So the House yesterday decided to tax the AIG scumbags, who are partly to blame for this economic disaster, at a whopping rate of 90%. They say the state and local governments will collect the other 10%. This new bill, which is not yet law, is targeted for AIG and other companies who are taking government bailout funds in excess of 5 billion and giving bonuses to its employees. This new tax rate targets bonuses given to those making the magic number of $250,000.00 per year.
I think we can all agree, it’s pretty bad that these guys and gals somehow get to reap a monetary windfall when their company was collapsing and the worldwide economy is in bad shape. It seems, on its face, not to be fair. Now, I haven’t reviewed the contracts giving them these bonuses, or the circumstances that must be met for these employees to get the money, so we will have to leave that to the imagination. I know I may be strange and unpopular here, but it isn’t the fact that these people got the bonuses that trouble me the most. Why? I'm more scared of the unintended consequences of such a rush to judgment by our Congressmen.
The dangerous underlying issues surrounding this outrage are: (1) why is Congress wasting so much time on millions of dollars, when we are running a debt in the trillions; (2) what will this do to all the other major banks and their employees (who most are not bad, but very good) that are taking TARP funds; (3) what are the consequences of Congress passing a retroactive bill, or a bill that changes the legality of something after it has already occurred?
Topic 1: Congress has spent the entire week now debating this AIG tax rate scheme. The worldwide economy is falling apart. We have two wars and a possible third or fourth on the way in Iran and North Korea. We have education, healthcare, infrastructure and defense issues at home (besides the failing economy). Why on earth are our representatives wasting such precious time on something that is honestly a drop in the bucket? Because of the media. The media is making the Democrats look bad, like the administration has no control over the TARP funds, the economy or its rebound. Fact is, it’s impossible to keep track of how every company is spending every dollar that is from TARP. I imagine this administration is doing the best it can. And, the reality is that the Obama administration doesn’t control the economy, at least not directly. So, this bill passage is just a circus to distract Americans and make the ruling party in Congress not look so bad.
Topic 2: The other major banks taking TARP funds will now fall victim to this potential new law. They too will not be able to give bonuses. This will force one of two things to happen. They will pay back TARP funds before they really should, leaving them in a weaker position, so that they can retain top talent (and pay them bonuses); or they will not be able to keep their top talent. I don’t know about you, but I (as a taxpayer) have a lot of money invested in these financial institutions, let alone all of our jobs depend on the banks staying afloat. I think I want the best and brightest minds in there. Do whatever it takes. So, how does taking away bonuses, or forcing these major banks pay back the TARP funds too early help? It doesn’t. This is not the way to handle the situation.
Topic 3: This is probably the most egregious thing that has taken place. Congress is now trying to implement a law that would take effect in the past. That means actions taken, when you thought they were, in effect, legal, become at best frowned upon and worthless and at worst illegal. There are a lot of legal theorists out there that suggest that creating retroactive laws is a horrible idea. Why? How do you follow the law, if it can be changed at anytime? What if you drove 70 on the interstate last Thursday, because it was legal? Then your state changed the legal speed limit to 40 on that same road three weeks later, but made the law effective when you drove on it last Thursday. The punishment is 10 years in prison, and there is proof you drove 70 on it. Now you can be convicted of a crime, although when you drove 70 on that road, it was legal…but now it isn’t. See the problem? You can never predict what the law will be. Now, my example is a little different than what is happening, but it will have the same effect on the stock market and the economy. How can investors properly plan their investments or execute contracts when Congress, at anytime in the future, could write laws to change the rules of the game. It’s going to scare people and it should. Retroactive laws are about the worst that can be made. Hitler use to make them in Nazi Germany to make his actions legal and the actions of his enemies illegal.
Congress’ new bill many face constitutional questions and be ultimately ruled unconstitutional. Representative Lamar Smith said it best, “Congress has let expediency override common sense.” We must ask ourselves, why is Congress rushing this? Why not take some time to debate the issue and figure out the best course of action. The money has already been given out, so why the rush? I can tell you this is not the best course. The simple answer is that House Speaker Nancy Pelosi wants to pass a quick law and sweep it under the rug, so she can say she tackled and solved the problem. Unfortunately, this solution will cause far more problems for her and President Obama to solve and could really hurt the Democrats in a couple of years at the polls. Democrats like to think they are the new world order, but Republicans had a pretty strong grip on things for a while, too…and look at what happened to them.
