The NY Times reports on whether the Treasury’s “Pay Czar” will try to break the contract Citigroup has with a Phibro commodities trader, under which the trader is owed $100 million. There apparently is no dispute that absent the Treasury lending Citigroup money, and the federal government claim to have a veto over pay, this individual would be entitled to the money based on his performance under the contract.

Predictably, liberals will claim it is unfair that any one person get so much money when the government is funding Citigroup, and conservatives will invoke the sanctity of private contractual rights.

If reliance on federal government money is the new standard for allowing the federal government to dictate which contracts will be broken, then why stop with traders? How about onerous public employee union contracts for states and municipalities that receive stimulus funding? Or the contracts of major Hollywood studios and stars, since it is very common that municipalities — some of which will receive stimulus funds — offer incentives to bring production to their cities and towns? Why is it “fair” that a movie star make millions or tens of millions of dollars, when taxpayers subsidize the production?

Once you accept the government’s right to break otherwise valid legal contracts, where does it stop logically? Or is there no necessary logic to it, just politics?

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