House passes AIG tax bill. What now?

More

It passed 328-93, with mostly Republic opposition. And the Republic opposition seems to have been motivated less by any principled objection to the bill than by a vaguely jealous sense that the Democrats shouldn't get credit for spanking AIG: The AP says: "Minority Leader John Boehner, R-Ohio, said the bill was 'a political circus' diverting attention from why the administration hadn't done more to block the bonuses before they were paid." But the circus certainly preceded this bill, and I'm sure it will tumble on for some time.

So where does it go from here? A few theories:


1. The strongly cynical view is that this bill will have disastrous consequences for every company that has received a government bailout, and any company that might consider taking a government bailout in the future. If you buy the arguments that labor markets in these industries are still competitive, then it will make it harder for companies that accept large amount of bailout funds to attract and retain employees. This will result in poorer performance by companies that the government de facto owns: it will be propping up increasingly vitiated and labor-starved institutions.

2. The mildly cynical view is that the bill won't really matter a great deal. If you restrict compensation for companies that accept $5 billion or more in TARP funds, then you will increase the number of companies who accept $4.9 billion bailouts. If you restrict bonus compensation for employees with incomes in excess of $250,000, then you will decrease the amount of "bonus" compensation and increase the amount of "salary" compensation. This is roughly analogous to the position that water runs downhill.

3. The mildly optimistic view is that the mildly cynical view is correct, but that's okay: the bill succeeds in satisfying populist ire with little negative impact and makes the government look effective. Evil corporations are chastened; Congress rides off on a white horse. Maidens swoon; children toss flowers.

4. The strongly optimistic view is that the compensation in question was preposterously inflated to begin with and will now shoot down to a more more rational level. This is a net gain for the companies, who were hamstrung by crazy compensation arrangements even if they didn't know it. It is also a victory for fairness and common sense. Maidens swoon; cherubic children toss flowers.

I think I'm a mild cynic.

But that's judging the bill solely by its immediate consequences. I still think, as I wrote in the last post (and in too many others), that the theory and origins of this bill are questionable, for four reasons: (1) The law is being pushed through quickly and we haven't had time to think about the unintended consequences; (2) It is retroactive, and we should want to discourage laws that are retroactive; (3) it targets an extremely small portion of the population, and we should discourage laws that are not general in application; and (4) it is, at least in part, motivated by a punitive impulse that isn't necessarily the best thing for our politics.
   

Jump to comments
Presented by

Conor Clarke is the editor, with Michael Kinsley, of Creative Capitalism. He was previously a fellow at The Atlantic and an editor at The Guardian. More

Conor Clarke is the editor, with Michael Kinsley, of Creative Capitalism, an economics blog that was recently published in book form by Simon and Schuster. He was previously a fellow at The Atlantic and an editor at The Guardian. He is also on Twitter.
Get Today's Top Stories in Your Inbox (preview)

The Time JFK Called the Air Force to Complain About a 'Silly Bastard'

51 years ago, President John F. Kennedy made a very angry phone call.


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

Adventures in Legal Weed

Colorado is now well into its first year as the first state to legalize recreational marijuana. How's it going? James Hamblin visits Aspen.

Video

What Makes a Story Great?

The storytellers behind House of CardsandThis American Life reflect on the creative process.

Video

Tracing Sriracha's Origin to Thailand

Ever wonder how the wildly popular hot sauce got its name? It all started in Si Racha.

Video

Where Confiscated Wildlife Ends Up

A government facility outside of Denver houses more than a million products of the illegal wildlife trade, from tigers and bears to bald eagles.

Video

Is Wine Healthy?

James Hamblin prepares to impress his date with knowledge about the health benefits of wine.

Video

The World's Largest Balloon Festival

Nine days, more than 700 balloons, and a whole lot of hot air

Writers

Up
Down

More in Politics

Just In