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Making Wall Street Pay
Wall Street's irresponsible bankers caused this economic crisis. It's only fair that they pay to clean up their mess
The deficit hawk crew, famous for missing the $8tn housing bubble that wrecked the economy, is now on the warpath, pressing the case for a big, new, national sales tax. They claim that the United States badly needs additional revenue to address projected budget shortfalls.
While we may need additional revenue at some point, it makes far more sense to impose a financial transactions tax, which would primarily hit the Wall Street banks that gave us this disaster, than to tax the consumption of ordinary working families. We can raise large amounts of money by taxing the speculation of the Wall Street high-flyers while barely affecting the sort of financial dealings that most of us do in our daily lives.
The logic of a financial transactions tax is simple. It would impose a modest fee on trades of stocks, futures, credit default swaps and other financial instruments. For example, the UK puts a 0.25% tax on the sale or purchase of shares of stock. This has very little impact on people who buy stock with the intent of holding it for a long period of time.
For example, if someone buys $10,000 of stock, they will pay $25 in tax at the time of purchase. If they sell the stock 10 years later for $20,000, they will have to pay $50 in tax. The total tax would be equivalent to an increase of 0.8 percentage points in the capital gains tax.
By contrast, if someone is interested in buying stock at 1.00pm to sell at 2.00pm, this tax is likely to take a bit hit out of their expected profits. The same applies people who are speculating in futures, credit default swaps and other financial instruments.
We can raise more than $140bn a year taxing financial transactions, an amount equal to 1% of GDP. Before we look to impose a national sales tax, or value-added tax, as the deficit hawk crew would like, we should insist that we first put in place a set of financial transactions taxes.
A national sales tax will primarily hit the consumption of ordinary workers. People will pay for it in all of their everyday purchases. Food, clothing, medicine - everything will cost a bit more as a result of a sales tax. Poor and middle-class people will end up paying a larger share of their income in this tax. This is both because they spend a larger share of their income than the wealthy and also because they spend a larger share in the United States. While the wealthy may have the opportunity to travel extensively in Europe or in countries not affected by the national sales tax, few low- or middle-income people will have this option.
Since the financial sector is the source of the country's current economic and budget problems it also makes sense to have this sector bear the brunt of any new taxes that may be needed. The economic collapse caused by Wall Street's irrational exuberance has led to a huge increase in the country debt burden. It seems only fair that Wall Street bear the brunt of the clean-up costs. A financial transactions tax is the way to make sure that this happens.
In short, we have to tell the deficit hawk crew, many of whom earned their fortune on Wall Street, to slow down. The country does face serious budget problems, even if they may not be as bad as this crew claims. However, if we need taxes to address a budget shortfall, then Wall Street is the place to start. After we have put in place a tax on Wall Street speculation, if we still need additional money, we can talk about a tax that will primarily affect the middle class.
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40 Comments so far
Show AllI'd guess that a financial transactions tax would have HUGE support across the political spectrum.
Therefore our media, protecting the elite, will make sure this idea never gets heard. It will be censored out of the discussion and the tax will end up being paid by middle and lower class as always.
Until progressives, liberals and populists get serious about fighting for control of the media every one of our ideas will go down in flames.
Totally agreed.
Any ideas on how to get control of the media? The Fairness Doctrine may work, but then they may consider the "liberal" position to be the opposing view of the conservatives, and our viewpoints could still get shut out.
Like all efforts it must start at the grass roots level where we each take responsibility for our local media demanding they report the progressive viewpoint which is censored from most stories.
You can find the contact numbers for most of your local media with a quick Google Search.
Call your local radio station, write to your local paper, post on local websites.
The national media contact list is here:
http://www.fair.org/index.php?page=111
Keep calling every day and raise a ruckus.
Contact the advertisers who support the tv and radio stations and tell them you're boycotting their products and will get your friends and family to join you.
If we had even a few thousand people nationwide who dedicated even 30 minutes every day to making calls and writing/posting letters we could cause a meaningful shift.
Finally, I urge you to take a look at the right-wing response to this article posted yesterday in support of the Fairness Doctrine.
http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/
2009/11/09/whos_afraid_of_the_big_bad_fairness_doctrine/
Progressives will need people as tenacious and vicious as they are to take the media back.
I actually work in media monitoring, so I know all about the problem of right-wing control of the media.
