By Mark Zimmerman
To begin, we should examine some terms. Most Greens would agree that the fiscal cliff is not a couple weeks from now. That would be the fiscal landing. We were driven over the fiscal cliff 5-10 years ago when a trillion and a half dollars spent on foreign wars was put on the national credit card so we could enjoy the “temporary” tax breaks that have led the economy to the fine state of affairs we enjoy today. The plunge was deepened when irresponsible Wall Street speculation crashed the economy in 2007-8, throwing millions out of work and leaving the government to pick up the pieces despite decreased revenues.
This debt problem wasn’t caused by the working people of America, it was in large part caused by the speculating portion of our country and it is they who should shoulder responsibility for it. You break it, you buy it, right?
Let the 2% keep their apparently sacred marginal rate. A more pertinent approach would be a sales tax on financial transactions ( stocks, derivatives and the like, not your ATM). This would inherently differentiate longer term investments, (which actually might employ people) because they are traded less often, from short term ones, like currency speculation, which only seems to employ the speculators. Britain, Japan and 40 other countries have such a tax and no one is expecting the London Stock Exchange to fold up or move to the Caymans anytime soon. In fact the U.S. had such a tax from 1914 – 1966. There’s no reason such a tax couldn’t be thresholded or indexed to exempt middle class IRAs or investments.
Or another approach that would link cause and effect would be to reexamine why we give capital gains preferential treatment over wage income. Why is paper speculation or programming a computer to make high speed trades more worthwhile than the work of a doctor, a teacher or a welder? Not why does it pay more, why is it given preferential tax treatment? Even though wealth is already highly concentrated, the capital gains tax could also be indexed to protect what little the middle class has retained.
No one is saying we should spend profligately. Obviously we should be responsible and efficient with tax revenues. But rather than slashing medicare for people who to whom it would make a real difference, why don’t we continue to eliminate fraud in the system or allow it to negotiate for drug prices like the V.A. does? Are there really no efficiencies to be gained when we spend as much on defense as the next 13 – 15 nations combined? And we’re still spending several billion a year on fossil fuel subsidies for an industry that had $80 billion in profits in just the year 2011?
Government spending is almost always referred to in the abstract, likely because it’s easier to vilify that way. What specifically is it conservatives are objecting to? Keeping our food and highways relatively safe? Keeping our national parks open? Helping the less fortunate, whether their misfortune comes from market disasters like ‘08 or natural ones like Sandy?
Like the saying “freedom isn’t free”, neither is the “free market”. Those that have benefited the most from it owe a commensurate responsibility for its maintenance. That should be what guides our ascent route back up the cliff.
Mark, great points. “you break it you own it” is so true. Keep fighting the good fight.
So, basically, what we have here is a presentation of the Labour Theory of Value. Someone trading securities adds less “value” to society than a doctor.
Poppycock. Economic value is determined by how much people are willing– freely– to pay for activity. If a stock trader makes more money than a doctor, then that trader has more inherent value than that doctor. Any other measure is bogus.
You say, “…when irresponsible Wall Street speculation crashed the economy in 2007-8, throwing millions out of work and leaving the government to pick up the pieces despite decreased revenues.”
Good grief. The Federal Reserve created a massive housing credit bubble by pumping dollars into the economy and artificially lowering long term interest rates, bolstered by a Congress that engineered a housing finance regime that encouraged people to take out mortgages they could not possibly repay.
Then Fannie Mae and Freddie Mac securitized those mortgages and sold them to public institutions under the guise of an implied Federal guarantee. Moreover, the Congress further abetted those purchases with a rating agency regulation that gave institution investors limited choices in where to put their money.
In other words, this problem was entirely the creation of government. They made the rules, and enforced them. Why are Barney Frank and Chris Dodd not hanging from a lamp post somewhere?
You say, “No one is saying we should spend profligately”. Have you not been paying attention the past four or more years?
Obama said, in a speech in February 2009, deficit spending and a ten trillion dollar national debt had put is into “an economic tailspin”. Not ten minutes later, he added, “Of course it’s spending. What do you think ‘stimulus’ means? That’s the whole point”.
The economic policy of this administration is based on cognitive dissonance.
You also say, “This debt problem wasn’t caused by the working people of America”.
Who do you think voted the likes of Bush and Obama into office? Twice, each. Working people of America.
You might want to rethink your thesis a bit. Decide if private property is a right or not. Decide if government spending is truly stimulative to anything other than more government. Then attempt to prove your case.
Otherwise, you are wasting valuable cyberspace.
Very interesting article from Mark Zimmerman. Here is my response.
1) the two wars cost one trillion dollars, which is equal to only one year of Obama’s deficit spending. We are way beyond spending on cheap wars.
2) The housing crisis was not the fault of Wall Street but Federal housing policies.
3) Mark argues for a tax without understanding of what he is taking from or what government will spend it on.
4) Investments are different from wages. The writer makes many flawed assumptions about the role of capital in society. If labor was done the same way investments were, here is how it would work. I pay you $25,000 a year, but not until the end of the year. Forget raises. You will not get those, but if you keep perfect attendance, I will give you 3 percent more. That is it. No raises, no incentives. You are at the mercy of fate for anything different to occur. That is how investments work.
5)The writer ignores the fact government gets its money by force, argues continuously how to spend it in the process of politics, resulting in absurd payments being made. This is why the free market works better.