Friday, March 20, 2009

President Obama Is Not Rushing Behind Bonus Tax Plan

This New York Times story is consistent with Senator Dodd's portrayal of the White House's reticent position on the regulation of bonuses:

The White House stopped short on Friday of endorsing legislation to severely tax bonuses paid to executives of companies that accepted taxpayer bailout funds.

Administration officials said instead that President Obama would assess the potential effect of the bill that emerged from Congress on efforts to stabilize the financial system.

At the same time, as Wall Street executives anxiously pondered the ramifications of the measure quickly passed by the House this week, some Senate Republicans began to voice opposition to the legislation, saying it was hasty and abusive.

For the record, I have deep legal concerns with the bonus tax. The retroactive application after AIG has made the payments, the clear targeting of AIG executives, the absolute hysteria over the issue, and resistance by Congress and the President to measures that would have prevented the bonus payments make this law highly suspicious from a legal standpoint.

After I wrote this blog entry, the Wall Street Journal published a similar report.


Aeneas said...

I guess there's not 'present' vote in the Oval Office.

Sorry, Professor, for being away for so long. But, I find it less and less possible to say positive things (yes, in spite of my cynicism, I don't relish the negative, as I do wish us the best) and I keep hearing my old aunt's words: "If you can't say anything good, be silent." On the other hand, I also keep hearing my other aunt's voice saying: "If you have something bad to say about someone, just pull up a pillow next to me and let me hear it." Ha!

If he had any guts, and he was truly the honest constitutional scholar he is supposed to be, he would veto this abomination of congress drunk on its own bath water. There are other ways to stop this. But, we know that this is nothing but posturing, to cover up the ineptitude of the whole thing.

I am so disappointed. So very disappointed. Good thing that there are thinkers like you to cut through this incredible crap. (now I'm using semi-bad words. Next, it's talking like a stevedore. I bet it would feel good.)

Darren Lenard Hutchinson said...

Welcome back, Aeneas. I was wondering where you had gone.

I think the Senate will kill this thing. I have been reading tax policy blogs, and they are uniformly opposed to it -- even liberals. Tax law should not be "weaponized."

Aeneas said...

I wasn't really gone. I keep reading your blog to keep sane.

I am glad to hear that there's a chorus against this. It is very dangerous. Very. And now I read that there's a whole piece of legislation coming up to 'regulate' pay and compensation on Wall Street, banks, etc. While our sense of justice says that there should not be such bonuses and compensations that are so out of balance with the rest of the world, this kind of populist rhetoric (spelling?) does not translate well into legislation in a free society and in capitalism (which, BTW has been the strength of this country even when in its extreme.) This is a very dangerous road. Very.

What do you think? Is it even constitutional to directly control compensation in privately owned, free entreprise society?

I like your description--'weaponizing' of tax laws. I refused for a while to hear the clarion call of the right that we're on the road to socialism/communism/whatever. But now, I do wonder. I would very much like to hear your opinion.

Darren Lenard Hutchinson said...

First, I think that the outrage over the bonuses shifts blame to the wrong party. The government -- not AIG --- controls the U.S. Treasury. If the government did not want firms to use TARP funds to pay bonuses -- which is a legitimate, even if debatable -- position, then it should have prohibited the behavior when it first enacted TARP last year.

I do not understand why the public is bashing AIG instead of two presidents, two sessions of Congress, and two Treasury secretaries for not blocking the payment of bonuses; instead, they are going ballistic over AIG. No wonder politicians get away with so much. People are easily swayed to focus on the wrong issue.

I have serious reservations about imposing liability out of anger. That's why the constitution prohibits ex post facto laws and bills of attainder and requires due process. It is unclear whether a court would invalidate the House's "AIG" tax bill (if it were enacted). Nevertheless, the law still offends constitutional principles.

I do not think that Obama is into socialism or communism. Those concepts are political theories; where they were "implemented" the results were mixed - in the sense that the governments did not have the same elements (the USSR did not operate the same way as Cuba or China, etc). That's the difference between political theory and political practice.

I understand socialism as advocating governmental ownership and control of the means of production in society. Obama has not advocated that. Instead, he has joined Bush in dumping tons of money into the private sector - especially "capitalist" banks. His problem is big spending, not governmental control.

He has not used the economy as an opportunity to impose restrictive measures upon the banks. In fact, he fought the inclusion of Dodd's original amendment which was fairly tough. Also, participation in TARP is VOLUNTARY, which is not how socialism is theorized. Furthermore, many capitalists understand and appreciate the concept of a "market failure," which might warrant governmental intervention, depending on the circumstance.

I think Obama is way too commited to the idea of "government" to qualify as a communist (if this means a "stateless" society).

Big government is neither liberal or conservative. All presidents want power and tend to augment government. Bush expanded the government enormously. Obama is doing the same. The last time the federal government shrank was during the Clinton administration.

Aeneas said...

THANK YOU! This is indeed a wonderfully lucid assessments I've seen in a long time; both on the issue of the administration(s) and AIG; but especially regarding the 'socialist' issue--when is socialim 'socialism' or a canard. You are quite right also that socialism IS or IS NOT 'socialism' depending on the government structure anda the elements present. The US is a very far cry from the parliamentary system in Europe (which has a form of socialism, one that has nothing in common with what they called socialism in the USSR or China), or the tsarist or imperial tyranny of Russia or China when socialism/communism took root. I have to say that, unlike Marx' vision of his ideals taking root in industrially and socially advanced societies, they took root in the most backward and were used in the most grotesque way.

But, I digress... It's late at night, and I suppose the spirits are about and I am wandering.

Darren Lenard Hutchinson said...

Thanks, Aeneas. Yes- the ideals of Marx were utilized to support horrific outcomes, but I suppose any political vision can serve as an instrument to produce "good" or "evil."

This has me curious: "It's late at night, and I suppose the spirits are about and I am wandering."

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