Congressional response to AIG is mindless

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As understandable as the Congressional response to the AIG bonuses was, the reality is that this does create a number of disturbing precedents. We have a stupid Congress mindlessly lashing out to compensate for its own complicity in political corruption (Congress has long been a major recipient of Wall Street largesse, including AIG) It all goes back to Tom Ferguson’s analysis in “The Golden Rule”. (Golden Rule: The Investment Theory of Party Competition and the Logic of Money-Driven Political Systems (American Politics and Political Economy Series))

That said, I hate the bill the House introduced for five reasons:

  1. The law is being pushed through quickly and the old warning about “legislate in haste, repent at leisure” appears to apply here;
  2. It is retroactive, and we should always discourage laws that are retroactive;
  3. It is clearly politically motivated and applies to a very small number of people (who will be next? liberal bloggers?); as a general rule, we should discourage laws that are not general in application;
  4. It is, at least in part, motivated by a punitive impulse that isn’t necessarily the best thing for our politics; and, 
  5. Most obviously, it attacks the symptoms, rather than the disease. Maine style political reforms which introduce public funding into our politics, and an independent commission which constructed real Congressional constituencies rather than these absurd exercises in gerrymandering, would do much to deal with the problem of political corruption at the top.
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I also take Steve Waldman’s point in Interfluidity, “If we want to control pay levels at zombie firms, the government should put them into receivership and manage them properly.”

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Anyway, I see that one of the kings of late night television, Jay Leno, agrees with me:

President Obama took to Jay Leno’s stage and compared life in Washington to “American Idol,” where ‘”everybody’s got an opinion.” The appearance on “The Tonight Show with Jay Leno” was itself a sign of just how much the culture has changed in America, where comedy and politics often mix.

From there, he went on to pitch his long-stated proposals to change the tax code by increasing taxes on all upper-income Americans, specifically families earning more than $250,000 a year and individuals earning more than $200,000 annually.

“The important thing over the next several months is making sure that we don’t lurch from thing to thing, so we try to make steady progress, build a foundation toward long-term economic growth,” he said. “That’s what I think the American people expect.”

Mr. Leno was even more negative to the House plan, saying it “kind of scared me.”

If the government decides they don’t like a guy, all of the sudden hey we’re going to tax you, and, boom, and it passes, that’s seems a little scary,” he said. “It was frightening to me as an American that Congress or whoever could decide I don’t like that group, let’s pass a law and tax them 90 percent.

Sources
On ‘Tonight Show,’ Obama Urges Steadiness in Face of Crisis – WSJ
HR 1586: Not a good tax clawback – Steve Waldman

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