Populist Anger Is Hard to Contain - The president could have spoken more responsibly about AIG

Populist Anger Is Hard to Contain. By SUZANNE GARMENT
The president could have spoken more responsibly about AIG.
WSJ, Mar 23, 2009

Last week's collective screech about the AIG bonuses should leave the participants shaken, the way you feel when you've done something really stupid in traffic and realize you could have killed yourself. Populism is dangerous. The AIG death threats gave us an inkling of just how dangerous. A political leader can't simply stir up a little bit of populism, then turn it off when it gets inconvenient -- not even a leader as eloquent as President Barack Obama.

When Edward Liddy, AIG's government-appointed CEO, made Treasury Secretary Tim Geithner aware that bonuses would be paid to employees of AIG's Financial Products unit -- which had virtually destroyed AIG, prompting a $173 billion bailout -- the administration didn't want to be the chief target of the criticism that would follow. It decided to get out in front, as chief criticizer. First, White House economist Larry Summers said that AIG's behavior was "outrageous" but that the bonus contracts could not be abrogated. "We are a nation of laws," he said, and an administration "can't govern out of anger."

Some presidential advisers thought the "outrageous" part wasn't plain enough. So the next day Mr. Obama angrily denounced AIG's "recklessness and greed" and said he would "pursue every single legal avenue" to block the bonuses.

Mayhem followed. The calls and emails poured in. Virtually every member of Congress assured the public of his or her personal anger and disgust. Last Wednesday, Mr. Liddy appeared before a House subcommittee as a prop for a Congressional Day of Rage. At the end of the week the House passed its 90% surtax on the bonuses. By then, there were protesters in the streets, threats of bodily harm to AIG employees, and beefed-up security at their homes. A legislative clawback of the bonuses may now be unnecessary. The employees have been asked to give them back, which suddenly seems like the best of a set of bad options, law or no law.

Within hours after Mr. Obama's initial anger announcement, the White House started trying to turn down the temperature -- without giving up its position at the head of the outrage parade. "I don't want to quell anger," Mr. Obama said. "I think people are right to be angry. I'm angry. What I want us to do, though, is channel our anger in a constructive way." At week's end, with the Senate working on its own clawback bill, White House Press Secretary Robert Gibbs said the president would judge any such bill according to whether it adequately reflected "taxpayer anger and frustration" and whether it maintained "our ability to stabilize the financial system and ensure that credit flows."

These statements are clever and ridiculous. You can't "channel" this kind of anger, let alone constructively. Populist anger is often illiberal and indiscriminate. The post-Civil War populist movement brought needed changes but also disenfranchised African-Americans in the South through Jim Crow laws and physical terror. As historian Richard Hofstadter noted in his famous book "The Age of Reform" (1955), the connection was not accidental. Further, Hofstadter cautioned, it is hard for political leaders to see the moment at which a populist outburst "has passed beyond the demand for necessary reforms" to "the expression of a resentment so inclusive" that it attacks the capacity of society to sustain values such as the rule of law.

It is one of the miracles of American politics that this type of misjudgment hasn't occurred more often and that populist excess has not done more damage. We should not take the miracle for granted.

Presidential adviser David Axelrod, explaining why Mr. Obama supplanted Mr. Summers's early statement about the bonuses with an angrier one, said that while Mr. Summers had to weigh the effect of the government's actions on its ability to manage the financial system, "the president's job is to speak for the country."

That is deeply wrong. Precisely because the president speaks for the country, it is his job, and not just Mr. Summers's job, to weigh the economic consequences of his words. The president's job is not to express populist anger but to address the anger and talk sense to it.

Ms. Garment, a tax attorney, is the author of "Scandal: The Culture of Mistrust in American Politics" (Random House, 1991).