AIG's bonus bucks continue to stir outrage. Up next: AIG executive Edward Liddy testifies before Congress today. Cue the sanctimony!
Secretary Geithner said yesterday that the Treasury will deduct the amount of the bonuses from the most recent AIG bailout. (Total spent propping up AIG so far: $200 billion.) But Geithner's policy isn't stopping congressional Democrats from plotting to tax the bonus money at absurdly high marginal rates.
When you get politicians ahead of the mob running companies, you get madness and idiocy here. The contracts are legal contracts, and it wasn't as if these bonuses were unknown or sprung at the last minute. They were written into these agreements over a year ago, long before AIG was even nationalized or partially nationalized.
And the problem here is that by the Congress now trying to break the contracts by a ruse, essentially a 100 percent taxation or confiscation, they're going against a few hundred years of common law where you don't do retroactive confiscation or bills of attainder, which are laws aimed at particular individuals. It's just not done.
And to sacrifice all of those principles of democracy and business and contract over, as Rich indicated, a tenth of one percent of the bailout, is absurd, particularly in a Congress which just a week ago signed a bill with enough pork to fund these bailouts for about 20 years.
John Fund wrote something similar in yesterday's "Political Diary" (subscription only):
The government, in a desperate attempt to avoid political pain caused by its own foolish economic mistakes and lax oversight, has poured billions into bankrupt companies. Then when those companies pass out bonuses they claim are necessary to retain qualified workers, the political firestorm leads government officials to propose tax rates that would make even British socialists of a half century ago blush. We are slipping into debates that have nothing to do with a free economy and everything to do with the government calibrating how to balance the favors it hands out with the inevitable moral outrage those favors engender.
Ugh. Someone stop this ride. It's no fun anymore.