Government has found yet another way to pry money out of the private sector. It’s called clawbacks.
Generally, clawbacks are defined as policies to pursue the repayment or recovery of compensation paid to business executives when accounting mistakes are discovered, contracts are broken, or fraud has occurred.
Government has stumbled onto clawbacks in recent years as a way to penalize private executives, raising the concept to a political science. Some forms of government clawback laws are legitimate, such as requiring a private company to uphold its end of a contract so government has protection when a company fails to perform.
Sounds good on the surface. Governments claim that this is merely a way to recover money for the taxpayer, but the taxpayer doesn’t usually see any loot. Anything recovered quickly gets spent on other government programs.
Government began to bastardize the clawback concept when the U.S. House and Senate passed the Dodd-Frank Act in 2010, later signed into law by Obama. One of its provisions was that compensation to current or former company officers could be seized if an accounting restatement was triggered, regardless of fault. It’s only a small step for government to turn this law into a class warfare weapon to confiscate large sums of money as “penalties,” even when executives are faultless.
But let’s not whine about mistreatment. Let’s put the shoe on the other foot. Since a clawback is a recapture provision saying that taxpayers should have money-back protection when business executives make bad decisions, let’s turn the tables and impose this obligation on politicians.
Brilliant, isn’t it? If politicians insist on imposing blame when decisions go wrong, impose the same standard on those who make bad decisions that lose taxpayer money, or that result in massive misspending of money.
And I know just where to start: the U.S. Department of Education, and its state counterparts, the prime architects of an education system known to the far horizons as a failure. Just look at any study comparing U.S. K-12 student readiness and capability against students in the rest of the developed world. I say it’s time we demand a clawback of executive compensation from all the bureaucrats who ran state and national education departments for the last 30 years.
Next on the agenda is the Department of Energy’s ecological-loan guarantees and tax incentives to various energy projects that promised to reduce greenhouse gases. Since this outfit has grossly wasted tens of billions of taxpayer dollars, it may be difficult to clawback that much money from its executives, but let’s give it a shot.
Now here’s my favorite. For the last 25 years, U.S. Congress and several U.S. presidents have been on a ferocious campaign to jack up the national debt ($22 trillion), the federal budget deficit (over $1 trillion annually), and net government debt-as-a-percentage of gross domestic product (107 percent) to astronomical levels. Who will join with me in calling for a clawback from every senator, congressperson and president in the last 25 years who cast a vote or signed a law creating those soul-wrenching numbers? Most of them made promises to their constituents that they would never do what they did. But they did. Let’s get some of that money back.
And surely, we can’t leave out the travesties of local government. I call your attention to one specific financial perversion where public money was grossly misspent without needing to be. A few years ago, Palm Beach County officials, seeing the political potential, stole the Scripps research project away from the private sector. The resulting financial hit to taxpayers was enormous: $60 million misspent for Mecca farmland, $40 million for unneeded planning and initial construction and $51 million for a “water pipeline to nowhere.” Most of the taxpayers’ money was wasted. This was a financial black hole where a clawback against incompetent misspending would be appropriate.
Seems to me that what’s sauce for the private goose is sauce for the public gander. Elected officials need to know the feel of the hangman’s rope.