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Conservatives &Fiscal Policy Richard Falknor on 20 Mar 2009 01:21 pm

A Bonus of Nonsense From Too Many Republican Solons

UPDATE MARCH 20!  NRO’s Larry Kudlow here in “A Hidden Agenda behind the 90 Percent Tax?” —  “Republicans in the House who just voted for massively high marginal tax rates had better think twice. When financial calm returns to the country, the GOP will not want to be accomplice to a confiscatory tax system that will stifle the economy and push America into decline for decades to come.”

A Bonus of Nonsense From Too Many Republican Solons

The Republican Study Committee (RSC) — the conservative conscience of the US House — gets it right again yesterday, this time on bailouts and bonuses – – by opposing the “retroactive tax punishment bill.”

But many House Republicans didn’t.  Why does this matter? Isn’t this just inside baseball? Why not just bash Democrats and senator Chris Dodd of Connecticut — being ever so politically careful to hold the popular president Obama not too personally responsible? This may make many House Republicans ‘feel good’ as incumbents — it might even poll well in the very short term.   But conservatives are facing a disciplined, street-savvy Hard Left administration with commanding support in both houses of the Congress.  Republicans in Congress need to project a coherent sensible response to concerns about the economy — a thought-through approach that will also gain the confidence of smart business men and women and their free-market advocates.  As some president named Coolidge once said, ‘the chief business of America is business.’

Here is what the RSC said yesterday – –

RSC Chairman Price urges all RSC Members to vote no on today’s retroactive tax punishment bill (H.R. 1586, introduced by Rep. Charles Rangel, D-NY).”

“Two Wrongs Don’t Make a Right.  Most conservatives remain opposed to the massive taxpayer ‘bailouts’ of private organizations.  Without the bailouts, the taxpayers would never have been put in the position of their dollars being doled out for executive bonuses.  But since the bonuses have been distributed, the solution is not to compound the problem with more inappropriate actions by the federal government.  Two wrongs don’t make a right.

Retroactive Tax Increase The tax increase in the bill would be applied to bonuses paid after December 31 2008.   Many conservatives believe that retroactive tax increases are unfair and unconstitutional.   

Confiscatory Tax Rate The legislation creates a tax rate of 90%.  According to the Tax Policy Center, the income tax has not had a tax rate at that level since 1963.  Even before the 1981 tax cut under President Reagan, the top tax rate was 70%.  Some conservatives may be concerned that this legislation establishes the precedent that the tax code can be used to impose confiscatory tax rates on other individuals. 

Bill of Attainder The bill, while not mentioning AIG by name, is clearly meant to punish AIG executives who received high bonuses–a specific group of individuals in response to public outrage over the bonuses.  As Roll Call put it: 

‘House and Senate leaders moved at breakneck speed Wednesday to turn outrage over bonuses at American International Group and other bailed-out companies into retribution, with votes beginning today to impose punishing new tax provisions on the firms.'”

The RSC provides more detail here – –

“Additional Background: On October 3, 2008, Congress passed H.R. 1424, the Emergency Economic Stabilization Act of 2008, by a vote of 263 to 171. The President subsequently signed the bill into law. This legislation was intended to provide a total of $700 billion of purchasing authority for the Treasury Secretary to purchase trouble assets from financial institutions.
On February 13, 2009, Congress enacted H.R. 1, the so-called ‘stimulus’ bill, with House Republicans unanimously opposed to the legislation. This legislation included the following provision:
‘The prohibition required under clause (i) shall not be construed to prohibit any bonus payment required to be paid pursuant to a written employment contract executed on or before February 11, 2009, as such valid employment contracts are determined by the Secretary or the designee of the Secretary.’
This month AIG announced that it would pay out $165 million in bonuses, and the provision noted above in the ‘stimulus’ exempts theses bonuses from the executive compensation standards for TARP recipients established by the ‘stimulus’ bill. Overall, the company has received $170 billion of taxpayer money.”

The National Taxpayers Union (NTU) here sums up the larger problem – –

“Everybody agrees that the bonuses are vulgar and disgusting, but the real problem is the BAILOUTS.”

