By Brian Bohl
Holding true to principles is easy in the abstract. Philosophical ideals can usually be upheld without fear of duress. Yet, the great arbiter for those ideals can only be found in the reaction to a crisis. On that front our lawmakers, specifically the well-known local politicians, are failing the test.
Reading the news that cash-strapped AIG was handing out $165 million in bonuses-when the company has already received more than $170 billion in tax-payer-funded bailout money-would make anyone want to impose at minimum 100 percent tax on those individuals who had the audacity to collect “bonus” payouts after one of the biggest tank jobs in U.S. financial history.
But, even when corporations or individuals deserve punishment, it is never a good idea when lawmakers try to capitalize on public outrage by trying to pass legislation that caters to the people’s whims in the short-run while undermining the Constitution and preexisting laws this country holds sacred.
Fortunately, President Obama rebounded from a difficult week for his administration and said the 90 percent tax being railroaded through the House would be a “dangerous way to go.” That is a sentiment that hopefully will be expressed by the Senate this week in what could result in a more clear-minded, legal approach.
The president is right in saying retroactive bonuses close to 100 percent is dangerous. Members of Congress were likely trying to protect taxpayers and punish unscrupulous AIG executives by passing a bill, 328-93, to levy bonuses on traders and bankers earning more than a predetermined limit. Pursuing this avenue might be popular at the time but violates freedom of protection statutes. It is the ultimate knee-jerk reaction.
It also could be detrimental to future economic growth. Extending those high taxes universally might curtail incentives for some businesses to come up with creative ideas to help the country out of the financial tailspin. It also signals a lack of forethought for lawmakers, especially those like New York Sen. Charles Schumer, who hasn’t voted yet but has taken the public backlash against AIG to once again get some face time and let his constituents know he’s on the case.
“This is disgraceful,” Schumer said. “This is unacceptable. And it is an offense to millions of hard-working Americans whose tax dollars are the only reason AIG continues to exist.
“If [AIG CEO Edward Liddy] does nothing, we will act and we will take this money back and return it to its rightful owners, the American taxpayers. We will take this money back by taxing virtually all of it. So let the recipients of these large and unseemly bonuses be warned. If you don’t return it on your own, we’ll do it for you.”
That’s tough talk, though Schumer was called out for his hypocritical stance with a report in the Wall Street Journal that found: “Mr. Schumer has accepted $112,000 in donations from AIG’s employees and its political action committee, making him the second-largest recipient among active lawmakers since 1990.”
When confronted, a Schumer spokesman offered this encouraging reply. “Virtually all the contributions were made over five years ago, and nothing has been contributed since taxpayers needed to step in to save this company from itself.” Take a moment to ponder that quote. In the meantime, I’m sure Schumer is putting on makeup to prepare for his next on-camera moment.
The bonus tax shouldn’t be bogged down by singling out just a handful of individuals, even as Rep. Steve Israel, a Democrat from Huntington, was another local politician pushing for the high punitive taxes.
When over 300 lawmakers sign on to something, there is plenty of blame to go around. That is also part of the problem. This is a time when everyone is struggling for good ideas, and it’s easy to latch on to the issue of the moment. AIG’s bonuses do not even comprise one percent of its total compensation. In the bigger picture, it’s a tiny piece of this country’s financial trouble.
“I think the president would be concerned that this bill may have some problems in going too far-the House bill may go too far in terms of some-some legal issues, constitutional validity, using the tax code to surgically punish a small group,” said Jared Bernstein, Vice President Joe Biden’s economic adviser. “That may be a dangerous way to go.”
Siphoning a low percentage of the company’s compensation still doesn’t excuse AIG’s behavior, or make it right. The point is the country’s problems are systemic and extend beyond a few individual failing companies. This country needs elected leaders to craft a long-term plan for recovery and success. When those lawmakers are willing to just arbitrarily toss aside laws in an effort to show citizens they are willing to take action merely for the sake of it, it could be a precursor for more disastrous choices ahead.
By letting the situation play out, 15 of the top 20 AIG employees who received the bonuses agreed to pay them back. Populist outrage was enough to spur that development, proving there was no need to create a law which targets just a select few individuals and runs counter to our justice system.
People don’t need legislative outrage. Instead of congressional indignation, the lawmakers need to focus on the big picture. Ordinary people aren’t supposed to make decisions in the heat of the moment. The same is true for public officials. If they are willing to disregard the Constitution based on some public outrage on one issue, it’s obvious they don’t have the guts to make the numerous long-term decisions that will be needed to put people back to work and cut the deficit.
Checks and balances could be the way government can be saved from itself. White House economic adviser Austen Goolsbee said just as much when he said President Obama could make the easy choice and force AIG to return the bonuses before issuing a cautioning comment.
“The president’s also been clear we don’t want to govern out of anger. He’s going to look at what comes out of the House, what comes out of the Senate, see what ideas we have,” Goolsbee said.
Brian Bohl is a Master’s candidate for journalism. You may e-mail him at