Perhaps we can just bypass local media outlets and start our own. I read a couple headlines about the FCC approving lots of new low-power FM stations. Why not start there? And then we can raise awareness of nationally available progressive TV news programs, such as Democracy Now!, Link TV, and any others other people can think of, because I think that's about it. We can also take advantage of the collapse of most newspapers to start up new papers. But this takes far more expertise, and money, than I have myself.
And it looks like the more offensive comments have been removed, but yeah it looks like a bunch of people just used conventional wisdom BS to rant about liberal bias in the media. Do you really want progressives to engage in empty rhetoric like that?
We can engage in many meaningful discussions such as a transaction tax on the sale of securities to pay for future Wall Street Bailouts.
There'd be overwhelming support for this tax.
But it'll never get the full media attention it deserves.
It's our job to bring issues like this to the surface...starting at the grass-roots level.
As we bring more people on board and educate them they'll see that the media is censoring important news.
That's how we'll sell them on the necessity of a new Fairness Doctrine.
Along with a transaction tax, we should increase capital gains taxes-higher on short-term gains, a little lower on long-term gains.
We have stopped rewarding people for "investing" and now the big reward is in gambling. When Wall Street demands 20-30% returns on their money and massive bonuses for moving money around, they create an atmosphere that is not conducive to long-term planning. Everything revolves around this quarters results. Great businesses were not built on this model. The only reason to even tolerate Wall Street is for them to provide some useful service to the country, not be a leach sucking off 40% of our GDP.
These people would make a loan-shark blush.
The securities speculation tax was one of the core issues of the Nader/Gonzalez campaign in the 2008 presidential election.
I was surprised that nobody took it up, that there was/is no furore about it, that none of the progressive organizations, who are champions of the Main Street, are fighting to get this implemented... OR maybe I just don't know of any.
"Wall Street's irresponsible bankers caused this economic crisis. It's only fair that they pay to clean up their mess"
Did they? Did they force people to buy new houses and turn them over every 2 years in order to take advantage of rising prices and make a profit?
Did they force people to buy houses that they couldn't afford?
Did they force people to use the equity from the inflated value of their homes to buy 4 wheelers, RVs, boats, pay off credit cards?
Did they force people to live beyond their means and use credit cards to pay bills till they could refinance and pay off the credit cards just to do it all again and again?
Did they force people to buy Hummers and jacked up pickups with fancy wheels and lots of shiny chrome and sound systems that could break your eardrums?
ETC.........?
No, they simply made it easy for us to do all that so that they could make more profit too.
The greed of the people is the same greed on a smaller scale.
How can we expect "them" to be responsible and exhibit self control when "we the people" have none?
I think you misunderstand who creates and enforces the conditions. The US economy is a pump. It pumps wealth upwards, working both on the upstroke (when it makes it seem like we 'little people' might get ahead a bit) and the downstroke (when we little people again get taken to the cleaners). Up and down, up and down.
Look at a longitudinal chart of wealth concentration. It should amaze and horrify you.
Well stated.
The 600 trillion in unbacked Credit default Swaps is what caused the meltdown, if these CDS had been redeemable the foreclosure rate would have increased but the Banks losses would have been covered.
So yes it was the greedy financiers who profited from selling unbacked CDS's that resulted in the collapse.
And beyond that people are educated and propagandized from the top to be consumer gluttons so even that is greatly caused by the predatory capitalist agenda.
Did they force them to have children they couldn't afford? People always forget that one. Material things, who cares. Who is gonna take care of all these kids they popped out? My property taxes, 50% pays for kids programs. I have no kids, the parents get to deduct their offspring on their income tax. My state, I get to pay for their health insurance too, I have none. This is gonna cost us more than any of the funny money games.
You have a problem with paying to improve the community but no problem supporting the destruction of nations and mass murder?
I would contend that the finitial collapse will cost much more in the future.
Quit complaining, your tax money goes for prisons as well. Why not let the public school system collapse and just send the kids straight to prison? You can invest in Correctional Corporation of America, the biggest private prison corp. Then you can make lots of money instead of paying for the low-income kids' education.
You are correct in one sense, if the poor refused to breed, the rich wouldn't get any new slaves to exploit. And why is it that even when 2 people are working full time they cannot afford to raise 1 or 2 kids without public assistance, yet their country can afford amazingly expensive wars and weapons? Does something seem wrong with this picture? Also, if you do not pay taxes who is going to build/fix your roads, treat and pump your water, etc.? Would you rather they privatize it and charge you a separate fee for each service? I think you'd come out better paying property taxes. Are you perhaps sad and bitter because you have no children, but wanted them? After reading you post, I feel sad for you.
glb: Are you Lou Dobbs? Glenn Beck? Many of the people you refer to are poor whites and people of color. Yoru comment can be taken as coded racism and classism.
