Sunday, December 13, 2009


On why the Obama administration would not tax Wall Street bonuses... I agree with the first and last thoughts.

Cognitive capture. In Calvin Coolidge’s day, people in Washington believed that what was good for General Motors was good for America. Today, many insiders, including some of Obama’s economics advisers, believe that what is good for Goldman Sachs and Citigroup is good for America. The guts of this (dubious) argument is that we don’t manufacture very much these days and our competitive advantage is in things like entertainment, information technology, and financial engineering. Therefore, anything that hobbles Wall Street threatens the future prosperity of the country.
Financial capture. Let’s face it, Obama and the Democrats raised tons of money from Wall Street and Silicon Valley, both places where stock options and big bonuses are a way of life. To turn around and impose a fifty per cent surtax on the donors and fundraisers that helped to finance last year’s victorious Presidential campaign would be a risky move going into another election cycle—one in which the Republicans could well regain control of Congress. At least, that is how the White House and DNC bigwigs would see it.
Centrist capture. Obama is a prisoner of his own moderation. When faced with a choice, he instinctively hews to the middle ground. Since imposing a punitive surtax appears to be a proposal out of left field, he will react against it. The only way he would go for it is if it were presented to him as the middle option between doing nothing and lining up the bankers and shooting them. Since nobody except the odd straggler from the Red Brigade has proposed the latter option, the idea of taxing bank bonuses fails to meet the centrist criterion and is likely doomed.

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