It’s unclear whether the $700 billion bailout of Wall Street will help stabilize roller-coaster financial markets. Congress now must focus on the unfinished business of a Main Street economic recovery plan.
For eight years, the Bush administration and the Federal Reserve ignored the housing bubble. They looked the other way as a huge unregulated financial sector of hedge funds and derivative gamblers mushroomed. The growth of this speculative casino sector did nothing to boost the real Main Street economy.
In the real economy, real wages were stagnant but expenses like health care, gas and food soared. With no mega-profits to harvest from the real economy, Wall Street gambled for risky high returns, first in high-tech, then real estate, and now in commodities such as food and oil. In each case, Main Street paid for the greed.
A Main Street recovery package could inject billions of dollars into long-delayed upgrades to our energy infrastructure, including mass transit and green technologies. This would stimulate good jobs anchored in local economies and reduce our dependency on foreign oil. The federal government should also send aid to cash-strapped states and localities to address the fiscal squeeze caused by the credit crisis and declining tax revenues. A stimulus for the real economy would have immediate positive effect.
A fair plan to pay for the recovery must not soak Main Street for Wall Street’s excesses. The bailout bill raised the national debt ceiling to a whopping $11.3 trillion dollars, up from $5 trillion at the beginning of the Bush years.
It would be wrong to have our children and grandchildren pay for the greed and speculation of Wall Street.
Instead of additional borrowing, Congress should develop a “pay as we go” plan. The lion’s share of funds should come from the Wall Street gamblers and the wealthy CEOs who profited from the casino economy.
Congress’s plan should include a modest financial transactions tax on the purchase and sale of stock and other financial products. A penny tax on every $4 invested would generate $100 billion a year. Other European countries tax stock transactions and they discourage speculation.
In August, the Government Accountability Office reported that two-thirds of U.S. corporations paid no income taxes between 1998 and 2005. Ordinary taxpayers shouldn’t be left holding this bag. A minimum corporate income tax, targeted to Wall Street financial firms, should contribute toward the bailout.
Many speculators have taken the money and run. They’ve bought extra houses and private jets and moved money into offshore accounts in countries like the Grand Cayman Islands. Lehman Brothers went bankrupt and may lay-off as many 25,000 workers. But their CEO, Richard Fuld, is set for life after being paid $354 million over the past five years. Congress should work to recapture some of this ill-gotten compensation.
An emergency income tax surcharge on incomes over $5 million should finance a portion of the bailout’s cost. Wealthy investors were the big winners in the unregulated bubble economy, watching their incomes and assets skyrocket. Meanwhile, President George W. Bush has cut their taxes for seven years. Instituting a 50 percent tax rate on incomes over $5 million and a 70 percent rate on incomes over $10 million would generate $105 billion a year until the bailout is paid for.
Congress should close down corporate tax havens that allow corporations to game the system and cut their taxes to zero. This would generate $100 billion from profitable companies that have paid no taxes over the last decade.
As taxpayers, we subsidize excessive CEO pay to the tune of $20 billion a year. Congress should close these loopholes, including the accounting gimmicks that permit companies to report one set of earnings to shareholders and another lower number to Uncle Sam.
In the end, we’ll all be stuck paying for Wall Street’s speculation binge. But a bailout that fails to require the Wall Street superrich to pay more would be yet another assault after the robbery.
Chuck Collins is a senior scholar at the Institute for Policy Studies where he coordinates the Working Group on Extreme Inequality — www.extremeinequality.org.
Distributed by Minuteman Media.