I reckon CD is now a Right-Wing site where we excuse financial crimes worth trillions and blame it all on poor people who were lied to and exploited.
Good for you rich white guy, you obviously are doing all right. For the rest of us we can die early with no healthcare and deplete the surplus population for you rich folks.
This is class warfare and you are my ENEMY
Actually I live in a log home that I built myself. No connection to anything. My own water, my own power. And I'm quite broke. I hunt for food and grow vegetables and work a low paying job.
My point is......we are all responsible. And you all fall for all their bullshit lies cause you want to "improve your lives". So you play the game and you all get pissed cause "they" play it so much better than you do.
When it all collapses and you come for my food, perhaps we will be enemies.
Good for you, its all about you, that is what we have been taught. We have no responsibilities to anyone but me me me. Now that is clear, if you don't give a f*%# then why even bother commenting here. Or, do you like to rub salt in wounds and tell everyone I told ya so. That's real helpful. If you are not part of the solution you are part of the problem, so step aside.
hey socialist. I'm sorry my pathetic attempt at sublety and understatement combined with irony and sarcasm was too much for you to take.
I donate my time to a lot of causes for people who need help. I also have 2 kids and 5 grandkids that I think are pretty damned special and I contribute to their lives as much as possible. And my poor paying but rewarding job in the service/fitness industry keeps me in contact with people all day every day in a very positive sense.
I try to get people to think. I try to get people to understand that there are better ways to live than doing the 9 to 5 (or some variation) and living in a cookie cutter neighborhood, and shopping at mega stores and driving new vehicles and paying insurance companies huge amounts of money for virtually NO service, and basically living life according to the standards set forth by the advertising man.
And another thing.........even if I was a rich white man and head of an investment bank, I still have a right, constitutional, to express my opinion. And I can do it anywhere I want.
hey socialist. I'm sorry my pathetic attempt at sublety and understatement combined with irony and sarcasm was too much for you to take.
I donate my time to a lot of causes for people who need help. I also have 2 kids and 5 grandkids that I think are pretty damned special and I contribute to their lives as much as possible. And my poor paying but rewarding job in the service/fitness industry keeps me in contact with people all day every day in a very positive sense.
I try to get people to think. I try to get people to understand that there are better ways to live than doing the 9 to 5 (or some variation) and living in a cookie cutter neighborhood, and shopping at mega stores and driving new vehicles and paying insurance companies huge amounts of money for virtually NO service, and basically living life according to the standards set forth by the advertising man.
And another thing.........even if I was a rich white man and head of an investment bank, I still have a right, constitutional, to express my opinion. And I can do it anywhere I want.
gib, I commend you for your ability to take care of yourself. Some of us are lucky in that way, and can make do and survive with little. Unfortunately, the human race, in spite of what the right wing spews, doesn't come in a one size fits all. Many of us BELIEVED in those in the business of selling houses and creating our mortgages. We didn't have the education in real estate or finance and depended on those who did. And yes, a lot of people did fall for their bullshit lies because they had no reason not to. Just as a lot of people put their trust in their doctor to keep them healthy, their mechanic to keep their vehicle running, and the grocer to provide fresh, healthy foods. Many of us never realized that the world had changed while we slept, and that nothing was as it had been. I've been awake, but I'm still learning the hard way just what a mine field life has become.
I understand what you're saying. I guess I just learned early in life that there's a big difference between people like doctors who provide a service after many years of training and education, and people like Bernie Madoff who talk and coerce for a living and sell you promises of a better life and riches and wealth etc etc.
Beware of salesmen. It's that simple. And where profit is involved, greed is involved and there are a lot, A LOT of liars who would love to take your money.
I do disagree with your statement about the world changing while we slept. IT's been happening for a very long time. And it's just a slightly different version of the same cycle that keeps repeating itself over time. I left the corporate life in 1985 at the ripe old age of 30 when I saw that the entire economy had become a huge ponzi scheme.
Mairead, (10:32am, below) has it correct. In the period of the housing boom I saw nothing but propaganda for home equity loans and low interest mortgages. There was a clear, concerted effort, from Alan Greenspan on down to realtors to encourage people to use home equity to keep the financial wheels turning.
