In the Great Depression, President Herbert Hoover raised marginal tax rates to 63%, and went on a deficit spending binge. He also signed the Smoot-Hawley tariff, which helped turn a recession into the Great Depression by triggering a trade war with other countries.
Obama is on the same path. His deficit-exploding $800 billion stimulus package blocked 97 Mexican truckers from U.S. roads. That NAFTA violation “caused Mexico to retaliate with tariffs on 90 goods affecting $2.4 billion in U.S. trade.” The CBO admits that the stimulus package will actually shrink the economy in the long run.
Yesterday, Obama praised the House’s passage of a bill to impose a 90% tax on bonuses at banks that received federal funds. He did so even though some of those banks are healthy and accepted federal TARP money under federal pressure so that unhealthy banks that also took TARP money would not be stigmatized. The bill passed in the furor over bonuses that AIG, being bailed out by taxpayers, paid to its employees. (Republicans only wanted to block the bonuses at AIG, which is a major donor to liberal politicians like Obama and the corrupt Sen. Chris Dodd (D-CT); Democrats successfully extended the tax to major companies receiving TARP money).
The AIG bonuses were publicly disclosed in November, as Michael Kinsley and others note in the Washington Post today. The Administration became aware of them and signed off on them long before a public furor arose over the bonuses, at which point Obama switched positions and began cynically condemning the bonuses to curry favor with the public. (Treasury Secretary Geithner has steadily backtracked about what he knew and when, first falsely claiming that he didn’t know of the bonuses until less than a week before they were paid; then falsely claiming he knew of the bonuses but didn’t know quite how big they would be — even though AIG’s public SEC filing last November predicted the full amount of bonuses ultimately paid; and even though the Administration was reminded yet again by a Congressman in a committee hearing on March 3 about $163 million in bonuses to be paid “in the coming weeks“)).
The Administration now admits that it itself suggested to Senate banking committee chairman Chris Dodd (D-CT) the very language Dodd added to the stimulus package that shielded AIG’s bonuses. “After explicitly denying responsibility, Senate Banking Committee Chairman Christopher Dodd eventually admitted to including the exception under pressure from the administration,” notes a columnist in the Washington Post.
Meanwhile, AIG’s current employees, who don’t deserve big bonuses, but are needed in their current positions to clean up the complicated mess left behind by AIG’s managers (and unload the arcane financial instruments in its portfolio), are receiving death threats aimed at them and their families as a result of all the demagoguery by disingenuous politicians claiming to be shocked by the bonuses. The politicians are feigning surprise even though many of them (like Elijah Cummings (D-Baltimore)) have known of the bonuses since as far back as November 27. AIG employees’ homes are being staked out by left-wing demonstrators.
If the Administration didn’t want AIG employees to receive their (mostly undeserved) bonuses, it should have quietly blocked them by putting limits in prior legislation it helped pass — not publicly demonized them, which will drive them away, leaving AIG (which is now 80-percent government-owned) losing even more money at taxpayer expense. Bonuses cost the taxpayers money; but so do death threats, which discourage talented employees from working at banks and companies taken over by the government.
Some of the employees subject to the 90 percent federal income tax on bonuses passed by the House will actually end up with negative pay, not only receiving nothing after taxes, but having to pay countless thousands of dollars they don’t even have. This is because they will have to pay other income-based charges on top of the 90 percent rate, including but not limited to Medicare tax (1.45%), state income taxes (up to 10.3%), and other legal obligations, such as family-court orders based on pre-tax income (in Massachusetts, divorced fathers pay 25% of pre-tax income, for just one child, in child support! Child-support payments are not tax-deductible. Some courts have formulas for alimony that are based on pre-tax income, ranging up to 30% of gross income.).
The combination of death threats and negative pay will discourage talented employees from working at AIG and other companies being propped up by the government, resulting in even greater taxpayer losses.