ON EXPENSIVE OUTRAGE (part II)

FOCUSED RETRIBUTION

The furor over the AIG bonuses discussed yesterday continues today, seemingly stronger than ever.  Most of the discussions in the media, print, TV and online, continue to fan the populist outrage. 

Occasionally one can find a piece here and there that takes a breath to look at the broader implications inherent here, as this Washington Post article tries to do:

"The bonus scandal has inflamed lawmakers in both parties and could have broad repercussions, and lawmakers warned that it could serve as the death knell for further aid to the ailing sector. Obama's budget calls for allocating another $750 billion to bail out troubled firms, and his administration had hoped to quietly "wind down" operations at AIG without an excess of intervention from Congress, but both of those ambitions could be in doubt after the explosion of attention drawn by the bonuses."

In the meantime, the politicians continue to out-do each other in what they'd like to do to address the situation.  Most popular today seemed to laser-guided taxation, as the piece goes on to explain:

"Action on the legislation could begin as early as today in the Senate. A proposal from Senate Finance Committee Chairman  Max Baucus (D-Mont.) and the panel's ranking Republican,  Charles E. Grassley (R-Iowa), would levy an excise tax on both AIG and the executives who received the payments, adding up to more than 90 percent of the total of the bonuses. That tax would also apply to future bonuses awarded, either by AIG or by other firms receiving federal aid.

"Similar proposals taking shape in the House would target as much as 100 percent of the bonus money..."
"House Speaker Nancy Pelosi (D-Calif.) said the House will consider its own AIG tax bill, along with measures authorizing Attorney General Eric H. Holder Jr. to recover excessive compensation payments made by companies that received federal financial assistance and to block further bonuses at such companies. Pelosi predicted "tough questioning" today when AIG chairman and chief executive Edward M. Liddy appears before Frank's committee.

Democratic lawmakers raced to put their proposals on the table.  Reps. Steve Israel (N.Y.) and  Tim Ryan (Ohio) introduced the Bailout Bonus Tax Bracket Act to create a 100 percent tax on bonuses over $100,000 that are distributed to employees of financial firms receiving federal bailout money.  Rep. John D. Dingell (D-Mich.) offered a version that would tax such bonuses at a 95 percent rate."

Amazingly, there were some politicians who expressed some broader reservations on this move to micro-targeted taxation:

"Some Democrats expressed concerns about the tax approach. House  Majority Leader Steny H. Hoyer (D-Md.) told reporters that he worried about running afoul of the Constitution's equal-protection clause, which forbids laws that treat certain groups differently.

House Ways and Means Committee Chairman  Charles B. Rangel (N.Y.) also raised doubts about the tax idea. "It's difficult for me to think of the code as a political weapon," Rangel told a handful of reporters outside his office. "Is this an indictment or a bill?""

Kudos to both these legislators for raising some questions to a raging mob.

These seemingly small steps take us down a slippery slope that can have far greater negative consequences that are utterly unintended.  Surely the last few years should have taught us that lesson well by now.

Comments

[Greg Ostroff]

got it right mike