For more on the abject unseriousness of the Deficit Commission's "chairman's mark," we go live to Dean Baker at the Center For Economic and Policy Research:
The deficit report put out by the commission's co-chairs, Alan Simpson and Erskine Bowles, had one striking omission. It does not includes plans for a Wall Street speculation tax or any other tax on the financial industry.
This omission is striking because the co-chairs made a big point of saying that they looked everywhere to save money and/or raise revenue. As Senator Simpson said: "We have harpooned every whale in the ocean - and some minnows." Wall Street is one whale that appears to have dodged the harpoon.
And I'm sure you are surprised to learn this! Baker has written pretty extensively about the virtues of a financial speculation tax, arguing that it is "a very attractive mechanism for raising revenue that is arguably efficiency-enhancing." If you cast your net, you'll see plenty of others supporting it as well. The New York Times' Paul Krugman and Bob Herbert have, over the past year, put forth some of the more convincing arguments. Here's Herbert, advancing the ball from Baker:
According to Mr. Baker, the co-director of the Center for Economic and Policy Research in Washington, the fees would raise a ton of money, perhaps $100 billion or more annually -- money that the government sorely needs.
But there's another intriguing element to the proposal. While the fees would be a trivial expense for what the general public tends to think of as ordinary traders -- people investing in stocks, bonds or other assets for some reasonable period of time -- they would amount to a much heavier lift for speculators, the folks who bring a manic quality to the markets, who treat it like a casino.
"It raises money in a way that comes primarily at the expense of speculation," said Mr. Baker. "The fees would be a considerable expense for someone who is buying futures, or a stock, or any asset at 2 o'clock and then selling it at 3. The more you trade, the more you pay.
"For the typical person holding stock, who is planning to hold it for a long period of time, paying the quarter of one percent on a trade is just not that big a deal."
This would be a bad thing if financial hyperactivity were productive. But after the debacle of the past two years, there's broad agreement -- I'm tempted to say, agreement on the part of almost everyone not on the financial industry's payroll -- with Mr. Turner's assertion that a lot of what Wall Street and the City do is "socially useless." And a transactions tax could generate substantial revenue, helping alleviate fears about government deficits. What's not to like?
Well, the answer to "what's not to like?" basically boils down to, "Who is it that doesn't like this idea?" As Krugman points out, Tim Geithner is one key opponent. But the lack of traction for this idea from the Deficit Commission's chairmen is rather simple to explain:
In this context, it is worth noting that one of the co-chairs, Erskine Bowles, is literally on Wall Street's payroll. He earned $335,000 last year for his role as a member of Morgan Stanley's (one of the bailed out banks) board of directors. Morgan Stanley would likely see a large hit to its profits from a financial speculation tax.
This just goes to show that while the financial industry may not have 310 million tits, it has at least one very dedicated sucker.
Erskine Bowles, Morgan Stanley, and the Deficit Commission [Dean Baker @ CEPR]
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