One of New York's schlubbiest congressmen, Charlie Rangel, does the city proud.
Charlie came up with the idea that the easiest way to get back the bonuses from those greedheads over at A.I.G. was to tax the hell out of them.
Frankly, I don't see a downside to this.
Well, that's not entirely true. There are a couple of downsides.
Most important, this new act of congress seems to skirt Article 1, section 9 of the U.S. constitution -- i.e., the section that says, "No bill of attainder or ex post facto Law shall be passed."
Skirt, I said, not violate. Retroactively upping a tax bracket seems pretty different than imposing some sort of criminal penalty on somebody for an action that was once legal. (Any legal scholars out there want to debate me on that? I'm not a lawyer. Send your comments to firstname.lastname@example.org. I will publish a contrary argument.)
While I could see a "strict constructionist" court striking the new rule down, I personally don't see a problem -- moral, ethical or practical. It's not like we're taking their freedom away -- just the bonus money that the tax-payer gave them. I think we're well within our rights.
There are a few other downsides which Andrew Ross Sorkin, one of the Times' business reporters, sketched out a couple of days ago but -- quite frankly -- I don't buy.
Sorkin (whose reporting I usually admire quite a bit) takes the contrarian view that the bonuses must be paid out. There are several reasons:
1) A.I.G. has a contract with its employees -- and a contract must be executed, like it or not. Breaking an "inconvenient" contract is a slippery slope and many companies might hesitate to do business with the government if their employees are going to be retroactively punished.
2) A.I.G. employees will leave.
3) The A.I.G. employees are the only ones who know where all the bombs are buried. They know enough about the workings of A.I.G. to completely destroy the company -- and maybe the entire economy with it. God forbid they should start working against A.I.G.'s interests.
All three of these arguments have some limited merit -- but I think they're all ultimately wrong.
1) I think this argument has the most merit; a contact is a contract and you can't pick and choose which ones should be upheld.
But this is why Rangel's solution is such a good idea! We'll keep up the letter of the contract. And we'll follow the letter of the law.
But, quite frankly, even if the new law hadn't been passed I would argue against paying out these bonuses because it seems clear to me that the A.I.G. financial people failed in what they were fundamentally contracted to do.
The A.I.G. contracts naturally made job performance irrelevant (Jesus fucking Christ!) but there's shitty job performance and then there's something else. Basic obligations must be met. If you do the job so badly that you essentially do the opposite of the job, well, you didn't do the job!
As for other companies reluctance to do business with the government because of them failing to keep up contracts, my response would be: "Bullshit. If you're drowning and the government throws you a lifejacket, you will accept it."
Sidenote: Whoever wrote those contracts should be fired immediately.
2) & 3) The A.I.G. people will leave argument is pretty much bullshit. There are maybe half a dozen people at every outfit that can write their own contract anywhere, (even in the worst economy since the Great Depression,) but those people are very, very rare.
(Although I had to laugh when Sorkin called them "the big moneymakers." No, Andrew, nobody at A.I.G. can make that claim any more.)
But also I think A.I.G. is currently political kryptonite. As greedy as the rest of the corporate world is, I don't think anyone wants to risk the potential backlash.
The government just showed its teeth; it's taking 90 percent of the bonus money away from these guys. The law was just rewritten in a way that hurts a huge number of companies. If these corporate outfits have any brains whatsoever, they'll keep their heads down and try to get through this crisis without many more displays of disgusting greed.