. . . . .

 “Though AIG’s bonuses were revolting to the millions of taxpayers forced to underwrite them, passing a targeted tax hike to recoup the money is a misguided policy that would set a terrifying precedent for punitive taxation on unpopular businesses or individuals. The problem that needs a remedy is the existence of massive taxpayer bailouts of private organizations in the first place, not the bonuses.

Though anger about the $165 million in bonuses is legitimate, there was hardly a peep from Congress last month when it was announced that Treasury had overpaid for assets by $78 billion. If Congress seeks to protect taxpayers, it should repeal the bailout and stop the bleeding. A “NO” vote on H.R. 1586 will be significantly weighted as the pro-taxpayer vote in our annual Rating of Congress.” (Underscoring Forum’s.)

National Review On Line’s (NRO) Jonah Goldberg explains here – –

Part of the problem with talking about the AIG fiasco is that there’s just too much to get mad about. I’m furious that Obama and the Dems are pretending they were surprised about something they not only knew about for a long time, but are responsible for in the first place. This is Chris Dodd’s doing, for pete’s sake. I’m furious, as Larry Kudlow noted yesterday, that Geithner et al are using AIG as a political money-laundering operation, bailing out Goldman Sachs and other firms by washing it through AIG. I’m mad about all sorts of things, some of which, alas, are necessary but no less infuriating. But I wouldn’t let my anger push me to advocate rescinding constitutional norms or the rule of law to force Dems — or anyone else — from office or take away their rights.

But Democrats are advocating using national rage to do precisely that vis a vis AIG. They’re talking about bills of attainder. Retroactive laws. Punitive taxes (who was that Congresswoman who wanted to fine these executives “1,000%”?). I’m sure some of them are sincere, just as I’m sure some of them are cynically deflecting attention and/or posing as populists. Whatever their motivations, we’re a nation of laws. As Calvin Coolidge said, one with the law on his side is a majority. Those bonuses — as bad as they might be — are just one more toxic debt we took on when we decided to bailout AIG. In fact they’re a tiny, tiny fraction of a fraction of debts we’re taking on thanks to this mess and Obama’s grand plans. But guess what? It’s always going to be ugly when the government takes over an industry — because government is very, very bad at taking over businesses.

It seems to me that if you think an “anything goes” business culture is a problem — and it is — an “anything goes” political culture is even worse. But that’s where we’re heading with this nonsense.” (Underscoring Forum’s.)

Former Federal prosecutor Andy McCarthy goes to the root of the matter here – –

“. . . [T]he bonuses certainly appear to be bad deals which government, eyes open, got us into — just like a bad treaty or any other bad law.  In our system, the remedy for that is to hold the policy making officials accountable at the ballot box — not to have the policy making officials abuse the enormous power with which they’ve been entrusted to try to expunge their fingerprints from the choices they’ve made, or turn the beneficiaries of their bad policies, ex post facto, into crooks.  The rule of law recognizes its limitations.  In our system, policy errors that affect everyone are the stuff of politics, not lawsuits and law tricks.” (Underscoring Forum’s.)

The moral of the story for Maryland and Virginia conservatives? 

Revisit the votes of your Republican U. S. Representatives for or against the TARP bailout last October here; then their vote yesterday here for or against what NTU calls “a targeted tax hike to recoup the money [which] is a misguided policy that would set a terrifying precedent for punitive taxation on unpopular businesses or individuals.”

Among Maryland and Virginia members, only Maryland Representative Roscoe Bartlett got it right both times although, among current Virginia Republican House members, Mr. Forbes, Mr. Goodlatte, and Mr. Wittman at least voted against the bailout in October. 

Mr. Wolf, the venerable appropriator of taxpayer monies, and Mr. Cantor, the Republican Whip, seem to lose their fiscal way by first voting for the October bailout which kicked off this perilous TARP scheme, then voting for a “retroactive tax punishment bill.”

Maybe the two should spend more time in remedial economics and constitutional law and less on state party intrigues?


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