All the Rage

Republican heads explode over AIG bonuses.

Congressional Republicans, like their Democratic colleagues, are livid, just livid, about the $165 million in bonuses handed out to AIG employees. They just aren’t sure what to do about it.

As the House prepared to vote Thursday on a bill that would tax the bonuses of employees at bailed-out firms like AIG at 90 percent, Minority Leader John Boehner said he opposed it but told other Republicans to “vote their conscience.” That afternoon, 85 Republicans joined 243 Democrats in voting for it.

The AIG bonus scandal, if we can call it that now, presents something of an existential crisis for the GOP. On the one hand, Republicans can read the same polls as everyone else and may even share the public’s outrage at the injustice of rewarding the same corporate goons who got us into this mess. On the other, they bridle at the notion of interfering with the business of business. Defend the little guy or attack big government? It’s a tough one. Even worse, the solution proposed by Democrats—taxing the bonuses—insults the very essence of conservatism.

The dilemma was clear even before Thursday’s vote, which explains the GOP’s muddled response. On Monday, Senate Minority Leader Mitch McConnell called the bonuses “appalling” and asked the administration to “pursue any and all lawful means of recovering these payments.” He has still not suggested how. In the House, Minority Whip Eric Cantor declared the bonuses “nothing short of an outrage” but refused, even when pressed, to propose a means of recovering them. Other lawmakers were equally wishy-washy. Sen. Jim DeMint criticized the bonuses, but his spokesman declined to specify a method of recoupment. Sen. James Inhofe promised on the Senate floor Monday that “we will do all we can to right this wrong and get these bonuses back.” As of Thursday, the Republicans had not proposed an alternative.

OK, they had. But to call it half-assed would be an insult to the cheek. The proposal looks good on paper: Unlike the Democrats’ solution, which would recoup only 90 percent of the bonuses in a year’s time, Boehner says the Republican alternative would get the entire sum in two weeks. But when I asked a Republican leadership spokesman how the bill would accomplish this, the answer was simple: Tell Treasury to get the money back. No matter that Treasury had already determined it could not legally recoup the bonuses once they were paid out. It needs to try harder. For evidence that recoupment by force is possible, the spokesman pointed to a quote from Sen. Chris Dodd, who said the stimulus legislation allowed Treasury to “reach back to these bonuses or compensation packages when they’re inconsistent with the TARP legislation or in contrary to public interest.” Yet if this were feasible, it’s hard to see why the Treasury Department wouldn’t have done it by now.

Other Republicans have their own pseudo-alternatives. Inhofe’s solution: no more bailouts. “Much of the blame should be directed right here, to the members of this body, the U.S. Senate, to the other side of the Capitol in the U.S. House for voting for the original $700 billion bailout,” he said Monday. If we hadn’t bailed out AIG in the first place, the reasoning goes, we wouldn’t have gotten into this mess. (It’s true—we’d be in a different mess.) Sen. Kit Bond, no fan of government takeovers, said taking away bonuses isn’t enough: “We need to go further.” What does that mean? “1) Identify failing institutions; 2) Remove the toxic assets, protect depositors, and remove the failed leadership; and 3) Return healthy, cleansed banks into the private sector.” Sounds familiar. Wait: Isn’t that exactly what the Obama administration is trying to do?

All this fretting feels not only strained but unnecessary. In voting on the bonus bill, lawmakers are choosing between the wrath of the American people and the wrath of, well, no one.

Practically the only person in America who could conceivably oppose this tax, and who could punish Republicans for supporting the bonus legislation, is anti-tax crusader Grover Norquist. And even he is giving them permission. Norquist fired off a press release Thursday saying he is “strongly opposed” to the bill. But he gave Republicans an out: His no-taxes pledge “did not apply” to the bonus bill, he wrote, because the legislation is “unconstitutional,” a “police action” concocted by Congress, and an “illegal political coverup” designed to distract from Obama’s and Geithner’s mistakes. “This legislation is not what the Pledge ever envisioned,” he wrote. Thus, he freed up anti-taxers to vote however they like.

With that, Republicans lost their last, best excuse for opposing the bonus recoupment. On the bright side, they have another week, until the Senate votes, to think of another one.