"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.
Follow Les Leopold on Twitter: www.twitter.com/les_leopold
But take note that investment in the US by the private sector has almost dropped by a trillion dollars from the 2006 level. Either the money is not being loaned out and/or it is going offshore to be invested in countries like China.
Two conditions will put us in a depression with even worse unemployment: the deficit hawks and under investment in the domestic economy by the private sector.
The current population growth rate is 1.3% Let's have a profits tax of 10%. And then reduce the tax by 1% for every .13% reduction in population growth rate until we reach zero population growth rate and zero tax. It doesn't matter how business pulls it off, that's their business, we'll just count on the "miracle of the marketplace" to get it done. If we continue to grow at 1.3% the population will double in 54 years and it will not matter if we solve every other problem.
Either that or free ice cream on Sundays.
1) US Gov't spending trillions yet the economy seems to be responding very weakly to all this expense
2)US gov't policies that is positioning about 20% of the working population to rely on gov't handouts
3) Policies that widen the gap between the top 1% wealthy and the rest of the population. These are mostly policies that weaken the US dollar which is destroying the poor and middle class.
This 787B "stimulus" was a total sham. It was kited as helping the broad economy; the stats showed it went to keep teachers, fireman, an police from being fired. You don't suck dry the part of the population that pays the bills to civil servants. In the end it keeps everyone in misery.
If French farmers can tie up Paris to be heard we can too
I think formulas such as this would help guide us to a more distributed and fair economy for the people of America.
I would also suggest that executive pay be dynamically capped with a formula directly proportional to front-line worker pay. For example, no more than 100X front-line worker's pay.
No man is worth any more than that, over the other people of America.
The "Free markets" is a lie. It is a mechanism to rachet down pay globally, it is a rich man's scheme to get richer, and a race to the bottom for workers wages.
When will the "people" wake up to this fact?
Since this is a windfall profit and bonus tax, banks will just shift from a bonus (deferred compensation) plan to a higher salary plan. If they shift enough, they can pay just as much or more and not show any profit that would be taxed anyway.
Pitchfork carriers are always too simplistic.
You are right about taxing windfall profits. Fixing the tax code back to 1955 would be a big start toward a just society.
I'm not giving up, but I'm tired of the same old rhetoric and the spinning of wheels. Lawmakers don't listen to their constituents, the President has his reasons for escalating troop presence in Afghanistan while people are losing their homes, the big bankers are laughing at us for being such patsies (through no fault of our own) and small businesses that could turn $100K of a bank loan into a profitable investment are shut out.
Is anyone as weary as I?
Yet, I see it as having a lot more potential...especially for rapid organizing ability. Consider what the group "Moveon.org" did in soliciting election funds for Obama's presidential campaign. Something like $600 million gained in months. That's effective. I'm sure that blew the socks off of McCain's campaign fund staff. They couldn't have envisioned or believed in that mode of soliciting. Otherwise, they would have taken the same approach. The Repubs. were caught off-guard.
The most immediate political use of the internet now might be in electronic petitions. I'm not sure HP is interested in anything like that, but petitions could be assembled and filled quickly on this site if they so chose. Subsequently, they could be directed by email attachment to Obama or congress.
But, as you indicate, where do we go from here in order to make a real difference? It may relieve some personal frustration in having a bit of a voice. Politicians may regard the forums as beneficial in giving the masses a chance to blow off some steam.
It must lead beyond personal expression, and beyond decisions on term limits and voting out the incumbents. It must lead beyond letters to congressmen and the president. The political organizing potential of this and other forums and the internet as a whole is yet to be determined. At least it appears that way to me.
I have asked all voters who favor the health insurance with THEIR modifications to contact their senators and representative to explain it to them. Mine listen, often call, or have a staffer call to get additional details. Our representatives are beholden to us. We "hired" them to vote our priorities when we elected them. They owe US their votes. I just hope that Lieberman's have been listening and reading my recommendations!
We should never, ever forget this dark chapter in U.S. economic history. This illustrates the end-goal of unbridled greed as well as absolute disregard for hundreds of millions of U.S. citizens and billions of people in the world. This is smugly capped off by one of the guilty CEOs who describes his current role as “doing God’s work.” If he’s correct, then the priesthood of Wall Street certainly answers to a sinister deity.
And, we just learned that we’ll be at war for more years than anyone imagined. Nursing Wall Street and two wars will be expensive for us, our children, and their children.
But there was time in the last couple of days for a D.C. jobs conference. The corporate representative even smiled as he said that if corporate taxes are lowered, it might lead to increased employment.
The most likely job prospects will be as Blackwater-type guards for the guilty on W.S. who have taken more of our money than they’ll ever be able to count.
We need a WPA.
Funny, my cat always smiles right before it bites the head off the mouse it has caught.