One of the most dominant narratives of the political conversation in the past few years has been the idea that “the United States is bankrupt.” This idea, largely pushed by the right-wing, is used to push more cuts to America’s already meager social safety nets. The financial crisis – caused primarily by the big banks and a corporate-controlled Congress – is now being used to cut benefits for the poor and the most vulnerable in this country. This scheme of things is obviously unjust, and entirely unproductive – doing nothing to curb the excesses that led us down this path in the first place. So what are the alternatives?
Putting aside for the moment the question of whether we really are bankrupt, are there alternatives to cut the debt in a more equitable and just way? Yes!
Enter on stage left – the financial transactions tax (FTT). The tax is fairly simple, putting a small ‘microtax’ on each stock trade -with the potential of raising enormous sums of money. Basically, it’s a sales tax on Wall Street transactions. A mere half percent (0.5) tax on stock, bond, or derivative transactions could raise, conservatively, $200 billion a year (source here). This tax- divided equally between buyer and seller- would have a trivial effect on regular, average Joe traders – but would quickly add up for high volume speculators who are
investing gambling for only seconds per trade. Besides raising revenues, this would also have the impact of discouraging the rampant speculation that creates bubbles and distortions in the market. In the words of University of Massachussets economist Robert Pollin, a FTT would “slow down the casino” of Wall Street- providing a valuable tool to dial down (or dial up) the amount of speculation.
Like most good ideas in Washington, the proposal for a financial transactions tax (FTT) has been largely ignored for years. Originally proposed by famed economist John Maynard Keynes in 1936, the idea got support under the first Bush Administration, and more recently from the European Parliament and even the IMF. Over 1000 economists from 53 nations have signed a letter in support of the FTT. The UK has had this type of tax in place for years, with a thriving financial center in London- years of evidence that it’s not going to ‘kill jobs’ as we so often hear. So what’s the hold up?
The Obama Administration. In his defense, President Obama himself was supportive of the idea according to insiders, even saying “we are going to do this!” His economic advisor Larry Summers, a man whose ideas and actions played a large role in causing the 2008 crisis - reportedly nixed the idea. For reasons unknown – Obama apparently took the advice. I suspect it has something to do with the very large sums of campaign cash he’s received from Wall Street. Like most decent changes in America – only overwhelming public support can push these policies. So get on board! With Occupy Wall Street, or more specific progressive movements like Americans for Financial Reform.