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March 25, 2009 - Freedomain Radio - Stefan Molyneux
16:15
1314 True News 27: AIG vs War

What should we save our outrage for?

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Hello everybody, it's Stefan Molyneux from Free Domain Radio.
I hope that you're doing very well.
I wanted to share a few thoughts about what has been going on with this executive AIG bonus payout witch hunt.
Because I think that there are some principles involved that seem to be escaping the notice of a number of people, and I think it's worth Having a look at those principles so that while we may not be able to stop the pitchfork waving torch branding mass hysteria, we at least can rise above the mob in this instance and keep our pride and integrity a little intact.
The first thing To understand is that we have a situation where an unpopular group of finance geeks is having the Valkyries hammer fist of the government being brought down upon them because they are unpopular and really for little other reason.
And let me sort of explain what I mean when I say little other reason.
The class warfare that has been inculcated in the United States over most of the 20th century, particularly after the Second World War, when the European brand of socialists fled the results of their own disastrous experiments and absconded to America to spread the infection of class warfare.
The class warfare is really reaching such unprecedented heights and depths that I think it is eclipsing pretty much every other conflict in society.
And the great tragedy is that the state serves The rich, the corrupt rich, the parasitical rich, the rich who enjoy the fruits of their connections to political power.
And yet the poor and the middle classes continually clamor for the government to step in and save them from the predations of the rich, when of course the state is that which serves the rich the greatest and the most powerfully.
And I did a recent video on corporatism which has the charts which back this up, that The lower classes were gaining the most wealth before the welfare state in the 1960s and after that they have gained the least wealth and the power has shifted to the more wealthy because whenever you have the government collecting and distributing vast tracts of income from any country It is the wealthy who benefit the most from such transactions.
The wealthy know the corridors of power, know the people in power and are very comfortable and familiar with the uses of power and in a way that you and I will very likely never be.
So we desire to Pick up a gun because we feel there is an intruder in the house, but that very action guarantees that it is the intruder who will end up with the gun, and we who will end up disarmed.
So, for instance, there is a hue and cry about the 160-odd million dollars.
Not exactly bonuses.
The word is not quite correct.
It is additional pay for services rendered.
Like, if you get this job done by X amount or X months, then you will get an extra 10%.
It is a completion incentive.
It is a form of pay.
A bonus is something that arrives unexpectedly because a company does well and is usually distributed to large sectors of the employee workforce, but this is not a bonus.
This is additional pay that is granted in advance for services rendered.
And of course, executives or other workers within AIG who have Pursued these incentives, have made specific decisions, you know, got foregone weekends with the family, worked late, traveled, and so on, made many personal sacrifices to make the money that is contracted to them.
And to have the government unilaterally come in, and because it is unable to break these contracts without a lawsuit, to instead use the punitive arm of the Internal Revenue Service to crush any profits that these workers may be receiving from these incentives, taxing at 90% to 102%, very specific and very targeted, though not so specific and targeted that...
It is not also going to sweep up in this net other people in the financial industry who have had nothing to do with derivatives trading or bad mortgage loan repricing or any of the other instruments that are claimed to be, at least on the surface, responsible for the economic catastrophe.
Basically, it's a carpet bomb to get three guys, and there are many, many innocent bystanders who were caught up in this.
And this, of course, is a great tragedy.
Do the guys at AIG deserve the bonuses or not?
Or the incentives or not?
Were they complicit? Were they corrupt?
Who knows? There's no way to know whatsoever.
But we do know that because the mob is crying foul, the government is taking upon itself to bring the hammer fist of, quote, justice down upon a very specific group of individuals and to apply a law retroactively and to continue.
As if it has never done it before, some people think, to continue to use the taxation arm as a way of punishing the unpopular and intimidating the downtrodden.
It's hard to think of these workers in AIG as downtrodden, but when you've made a lot of sacrifices to earn some money and then it is all summarily taken away from you, you're not going to be happy.
Now, of course, We think, those within the population who are for this kind of retribution, we think, of course, that we are going to give these additional powers to government, this precedent-setting situation.
Not entirely, but somewhat precedent-setting situation.
Where if we raise our pitchforks and point at a particular individual or group of individuals, that Congress will stampede off and apply sanctions against those individuals.
We think that by expanding the powers of the government in this way, these powers will only ever be used against the rich, against the wealthy, against those we dislike, against those we feel are unjustly pillaging and profiting from the system.
And, of course, quite the opposite is true.
Yes, there will be some clawbacks of some bonuses, but that's not really what's going to happen in the long run.
In the long run, these very same powers are going to be used against the powerless, because as soon as the government creates, on the basis of popular request, a new power aimed at the wealthy, all that happens is that the wealthy take a hold of the government through bribery, through donations, through intimidation, through the threat of Closing down, going overseas, moving their assets elsewhere.
The new powers are simply incorporated into the arsenal of the rich, and then, because they need to make work for themselves, they find other victims outside the wealthy classes to terrorize, to intimidate, to bully, and to steal from.
So we keep thinking we're going to create these powers and give them to the government, and the government is going to use them against our enemies, but our enemies always end up escaping the net.
And it ends up being turned against us, right?
So we, oh, let's have passports to keep the bad guys out of the country.
Well, bad guys will simply get fake passports and pass through no problem.
