, 2010, J.T. Brown asserts “ … I have to strongly disagree with his [Jonah Goldberg’s] supposition that the private sector is somehow inherently more wise and judicious with its resources than the public sector is.” The principal evidence given to support this thesis is: (1) the “common” workers (I assume the author means employees) did not get to democratically elect the company’s leaders; (2) the reason executive salaries are higher is that they set their own salary; and (3) executive compensation in private sector firms has grown at a faster rate than the average American worker’s salary. The author’s conclusion: “Now which sector is it that is taking money without representation again?”

Wow, this writer is factually inaccurate and his or her conclusions are empirically disprovable. The writer misrepresents how corporations work. First, shareholders (who may or may not be “common workers”) do elect directors, who in turn hire company officers, who manage the company. If J.T. Brown wants a vote, he or she can simply invest in company stock or contribute to the 401K plan rather than put his or her money into a flat screen TV. Second, the elected directors, not the officers themselves, set the officer’s salary, and in all organizations with which I am familiar review and approve all compensation policies in the company. Third, the rate at which executive compensation has grown relative to worker’s compensation is irrelevant to whether or not the corporation “judiciously or wisely” employs its resources. In a private corporation – either for-profit or not-for-profit – the marketplace makes that determination and the business either stays in business or goes out of business. If the business fails, its capital is redeployed in the marketplace. The same cannot be said for government, which has no competitors, enacts and enforces its own laws, and prints money when it has none.

So, let’s see: social security is bankrupt, Medicare is bankrupt, Medicaid is bankrupt, and our current levels of debt as a country are unsustainable. Does not sound like judicious and wise use of resources to me.