A new Wall Street sin tax could raise $100B a year to reinvest in Main Street America
12 min read
Where’s the audacity, the fairness… the money?
Lonnie Johnson was the early blues and jazz great who turned the guitar into a solo instrument. In the 1920s, he pioneered improvisational guitar pieces featuring fast-flying, finger-straining licks. One of his instrumentals was so challenging that he warned of the difficulty right up front in the title: “To do this, you got to know how.”
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That seems to be the problem for a group in Washington called Obama and the Plunkers. They don’t know how to handle the tough pieces of political music. Not that they lack the talent, but they lack the courage, the drive, and (let’s admit it) the audacity. Rather than stretching the limits and reaching for greatness, they stick with conventional, middle-of-the-road stuff that has a nice beat, but fails to excite, much less satisfy.
After two years of watching Obama in action, we can now see him for who he is: Bill Clinton. Yet another corporate Democrat who refuses to rock the boat. Obama is willing to push big issues onto the national table, and that’s a major positive. But then he immediately removes from the table the big solutions needed to deal with those issues: Medicare for all? We can’t even consider that. Restructure and decentralize Wall Street? No, no, we’ll just write new regulations for the big banks. And so forth.
Granted he is faced with a gang of congressional Republicans who are nothing but disgusting political saboteurs. They’ve gone all out to kill even his most modest reforms. But at some point (months ago), he needed to stop extending his hand to these political thugs, clench it into an FDR-sized fist, and pop them right in the snout. Unfortunately, it appears that Obama suffers from a debilitating governing malady: chronic capitulation syndrome.
A dismal December
The twelfth month, usually a time of joy and joviality, turned into a season of dismay and despondency last year for those of us looking for some bright, flaring sign of post-election feistiness from the Obama White House. Instead of rallying friends and allies with a spirited fist pump and an encouraging shout of “Onward!” the Obamacans adopted what Paul Krugman labeled a “whipped dog demeanor.”
A disheartening tone was set right after election by the President himself. To my astonishment, he actually apologized for having painted BP, Wall Street, the insurance giants, and other corporate powers “as the bad guy.” Hello–they are! He went on to declare that he would recalibrate his approach to “make clear to the business community that the most important thing we can do is to boost and encourage the business community.”
"Two wrongs don't make a right, but three left turns do." --Jim Hightower
Them? They’re not the ones hurting. They’re doing the hurting. Corporate chieftains wield unmatched power and are wallowing in unbelievable wealth. Their “community” is an exclusive, gated compound of insatiable privilege, from which they’re relentlessly waging a brutal class war against America’s majority (the workaday middle class, the jobless, and the poor). Those moneyed elites neither need nor deserve a president boosting them.
Still, not only did he say it, but he soon showed us that he meant it. In quick succession, the President of the United States (a Democrat, remember?) proceeded to bow meekly to the corporate barons three times in early December.
THE GRATUITOUS BOW. He began December 1 with a cheap shot at federal workers, hitting them with a two-year wage freeze.
Public employees are the new favorite political target for the corporate-funded, right-wing attack machine. They’re demonized as overpaid paper-pushers and caricatured as the embodiment of an obese, out-of-control government. They also happen to have jobs that profiteering corporations are eager to privatize. Moreover, the federal workforce is largely unionized, which galls the US Chamber of Commerce, the Koch brothers, and other union-hating corporate forces eager to crush labor so they can rip apart America’s middle class wage structure unimpeded.
So, out of the blue, Obama blindsided a dedicated corps of federal air-traffic controllers, park rangers, health researchers, engineers, nurses, and other good people doing good work (at an average of 24 percent less pay than they’d get in the corporate world, by the way), using them as props for a bit of cheap political theater. It’s all about slaying the deficit monster, he declared: “All of us are called on to make some sacrifices… and I’m asking civil servants to play their part.”
Never mind that it’s a part in a farce. In terms of our country’s 14 trillion debt, the $5 billion to be ‘saved’ over two years by Obama’s wage freeze is chump change–for example, it’s less than he’s spending per month on his Afghanistan adventure. Federal workers are hardly the massive force and budget bugaboo that corporate propagandists wail about. They number just over two million, the same as in the Reagan presidency, even though there are now 50 million more Americans that government must serve. They are simply not the problem behind the bloated national deficit–even slashing the federal payroll by half would reduce the annual budget by less than three percent.
Apparently, Obama and crew thought that the cynical use of government employees as political fodder might appease his intractable Republican foes. It did not. They took his gift, laughed at the lameness of his gesture, and gave him nothing in return.
THE GUTLESS BOW. On December 6, the President announced that he had compromised with the GOP’s scurrilous Senate leader, Mitch McConnell, on a $858 billion tax cut deal. You know you’ve been had when your foes are chortling and doing high-fives, while your supporters are so hot with anger that their hair is on fire.
