No Runny Eggs

Over the weekend, I asked Rep. Paul Ryan’s office for an expansion on his reasons to vote for the 90% TARP tax. This statement sent to me this morning isn’t exactly what I was hoping for:

Wisconsin’s First District Congressman Paul Ryan voted in favor of H.R. 1586, which passed the U.S. House of Representatives by a vote of 328 to 93. His statement follows:

“I share the outrage of those I serve. At a time when job losses are mounting and difficult days lie ahead for our nation’s economy, the last thing Congress should do is waste taxpayer dollars. The same individuals who drove AIG into the ground should not be rewarded with bonuses on the backs of taxpayers. Efforts to stabilize the financial system to get credit flowing again and protect jobs must not be diverted to subsidize failure. If the Janesville and Kenosha auto workers were forced to take pay and benefit cuts as a condition for TARP funding, then surely the AIG executives who helped create this crisis should not receive taxpayer financed bonuses.

This bill was rushed through the U.S. House of Representatives in order to cover up the fact that the stimulus legislation, which passed earlier this year, specifically made these bonuses possible. The truth is these bonuses would have been avoided if Senator Christopher Dodd (D-CT) and the White House had not removed the provision blocking them. The American people have a right to know how these taxpayer-financed bonuses occurred in the first place. I voted in favor of this bill because I believe these taxpayer-financed bonuses should never have been allowed.

The critical issue of the bill’s constitutionality, however, must be fully explored. I have received contradictory opinions from legal experts on this matter, and Congress should have allowed more time to deliberate and settle this important issue. Unfortunately, this bill was rushed to the floor in the same manner that the stimulus legislation was considered which created this mess in the first place.”

Where do I begin? Let’s start at the top. While the GM and Chrysler were required to renegotiate their union contracts, those talks have not yet yielded a final agreement. I will note that one of the few concessions the UAW gave Ford, which is expected to be the general framework for the new agreements with GM and Chrysler, was the suspension of bonuses.

There were points at which the government “could” have required AIG to not pay bonuses. Rep. Ryan pointed out one of them. Another point was to make it a part of TARP back in October. A third was when the Federal Reserve first started bailing out AIG. I would still consider that odious, just as I consider the bailout of GM and Chrysler odious, with any demand from the Fed Reserve just a bit less so. It would, however, have had the advantage, at least in September and depending on how it was written, at the other points, of being something that AIG voluntarily entered. That is something that can be said for GM and Chrysler; they took their federal money knowing they had to get concessions out of the UAW.

Instead, Treasury Secretary Timothy Geithner rammed home the bonuses when he was head of the New York Federal Reserve bank, the originator of the first of the infusions of cash into AIG. Instead, Sen. Chris Dodd (D-CT) inserted protection of the bonuses into the last of the infusions of cash into AIG.

Yes, it is a punitive tax. It does not apply just to future bonuses, but those paid out on January 1, 2009. As James Taranto pointed out, in high-tax locales, the cumulative tax rate would be over 100%. It is so bad that even the Obama administration has misgivings about using this particular vehicle.

I can’t put it better than Sen. Judd Gregg (R-NH): “People are disgusted and outraged, as they should be. But let’s not overreact in a way that basically has the Congress grabbing its pitchforks, and charging up the hill, and abusing what is a core authority of a government, which is the authority to tax its people.”

Regarding the bill’s constitutionality, or lack thereof, it is rather easy to apply the “duck” test. If it looks like an ex post facto bill of attainder, waddles like an ex post facto bill of attainder, and quacks like an ex post facto bill of attainder, I expect the courts will call it an ex post facto bill of attainder.