Government and the public seem to be in a huff about AIG giving their employees bonuses after receiving money from government. I don’t understand why.
Typically government tries to keep things “normal”. It is not a big fan of demand shifting or preferences changing in any way. It is hard to plan when your constituents are constantly making their own decisions.
Last year and this, this inclination toward normalcy was in full display. This is when AIG went to the government and said, “Hey, something crazy has happened that we did not plan for. If we don’t get some cash we are not going to be able to operate as normal.”
The government said, “Oh crap! Really, you too! OK, here is $165 Billion. I hope that is enough to keep things normal.”
Now, AIG has done exactly that. They normally pay their employees mostly though bonuses and this year was no exception. Of the amount they were given they have spent 0.1% of it on these bonuses.
This did what they said they were going to do. Why are we surprised? I see two valid reasons.
You can be upset about this because you are new to the libertarian principle and have not gotten used to seeing how government inherently throws incentives out of whack.
You can be upset because you believe Scrooge McDuck was real and rich people mostly put their money in vaults that they like to swim in.
If you supported the bailout, then these bonuses are what you supported.
If you opposed the bailout of AIG but support the bailout of other companies or people and are upset, I have two questions for you. What upsets you about this compensation and why do you think the others would not do the same as AIG?
If you supported the stimulus then I think you have the least room to be upset because the truth is Scrooge McDuck does not exist. These guys may have created crazy investments, but they do not put their money under mattresses or in vaults. They buy things and invest. This will stimulate aggregate demand, the Keynesian principle we are working from, as much as giving the money to anyone will.
I hope you give me other options in the comments.
Yesterday I was having lunch with a groups of peers and our VP at work. Our VP was talking about how we still have a budget for training and morale boosting events. This is after having two rounds of layoffs. He said sometimes people like to draw the line from still having these budget items to being able to still have some of our colleagues. Hoever, this is not how any company or even family works.
Companies don’t lay people off or cut programs so everyone else has to scrape by in the remaining departments. They lay people off so they can continue to have a going enterprise.
Generally, you don’t cut things from your family budget so you can scrape by in all areas, but so you can live fully in most areas remaining.