Obama said he did it for the middle class, but more than a fourth of the cuts will go to multimillionaires–the richest one percent of Americans. Let’s personalize that. Obama’s compromise will give:
An extra $1.3 million a year to the ruthless, Democrat-bashing, Fox TV media baron Rupert Murdoch.
$700,000 to coal mine chieftain Don Blankenship, whose disastrous don’t-give-a-damn litany of safety violations makes him rich while it kills miners.
Between $700,000 and $1.6 million to further enrich Lloyd Blankfein of Goldman Sachs, Jamie Dimon of JPMorgan Chase, and each of the other high lords of Wall Street who imploded their banks, crashed our economy, and continue even to draw bailout funds from the government.
$200,000 to Tom Donohue, the CEO of the US Chamber of Commerce who used tens of millions of dollars in secret corporate cash last year to defeat about 62 of Obama’s Democratic allies in Congress.
Especially appalling was Obama’s whine that he had no choice, for McConnell and gang were going to filibuster any tax cut for the middle class unless billionaires got theirs, too. It takes 60 senate votes to break a filibuster, shrugged Obama, and we didn’t have them, so I had to give in.
No he didn’t. He could’ve gutted it up and called McConnell’s bluff, forcing the Repubs to vote against the middle class in order to save the rich. Then Obama could’ve gone to the people, rallying them into a furious populist rebellion.
Ok, he’s no populist, but another way to defeat Republican recalcitrance was readily available to him: ‘reconciliation.’ This is a budgeting process allowed by senate rules that only requires a simple majority (51 votes, which the Dems had) to enact tax cuts into law. In fact, reconciliation was the method that George W, McConnell, and the GOP majority used to slide their tax breaks for the super-rich through the Senate in 2001 and 2003. If reconciliation was good enough for them, why didn’t Obama use the same stick this time to beat them back?
THE GARISH BOW. After a year of being pounded by teabag/right-wing ranters as EvilDeficitMan who single-handedly is bankrupting America, Obama decided to fight back. Thus, last February, he created–TA DA! –a commission. That’ll show ’em. And it’s not any ol’ commission, it’s bipartisan. As co-chairs of his bipartisan deficit-reduction panel, he chose a cranky corporate Republican, former Sen. Alan Simpson, and a mild-mannered corporate Democrat from the Clinton White House, Erskine Bowles. So, it’s bi-corporate, too.
Throughout its deliberations and public posturings, the commission’s mantra was that all solutions were being considered, no federal expenditure was sacred, cuts would be widespread and everyone would share the pain. Then, in December, with a flurry of colorful charts, and a blizzard of statistics, the co-chairmen revealed their proposal for cutting $3.8 trillion from deficits projected between now and 2020. “We have harpooned every whale and some minnows,” Simpson declared proudly. Every whale?
Pure BS. While the commission’s report is grandiosely titled “The Moment of Truth,” it adds up to an embarrassing kowtow to concentrated wealth– and a kick in the pants to workaday families. Its bullet points mirror the ideological boilerplate that constantly spews out of various Koch-funded, laissez-fairy think tanks. Bizarrely, the panel’s first recommendation is not to reduce the deficit but to increase it by cutting taxes for corporations (from 35 percent to 26) and for the rich (from 35 percent to 23).
Next, the pain rains down on the middle class and low-income folks: eliminate the child tax credit and earned income credit; do away with the tax deduction for home mortgages; raise gasoline taxes by 15 cents; tax health care benefits that employees get; increase the co-pay rate and raise the deductible seniors pay for Medicare; and bludgeon Social Security by cutting benefits, providing smaller cost-of-living increases and raising the retirement age to 69.
This is not a deficit reduction plan, it’s a wealth-redistribution scam, and Obama should denounce, disown, and trash it. But he hasn’t.
Why not real reform?
The national debt is certainly a long-term problem for our country (including the fact that it is mostly owed to China and other foreign sovereignties that have agendas different from ours). But the Powers That Be keep approaching the problem (and us) with contemptible dishonesty. The Big Lie is one that Simpson has repeated constantly, as if trying to make himself believe it: “Everything is on the table,” he practically shouted to a questioner last year. “Everything’s on the table. Do you hear me?”
Excuse me, your honorable, but not so. Removing the income cap on Social Security taxes, outlawing offshore tax havens, raising the corporate tax rate, taxing foreign currency speculation, banning dynasty trusts, eliminating interest-payment deductions for corporate mergers, stopping the waste and fraud of war profiteers, raising the ridiculously low fines for environmental and safety violations, disallowing corporate tax deductions for lobbying–these and many more possibilities were NOT on the table, because… well, because they would spread the deficit-cutting pain to the wrong “everyones.”
