Unequal Protection Under the Law

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GUATEMALA CITY, GUATEMALA –Here in the center of Guatemala City, private security guards armed with M-16 rifles, shotguns, and revolvers stand outside barbed-wired compounds that house residences and private businesses.

Americans think that failure in the administration of the law only happens in emerging economies. But it is taking place in the United States, in ways large and small, from urban streets to the halls of power. This hinders investment, entrepreneurship, and economic growth, and forces Americans to spend valuable time ingratiating themselves with the sources of power.

One symptom of the breakdown of the law is the rise in gang violence. The U.S. Department of Justice estimates that the number of gang members reached 1 million last year, up from 800,000 in 2005—and these are only the ones that can be counted. The number of U.S. communities affected by gangs rose to 58 percent in 2008, up from 52 percent in 2005.

The misnamed Employee Free Choice Act, introduced last month in Congress, would permit unions to bypass a secret ballot and organize based on collected signatures on open cards. Union officials would be able to visit workers at home and pressure them for signatures, subjecting them to intimidation without recourse to the police. Think school bullies on the playground and you get the idea.

Guatemala suffers not only from a lack of law and order, but from their selective application. And that painful lesson is no less true in the United States.

Take taxes, for instance. Most Americans assume that failure to pay taxes would put them out of consideration for Senate-confirmed positions. Not so for President Obama’s appointees, at least five of whom had problems with unpaid taxes. Although Tom Daschle withdrew, Treasury Secretary Timothy Geithner, U.S. Trade Representative Ron Kirk, and Labor Secretary Hilda Solis (whose husband owed taxes) were confirmed. Kansas Governor Katherine Sebelius is set to become Secretary of the Health and Human Services Department later this month.

It’s hard to remember prior Cabinet nominees with tax problems of similar magnitude being confirmed. Indeed, President Clinton’s two nominees for Attorney General, Zoe Baird and Kimba Wood, withdrew from consideration when tax problems were discovered.

It’s not just high-ranking American government officials who benefit from the seemingly arbitrary and discriminatory application of government programs. Two small banks, Old National Bancorp of Indiana and Signature Bank of New York, are among those who have been allowed to return the Treasury funds that they received from the Troubled Assets Relief Program.

Yet other institutions, such as Goldman Sachs, Morgan Stanley, J.P. Morgan, and Bank of America, were reportedly pressured to keep the funds in a March 27 White House meeting with President Obama. A government that can decide to pressure banks to do something not required by law is engaged in extra-legal activities. A government that decides to pressure some institutions and not others is inherently discriminatory.

The government’s treatment of executive compensation bonuses, standard in many industries, has also been capricious. Some executives working in banks that received TARP funds were paid their bonuses without a peep from Washington. Others, notably those working at AIG, were demonized both by press and government. Some returned the money.

President Obama has attacked those who received bonuses, saying that only his administration is standing between the bankers and the populist “pitchforks.” Yet he has not criticized his own staff. Michael Froman, President Obama’s deputy national security advisor for international economic affairs, received a $2.25 million bonus from Citigroup, a recipient of TARP funds. Other White House aides, such as Larry Summers, received millions in compensation from financial institutions.

Whereas banking executives are being asked to return bonuses, politicians, including Mr. Obama, who received contributions from those same companies are not offering to return them. Uncle Sam has decided that it’s not OK to pay employees bonuses, but it’s OK to pay politicians campaign contributions.

The discretionary application of government power can be seen in the choice of companies that qualify for bailouts. Newspapers, retail outlets, hotels, construction, airlines—all are in trouble, and the unemployment rate is 8.5 percent, the highest in 25 years. However, the only non-financial companies selected for bailouts are domestic auto companies.

Within the auto companies, the Obama administration decided that Robert Nardelli, chairman and CEO of Chrysler, could keep his job. Yet GM chairman and CEO Rick Wagoner was forced to leave, along with many GM directors. Not only was this arbitrary, but it was done without any consultation of Congress.

The $787 billion stimulus funds are similarly based on decisions made by federal government agencies. Some businesses will receive large sums from government; many more will receive much less; and the vast majority of the millions of American businesses will receive absolutely nothing.

One of the greatest strengths of the United States has been the uniform and predictable application of laws. If we lose that, we lose much that we hold dear. To see such consequences, just visit Guatemala.

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