Friday, October 23, 2009
I Support All Pay Limits
The fact is, the companies that still owe the government money were mismanaged, and should have failed last year. The fact that they’re still operating is as a result of our politicians acting contrary to the interests of the American people. Had they been allowed to fail, the assets would have been bought by other, better managed firms. Those firms would have fired the people responsible, and reorganized the companies right away. The market could have then come roaring back without an undue burden upon the taxpayer.
Instead, our government stepped outside the bounds of its constitutional authority and propped up the mismanaged companies with taxpayer dollars. But that won’t stop the companies from eventually dying none the less. The difference is that instead of dying right away and donating their still useful organs to others, we’ve put them on life support where they will continue to fester uselessly, and to drain the resources of the taxpayer.
I support our government limiting the compensation of executives from those specific companies because it will hasten their demise. No competent risk manager will accept the terms offered by the government, so they will end up with incompetent managers or none at all. If market forces are then allowed to operate, they will be in default in no time. The danger however is that the US government will not allow them to fail in the future either. If the executive compensation is also attached to legislation preventing those firms from receiving any further government support (be it equity, debt or credit guarantees of any kind), then I can stand firmly behind them.
Some have raised the concern that having taken over the taxpayer supported companies; the government might then also want to limit the compensation of other executives as well. I support those efforts as well, and I do so for two reasons. The first is that I believe socialists are only elected by people who don’t realize what a terrible idea socialism is. So in some respects, the purpose of a socialist politician is to teach that lesson to a new generation. Government limited compensation for all executives will have an economic effect so terrible, that no one will be able to ignore that lesson.
Secondly, if the Obama administration limits the compensation of all executives, then all the companies which don’t rely on Washington for their support will move their headquarters overseas, while only those companies that rely on congress to make their way will remain. This will greatly limit the ability of the Obama administration to transfer wealth from those who earn it to those who don’t. In effect it will cause the socialists government to ‘run out of other people's money’ all the sooner.
These may sound like extreme measures but they are no less than what we are on track for eventually with the current administrations economic policies. It's just that these will have the benefit of being completed sooner, and will therefore leave us more time to rebuild America again.