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Republicans Mount Populist Campaign Against AIG

Image has not been found. URL: /wp-content/uploads/2009/03/cantor-cnbc.jpgRep. Eric Cantor (R-Va.) discussed the AIG bonus scandal on CNBC Thursday morning. (YouTube screenshot)

Wednesday morning, Democratic members of Congress in 49 swing districts were told that they had not, in fact, voted for the American Recovery and Reinvestment Act, the $787 billion economic stimulus bill passed in February. According to the National Republican Campaign Committee, Democrats had voted for the “AIG Stimulus.”

“The facts are crystal clear,” wrote the NRCC in a release targeted at freshman Rep. Tom Perriello (D-Va.), who won his rural seat last year by only 727 votes. “Democrats, including Tom Perriello, voted for this ‘AIG stimulus’ bill, which was negotiated behind closed doors in the middle of the night and allowed for taxpayer-funded bonuses to go to AIG executives.”

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Image by: Matt Mahurin

NRCC spokesman Paul Lindsay continued to push that message throughout the day Wednesday, as AIG Chairman Edward Liddy took heated questions from the credit subcommittee of the House Financial Services Committee over why and how the troubled company — which took $150 billion in bailout money — proceeded to pay out $165 million in executive bonuses. “The anger over the AIG bonuses and the stimulus that allowed them to be paid out is palpable throughout the country,” said Lindsay. The controversial funding actually came from the October 2008 bailout bill, and the Troubled Asset Relief Plan money doled out to failing companies. But Republicans are honing in a stimulus provision, written by Sen. Christopher Dodd (D-Conn.), that protected bonuses to TARP-taking companies as long as they were approved by Feb. 11.

As the AIG bonus scandal explodes, Republicans are looking for ways to blame the president and the majority party. Privately, some admit that this is the first attack that’s sticking after two months of grappling with the administration and its economic policies. In private and in public, some conservatives are cool toward attacking AIG’s bonuses and demanding more government regulation of companies that receive TARP money — even if it’s a one-time deal. And some conservatives are attempting to shift the focus of voter outrage from the bonuses to the bailouts themselves.

“There is a fair degree of hypocrisy in this,” said one Republican House staffer. “It’s as if Geithner had been Treasury secretary for last three years and Obama was president in September. We had a bipartisan vote for the bailout – although the opposition was bipartisan, too. Neither party comes to this with clean hands.” The staffer echoed the public statements of some conservative members of Congress — that the frenzy of bonus-bashing was moving the debate further to the left, and losing focus for the larger battle against endless big-business rescue packages and government intervention in the economy.

There is no unified Republican argument against the AIG bonuses, and there is some surprise at how quickly the party’s leaders have adopted a populist campaign to penalize AIG and pull back the bonuses. The NRCC and House Minority Whip Eric Cantor are attacking Democrats as tacit supporters of the AIG stimulus, a strategy that took several days to get off the ground. A March 16 op-ed in The Washington Post by Bill Kristol — the editor of the Weekly Standard who had previously and influentially argued for Republicans to ask for more transparency in the economic stimulus as a way of killing it — argued that the GOP should come out swinging for pulling back the AIG bonuses.

“Isn’t this a moment,” Kristol wrote, “for the GOP to separate itself from the Bush administration as well as the Obama administration, who together have been responsible for an incompetent and improvident bailout?” There was an opening, he argued, for Republicans to be “on the side of a healthy populist reaction to the AIG situation.”

On March 17, the “healthy populist reaction” took the form of multiple public thrashings of AIG by Republican members of Congress, and of a quickly-composed resolution of inquiry — H.Res 251 — that demanded greater Treasury oversight over companies that took TARP money. The resolution was opposed by Democrats, although the office of resolution author Rep. Stephen LaTourette (R-Ohio) said that Republicans would keep pushing for it in the Financial Services Committee. And while Democrats shunted it back to committee, Republicans took to the floor to attack corporate greed. “Enough of these bailouts,” said Rep. Mario Diaz-Balart (R-Fla.), “so that millionaires can become billionaires!”

Talk like that worries Chris Edwards, the director of tax policy studies at the libertarian Cato Institute, who spent three years working for Republicans on the Joint Economic Committee. “It’s a very dangerous path for the Republicans to go down,” said Edwards, “the populist path instead of the limited government path. Ultimately, we want the best and the brightest people to work in this industry. I worry about this talk that’s going to make an entrepreneur think twice about entering financial services. Why would you, when you fear Washington coming in retroactively and attacking you like this?”

The differing Republican tactics were on display during Wednesday’s hearing of the House subcommittee. Rep. Judy Biggert (R-Ill.) told AIG’s Liddy that Congress was looking for a way to “reverse this travesty” and “get the money back.” But Rep. Tom Price (R-Ga.), who chairs the conservative Republican Study Committee, argued that “this is what a political economy looks like” and that the real problem was ever bailing out AIG, spending “a thousand times the amount paid out in bonuses.” Rep. Jeb Hensarling (R-Texas), Price’s predecessor at the RSC, blamed “a congress and a president who could have prevented all of this.” Rep. Spencer Bachus (R-Ala.), the committee’s ranking member, pleaded for sanity about the bonus scandal: “We need to give the new management team the time it needs to do the job it has been assigned.”

According to one Republican strategist, the philosophical arguments are a sideshow. Republicans will concentrate on the populist, anti-AIG message — with a drumbeat of questions about the role of Geithner and Dodd in the outrage-because it’s working.

“We know this works because the way Democrats have responded is much, much more defensive than the way they responded to attacks on the stimulus,” said the strategist. “That says a lot about their disorganization and how they weren’t prepared for this.”

In the broader conservative movement, there’s no shortage of disappointment with the anti-AIG bonus, populist strategy. After a full month of political attacks that cast him as the leader of the Republican Party, Rush Limbaugh has used his radio show to call the AIG scandal a “phony outrage” and a “distraction” from the bigger problem of the bailouts. Steve Moore, the Club for Growth founder who is now an editorial page writer at The Wall Street Journal, called the AIG bonuses “totally undeserved” and “almost fraudulent,” but cautioned that “the best framework for Republicans here is ‘no more bailouts.’ That’s the essence of the problem – that congress in no position to run a bank. Nancy Pelosi and Barney Frank can’t run an insurance company. We don’t want to miss the forest for the trees.”

For now, that argument is losing out to the much simpler argument-the one at 76 percent in the Gallup Poll-that AIG needs to be punished for its greed. On Wednesday night Jim Tedisco, the Republican candidate in the special election in New York’s 20th Congressional District, debuted a TV ad attacking Democratic candidate Scott Murphy for supporting the economic stimulus package and thereby “supporting a loophole letting the AIG executives keep their bonuses.”

“Scott Murphy has based his whole campaign on the AIG stimulus,” said Paul Lindsay. “He should answer whether he read the bill.”

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