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Thursday, March 19, 2009

More on the AIG Bonuses

Greg Mankiw notes that the AIG bonuses, which seem to be such a focus of Congressional leaders these days, amount to 0.001% of GDP - a pretty trivial amount for Congress to be spending most of its time on.  Of course, he also notes that it might be a good thing Congress is spending so much time on it, since when they pass "more important" legislation, they usually screw things up and the economy tanks.

Dianna Furchtgott-Roth weighs in on the plan to tax away the AIG bonuses, noting that the plan is unconstitutional and dangerous, and instead Government should get out the business of taking over the financial sector:

Members of Congress are also discussing emergency legislation to tax away part or all of the bonus. This would set a precedent—corrupting if not unlawful—of using the IRS and the tax code as weapons of the state to go after individuals whom the Administration and Congress want to punish. Such sanctions might amount to ex post facto punishment, legislation that makes unlawful behavior that was lawful when it occurred. The Constitution prohibits such legislation. Even President Nixon, who had an enemies list, never dreamed of this.

The wave of public sentiment against the AIG bonuses presents the government with a choice. It can try to run companies that receive bailout funding in a way calculated to win public approval, micromanaging every detail. To do that successfully in a business sense is impossible. The government cannot even manage its own federal agencies efficiently, with episodes of wasted resources surfacing regularly.

Better, the government should get out of the business of rescuing ailing companies.

Bingo.  As I told my Senator/broker - please sell my AIG shares.

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