About the Obama Administration’s executive pay caps

Via Andrew Sullivan, “Going Galt” blogger Alex Tabarrok argues against the Obama Administration’s plan to cap pay at companies still operating on government bailout money.

If the administration actually follows through, most of these executives will quit and get higher paying jobs elsewhere.  Executives not directly affected by the pay cuts will also quit when they see their prospects for future salary gains have been cut.  Chaos will be created at these firms as top people leave in droves.  Will the administration then order people back to work?

Ridiculous. For one thing, the seven big companies that the new regulations apply to are still in business thanks to taxpayer subsidies. Instead, as Sullivan quotes Felix Salmon: “[T]hese guys are effectively civil servants now, and they deserve to be paid as such.”

Second: Cash pay is capped at $500,000. You know what? That’s a lot of money to normal people.

Third: It’s a really awful economy right now. If there were a bunch of high-paying jobs lingering open at solid, non-taxpayer-supported companies, don’t you think top executives who are about to take pay cuts would’ve fled by now? Perhaps there’ll be some movement, but in all likelihood there’s simply not that many lucrative jobs to move into right now.

Finally: The restrictions on pay end, as I understand it, when these companies pay the government — the taxpayers — back. And that’s fine. Until then, I’d rather executives of failing companies not get super-rich on my dime.