So, why shouldn't we govern out of anger, exactly? I've heard a number of politicians, including President Obama, say that we shouldn't govern out of anger. However, they never make a case against governing out of anger--they just say we shouldn't do it. Further, their calls not to govern out of anger are confusing when they seem to actually be governing out of anger themselves.
For example, consider Representative Emanuel Cleaver who regrets his vote on the bonus tax for companies receiving government money.
Cleaver voted for the tax. He said he felt "uncomfortable" about the impending vote all day. He spoke to colleagues about his concerns.
And then he caved.
"I joined the cowards," he said, referring to the 327 other House members who backed the bill; 243 Democrats, 85 Republicans. "Maybe this is a confession."(...)
"What we did was to tell the financial services industry, if you choose to work with us, we will demean you at every opportunity," Cleaver said.
Obama also asked Congress to budget for a $250 billion place-holder fund that's intended to pay for a third round of bailout money for struggling banks -- but that notion is dead on arrival in Congress, as Senate Majority Leader Harry Reid (D-NV) acknowledged this afternoon.
"[I]t's not in there, and I have no problem with that," Reid told reporters.
The bonus scandal outrage was almost certainly the final straw that broke the back of the third bailout. Given that it almost killed the second bailout as well, any notion that the bonus scandal was simply a side issue, faux outrage, or a smokescreen should be safely dead by now. It just saved us $250 billion.
Passing more bailout funds through the budget was the only chance Congress would ever approve more. Now, that threat is gone. And it wouldn't have been possible without red-hot, blinding, widespread outrage over the bonuses. Score one for anger!
The Wall Street Journal has an article up about the Obama administration's outreach efforts to Wall Street. Among the cute stories about hashing out the housing plan over pizza with banking executives, comes the underlying story of how the bonus tax threatened the Wall Street bailout itself. Far from being a side issue or a petty amount of money, the message of the banking industry to the Obama administration was clear: give us our bonuses, or we will blow up the economy. From the story:
Meanwhile, Treasury Secretary Timothy Geithner and his colleagues worked the phones to try to line up support on Wall Street for the plan announced Monday. They told executives they don't favor using the tax code to retroactively penalize specific individuals who had received bonuses, according to people familiar with the calls. They asked officials to sign on "in pencil, not ink," and to "validate" or "express support" for the plan, these people say.
Some bankers say they turned the conversations into complaints about the antibonus crusade consuming Capitol Hill. Some have begun "slow-walking" the information previously sought by Treasury for stress-testing financial institutions, three bankers say, and considered seeking capital from hedge funds and private-equity funds so they could return federal bailout money, thereby escaping federal restrictions.(...)
Bankers were shell-shocked, especially when Congress moved to heavily tax bonuses. When administration officials began calling them to talk about the next phase of the bailout, the bankers turned the tables. They used the calls to lobby against the antibonus legislation, Wall Street executives say. Several big firms called Treasury and White House officials to urge a more reasonable approach, both sides say. The banks' message: If you want our help to get credit flowing again to consumers and businesses, stop the rush to penalize our bonuses.
There are a couple of extremely noteworthy items here. At the top of the list is the way that the financial services industry is directly threatening to blow up the entire private-public bailout plan unless they get their bonuses. They don't want any new regulations, any limit to their compensation, and even any angry rhetoric. They just want the government's money, no strings attached. And if their demands aren't met, they will destroy the entire country. It is pure economic terrorism.
There are three good reasons why the bonus tax that will eventually end up on President Obama's desk should be as broad as possible:
Passing Constitutional Muster: Lawrence Tribe has written that, in order for a bonus tax to be constitutional, it must be "sufficiently general to avoid classification as a measure targeting solely a closed class of identified and named individuals." The more narrow the bonus tax legislation, the less likely it will be ruled constitutional. As such, making the bonus tax as broad as possible is necessary to the survival of the legislation.
Addressing a broad culture of greed and excessive executive compensation: I agree with President Obama that the bonus scandal is a "a symptom of a larger problem," based on a broader "culture of greed.". As such, if the bonus tax that is aimed only at AIG, then it simply is not good enough legislation. The bonus tax has to make a broad dent in broader problem of excessive financial services industry employee compensation, which is directly connected to our ever widening income inequality. This is one of the best opportunities I can ever remember to pass such a law.
If the bonus tax legislation it is made as broad as possible and executed properly, it can accomplish quite a bit of good.
