Friday, March 20, 2009

Cutting off the nose to spite the face

If the "TARP bonus" bill the House passed becomes law, any of the hundreds of thousands of people who work for Citigroup, Bank of America, AIG, and nine other major US corporations will have to fork over 90 cents of every bonus dollar that puts their household income over $250,000.

That's household income, not individual income. If you're married and filing singly, you'll have to surrender anything over $125,000. Indefinitely.* (The bill seems to apply only to "bonuses", although this isn't crystal clear in the wording. If so, this distinction is ludicrous: Companies will just pay execs bigger salaries.)

Is $250,000 per household a lot of money? Sure. But it's not a lot of money for two moderately successful corporate executives. Or a corporate secretary married to a lawyer. ...

But that's not the really distressing part. The really distressing part is what this tax will do to the corporations that we now own and are supposedly trying to save.

(Remember? That's the reason we bailed Citigroup, AIG, GM, and the rest of them out--to save them. Because we convinced ourselves that civilization would end if we didn't.)

Thanks to our stupidity bailouts, we now own major stakes in these firms--at mind-boggling expense. So it's not clear why we want to destroy them. But that's what we seem determined to do.

Believe it or not, hidden inside these companies are thousands of decent, competent people whose households bring in more than $250,000 a year. Many of these folks had nothing to do with the gambling addiction that bankrupted their firms. Many of them still have a choice where to work. And now that they've learned that their family's pay will be capped at $250,000 indefinitely, many of them will quickly decide that now is a good time to pursue their careers elsewhere. (That is, unless their firm takes the easy and obvious step of just paying them a fatter salary, which just renders the whole thing a farce.)

The real lesson here, unfortunately, is that it's a disaster for the government to run private companies. We used to understand that. But ever since we started telling ourselves that we had to save bankrupt institutions by taking them over and pretending not to "nationalize" them, we have apparently forgotten.
--Henry Blodget, Huffington Post, on populist outrage going off the rails

No comments: