Monday, March 23, 2009

At Least a Crumb

The bonus debacle had prompted the approval of a bill by the US House of Representatives to impose a 90% tax on bonuses awarded by companies bailed out by the US government.

But President Barack Obama said such a measure would be unconstitutional.

Practically the only good thing I've been able to say about Obama since the election is that, for all we know, McCain would have been even worse. So it's nice to see that, on at least one small issue, he is on the right side. He is, of course, willing to demagogue, along with practically everyone else in Washington, over the financial crisis. He is also willing to use it as an opportunity to spend enormous amounts of borrowed or printed money doing things that he and his political supporters approve of. But at least he has enough honesty and sense to recognize the legal problems with using Congress to punish people for behaving in a way that is unpopular but not illegal.

Even if you call it a tax.


Anonymous said...

Right, I believe the solution is to not target a group of individuals like that, but rather tax all bonuses of everyone at 90%. That should help the economy out don't you think?

Anonymous said...

Why are people surprised that rewarding irresponsible people with money leads to more irresponsible behavior?

If they went bankrupt, there would be no bonuses.

Anonymous said...

Congress is almost making me feel sympathy for the financial crooks, and that isn't easy.

The rule of law has been thrown out the window for the last year, since the Bear Sterns bailout.

montestruc said...


You might want to give this a look if you have not already.

David Tomlin said...

I agree the bill is bad, and I hope it doesn't become law. The tax code is too blunt an instrument to resolve this issue fairly.

But I'm not sure it's unconstitutional. In particular, I dispute the assertion that the bill punishes. Its intent is to prevent taxpayer funds from being diverted from their legislated purpose, which was to prevent a systemic financial breakdown. No one claims that failure to pay these bonuses would trigger such a breakdown.

It's often pointed out that absent bailout the bonus claimants would likely be awaiting the decision of a bankruptcy court. And I think that's the real problem. Congress is usurping a judicial function, but it is that of a bankruptcy court, not a criminal court.

I'm not lawyer, but it seems to be generally agreed that 'attainder' has always been understood to mean criminal punishment. So, bad bill, but not unconstitutional, at least not under the attainder provision.

Anonymous said...

Didn't you people get the memo?

We're living in a kleptocracy now, so of course this is constitutional. Besides, what's constitutional is whatever the people in black dresses say is constitutional.

DerekL said...

"I'm not lawyer, but it seems to be generally agreed that 'attainder' has always been understood to mean criminal punishment."

How are fines not criminal punishment?

Troy Camplin said...

At lest he did recognize something to be unconstitutional. Almost nothing else he has done is constitutional, so I don't know why he's picking this particular battle. I suspect it might have something to do with the fact that it was his Treasury dept. that pushed for the change that allowed the bonuses in the first place. Let's not get anyone looking to hard into that fact.

David Tomlin said...

How are fines not criminal punishment?

Loaded question fallacy.

David Tomlin said...

Practically the only good thing I've been able to say about Obama since the election is that, for all we know, McCain would have been even worse.

Does that mean you are officially disappointed in your pre-election optimism about Obama's economic policies? Or is it still too soon to say?

Glen Greenwald has a good round-up of Obama pluses and minuses.

It's from a liberal perspective, but except for matters involving federal spending I mostly agree with it.

Anonymous said...
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montestruc said...

In addition to being a bill of atainder would it not also be an ex-post-facto law at the same time?

By that I mean change of the tax code on payments already contracted and possibly paid.

David Tomlin said...

If the bill becomes law, it will probably be challenged in court on several grounds - bill of attainder, ex post facto, impairment of contracts, and taking of property without due process. For each of the grounds opposing counsel will have counter arguments.

A bit of googling will probably turn up several articles by legal experts arguing the various points.

It looks like the bill will die quietly in the Senate after the furor is past. The bicameral legislature blocks bad legislation in response to transitory populat enthusiasm, just as Madison envisaged.