AIG versus NSF
According to CNN.com, Congress is deliberating a bill that would reclaim bonus money AIG irresponsibly handed out to its failed executives, by levying a special tax on said money. I’m not sure about the idea of legislating a tax on particular individuals… it seems, like the Terri Schiavo affair, a ridiculously misplaced application of government power. Why is such a bizarre tactic necessary in the first place? It only seems prudent, when giving out federal grant money, to attach boilerplate legal verbiage designating the consequences of using that money for random, frivolous nonsense. Apparently the bailout money didn’t include such basic safety measures. But why not? Other federal grant programs do.
A case in point: NSF. The National Science Foundation gives out money to universities and private businesses all the time, but they attach certain strings. NSF asks, before they trust you with US tax dollars, for you to provide a detailed budget of how you intend to use the money. They ask you to write up a proposal describing in detail what work you want to do with their money, who else you intend to work with, how long it is likely to take to finish, and what useful goal your intended project will serve. If you receive NSF money, you aren’t allowed to move money from one budget item to another willy-nilly. If you want, say, to spend a few thousand dollars on a new machine of some kind, rather than travel to a particular conference, you must ask your benefactors at NSF if that’s okay. If you have a good reason for the request, usually they say yes… but the rules stipulate you must ask. Mainly this is done to prevent receivers of NSF largess from, for example, blowing all their research grant money on drugs and call girls. Not that we’d do that.
If NSF can exercise prudent and responsible oversight of their grants, why can’t the Department of the Treasury? I’m no economist, so perhaps there’s an aspect to this I miss. But it’s simply opaque to me why the Treasury couldn’t have added some general-purpose oversight language in their bailout grants. If they had, today Congress wouldn’t need to waste valuable time and effort cooking up desperate, ad hoc tax laws. Like NSF, Treasury could have simply said “no”, and that would have been that.