Some of us see through it. In mass society, they count on our numbers being few. I saw articles in USA Today's real estate column extolling the virtues of these mortgagtes. Ted Koppel did a piece about So Cal real estate at least 6 years ago. My jaw dropped to see a Mexican-American realtor, driving around in a fancy convertible, saying how his clients are surprised and pleased to find out they can get so much more house by taking an interest only loan.
Also, estimates are that about half the problems with credit card debt come from the stupid and greedy, the other half is related to sudden illness and/or job loss.
No, I don't think the debt should be forgiven. But to not understand that bankers and realtors are considered "professionals" is to blame only the victim. Professionals are supposed to have a code of ethics to guide their activities. Some people who got in over their heads have been quoted as "surprised" that they could get such a deal but figured the bankers knew what they were talking about.
When the gov't artificially lowers interest rates and encourages debt, we are all negatively affected. People with savings who were responsible were punished with low interest rates even as the business news kept telling us the savings rate was too low--a call for higher interest rates if markets are going to work.
Because "they" have the inside track on the Washington lobbying game and can shape the rules of the game so only "they" can play. Because Americans bought these houses with the idea of real, tangible investments that they were lead to believe would grow in value while "they" get a chance to play with financial instruments that produce no jobs, no income gain for the American worker, no new technologies for growth in this nation. Because Americans needed to max out credit cards while food and energy prices gyrated, property taxes and other nuisance taxes rose while income taxes for the wealthy were cut while "they" had little problem freezing wages, enriching themselves with sharp increases by the medical insurance and playing interest rate games. Because Americans bought Hummers because "they" blocked efforts to make energy efficient automobiles. Average Americans can, and have been, short sighted and selfish in pursuing material gain...and the wealthy and powerful in this country would be all too happy to go back to the status quo as it maintains their position in this society as they have enriched themslves by creating this architecture of selfishness. We should expect them to be more responsible because they have repeatedly assured us that they were the brightest kids in the room who would, through the devices of scum economic intellectual Milton Friedmanite of low taxes, global markets, little government regulation, privatization of the public sector and other pie the sky stuff, lead us into the free market paradise.
Wall street represents the corporations that have taken over the country. Quit investing in corporations. You will be surprised how liberating it is to ignore Wall Street completely. If you feel that you are so dependent on Wall Street you are really headed for the cliff.
For long-term investors in securities, and bona fide hedgers in futures markets, a tiny transaction tax wouldn't be any kind of hindrance. Short term speculators in either market would just have to get used to the transaction tax. It will help cover the cost of (I can only hope) new, stronger market regulation and enforcement.
I'm with glb and the bear. Quit buying needless crap and don't play their tainted market game. Same goes for banks.
Here is an interesting commentary by Alex Brummer, City Editor of the Daily Mail (a right-wing newspaper), on the prospects of a proposed Tobin Tax, here in the UK:
Taxing trades
"No one should consider the transactions tax on the banks dead and buried, despite the scorn poured on Gordon Brown's brief appearance at the G20 summit.
What the critics of the tax fail to acknowledge is that wholesale banking is an imperfect market where the domination of a handful of really major players allows super-normal profits to be made, which drive bonus payments.
This is not the 'work of God', as argued by Goldman Sachs chairman Lloyd Blankfein in his Sunday Times interview. It is profiteering by the few on the backs of the many, and the Prime Minister deserves some credit for buying into the argument.
It is only too easy for people to say it cannot work because any such tax is too porous.
Transactions taxes of a kind have always existed, including stamp duty on share dealings.
This may be a bad tax as far as the City is concerned but it has raised money for the UK Exchequer despite the fact that hedge funds have all kinds of avoidance strategies such as trading through contracts for differences.
There will always be people who will try to outwit the system. But the betting must be that the bigger players Goldman, JP Morgan, Barcap et al, have too much riding on not alienating governments in the G20 economies to try such tactics.
So while there will be leakage it will be limited. Indeed, the clampdown on tax havens demonstrates it is possible to bring them within the purview of global regulation with enough willpower.
The more serious set of questions is on which transactions it should be levied, at what level and what the money should be used for.
This is currently in the hands of the International Monetary Fund. But it may need some clearer briefing on what policymakers have in mind.
It is not surprising the Americans hate the idea of TT. It is in their nature to reject international jurisdiction over their affairs.
Similarly in Britain, the Treasury generally likes to have a monopoly taxation policy.
