Princeton, JC Wire
A study released today prophesied declining managerial productivity as American executives cash in their gains from the recent recovery and retire in droves. The Princeton Economic Review Council heralded the calamity that will soon impact GNP and US competitiveness. Alston Freeride, group chairman, summarized the dilemma: “In recent years, senior executives have made so much money, so fast, that they are deciding to retire early. The loss of experienced managers from the US economy nullifies our distinct American advantage in the global arena. We are watching an economic catastrophe unfold.”
The report describes how upper management in the Fortune 1000 has enjoyed a field day with the economic recovery since 2009. The extended Bush era income tax rates plus low capital gains tax on stock options have rocketed their accumulated net assets. Arthur Andreesen, Professor of Finance at the University of North Carolina, elaborated: “At the depth of the recession in 2009, company boards granted resets of stock options at historically low levels, and added more options on top of that out of shear desperation. Low income tax rates have frosted the cake as upper level managers have accrued wealth faster than any time in recent memory. Now they’re saying, ‘Why work?’”
Nobel Prize-winning economist Paul Krueman of Princeton University contributed to the study and commented on the impact of personal taxes: “Earned income rates for the highest brackets have decreased from 90% to less than 40%. This ‘open gate’ to the personal accumulation of wealth by those in a position to take advantage is unmatched in our nation’s history. It’s a wildfire about to get out of control.”
When asked why remuneration for a job well done is to be discouraged, he elaborated, “Taxes are like a damper in the fireplace. We’ve been blowing on the ashes of the last recession with stimulus after stimulus. We’ve turned a blind eye to managerial misconduct so financial managers will stay in position rather than flee from prosecution. This strategy has been so successful that the fire has heated up too fast, too hot. To avoid another sharp downturn, we need a steady flame. That means closing the damper with a justifiable rise on the highest earners. It’s the only way to keep them engaged.”
Former Treasury Secretary Henry Paulsen, in position during the crisis in 2009, agreed with the report, saying, “We need to keep our experienced business leaders in place, as we did with unconstrained bonus payments during the bailout. Just as we are asking the average American worker to extend his employment past 65, senior managers must continue their contribution. Raising income tax rates will not only defer the accumulation that is spurring the managerial exodus, it will imply a sense of uncertainty that will keep them in the saddle.”
Asked why they would stay with a reduced income, he elaborated, “These are risk managers; upping the risk quotient with a tax rise will make them think, hesitate, and take the naturally conservative tack of staying on board. We want to deter their jumping ship for a few more years. Otherwise, the economy could flounder.”
Democratics hailed the report as a call to lower the capital gains tax rate as well. However, Chairman Andreeson responded to the contrary, stating, “Capital gains doesn’t really affect the management issue. That low rate mostly benefits inherited wealth. Those people don’t really work, have no appreciable skills, and only indirectly contribute to national economic growth via capital infusion. It’s the experienced corporate manager who’s already liquidated his options we need to keep in place.”
Republican Congressman Paul Ryan countered the report by stating that a rise in personal income tax would not make managers stay engaged but “finding no economic reward in working, would leave power, prestige and accumulating wealth behind. It would be a departure from America-As-We-Know-It in the 21st century.”
Rep. John Boehner, Speaker of the House of Representatives, said that increasing the personal income tax rates would send the wrong message. “We’re trying to keep money in the country. Raising taxes would only force executives to deposit money in secret offshore accounts, reducing the assets put to work in the U.S. Who would want that?”
Nonetheless, Chairman Andreesen held firm to the study’s findings. “Raising personal income taxes is our only hope. Not on the low or middle classes: they already spend everything they have and more – which, by the way, helps our banking institutions. More importantly, the higher level earners must take an active, responsible part in this economic correction. Otherwise, the next recession – or depression – is only a matter of time.”
The Obama Administration had no comment other than to question the entire debate. “We need more tax revenue to repair the damage done to our infrastructure, our education and the basic tenants of our children’s future,” said an official who declined to be named out of fear of Congressional reprisal. “Why are we so concerned about these guys anyway? They brought us to the brink of Hell!”
On the private investor side, Warren Buffet, acclaimed institutional financier, stated, “I’m not opposed to an increase. I’ll still pay at a lower rate than my secretary.”