Time's Jay Newton-Small asserted that Sen. Chris Dodd's proposal for a 100 percent tax on AIG bonuses, "may have been overcompensation, so to speak, on Dodd's part," adding, "The National Republican Senatorial Committee was quick to point out that Dodd had amended the stimulus plan to make a specific 'exception for contractually obligated bonuses agreed on before Feb. 11, 2009.' " But Newton-Small did not point out in response to the NRSC's attack on Dodd that several Republican senators reportedly said in February they oppose any government restrictions on executive compensation.
In a March 18 Time article, Jay Newton-Small asserted that Sen. Chris Dodd's (D-CT) proposal for a 100 percent tax on AIG bonuses, "may have been overcompensation, so to speak, on Dodd's part." She added: "The National Republican Senatorial Committee [NRSC] was quick to point out that Dodd had amended the stimulus plan to make a specific 'exception for contractually obligated bonuses agreed on before Feb. 11, 2009.' That exception gives cover to the AIG bonuses." But Newton-Small did not point out in response to the NRSC's attack on Dodd that several Republican senators reportedly said in February they oppose any government restrictions on executive compensation.
The Obama administration announced on February 4 several conditions for future recipients of government funds from the Troubled Asset Relief Program (TARP), including a cap of $500,000 on senior executives' compensation (other than restricted stock) for those companies receiving "exceptional assistance." On February 6, Ryan Grim reported at the Huffington Post that, in response to that announcement, several Republican senators expressed their opposition to government compensation caps:
Senate Minority Whip Jon Kyl (R-AZ) blamed the "tone deaf" bankers for creating the political environment that allows Obama to call for a cap.
"Because of their excesses, very bad things begin to happen, like the United States government telling a company what it can pay its employees. That's not a good thing in America," Kyl told the Huffington Post.
"What executives have done is troubling, but it's equally troubling to have government telling shareholders how much they can pay the executives," said Sen. Mel Martinez (R-FL).
Sen. James Inhofe (R-OK) said that he is "one of the chief defenders of Obama on the Republican side" for the president's efforts to reach across the aisle. But, said Inhofe, "as I was listening to him make those statements I thought, is this still America? Do we really tell people how to run [a business], and who to pay and how much to pay?"
Sen. Sam Brownback (R-KS), though, said the underlying reasoning has merit. What applies to welfare recipients ought to also apply to corporate welfare recipients, he said.
"I think it does apply to that," he said. "People are livid about these big bonuses and if the groups want to take government money it seems they should be able to have some limits on these bonuses."
"If they don't need it, don't want it, fine. Don't take it," the Kansas Republican added.
Other Republicans disagreed. "It's still government running business," Inhofe said.
"It's a leap, because the executive at the bank is a free agent who can leave the bank and go to work someplace else," said Sen. Bob Bennett (R-UT) of the welfare comparison. "You run the risk of having a brain drain at the bank of their top talent."
Bennett said, "Some of the things some of these bank executives have been doing demonstrates they have a tin ear. At the same time, I'm generally troubled by wage and price control, no matter how logical it may appear."
The objection to the government intervention in salaries is rooted in the Republican belief that government is inherently ineffective. "If Congress can run a financial institution, it belies everything I've seen in this body. Government does not do a good job running private institutions," said Sen. Kit Bond (R-MO).
Sen. Tom Coburn (R-OK) agreed: "If we do such a good job of running the federal government, what business do we have telling them how to run the banks?"
The GOP is also concerned that setting compensation limits could put the country on the road to serfdom. "This is just a symptom of what happens when the government intervenes and we start controlling all aspects of the economy. This is just the first piece," said Sen. Jim DeMint (R-SC). "If you accept the fact that the government should be setting pay scales in America, then it's hard not to go after these exorbitant salaries. But I think it's a sad day in America when the government starts setting pay, no matter how outlandish they are."
"What are we going to do next?" wondered Martinez. "Tell a company if they get TARP money where there [sic] offices should be? They should be renting maybe from an abandoned federal building?"
From Newton-Small's Time article, headlined "The AIG Bonuses: Getting Mad and Getting Even":
Senate Banking Committee chairman Chris Dodd suggested one of the more severe solutions: that the government tax 100% of the bonuses, thereby recouping the losses. It may have been overcompensation, so to speak, on Dodd's part. The National Republican Senatorial Committee was quick to point out that Dodd had amended the stimulus plan to make a specific "exception for contractually obligated bonuses agreed on before Feb. 11, 2009." That exception gives cover to the AIG bonuses -- though it should be noted, as Dodd's aides do, that the Senator did not know about the AIG bonuses at the time the bill was being drafted. (Dodd is facing a tough re-election battle next year in Connecticut. He was the largest recipient, at $103,100, of AIG political contributions in 2008, according to opensecrets.org. The second largest recipient was President Barack Obama. John McCain and Hillary Clinton also received substantial amounts.)