We all know how hard it is for Wall Streeters to get by in a market economy, but can't we try a little bit of tough love to see if we can't wean them away from the public trough. The newest absurdity is the insurance policies that many large companies take out on their employees in order to game the tax system.
Many of us might have been led to believe that these "dead peasant" policies had been eliminated with a 2006 change in the tax law. But no, the NYT tells us that they are still there. Remarkably, the paper doesn't understand the issues involved at all. It tells readers:
"But critics say it is immoral for companies to profit from the death of employees, while employees themselves do not directly benefit."
Well some critics might be concerned about the morality of this practice, but the more obvious complaint is its economic absurdity. The article goes on:
"Companies and banks say earnings from the insurance policies are used to cover long-term health care, deferred compensation and pension obligations."
Okay, that's it -- everything we need to know is right there. Insurance companies don't give away money. Why are there "earnings" from these insurances policies that are available to "cover long-term health care, deferred compensation and pension obligations." The answer is that these policies are tax subsidized.
The question then is why are taxpayers subsidizing such absurd insurance policies? If we want to subsidize "long-term health care, deferred compensation and pension obligations," there is a very simple way to do it, subsidize long-term health care, deferred compensation and pension obligations. That way we would not waste money supporting the intermediaries who undoubtedly collect high fees and make high salaries and bonuses in the process.
Yes, but that would meet cutting out the insurance industry and we know the boys and girls in the industry can't be expected to make their way in a market economy without a big helping hand from the government. At least they aren't getting food stamps.
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