The "because they are cheap" comment is definitely problematic. The best people are smart enough to know they have value. Of course, picking the best people is still a problem--no matter how much money is on offer, idiots will apply in larger number than great people (because great people are often being well-treated in their current position).

But the "if they turn out to be an idiot it's easy enough to get rid of them" is a big bonus for smart people. I've left contracts and jobs because the people around me weren't smart enough, or ambitious enough, to be doing the job they were hired to do, and yet they weren't cut loose. I don't want to screw around on a job where I know great things aren't going to come out the other end.

It may be hard to grasp everything everyone on the team is doing, and to know whether they're great at what they do (particularly if the project is large and has many individual pieces), but if you find yourself doing more work because of stupid stuff one of your team-mates is doing, it's a good sign that something isn't right. I don't know any great developer that enjoys that.