It’s been said that we Americans are a people with a short attention span: We’re transfixed, sympathetic to, or outraged by whatever is most sensational at the moment.
Tomorrow? Well, it’s another disaster, scandal, whatever.
A year ago, as the financial system was crashing and burning, everyone was screaming for the hides of brokers, bankers, and other wheeler-dealers who had been raking in hundreds of millions in salaries and bonuses while playing fast and loose with mortgages, derivatives, and instruments so esoteric nobody really understood them.
It took a trillion bucks or so of taxpayer money to stave off a meltdown of the entire economy, and “reform” and “never again” became the watchwords du jour (whether the “cure” is temporary or long term remains to be seen).
Yet, here we are, with precious little accomplished in the way of reform, banks reaping millions in profit from interest on bailout money they’ve invested in Treasury securities rather than channeling it into loans, bankers and brokers still getting mega-millions in salaries/bonuses — but ho-hum, we don’t have time to get upset about all that because we’re now on a high horse about health care and climate change.
As a reader succinctly observed, “The government is running on financial empty, while Wall Street barons do everything they can to squash any overhaul of the regulatory system.”
All of which has produced renewed interest in enactment of a financial transactions tax, which advocates say could easily produce an amount equal to 1 percent of the nation’s Gross Domestic Product and substantially reduce volatility and speculation in markets.
The idea of levying a small tax on foreign exchange transactions was suggested decades ago by the late Yale economics professor and Nobel Prize winner James Tobin, but was considered too unmanageable for the pre-computer era.
Now though, says Nobel laureate and Columbia University professor Joseph Stiglitz, computerized markets would make the process a piece of cake. And, he says, the tax should be levied on all financial asset classes, not just foreign exchange.
The topic was discussed at the recent meeting of G20 ministers and is among ideas being studied by the International Monetary Fund.
“For those who actually want to crack down on speculators in a meaningful way, there is a practical solution — tax it,” says Dean Baker, co-director for the Washington-based Center for Economic and Policy Research. “A modest tax on all financial transactions would impose a serious cost on those who actively speculate … while having almost no impact on those who use these markets for hedging.”
It could also raise “an enormous amount of money,” as much as $150 billion per year, he says.
The tax would be “very manageable” for farmers and others who use the markets to support productive economic activity, Baker says, but “would impose serious costs on (speculators and) those who see the financial markets as a casino…”