The American people bought the media's storyline that from the Bush era's sunset would dawn the Obama age of bipartisan pragmatism and competence. Yet today, American politics is uglier than ever.

The AIG bonus debacle is the latest stomach-turning episode. The political class's bungling of the bailouts has made the scandal not just who knew what when, but who should have known what when, rushing through trillion-dollar spending bills that elected officials—much less the public—hadn't even skimmed. More grotesque than taxpayers funding unseemly bonus packages has been Congress's pitchforked attempt to make up for that misstep. Punitive, 90 percent, retroactive taxes on bonuses are only the beginning of the policy fallout of this political scandal.

Americans gleefully watching the mob attack on AIG executives may soon pay for their schadenfreude. Congress may be coming after you next.

AIG bonuses were the initial target, but lawmakers quickly expanded their sites to any bank that received federal bailout money. Now, the administration is preparing more sweeping reforms of financial sector oversight, which will include limits on executive pay. While the details have not yet been revealed, the New York Times reports that regulations could create pay limits based on company performance and discourage “outsized” bonuses. Financial services companies (including those that haven't received federal bailout funds) will be subject to the new rules, but the administration may not stop there: all publicly traded companies may face new restrictions.

Perhaps you still feel as though you'd never be affected by this kind of government intervention. Yet no one should feel safe. The administration and Congress have already flirted with legislation with the potential to vastly expand the federal role in dictating compensation packages across the economy. Continued...