Populist Angst or Good Public Policy?
Sunday, March 22, 2009
I found myself in DC last week for work. I met up with an old friend, who also happens to be a US Congressman. He was really upset with AIG for giving bonuses (or, retention payments…whatever you choose to call it). Because they were given out in the form of contracts, there was nothing the government could do to retract them, even though they were paid for by taxpayer bailout dollars. So, he had the idea that the government would tax the bonuses. Technically, the bill he introduced would tax bonuses (retention payments) for companies that have a certain percentage of ownership by the federal government (70%, I think). Thus, this will pertain to AIG and to Fanny and Freddie (thus preventing this from being punitive to one company only).
He argued that this company shouldn’t be using taxpayer bailout dollars for bonuses to the people who got us in this mess in the first place and almost decimated the economy.
The opponents said that the retention payments are needed to keep talented people at AIG in order to clean up the mess. They also said that this punishes anyone in the company who was not involved in the bad stuff that AIG did.
The House of Representatives passed a very similar bill on Friday, and the Senate will take it up and the President has said he would sign it.
Someone else told me, upon hearing about this bill, that “good public policy never gets in the way of populist angst” and that he thought this was more political than policy.
I think this is good policy and good politics, but I am open to hearing the other side. I know that the general public wants this done (I heard so at an irish bar on St. Patrick’s day!). What do you think? Good policy, or just good politics?
10 comments:
The opponents said that the retention payments are needed to keep talented people at AIG in order to clean up the mess.
That statement sums up what I think about taxing these..."contractual obligations." It was those very same "talented people" who got us exactly where we are, so I don't really feel like we need to recognize them with this pay.
Ultimately, Gary has "a" solution. I think his bill is a nice step in everything we need to do to levy some sort of punishment against people who have been screwing us. It will certainly satisfy our need for retribution.
But, as Colbert put it the other night, we need to "keep our heads." The bigger issue here is the deregulation of the banking industry under a bill Phil Gramm supported in the mid-90s. That's the fix. Gary's bill is a response to public pressure to stop using our tax dollars to somehow reward the guilty, and it's appropriate. Maybe he should amend it to somehow reward the person or persons who create the new financial tool that will get us out of this mess!
But again, the real problem is deregulation. Time and time again, when you deregulate business, despite promises and platitudes to the contrary, this is what happens. Populi gets screwed.
As has been mentioned over at Mike's blog, there were plenty in government that knew about the bonuses, so I get the feeling that the anger coming from Congress has more to do with shifting the blame over to the the private sector. Congress and the Administration(s) certainly played a major role in this situation, so I can understand their desire to avoid blame.
Bonus payments from public funds certainly does look bad, but I honestly don't know enough about working in the financial sector to know if they really would lose people if these aren't used. There were also major parts of AIG that showed a profit and did well, but I still think it looks bad to pay bonuses from bailout money.
Frankly, I think certain people, such as Geithner, Frank, Dodd, Bernanke et al., are the ones who should be placed on the stand and grilled as to their role in this whole mess.
The time to set policy was last months when they could've told AIG no bonus money and no money for counterparties (which is the bigger deal than the bonuses actually).
I'm not crying over highly taxes thieves, but this current plan sounds like ex post facto law which the Constitution prohibits.
Definitely politics and questionable policy.
And today, Geithner throws another trillion to the banks.
I understand the argument that the bonuses should have been prohibited originally, and agree. The Dems screwed up there (whether on purpose or not). But what is the problem going back and fixing the problem? Hindsight is 20/20.
My understanding is that not all laws with ex post facto effects have been found to be unconstitutional. This seems to be one case. They are not making the bonuses illegal, just taxing them. So I don't know if that is a proper argument (although I am not a lawyer).
Interesting thought, though...
But what is the problem going back and fixing the problem?
I am on Gary's side on this issue, and while populist, it does effectively "return" the government's misspent money in this case. But specific to the quote above, it's not the problem to be fixed. As I said in my earlier response, "The bigger issue here is the deregulation of the banking industry under a bill Phil Gramm supported in the mid-90s." Gary has "a" fix, but it's not "the" fix.
They are not making the bonuses illegal, just taxing them.
And I think that's why Gary's fix doesn't violate ex post facto.
A post over at Volokh.com suggests that the tax may violate the prohibition on a Bill of Attainder. I don't know much about the caselaw regarding this area of the Constitution, so I can't make any predictions as to how courts will rule.
I don't feel all that sorry for the bonus takers, but I am not willing to circumvent the Constitution to get the money back.
but I am not willing to circumvent the Constitution to get the money back.
That's a slippery slope indeed.
I guess another thing that chaps my ass is that these "bonuses" are contractual, and the government can't change or modify contracts. That said...now that the government is part-owner of AIG, can they now make contractual modifications that they couldn't before?
It seems like we've been running across this issue more and more lately; What do you do when the best long-term approach allows some "cheaters" to win?
If we protect morgage-holders, some people will get away with their mistakes (on our dime). If we respect the principles behind the Bills of Attainder clause, these jackasses will take home serious bank (on our dime).
I think the President was right when he talked about not governing out of anger. There's a fine line between making sure this doesn't happen again and playing "eye-for-an-eye".
As for the ex post facto clause, I'm pretty sure that is limited to criminal statutes; it would only apply if the tax was considered to be a criminal penalty on previously legal behavior. It might still violate due process, though, and I think the Bill of Attainder issue is the bigger one. But I could be wrong, and I defer to other lawyer-types.
Ex Post Facto with a big goddamn scoop of Bill of Attainder on top.
I don't think it's good politics OR policy—it's just good television. It's posturing and preening by the fucking complicit morons in Congress, and I wouldn't be surprised if it fell apart in court. Which all parties concerned are surely aware of, but no one will be paying attention when that happens.
This is focusing on a rotted log on the ground while the entire forest goes up in flames.
Geithner's "plan" that is being released this morning is the shit people need to be locked in on, but some fucking vote in the Senate on a dubious tax law that absorbs a drop in the bucket is all that anyone will be talking about.
Geithner's "plan" that is being released this morning is the shit people need to be locked in on...
Amen. This is like the earmark debate; it's only interesting because (a) it is so easy to grasp, and (b) it has that 'good guys v. bad guys' or 'big evil entity v. the average joe' feel.
It's sort of why the automaker bailouts got so much more public scrutiny than the bank bailout; people understand "bad car, no sell, union take money" much better than complex derivatives.
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