Just say no to “Emergency Legislation” (to retroactively tax TARP recipients bonuses at a 90% rate and thus set dangerous precedents)
Posted by danishova on March 19, 2009
"Bills of attainder, ex post facto laws, and laws impairing the obligations of contracts, are contrary to the first principles of the social compact, and to every principle of sound legislation. … The sober people of America are weary of the fluctuating policy which has directed the public councils. They have seen with regret and indignation that sudden changes and legislative interferences, in cases affecting personal rights, become jobs in the hands of enterprising and influential speculators, and snares to the more-industrious and less-informed part of the community." James Madison, Federalist Number 44, 1788.
Congress would do well to be reminded of Madison’s wise and timeless observations. I suspect that far too many people in positions of power find his views quaint and old-fashioned, much like they view our constitution. Crazy populist rage (and a cutthroat desire to deflect blame from their own incompetence and corruption) is inciting rash action from Congress. Not only do contracts made by private corporations no longer seem to matter to a meddling government, but apparently Congress is unaware of the wise old saying that haste makes waste.
Every time we turn around there’s a “crisis” which needs to be “fixed”, and Congress rushes through legislation which is not thoroughly debated or aired for the American people before our representatives vote on it. The latest “emergency” crisis is driven by rage at A.I.G. over a $160 million in retention bonuses which were specifically permitted under the “emergency stimulus bill” (that no one read!) with an amendment authored by Sen. Chris “Lyin’” Dodd, possibly at the urging of the White House and Treasury. We’re still trying to sort out all the lies and obfuscations told by the various parties involved…
WASHINGTON (Reuters) – The U.S. House of Representatives, reacting to public furor, will vote on Thursday on a bill to recoup most of the bonuses paid to AIG executives after the insurer got billions of dollars in government aid, Democratic leaders said on Wednesday.
The bill would impose a 90 percent tax on bonuses for executives whose incomes exceed $250,000. The tax would apply to executives of any company that received at least $5 billion in government bailout money.
Ah, there’s that magic $250,000 number again. Do not, I repeat, do not earn more than $250,000 or you will be royally screwed by those in Congress who are endlessly plotting wealth-redistribution schemes.
But back to Madison… This is a very dangerous, constitutionally questionable, precedent-setting path to take. What’s to stop Congress from retroactively singling out other groups for involuntary, un-negotiated, contract revisions and punitive tax policy ? If they’re going to go after companies who received TARP funds today, what’s to stop them from going after employees of all corporations who receive any kind of tax breaks tomorrow? What’s to stop Congress from incrementally deciding that all bonuses for every American earning over $250,000 should be taxed at 90%? Moreover, many of the companies who received these TARP funds (like Wells Fargo) did so under extreme pressure from the government who essentially told banks: You have to take this money and be a Patriot and defreeze credit, and we won’t let you leave the room until you sign on the dotted line. Are we now to penalize Wells Fargo’s employees because their employer did what the government
asked demanded they do, against their better judgment?
Later we read:
"The American people are very upset about what they have heard about bonuses being paid by institutions which received taxpayer funds," House Speaker Nancy Pelosi told reporters.
That’s rich, Nancy. The American people are also “very upset” about the trillions of dollars of taxpayer dollars you are wasting with your pork-laden “stimulus bill”, and earmark-rich, bloated, “Budget”. Nice job changing the subject, Madame.
House Democratic Leader Steny Hoyer said he expected the bill to pass overwhelmingly. It is being rushed to the House floor under an expedited procedure and will need a two-thirds majority to pass.
Hoyer said the House was working on other measures to ensure the government recouped the bonus money.
The House Judiciary Committee on Wednesday approved a bill that would authorize the U.S. attorney general to seek repayment of excessive compensation from employees of companies that have received more than $10 billion in federal aid.
I’m confused. Is the threshold for excessive retroactive taxation $5 billion or $10 billion? Does this mean that the Attorney General won’t get involved unless banks were loaned more than $10 billion? Isn’t this all terribly arbitrary? And how do we define “excessive compensation”? Is that like a “windfall profit”? Frankly, if it were up to me, I’d start with examining “excessive compensation” in Congress, and stay out of what private companies determine is the proper way to pay their employees, but I digress.
But that’s not all!:
The measure, approved by voice vote by the Judiciary Committee, also would allow the attorney general to restrict future payments to executives to 10 times the average non-management wages at companies getting federal aid.
You’re kidding me! Executives can’t earn more than 10 times the average of non-management employees? Do the wages of the custodian who cleans toilets at the bank get averaged in too? Is A.I.G. CEO Liddy’s “wage” of $1.00 a year included in the “average”? How do they define “wages” anyway? Are wages a base salary, or do they include bonuses and commissions? What about overtime? Is this “average” going to be taken by all banks receiving TARP funds, or only the banks who received $5 billion (or is it $10 billion)?
While we’re at it, could we examine the “wages” of the workers who’ll be receiving “stimulus money” for “shovel ready” infrastructure projects? Aren’t they being paid waaaaay more than they “deserve” because of the Davis-Bacon “prevailing wage” provisions that were stuffed into the bill? Instead of paying someone, say, $10.00 an hour to caulk a window (no doubt we’ll be informed that window caulkers are indispensable “environmental engineers”) they’ll be earning 3 times that amount, on the taxpayers
dime trillion. I’m outraged!
Thankfully some members of Congress have common sense, and hopefully a healthy respect for Madison’s views:
Some Republicans praised the concept of trying to recoup the bonuses but questioned the method, expressing concern it runs afoul of U.S. law and potentially the U.S. Constitution.
"Congress has let expediency override common sense," said Representative Lamar Smith, the top Republican on the Judiciary Committee.
"Congress already has learned the hard way the unintended consequences of rushing to legislate without adequate expert testimony and debate but that’s exactly what we are doing now."
Some Democrats also questioned the constitutionality of the legislation.
I thank Lamar Smith for his wisdom. Let’s hope the American people wise up before it’s too late.
Update: Tom Maguire weighs in here.
Udpate: Allahpundit reports on John Kyl’s efforts to slo-mo this process in the Senate, with the hope that reason will prevail over hysteria. Kyl said:
“I don’t believe that Congress should rush to pass yet another piece of hastily crafted legislation in this very toxic atmosphere, at least without understanding the facts and the potential unintended consequences,” Kyl said on the Senate floor. “Frankly, I think that’s how we got into the current mess.”…