"I want to be clear: While I believe the government has a critical role in creating the conditions for economic growth, ultimately true economic recovery is only going to come from the private sector." President Barak Obama, White House Jobs Summit
Well, Mr. President, I've got a proposal for you and it won't cost the government a dime. In fact, it will raise money for jobs programs like "Cash for Caulkers."
But first we've got to face up to our jobloss recovery. Unemployment now is 10.0 percent with an overall jobless rate of 17.2 percent (BLS U6). At this pace we may not see full employment again for an entire decade.
President Obama's belief that a "true economic recovery is only going to come from the private sector" doesn't mean much to the 30 million Americans without jobs or the one in four children who are on food stamps. Any job is a "true" job if you can't feed your kids.
But the Administration has boxed itself in by refusing to create jobs directly and by falling in line with the screeching deficit hawks who now control the debate.
To break through, the Administration must focus the nation's growing anger on Wall Street's unwarranted welfare. Obama, Summers and Geithner must back away from their confining strategy of building "investor confidence" first, foremost and always. Instead, of worrying about "true" jobs, President Obama should give voice to the great injustice staring us in the face:
We live in a divided and fractured economy. Wall Street will make record profits and pay out record bonuses as unemployment and hunger hit record highs in the richest country on Earth. This is our new billionaire bailout society with a hollowed out middle class.
Now is the time for a policy that directly connects the well-being of Wall Street to Main Street. Congress and the Administration should call for a steep windfall tax on all Wall Street profits and bonuses, directly tying the tax to the unemployment rate. The justification is simple: When the economy crashed, we put the entire financial sector on welfare with bailouts valued somewhere between one and thirteen trillion dollars (depending how you count the various liquidity programs and asset guarantees.) Welfare recipients are not entitled to windfall profits.
We should start with a windfall profits/bonus tax of 90 percent as long as the yearly average unemployment rate is higher than 10 percent. Then it could drop as follows:
75 percent until the yearly unemployment rate drops below 9 percent;
60 percent until it drops to 8 percent;
45 percent until it drops below 7 percent;
30 percent until it clears 6 percent and;
15 percent until it crosses 5 percent.
Full-employment (below 5 percent) would automatically end the windfall tax.
Would the American public back such a tax on Wall Street? I believe there would be overwhelming support because everyone realizes that the financial sector caused the crash and the unemployment in the first place. And as Ben Bernanke recently pointed out, Wall Street is causing unemployment to rise right now by its failure to make loans to jobs-producing businesses.
This proposal, if enacted, also would provide enormous incentive for Wall Street's best and brightest to figure out ways to put our people back to work. But don't count on it. Instead, they will do all they can to prevent this policy from seeing the light of day. The business of Wall Street is to make money, not jobs.
But a windfall profits/bonus tax, even if not passed, would change the debate dramatically. The Obama administration and the Democrats would be attacking welfare for the wealthy while also trying to bridge the divide between Wall Street and Main Street. Because the windfall tax would raise revenues, it would force right wing ideologues either to support the proposal or defend Wall Street's obscene profits and bonuses. The deficit hawks would have their feathers plucked.
But most importantly, by tying profits to overall unemployment we would be exposing the rot of our new billionaire bailout society. We would be saying loud and clear that those who crashed the system must be held accountable for the damage done, and should not be permitted to profit from taxpayer support.
The proposal also would serve as a constant reality check. It would remind us that top bankers profited wildly through their reckless financial gambling until our economic system collapsed under the weight of their fantasy finance scams. Then the taxpayers were forced to cover their bad bets with trillion dollar bailouts. And now the bankers are pretending none of it really happened as they happily walk off with record profits and bonuses again while 30 million are jobless and 49 million go hungry.
For just one moment let's imagine this windfall profits tax actually passed. Wouldn't it be something to see the powerful bank lobby swarm all over Capitol Hill, pushing measures that would create jobs as fast as possible?
Now, that's my kind of fantasy finance.
Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It, Chelsea Green Publishing, June 2009.