Senate Will Weigh Risks Of Bonus Taxation

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Published on Monday, 23 March 2009

Written by Carl Hulse, NY Times

The fight over bailout bonuses shifts to the Senate this week as lawmakers gauge whether the cost of quelling public outrage with new taxes on the big paychecks could damage efforts to stabilize the financial industry by discouraging bank executives from participating in federal programs.

"This kind of a clawback legislation has to balance between the need to address the absolutely reasonable and well-justified anger of the Congress and the American people about how this money is being spent in these undeserved bonuses and the need to pursue financial stability," Jared Bernstein, an economic adviser to Vice President Joseph Biden, said Sunday on ABC's "This Week."

As the White House pulled back from its initial favorable response to the House vote last week, senators have also shown some hesitation about embracing the House's 90-percent income tax on bonuses paid this year. But they also say some action has to be taken to prevent financial firms from gouging taxpayers by paying bonuses.

"We need to look for an alternative means of recouping this money that doesn't cause further harm to our economy as we're trying to get banks lending," Senator Susan Collins, Republican of Maine, said on the same program.

As the Senate wrestles with the bonus issue, the House and Senate budget committees are scheduled to begin writing their fiscal blueprints before the budgets are subjected to floor votes next week. Their job has been complicated significantly by new estimates raising the deficit projections, giving lawmakers with reservations about the scope of President Obama's agenda new reason for urging less spending.

"The practical implications of this is bankruptcy for the United States," Senator Judd Gregg of New Hampshire, senior Republican on the Budget Committee, said on CNN. "There's no other way around it. If we maintain the proposals which are in this budget over the 10-year period that this budget covers, this country will go bankrupt. People will not buy our debt; our dollar will become devalued."

Democrats said the president's budget would require some adjustments. And Senator Kent Conrad of North Dakota, the Democratic chairman of the Budget Committee, also said he would steer clear of a procedural maneuver that would bar filibusters against budget-driven legislation on health care and energy.

"I have said for weeks, I don't think it is the right way to write substantive legislation," Mr. Conrad said on ABC.

But House Democrats may still put the procedural weapon in their version of the budget and it ultimately could be included in a final budget negotiated between the two chambers.

As they brace for the budget fight, senators will this week consider their bipartisan version of national service legislation approved by the House last week. In the House, lawmakers may finally send a broad conservation measure to Mr. Obama, setting aside thousands of new acres of public lands.

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