The same people yelling about bailing out private insurance businesses are the people screaming about efforts to collect and control the use of taxpayer funds at these very same companies.
Words like “outrage,” “incomprehensible,” and “offensive” have all been used to describe the AIG mess and I don’t disagree with those characterizations. I just wish my fellow Americans would look a bit closer at the way Washington works and understand the use of legislative tools and strategy before criticizing every action taken. Americans need to do a little research, comprehend “strategy” votes, understand procedural maneuvering and avoid the far too frequent knee-jerk criticism and condemnation they so easily dish out to our elected officials. At the end of that analysis, if you still believe the actions taken were wrong, by all means criticize with a passion.
However, in the case of the AIG bonus situation, instead of being angry at Congress for casting what I could best describe as a “no-confidence” vote in the administration’s handling of the AIG bonus issue, I believe anger and “outrage” should be focused at the correct players – namely the White House and the Treasury Department.
Facts are a stubborn thing and a quick review of the facts sheds some much needed light on this issue. On March 19th, the House of Representatives passed H.R. 1586, the first legislative response to the public outrage surrounding battered insurance giant American International Group, Inc. It targets a narrow group of individuals, topped by executives and other employees at AIG on the receiving end of $165 million in bonus checks. The final vote was 328-93, surpassing the two-thirds majority needed to pass the bill under suspension of the rules, an expedited procedure that bars amendments and limits debate.
The legislation would impose a 90 percent tax on the bonuses, targeting a narrow group of individuals at about a dozen firms that have received more than $5 billion in federal aid, including AIG. It is important to note that AIG is now 80 percent owned by the federal government and on the receiving end of $170 billion of taxpayer bailout money.
It is equally important to understand that the bonuses were allowed as a result of a Democratic decision to remove a tax proposal similar to the one included in H.R. 1586 from the economic recovery legislation. Instead of including this language in the recovery legislation, House Democrats replaced it with language that specifically prevented restrictions on bonuses paid pursuant to contracts signed before Feb. 11. Leaders stated that this provision was added at the request of the Administration.
So, if you are in the minority and have no control over the legislative agenda and wish to make a point, what do you do? You use every legislative tool you have to send a strong message and in this case that message was a “no-confidence” vote in Secretary Geithner and the Administration for negotiating the exclusion of restrictions on taxpayer funds in the Economic Stimulus legislation.
Should the AIG Bonus legislation, as passed by the House, ever become law, I think there is a good chance it could be declared unconstitutional. And I think lots of smart Republicans and Democrats realized that when they cast their “yes” vote. The ultimate fate of the House bill is not clear. The Senate version of a bonus tax differs in some key ways from that of the House. And while the legislation feels like “justice” to those outraged, it is at best bad public policy and at worst, unconstitutional. But I believe it is so much more than that. I think frustrated members of Congress wanted to send a message.
While I believe a strong message was sent to Administration, a stronger message was sent to those receiving our tax dollars. That message was “finally someone is looking out for us and you should take caution when taking these valuable resources from hard working Americans.”
Surprisingly, that message was sent, received and apparently processed by those on the receiving end.
A final version of the legislation has not been signed into law, but just look at the results so far. First of all, Secretary Geithner recently stated that he will deduct $165 million from the next $30 billion that AIG is slated to receive. Secondly, Edward M. Liddy, the government-installed chairman and CEO of AIG, has asked employees to return portions of their bonuses and said that at least some are doing that. And finally, according to New York Attorney General Andrew Cuomo, nine of the top 10 bonus recipients have already agreed to return the money, and half of the total $165 million may be retrieved.
I would suggest that those “outraged” by Congress’ action take heart and understand that sometimes Congress works the way it was intended. I would argue that in the case of the AIG bonus mess created by the Administration, they did just that. This legislation is bad public policy and hopefully will never become law. But the threat of that possibility has sparked the right outcome.