Here at Conservative Command, we’re going to go out on a limb and defend the $165 million in bonuses AIG is paying its executives.  Sure, the prevailing argument is that a company that has benefited from $170 billion in bailout funds should not compensate its executives so lavishly with those same taxpayer dollars.  That idea has some force because it’s “fair” (a popular word with this administration).

But such vague notions of “fairness” undermine the very purpose of those bailout dollars.  The government gave AIG billions of dollars in order to rescue the company and keep it in business.  Yet, to stay in business, a company must remain competitive.  And, to stay competitive, a company like AIG must hire the same top-tier executive talent that it attracted before this economic meltdown occurred.

If the government forces AIG to retract those bonuses and makes good on its promise to force companies that received bailout money to cap salaries at $500,000, companies like AIG will have little to work with to retain and attract executives and leaders who can steer them in the right direction.

This is a prime example of why government intervention in the marketplace, no matter how small, never works.  When the government attempts to dictate how a company should operate (even if it owns part of that company), it causes paralysis in the private sector.  

Top-tier executives are responsible for producing business and innovations.  Here’s a newsflash: they don’t work for free.  Executives go to work for these large companies precisely because they have the potential to make millions of dollars.  If an executive has produced millions of dollars in revenue, he or she should be entitled to whatever compensation the market allows.  If it’s a $5 million or $10 million bonus, then so be it.  It is well-deserved.   

There are those who say that AIG walked into this predicament by accepting the bailout money.  “If you don’t want the government telling you what to do,” say some liberals, “then don’t take the cash.”  That sounds fine until you consider the motivation behind the government’s intervention.  If the motivation is to fix ailing businesses, then the government should give out the cash and then stay on the sideline. 

Clearly, that is not what’s happening here.  Since it injected money into the private sector, the government has tried to dictate and condemn a variety of decisions at these companies.  This is not some altruistic government attempting to right the financial ship.  This is a government intent on controlling the private sector and centralizing our nation’s economy. 

President Obama has already stated that he intends to use every legal avenue to block these bonuses.  Whether or not he succeeds, this dispute between the government and AIG does not bode well for our economy.  Further meddling will lead to further stagnation.  An ailing economy cannot recover while the government continues this hand-wringing.  Furthermore, businesses and entrepreneurs already indecisive about how or what to invest and investors confused about when or what to buy will continue to keep their dollars out of the game. 

Such are the consequences of an administration intent on re-defining a capitalist economy.   

If you like this post, please consider subscribing to my full RSS feed.  You can also subscribe by e-mail and have a copy of each new post automatically delivered to your inbox.