A Wall Street sin tax
The moneyed populace is adroit at getting Congress to shift America’s tax burden to workers, consumers, small business–anyone but them. Sen. Russell Long, the former chair of the finance committee (and Huey’s son), used to quote a little back-country ditty on this point: “Don’t tax me, don’t tax thee, tax that fellow behind the tree.”
Some extremely rich fellows who’ve been hiding behind the tree to avoid taxation for years are the global financial speculators engaged in the high-rolling, computer-driven, fast-buck, multitrillion dollar, casino gam- bles that now define Wall Street. Unbeknownst to most people, the dominant investment banks today have been converted into casinos. Rather than amalgamating capital to finance the real economy (start-up businesses, innovation, expansions, etc.), the vast bulk of Wall Street transactions are purely speculative spins of the wheel–such as gaming foreign currency exchanges, collateralized debt obligations, credit default swaps, crude oil and farm commodity futures… and more.
These transactions create nothing but quick profits for those few big traders who can afford to play, with most of them using automated tracking systems and superfast computers to invest millions of dollars at a time into these exotic financial instruments. They buy into a scheme one day and sell it the next–or even turn the transaction around in a matter of minutes. And we’re talking about huge sums of money every year–a mindboggling $700 trillion according to the Wall Street Journal.
At last, a principled stand in Congress
Is there no balm in Gilead… or in Washington? Will no Democrat soothe the people’s anger at the constant giveaways to the rich from our depleted public treasury? Is there at least one strong populist vertebra in the weak spine of the Democratic congressional caucus?
Maverick Dallas billionaire Mark Cuban, a longtime and big time trader of stocks, candidly notes that Goldman Sachs, et al. have shifted almost entirely from investing in real businesses to inventing convoluted games for speculators. “Creating capital for business has to be less than one percent of the [trading] volume on Wall Street,” he says. As we saw in the 2007 crash in the housing bubble, such gamesmanship for the few wreaks havoc on the many. And as we’re now seeing, Wall Street’s continuing refusal to invest in productive enterprises has created America’s new normal of a jobless economy.
0.25 PERCENT. One way to restore some sanity is to erect a disincentive for Wall Streeters Gone Wild. A ‘financial speculation tax’ would achieve that… and more. First, the FST would be a very modest assessment of, say, one quarter of one percent per transaction. Every time anyone buys or sells a stock or bond–as well as any derivative, option, future, credit default swap, or other financial exotica, a tiny tax of 0.25 or less percent would be applied to the transaction.
Regular folks who have some of their money in the stock market would feel no pinch from this tax, for they are not constantly buying and selling. They make relatively stable, small, long-term investments in stocks and bonds, so the FST would be a trivial charge.
However, the tax would sting the global speculators, churners, hackers, and other high-rolling profiteers who surge in and out of the market, buying and selling huge volumes of assets at lightning speed. Each of them rolls the dice on hundreds of these ultra-short-term transactions every day, grabbing millions of dollars a year by finding a small profit margin on each one. Because of those small margins, an FST add-on of 0.25 percent to buy each asset and another quarter percent to sell it would be a real restraint on their addiction to frenzied and dangerous gambling on financial nonsense, helping to stabilize our present ‘flash-crash’ economy.
FST amounts to a very progressive ‘sin tax’ on Wall Street’s casino culture, possibly compelling more capital to move into America’s crying need for job-creating investments in Main Street enterprises.
While the tax on speculators is tiny, it would pay off big for our country. Two economists–Robert Kuttner and Dean Baker–calculate that it would generate $100-150 billion a year for the public treasury, virtually all of it from extremely rich speculators. This is money that is desperately needed to reduce the deficit, while also providing funds to launch a nationwide program to rebuild our infrastructure, create a green-jobs economy, and get America moving forward again.
Isn’t this idea too new, too untried, too… wild? Nope. From 1914 to 1966, the US had a 0.20 percent tax on the buying and selling of stocks. And in 1932, Congress more than doubled it to help finance job creation and national recovery during the Depression. It worked, helping America prosper. As for being too wild, after the 1987 Wall Street crash, none other than President George Bush the Elder endorsed the idea, as did GOP Senate leader Bob Dole.
It’s time to put the Wall Street tax back on the table. Rather than just cutting back on the middle class and on America’s future–as the sour, no-can-do, gutless ‘leaders’ in Washington and on Wall Street propose–let’s invest in the genius and gumption of grassroots people to build America up.
The money to do that is now being frittered away by a handful of self-serving speculators and greed-headed bankers on Wall Street. Let’s reclaim a chunk of it for the common good of all the people–0.25 percent at a time.