Now, the regular-Joe public is rightly pissed off. They see their homes being taken away, their jobs eliminated, and their retirement savings evaporating into the ether. And now, their tax dollars are going to pay the bloated salaries not only of current AIG fatcats, but already-departed ones as well. The various AIG evasions have fallen flat. The notion that these are retention bonuses does not hold water, since a good portion of them were for ex-employees. And the self-righteous puffing that this is a nation of laws and legal obligations, necessitating the honoring of contractually-agreed upon payouts, has been soundly skewered by Andrew Cuomo and others. Contracts are renegotiated all the time, especially when extraordinary circumstances apply. Auto-workers were forced to restructure their contracts and benefits in order to receive federal money, so the assertion that AIG's hands were tied in regards to these bonuses is absurd.

But a more disappointing aspect of this AIG mess is the grandstanding, finger-pointing, and dishonest jaw gaping that our politicians (including our President) are doing. Soon after the bonus news hit, it also became clear that everyone and their mothers had know about them for about a year. Congressmen and Senators who had voted for the stimulus plan which included these bonuses had to pretend that they did not actually read the portion of bill concerning the AIG payouts. GOP pols then rightly pointed out that, just as they had said, the stimulus bill was bloated and sprawling, and mostly unread by its supporters. When further details came out that Chris Dodd was somehow involved in the stimulus amendment that honored these bonuses, Obama administration "sources" leaked the falsehood that the Connecticut Senator had forced this provision on the doe-eyed innocents in Congress and the White House. In fact, it was just the opposite. As Jane Hamsher made indisputable clear, it was Obama administration officials Timothy Geithner and Larry Summers who openly criticized Dodd's opposition to honoring executive bonuses, and the White House pushed and pushed to get the payouts back into the stimulus bill. This obviously makes sense, because Geithner and Summers have consistently displayed too much confidence in the financial industry, that its problems are only temporary and not systemic (more on this later). 

In any case, there was just too much tone-deafness all the way around in allowing these bonus provisions to be included in the stimulus package, no matter who is ultimately to blame. How can any politician worth her salt not know that any type of executive bonus paid out with tax dollars, in a time of surging economic distress, will eventually come to light in the media and visit devastation upon whoever allowed it to happen? Thus the shamelessness of the grandstanding and moral outrage when the shit eventually hit the fan, with even the President expressing righteous consternation at the scoundrels involved. Edward Liddy, the AIG CEO who is now likely ruing his decision to come out of retirement to work for a $1 a year, was dragged before a congressional committee for a public dressing-down. New tax rules are being rushed into place to get back the bonuses that were paid out, a kind of hand-in-the-cookie-jar admission by officials that, "yeah, we probably should have know that we'd get caught sliding that money to people don't need it, so we'll just get it back -- no harm, no foul." 

So yes, it feels somewhat good for everyone, politicians and laid-off workers alike, to pound on the SOBs at AIG. But in the longer view, we really need to remember some recent history, especially regarding executive compensation and inequality. And we need to return, again, to the very dangerous idea that the current crisis is just temporary, with an ultimate recovery all-but-assured if we can just "unclog" the credit process. It is becoming evident that the President's economic team has a fundamentally incorrect understanding of the economic system as a whole, and some heavy hitters are starting to call this out.

First, let's look at this sudden concern with greed and executive compensation. The AIG scandal, and some similar issues with other bailed-out companies, has everyone up in arms over corporate greed, outlandish CEO bonus pay, and the like. My usual barometer for these issues is the bizarre, but strangely irresistable program Morning Joe, where Joe Scarborough and a coterie of pundits joke and scold their way through the "news." Like most talking-head shows, on both the right and left, there is virtually no sustained analysis or coherent dissection of the larger systemic problems we are facing. It is an entertainment show, and the short-attention-span participants, like Mike Barnicle and Mika Brzezinski, fulminate, frown, and ultimately shtick their way through the day's stories. One day's outrage over pork barrel spending is forgotten the next day, as the players move on to a hot new issue, like the lack of any real "productive" work in America. But actually, the bloated CEO pay has had some staying power on the show recently, with Barnicle and others actually bringing some disturbing stats to the table: i.e., in 1965, average CEO compensation in the United States was approximately 24 times what regular workers earned; by 2007, this had ballooned to a 344-1 ratio. This quasi-continuity off attention on Morning Joe tells me that there must be a substantial public disgust for the captains of industry.

But while CEO pay is certainly troublesome, and it feels good to rail against greed and corruption, the longer view is growing economic inequality itself. As we have described in many earlier posts, changes in information technology, financial instruments, and global distribution of production have completely changed the algorithm of work and economic compensation in America. The working out of high consumer capitalism simply does not merit paying the majority of the population a sustainable wage. Concentration of wealth and power is thus a systemic feature of our overall living arrangements, and not a moral problem of greed or corruption. Families are struggling to maintain high levels of employment and consumption in an economic landscape that simply doesn't need their skills any more. Household income has thus been flat for decades, despite growing productivity and longer working hours. Families thus have to borrow their way into massive debt, just to keep the current social form (One Person-One Job/One Family-One Dwelling) afloat. But the underlying project of overvalued sprawl that underlies the whole thing has finally gone up in smoke, and people are finding out very quickly how little actual value the economy of the last few decades had. 

Many progressives and liberals have been sounding the warning about this overall landscape of inequality for years. Ralph Nader, especially, has been relentless in his pleading for us to do something about unfair "free" trade agreements that send manufacturing jobs overseas, about the shrinking fortunes of the middle class, and about excessive corporate power that shuts all other voices out of the public policy debate. But in our infatuation with the endless growth economy and its supporting moorings of outlandish personal consumption, we ignored all of the Cassandras out there who have been telling us our way of life was ecologically disastrous, spiritually empty, and economically unsustainable.

So we need to get over the easy luxury that comes with pummeling the AIGs of the world. It is a seductive moral comfort food, but it won't help much in turning things around. Blaming the corrupt bad apples preserves the illusion that we just need to put some regulatory and stimulative fixes in place, and the old American Dream will return, with its bounty of rising home equity and profligate personal purchasing. Those days are gone, and some serious economic voices (Paul Krugman, James Galbraith) are starting to question the underlying economic conceptions of the Obama administration. They argue that a much more realistic and pessimistic program is needed, one that hearkens back to the Great Depression and the New Deal for an appropriate frame of reference.  We'll look at these issues next time.