And we are the ones with the endless inconvenience every time we want to cross a border.
Every single time you try to use violence against your enemies, it is a gun that goes off in your own face.
And that, of course, is a real tragedy.
And the most astounding thing, in my opinion, about this whole mess is that...
People are genuinely and with straight faces.
They are claiming that they are redressing an injustice and an immorality on the part of these workers who have contracted and have earned the reception of this additional pay.
That by smashing up contracts and taxing people arbitrarily as punishment for the wrath of the mob, that this is some form of exercise of justice and doing the right thing.
And it really is an astounding thing to think about.
So we have some people who made contracts to receive pay On the grounds of work performed, and they performed that work successfully.
At a time, as I've mentioned before, when all the government economists and projectors and pundits and stockbrokers, Jim Cramers and public figures were all saying, you know, the economy is great, it's not a bubble, it's real gains, and so on.
So they made these contracts and they expect the pay.
The government can't break the contracts because it will cost them far more in lawsuits if they just arbitrate a great contract.
So they're going to use the secondary weapon, the backup shiv of taxation to achieve these ends.
But in terms of the net negative impact on America, well, there's two things to consider.
The first is minor, the second is not.
The minor one, of course, is that this just means that the government, which now owns a majority of AIG, all of this government is going to do, by passing this law, which says anybody who makes more than $250,000 is going to be taxed at 90% on any additional incentives, over and above base salary,
and it only applies to those who are taking government bailouts, all this is going to mean is that the most competent people We'll look at firms run under the umbrella of the government bailouts and we'll say, okay, well, I can't make any money there, so I'm going to go elsewhere.
I'm going to go to a competitor who's not in the bailout.
I'm going to go overseas or I'm going to switch professions, but I'm certainly not going to go and work for any bank that is under the umbrella of the government bailout because I'm going to be taxed on all my bonuses and these people aren't So they're going to leave.
What does it mean when you put a fierce cap on the salaries of people whose talents you need the most to prop up newly nationalized banks?
Well, the value of those banks It's going to decline.
It's like if you were going to make a movie and you said, well, we can't pay any actor more than $50,000.
Well, how successful is your movie going to be if you have the money to pay, you know, Brad Pitt for 10 million or whatever, right?
Well, you can't pay more than a million dollars for an actor while you'll get some guy from a sitcom, right?
I mean, you won't get the top tiers and simply that means that the value of your movie is going to decline.
So, by driving out the most valuable and productive employees from the newly nationalized banks, the value of those banks is simply going to decline, which is going to be much worse to the American taxpayer than $100.5 million clawed back in theft of these pay incentives.
So, that's sort of the first thing. The second thing, which is much more important, is Congress is...
reacting, let's say, to a righteous rage on the part of the American population.
In that these stockbrokers or these executives or these workers at AIG who have qualified for these pay incentives, that they have done harm to the economy, they have not done a good job, and therefore we should claw back their salaries through punitive and specific taxation.
I didn't look this up, though perhaps someone can tell me.
I would guess that $160 million is probably not more than a couple of days of the Iraq War and the Afghanistan War and maybe a day of running the 700-plus overseas bases.
But even if we just talk about the Iraq War, $160 million, a couple of days of that, which has been going on for more than six years now.
So, when people have contracted for bonuses in an environment the government says is stable and growing, or contracted for these additional pay incentives, and they then receive them, the government, because of the wild cries of the mob about injustice and corruption, the government will chase these people down with the iron hammer of the IRS and claw back the money and shatter basically null and void the contracts, create retroactive laws, Which is not a very good thing, right?
To say that this stuff basically all applies retroactively because there's no way these people would have entered into these contracts if they'd known that 90% to 102% of the money was going to be taken away.
So, this is the level of moral confusion, to say the least, to put it as nicely as possible, the level of moral confusion in the world.
That some people who are getting additional pay for work that they did that's contracted for are bad and evil and the American people rise up in righteous indignation and demand that Congress do something about these malefactors.
But if you lie to start a war, Which consumes tens of thousands of American lives, hundreds of thousands of Iraqi lives.
Brings home traumatized, drug-addicted PTSD soldiers to reunite with their families, triggering waves of alcoholism, drug addiction, abuse, mental problems, suicidality.
If you shatter the economy, morale and warrior class of a nation, Drive millions of Iraqis overseas, drive them out of their homes, bomb civilians, maim children, blow apart schools and hospitals,
water treatment facilities, people wallowing in shattered homes, drinking the filth of their own waste, unable to get medicine, unable to get health care.
If you do that, then the American people, and Barack Obama in particular, will reward you for your service and dedication to the nation.
And nobody will come after you.
They won't even take back your pension for starting a war that leaves America trillions of dollars in the hole, blood washed in the desert and in the streets of America.
Because, you see, we must save our righteous indignation for some finance geeks who are getting a couple of extra dollars, not for those who start citizens slaughtering wars.
Why, for those people, we must stand and salute.
But for people who are attempting to exercise their voluntary contracts that the government agreed to in the bailout contract, well, for those people we must rise up in righteous indignation, you see, and bring the hammer of justice down on them, because we would not want to get confused about what moral indignation is really for,
and we wouldn't want to accidentally apply moral indignation and sanctions To those who let slip the dogs of war, slaughtering nations, making the sand of the desert clump with the blood of the innocent.
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