Outrage

The political and media response to AIG's bonus payments, which appear to be contractually guaranteed, is one of the most outrageous and despicable public acts in recent (and not-so-recent) American history.

Morally, the tax plan is pure wealth confiscation. The 90% excise tax, when combined with state, local, and payroll taxes, is likely to produce a tax rate in excess of 100%. Consider this: during the presidential campaign Barack Obama took umbrage with accusations that his tax policies were a form of socialism, and Joe Biden reacted with disbelief during a TV interview when asked if Obama/Biden's policies were a form of Marxism.

And now the Democratic party wishes to impose taxes that make Obama's tax plans look modest by comparison.

Legally, it is a retroactive tax increase - meaning it is a game of gotcha. There is some debate as to whether it violates the U.S. Constitution's prohibition on Bills of Attainers, which prohibition is designed to prevent the government from imposing specific penalties on specific individuals.

Politically, it represents the rule of the mob. The names of the AIG bonus recipients have been disclosed, which has led to death threats and picketing outside their homes by Acorn "activists".

Is this the activism that Barack Obama cherishes so much?

Worse, the mob may be succeeding in its goals. News reports indicate many of the AIG bonus recipients are returning their bonuses. If you think that is a good thing, consider that now that the mob has won a victory, it will be emboldened for the next issue it seeks to pursue.

Economically, it will reduce the willingness of people to work in the financial sector, particularly TARP firms - making it more likely that the government will lose billions on its TARP investments. The government needs the TARP firms to make lots of money to recoup its investment in them, and the firms need the best talent they can attract and retain to increase profits.

Moreover, the Obama administration introduced today its latest plan to combat the problems confronting the financial sector, after its initial plan a month ago lacked specifics and was poorly received. The new plan entails the government partnering with large investors to purchase assets from banks, with the government providing attractive terms to investors to induce them to participate.

The government will now have to make those terms even more attractive to encourage investors to participate, since the risk of doing business with the government is so high - with the investors having to ask: will they be allowed to keep the profits that they hope to earn from such investments, given the frenzy over the bonuses paid to TARPed firms?

The government will lose far far more money, from further losses on its TARP investments and increased subsidies to investors in the latest bailout plan, then the amount of the AIG bonuses.

And Barack Obama has been AWOL in terms of exerting presidential leadership on the issue. For a man who made his political career by not taking hard stands (witness his huge number of missed votes when he was an Illinois state legislature - if you don't vote, then a constituency who doesn't like your vote can't be upset with you), he now confronts making tough choices.

Yes, he has made tentative comments expressing his concern with the tax plan. But real leadership means speaking out, even if it isn't popular.

The silence is deafening, and disturbing.