You've heard all the dire statistics: the current national debt is equal to $35,000 for every man woman and child in America. At the rate we are going, in just a few years, the whole of the federal government's annual tax revenues will be insufficient to finance, let alone pay down our debt. China could crush our economy tomorrow simply by refusing to lend any more.
If anything is clear, it is that maintaining our current course will lead to ruin.
So I am calling today for a renewed focus on fiscal responsibility in Washington. However, before my small gov't readers get too excited, I say we must recognize our obligations (not our limitations) and take decisive action to create the financial resources to meet them.
President Obama is taking a nice first step with his proposal to have the banks pay for some of the damage they have caused, but instead of a one-time we-tanked-the-economy-and-we're-sorry payment, we need to institutionalize a larger financial role for larger financial institutions. I'm talking about a financial transactions tax (FTT).
A miniscule tax on stocks, bonds and other financial assets, an FTT could be what is needed to help get our nation's debt under control. While taxes are always an unwelcome concept - particularly when budgets are stretched, the amount of the tax and who it would affect makes this a surprisingly appealing option. So appealing in fact - it is already before congress.
A tax of a mere 0.25 percent on the sale or the transfer of a stock is what is being proposed. According to economist, Dean Baker, such a small percentage would not be a cause for alarm to the average stock and bond buyer who keep their purchases long-term. The people who buy in large amounts and trade again just as quickly would pay more (read speculators). Those are the ones who are either making higher amounts and can afford it, or should be less reckless with their buys. These behaviors also contribute to the kind of stock market swings that can wipe out savings, kill companies and collapse an economy.
Rep. Peter A. DeFazio (D-Ore) introduced the bill last month to the House and Tom Harkin (D-Iowa) is supporting a similar measure in the Senate. A number of courageous members have signed on to these proposals, but the legislation is still considered a long-shot.
Rep. Michael McMahon (D-NY) on the other hand, opposed the idea. He claimed that these taxes will hurt smaller investors. I'm not sure what he means by "smaller investors" but maybe he is thinking of his top campaign contributor, Goldman Sachs. Since Goldman Sachs and their comrade institutions on wall street have enough money to afford a record 145 million in bonuses this year, I think they can handle it.
The truth is 99 percent of the American people invest to send their children to college, and to afford a decent retirement, and to leave something to their families. They don't use the stock market as a casino to make phony "profits," but to participate in real solid economic growth, owning shares of companies that make things to make our lives better. Because they don't buy-and-sell-and-buy-and-sell-and-buy-and-sell, they will pay an infinitesimal amount. Those who use our markets as a casino, to skim profits, they will pay, and they should.
An FTT could raise as much as $100 Billion. That would pay for healthcare (one or our obligations) and then some. For more details, Dean Baker lays out the plan here. This system isn't anything revolutionary. According to The Washington Post, "The United States collected a 0.2 percent tax on selling stock from 1914 until 1966."
If you like what you are reading here - lend your voice to the effort for financial reform like the FTT by signing the petition at BreakuptheBigBanks.com.