Archive for March, 2009

The AIG Witch Hunt

Thursday, March 19th, 2009

The AIG witch hunt is a sickening example of how corrupt politicians amass power and threaten individual liberty. Venting anger about the economic disaster may feel satisfying, but this witch hunt is dangerous for at least two reasons. First, it distracts the public from the fraud, waste, and abuse that the Federal Government has committed against the American people, and second, it generates popular support for taking property from unpopular individuals.

Since at least 1970, the Federal Government has been giving away tax dollars to corporations in ever increasing amounts. For a chronology of this corrupt practice, see http://www.propublica.org/special/government-bailouts. Just over four weeks ago, however, the Federal Government took this practice to new depths, siphoning $787 billion from taxpayers to “stimulate the economy.” Naturally, special interest groups sent a swarm of lobbyists to secure their share of the loot. Soon after, the President asked for $3.9 trillion ($1.75 trillion more than the country’s projected receipts) to pay for his programs during his first year. Despite this gross misconduct, our clever political leaders have successfully distracted attention from their own misdeeds by inciting outrage over $165 million of retention bonuses.

As galling as it may be to those of us who aren’t on the AIG gravy train, by paying the retention bonuses AIG is simply honoring a contractual obligation. Isn’t that the honest thing to do? Don’t our ideas of honor and justice encourage people to fulfill promises and pay what they owe? Nevertheless, legislators are calling for blood and the mass media happily assists by goading the public into a frenzy.

Presently there is no evidence that AIG has done anything unlawful by paying these bonuses. Yet our distinguished political class protests that AIG should never have paid out, and suggests imposing a 90 to 100% tax on the individuals who received the bonuses to recoup the money.

To protect individual liberty, the Constitution strictly limits government action and lists certain rights that the government must not violate. Prominent among the rights protected by the constitution is the right to be protected in the possession of property. The Fifth Amendment commands “No person shall … be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use without just compensation.”

If the Federal Government were to use its power to take back the bonus payments, it would undermine the Fifth Amendment’s protection of property rights. No matter how the statists decide to spin it, such an exercise of power would in essence be the use of force by government to confiscate the lawfully owned property of the targeted individuals without due process of law. In effect, such action would amount to a declaration that the property rights of individuals who are politically unpopular are no longer protected. I think that would be a mistake.