That should not mean that the TT is strangled at birth. It is a rational response."
http://www.dailymail.co.uk/money/article-1226497/ALEX-BRUMMER-COMMENT-Rosenfeld-digs-siege.html#ixzz0WTHMMzT1
pbecke: Thank you for posting the article.
We've seen in CA that if rightwingers can lower progressive taxation (prop tax) and raise regressive taxation (sales tax), they can hatch a new generation of 'anti-tax' advocates who don't realize they are being scammed by the tax code. They can then win elections on an anti-tax platform, creating deficits (cuz they have no intention of paying for tax cuts with gov't service cuts), and eventual insolvency.
When someone proposes regressive tax increases, like sales taxes, it should be fought by everyone. It not only punishes the poor, it actually swells the ranks of the 'anti-tax' crusaders whose debts have crushed this nation.
That's right ubrew. Sales taxes and VAT are stacked at the bottom. They land hardest on those least able to afford them. And because they are in your face every day, they are resented. "...and twenty more for the Governor.."
Transaction taxes don't get defered to the end purchaser. They are pay as you go. And they don't apply to consumer goods, just to financial products anyway, so poorer people are less impacted.
Baker is right on. This is an adaptation of the Tobin Tax. It was devised to act as a brake on fast flows of money in the ForEx markets. But it should apply to transactions on all financial instruments.
At 170Bn/Year plus another 200Bn/year on a recreational pot tax, we'd be out of debt before the next generation takes the reins.
MIDDLE CLASS? WHAT MIDDLE CLASS??
Dean Baker is 100% correct ...
The financial transaction tax is a win-win, while a regressive VAT tax only makes matters worse ...
Any new revenues needed should hit the wealthy. Both the income gap and the wealth gap are at all time highs. Yet nary a word from from the vast majority of economists on taxing these groups.
The whole problem started with the Reagan Tax Cuts. They need to be rescinded. Just a glance at graphs of the beginning of our current catastrophe shows that the Reagan Tax Cuts along with deregulation started our current bubble ...
During Reagan's term we went from the biggest creditor nation in the world to the biggest debtor nation in the world and we never looked back.
The financial transaction tax is a start, but only a start, towards a fair tax system and a rejuvenated economy. Without taking out all these usurious profits for the already rich they will only blow more bubbles as they chase yield around the world.
I don't support a national sales tax but more than imposing a new financial transaction tax, the best idea is to retract the bailouts so that the national debt can be reduced and Wall $treet will be forced to fail for its crimes as they deserve it. I cannot understand how the author can afford to conveniently ignore the 800 lb gorilla being the bailout itself which rewarded W$ for its bad behavior.
Baker is only pleading for the financial transactions tax ... the other tax being discussed now in DC is the VAT or national sales tax ...
I believe Baker is making the right plea ...
If one were to write about all the ills needed to be remedied on Wall Street you'd need several hundred pages ...
0.25%? Why not 1% at least.
The Banksters rape us blind, repeatedly, and our answer is a .025% tax?
Take that, bank robbers! Let that be a lesson!
Look - Greed cannot be controlled by laws and taxes any more than drunk driving laws and penalties have ended drunk driving. Especially Greed at such a sick and twisted level.
The only way to 'make Wall Street pay' is to remove uber-Greed from the equation. The words 'life, liberty and the pursuit of happiness' do not, and never have, meant the 'freedom' to steal and hoard as much wealth as possible regardless of the consequences to fellow Americans, God and country.
Here's how: just like in most pro sports - Financial 'Industry' salary caps, to start. Let em whine, who cares - Banksters top out at, say, $50 million. That's it - ya can't 'live' on that, get a f**king shrink. The world economy is too important to be left in the hands of men driven solely by the insatiable desire for more.
Corporate profits capped as well - anything over 15% must be transparently worked back into the system via any number of 'green' efforts, infrastructure upgrades, education/training initiatives...
Etc - ya get the idea. Look - it's children who run around grabbing everything screaming 'Mine! Mine! Mine!' Not Adults! Adults make sure everyone at the table has enough to eat.
A related story in today's Guardian concerns the Tobin tax (which would be imposed on currency transactions).
http://www.guardian.co.uk/commentisfree/2009/nov/10/tobin-tax-backlash-financial-transactions
Its been floated again by Gordon Brown, while there is reported to be political momentum in Europe for a wide spectrum financial tax. Some Europeans wish to apply such a tax to developing alternative energy sources so the issue might well surface in Copenhagen.
Naturally the US would not be able to implement such a tax since the government of Goldman Sachs would not permit it, putting the US offside on yet another issue.