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Posted by on Mar 20, 2009 in Economy, Politics, Society | 8 comments

Populism, AIG and the Crossing of a New Threshold

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Much of the populist rancor up to now over everything from AIG bonuses to shady securitization schemes to bailout bonanzas has taken the form of media ranting. Whether it’s Rick Santelli on the right or Jon Stewart on the left, the public outrage over various shades of corporate and governmental malfeasance in this economic crisis has been limited to the realm of late night television and the blogosphere.

Now that has changed.

Congress just approved a highly punitive 90% tax on bonuses beyond $250,000 to ANY employee at ANY financial firm receiving TARP money. Even more remarkable is the fact that half of the House Republican caucus voted for this measure.

Folks, this is close as you will ever see to real “class warfare.” Yes, these firms would be kaput if not for the TARP. And they shouldn’t be awarding bonuses to anybody for failure – especially not with taxpayers’ dollars.

But remember that many employees at these firms work for divisions that are still quite profitable. Yet, the decisions made by people in the holding company or some far-off division imperiled the whole company so gravely that the government had to provide a bailout and, hence, a ban on the bonuses of any and all employees throughout the firm. This is the proverbial broad brush.

Forget for a moment the question of whether or not $250,000 constitutes a sizable income in New York City. And forget for a moment the easy way that companies can get around this (by renaming bonuses as salary, though there would be other tax implications).

Think of what a threshold the Congress – both parties – has crossed by passing this legislation.

In the Senate, some are calling for a slowdown of this measure, but Republicans like Charles “Japanese option” Grassley and Olympia Snowe are pushing for an equally punitive measure along with many Senate Democrats.

How is it that a party that united to oppose the stimulus bill has now effectively endorsed one of the most punitive tax increases in modern American history? How is it that Eric Cantor, the conservative GOP House Whip, voted for this confiscatory tax increase on virtually the entire financial sector?

As Bob Dylan sings in “Ballad of a Thin Man,” – “Something is happening here and you don’t know what it is. Do you, Mr. Jones?”

Cartoon by RJ Matson, Roll Call. The cartoon above is copyrighted and licensed to appear on TMV. All Rights Reserved. Unauthorized reproduction prohibited.

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Copyright 2009 The Moderate Voice
  • GeorgeSorwell

    It looks like a straight-up bill of attainder to me. As such, I doubt it will stand much scrutiny in the courts.

    I missed the detail about how many Republicans voted for this. They (a) found a tax increase they liked and (b) defied Rush Limbaugh.

  • Leonidas

    Yup I agree, the courts shouldn’t uphold this, Article I Section ( of the US Constitution would seem to forbid it. Thank God our founding fathers had more foresight than their descendents in government.

  • Don Quijote

    But remember that many employees at these firms work for divisions that are still quite profitable. Yet, the decisions made by people in the holding company or some far-off division imperiled the whole company so gravely that the government had to provide a bailout and, hence, a ban on the bonuses of any and all employees throughout the firm. This is the proverbial broad brush.

    How many moderate on this site a few weeks ago, as a condition to bailing out GM & Chrysler with a few measly billions, were ready, willing and eager to cut UAW worker’s pay and benefits?

    But now that the people getting the short end of the stick are college educated members of the upper-middle-class whose company had be bailed out to the tune of hundreds of billions, it’s not fair. FU! They should be grateful they have a job, their company & industry is the reason the economy is in free fall.

  • Don Quijote

    Elrod,

    A slightly more elegant version of your argument can be found here:The Costs of Bailout Rage, and I’ll quote:

    But, you ask, what about autoworkers who are being squeezed to renegotiate their contracts? Those renegotiations mostly involve the future terms of employment, though, it is true, they also could affect retiree health benefits. If an autoworker doesn’t want to show up on the assembly line under the terms of a new deal, he or she doesn’t have to. That’s different from telling AIG employees they’re not getting the amount on which they agreed for work they’ve already performed.

    Once the pitchforks are out, it’s awfully hard to convince the mob to put them down.

    To which a far more elegant reply can be found here Leave the people who destroyed the world aloooone which I will again quote:

    The “true” qualification gives away the show. So, if I understand correctly, the agreed-upon non-salaried compensation of white collar workers is absolutely sacrosanct, while that of blue-collar workers can be casually dispensed with. And if blue collar workers don’t like re-written contracts they know where the door is, but if white collar workers who are either inconsequential or responsible for turning a profitable multinational corporation into a zombie wealth-destroyer threaten to leave into a horrible labor market — heavens to Betsy, let’s find a few more million to keep them aboard! Perhaps we can take it from the health benefits of retired manual laborers!

    It’s about time the pitch forks came out and it would be good if they stayed out for a few years.

  • DdW

    I am disgusted by the bonuses at AIG.

    However, I agree, punitive taxation, special taxation, directed taxation, pinpointed taxation, retroactive taxation, vindictive taxation, “bill of attainder,” or by whatever name you want to call this stupid move by a bipartisan Congress smacks totally of “Unconstitutionalism.”

    Amazing how these politicians can vote in a bipartisan manner on a idiotic bill like this, but can’t get their act together to fix our nation’s economy

    Dorian

  • Leonidas

    As far as the union workers are concerned, they should be able to keep to the terms of any contracts they signed before the bailout if they desire to. I’m not for going after them for doing so anymore than the AIG bosses. However, given that they likely wont be able to find a better deal elsewhere for their services, unlike many of the AIG execs, and given that they likely don’t have the wealth to retire if they chose to, unlike many of the AIG execs, they might want to consider the long term health of the company more. It would be nice if the AIG execs did as well, and some likely do and volunteered to return their bonuses in part or full, but the fact is they don’t have to. Its a free country still.

    Meanwhile many in Congress and the Whitehouse hardly batted an eye at $58 billion to foreign banks from the bailout money and $7,7 billion in earmarks.

    This picture sums it up:

    http://cagle.msnbc.com/working/090320/varvel.jpg

    • Don Quijote

      That picture is not a valid comparison.

      given that they likely wont be able to find a better deal elsewhere for their services, unlike many of the AIG execs,

      I want to meet the suckers who will hire the idiots who lost 10’s of billions and took the global economy down with them.

      Meanwhile many in Congress and the Whitehouse hardly batted an eye at $58 billion to foreign banks from the bailout money and $7,7 billion in earmarks.

      Earmarks have nothing to do with this issue, and the $58 billion are just some of the losing bets that AIG made, had they not been covered by Uncle Sam, AIG, Goldman Sachs, Citibank, Societe Generale, Deutsche Bank and quite a few other financial institutions would be belly up today and we would probably be in far deeper shit. This is what happens when your economy is based upon gambling, sooner or later you are going to lose your shirt.

      and given that they likely don’t have the wealth to retire if they chose to, unlike many of the AIG execs,

      I have a sneaking suspicion that when the AIG executives discover how much personal security can cost, that they won’t be able to retire either.

  • superdestroyer

    I guess Geithner did not pay attention to President Obama enough during the campaign. President Obama repeatly said that he would use the tax code to take away money from upper middle class and upper class whites and give it to important blocks in the Democratic Party. Since people have really started to believe that there is nothing wrong with using the government to rob Peter to pay Paul, it will be very hard to control them.

    Of course what is lacking is what happens to the overall economy when most people will be more willing to taking from others instead of adding to the economy themselves.

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