AIG and ideology

Democrats and Republicans are vying for the high ground on the AIG imbroglio. Here’s a scorecard as I see it.

1. Democratic Senator Chris Dodd fumbled by pulling safeguards out of the stimulus bill that would have prevented the mega-bonuses. He’s in political trouble already and this doesn’t help.

2. This situation heightens concerns about Treasury Secretary Tim Geithner, who has so far failed to live up to the ‘best and brightest’ standard set by President Obama.

3. In practical terms, Democrats have found a way to fix the problem, by levying a 90% tax on big bonuses paid to executives at government-subsidized companies.

4. Republicans are struggling mightily with that practical solution, because a) it offers Dems a way off the hook and b) it uses taxes to solve a problem.

5. Conservatives are now ideologically divided on the issue, with some insisting that AIG should be free to pay its execs whatever the company wants (that’s capitalism, folks) and others voting with the Dems to claw back the cash.

In the short term, the AIG mess hurts Democrats, who benefited mightily from AIG campaign contributions.

But in the long term, if Dems show that they’re flexible and practical enough to fix problems like this, they emerge relatively unscathed.

Tags: economy