As such, signs that the bonus tax that passed the House is not as broad as possible are worrying (more in the extended entry):
Because virtually all Wall Street employees receive bonuses -- in many cases making up the majority of their compensation -- firms would rather back out of the government's rescue programs than be subject to such harsh tax measures, industry officials said. The banks could still survive, but without federal assistance they would not have enough capital to restart lending, which is considered central to reviving the economy.
Shorter financial services industry: we won't help you fix the economy, unless you give us our huge bonuses.
That is a direct threat from the "industry officials" used in the piece. They consider receiving their enormous bonuses to be more important than helping the economy. If they don't get their bonuses, they would rather the whole thing burn down.
The good news is that this is not much a threat. Anyone who pulls out of the bailout program because they won't get huge bonuses should not have been in the bailout program in the first place. Giving hundreds of billions of dollars to people who consider personal enrichment more important than helping the economy is a really, really, really bad idea. What do we think people with such attitudes will do with our hundreds of billions of dollars? The best bet is that they will use it to get rich, rather than help the economy.
The bonus tax will weed out the people who only want to get rich, and have no interest in helping the economy. If this means it weeds out too many people for the private-public partnership plan to work, then that is fine, too. At that point, the only option left will be temporary nationalization, and we will still have the money to pull it off. To that effect, the scandal delayed the announcement of the public-private partnership program, and the insolvency "stress tests" are already underway.
This bonus scandal might end up handing us temporary nationalization. It is far from a guarantee, but it is a possibility. If it does, it will prove to be the best scandal that ever happened to a Democratic administration.
"Today's vote rightly reflects the outrage that so many feel over the lavish bonuses that AIG provided its employees at the expense of the taxpayers who have kept this failed company afloat. Now this legislation moves to the Senate, and I look forward to receiving a final product that will serve as a strong signal to the executives who run these firms that such compensation will not be tolerated.
In the end, this is a symptom of a larger problem - a bubble and bust economy that valued reckless speculation over responsibility and hard work. That is what we must ultimately repair to build a lasting and widespread prosperity."
Yes! The make him do it dynamic strikes again. Hope stays alive. Government stays responsive.
Better news: the majority of Republicans voted against the bill. The current count is 87 against, and 85 in favor. Republicans were running 2-1 against the bill for a while, but are now changing their votes in the face of overwhelming passage.
This is going to start turning things around. This is the side we need to be on. Real action is being taken to recoup the bonuses, and Republicans were the ones opposed.
Six Democrats voted against the bill. It will be interesting to see who they are. No matter what district they are from, their constituents are not going to like this.
"People are not sitting around their kitchen tables thinking about AIG," Axelrod said. "They are thinking about their own jobs."
Wow. That is a lot of cognitive dissonance, given that President Obama himself said that people were "right to be angry, I'm angry," over the bonuses. Are people angry, or don't they care? Depends on if you are listening to President Obama or to his senior advisors, I guess.
Look, people are angry about their jobs, and their health care, and they are taking out that anger on the bonuses. It is a fairly simple causality chain that should be obvious to any political observer:
People are pissed about the economy being in a recession, because it makes their lives worse.
People blame Wall Street for the recession. They are right to do this--it ain't a secret who caused the problems we face.
People don't like that, to fix the recession, more government money is being spent on Wall Street than on average Americans.
When Wall Street grows even richer as a result of the bailout, but the lives of average Americans are only getting worse despite the bailout, then it makes most people really, really, really fucking angry.
Americans aren't mad at the bonuses in and of themselves. Americans are angry about the bonuses because they are angry about the recession. Because they are angry at Wall Street. Because they are angry at the bailout. The specific anger at the bonuses is just a vehicle for other, broader anger right now. To not recognize this is an extraordinary level of tone-deafness. There is a direct, obvious connection between anger over the bonuses and people being worried about their jobs.
As much as many political observers like to think otherwise, people are not dumb. Right now, Americans can quickly draw a connection between their economic condition and people on Wall Street getting rich. If you think that people are sitting around saying "I am worried about my job, so I wish people would stop talking about Wall Street getting rich, because I see no connection between the two whatsoever," then you are just blind. Worse, you have basically turned into the same people who defended the Bush administration for losing $12 billion in cash in Iraq, because supposedly that wasn't really much money.
Americans are pissed about the bonuses because they are pissed about the recession. Because they are pissed at Wall Street. Because they are pissed a a bailout they were told was necessary, but that only seems to helping make the rich get richer. If that isn't obvious to you, it should be. Democrats and progressives are screwed if we don't catch this populist wave.
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