Wesley Mouch with your Paycheck?

Another disturbing proposal is upon us. Legislators are actually entertaining the notion of dictating the pay of all employees of companies that have received government funding.

But now, in a little-noticed move, the House Financial Services Committee, led by chairman Barney Frank, has approved a measure that would, in some key ways, go beyond the most draconian features of the original AIG bill. The new legislation, the "Pay for Performance Act of 2009," would impose government controls on the pay of all employees -- not just top executives -- of companies that have received a capital investment from the U.S. government. It would, like the tax measure, be retroactive, changing the terms of compensation agreements already in place. And it would give Treasury Secretary Timothy Geithner extraordinary power to determine the pay of thousands of employees of American companies.

Of course, this is but only a logical development, as would be known by anyone familiar with the nature of government intervention and money in general. When we spend money, we want to know where it is going and, if we are smart, will not finance activities we do not approve of. When the government starts paying for the operation of a business or industry the politicians involved will sooner or later act as if it were their money that had been spent, and will be suggesting, or forcing, courses of action.

What is their standard of how people should be paid?

In addition, the bill gives Geithner the authority to decide what pay is "unreasonable" or "excessive." And it directs the Treasury Department to come up with a method to evaluate "the performance of the individual executive or employee to whom the payment relates."

And how will he decide what is "unreasonable" or "excessive"? And by what process will the Treasury Department come up with method to evaluation performance? Will it be based on sound economic principles of how employers keep their employees, or by the popular opinion of voters?

This will be particularly harmful to our economy, especially at a time like this, since the government does not work from the motivation of profit as a business does. I predict that, if Geithner is granted these powers, he will take a look at some sheets and decide that everyone is being overpaid. In a free economy, the proper amount of payment is according to the economic worth of the work or the abilities of the person; in the government, the arbitrary ideas of politicians as influenced by the smiles and approval of potential voters.

Worst yet, what is to stop this from expanding even further beyond businesses that received government funds? As I argued in The Sisyphean Judgment of Politicians, any attempt by politicians to run the economy is doomed to failure as Sisyphus is doomed to have the boulder roll down the mountain, so we have a vicious circle of government creating crises and trying to cure those crises with more government.

If this continues unabated by principled thinking or cultural change, Timothy Geithner may soon be cutting your own paycheck.