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Tuesday, March 31, 2009

Public Anger and the AIG Bonuses Scandal

Not too long ago, I wrote a column explaining why the Obama administration's desire to implement salary caps for executives effectively amounts to a form of government extortion. What is basically happening is that the government is dangling carrots in front of these companies--which they are almost obligated by their stockholders to take--and then forcing them to work contracts a certain way. I argued that this was wrong on the grounds that government's job is not to influence companies to behave certain ways in return for piles of cash. It's job is merely to lay the rules and enforce them, no strings attached.

But this business with AIG bonus payments far surpasses any disturbances I previously felt with the Obama adminstration's tactics and apparent goals. Obama's team, supported by Congress, is now forcing AIG to withhold bonus pamyents it had contracted to pay years ago. I don't know which news agency broke the story; in fact, it is my belief the Obama adminstration itself broke the story to cause further distractions, which I'll explain in a bit.

But it doesn't matter: The government is using the "crisis" argument to ignore its constitutional obligation to uphold contracts. I had enough trouble accepting that Obama was writing contracts for companies at all. But this...simply breaching them, because a bunch of angry voters want him to?

Speaking of angry voters, there couldn't be a more perfect example of Bryan Caplan's rational irrationality at work. Obama is riding popular opinion here: He knows the people are behind him. And he needs to cater to them to win again in four years.

But talk to most people, and you'll find that they are perfectly aware that these 150 million or so dollars of bonus money are a tiny fraction of what Obama is spending right now anyway. They simply don't care for such "numerical" arguments. Then explain to them how Obama is reneging on his biggest campaign promise--middle class tax cuts--because he suddenly and, quite surprisingly, needs that money to finance all the other things he promised. Ask them if he is not using this AIG "scandal" as a ploy to focus the public's mind on something other than their fast disappearing tax cut hopes.

Prepare for anger and passionate defense. Obama is doing the right thing, you'll be told, with a capital sniff. It may be small money, but he's doing it for us. Becuase that's what's fair. Oh, Obama.

Fair? Really? I want to know how much of this money is coming to my bank account. Because if none is--and trust me, Obama is not re-distributing this wealth--then I have no reason to care whether these payments happen. If contracts were made, money should be paid, plain and simple. Public support or no, Obama has no right to ignore or confiscate the obligations of a contract. In this case, Obama should do his job. And that doesn't include changing course every other week according to the whims of a fallacious populace.

The more I watch what's happening, the more I am depressed, because it continues to affirm the point of Caplan's book: That voters are rationally irrational. In fact, given the continual support I see for Obama's stunts, I won't be at all surprised if he is reelected in 4 years, despite the flagrant consitutitonal violations he is making and in spite of the fact that he has done nothing during this crisis but cater to corporate interests.

Correction: Nobody is forcing AIG to do anything. But the Congress did, with Obama's full support, pass a new tax law that applies only to these AIG employees and will confiscate 90% of these earnings. So there you have it.

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