Tuesday, March 17, 2009
Bonus outrage: cui bono?
Another fine guest post by George F. Will
Hello again American Airspace! I see Michael’s still recovering from his travels last week, so I thought I’d just drop by on my own to have a word with you. Because I believe our country has reached a tipping point, and I strongly suspect we’re going to tip in the wrong direction.
There’s a lot of media-driven outrage being directed at the American International Group lately, and I’m sure I’m not the only person in Washington who’s more outraged by the outrage than by the alleged transgressions of AIG. But Edward Liddy has it exactly right: those bonuses were part of a legal and binding contract, and we can change that contract today no more than we can reverse the tides. In overlooking this simple fact, liberals seem to be indulging once again in the moral lassitude that led to the Constitutional crisis of the previous decade: forgetting that we are a nation of laws, and that the rule of law is our secular faith. Where AIG is concerned, one might say, there is most certainly a “controlling legal authority.” Employment contracts are the very foundation of a civilized society, and cannot be altered or set aside except when the employees in question are unionized auto workers.
It is also true, as Mr. Liddy points out, that if AIG cannot honor its contracts and award its bonuses, it will fail to recruit and retain the finest minds in the business world; that is why such firms need to pay retention bonuses regardless of whether the recipients of those bonuses actually remain at their jobs.
But the bonuses themselves are only half the story. Even more insidious that the sudden bout of populist fever infecting our national discourse is the redistributionist tax agenda that would permit AIG’s most successful and productive executives to keep a mere sixty percent of those bonuses. Caught up in the staged outcry over the bonuses, we have forgotten last week’s true outrage—the Soviet-style social engineering to which an overreaching and inexperienced President plans to subject us. Clearly, Obama needs to be reminded that the tea party is far from over.
A confiscatory tax rate is more than a social injustice. It is a recipe for social disaster. What executive in his right mind would continue to work for his $10 million bonus, if he knew that he would be compelled to return nearly four million of those dollars to the federal government? In his zeal to “spread the wealth around,” Barack Obama, like all redistributionists, fails to understand how wealth is created in the first place—by hard work and ingenuity. Penalize that hard work, discourage that ingenuity, and before long our financial system will be in ruins.
In “Cui Bono,” Thomas Carlyle wrote, “What is Hope? A smiling rainbow/ Children follow.” Children follow rainbows, as so many young people have followed Obama, expecting a pot of gold as their reward. But hope is not a financial plan, and rewards come only to those who work for them. It is time for the Democrats to grow up, learn the lessons of adulthood, and begin dismantling a tax system which creates so many disincentives to wealth creation. Justice demands that bonuses must be paid, yes. But true justice demands that bonuses be tax-free.