America Needs a Financial Transactions Tax
The budget sequestration debacle proved two things beyond any shadow of a doubt. First, it proved that Speaker of the House John Boehner (R-Ohio) has lost whatever was left of his political clout. Second, it proved that this country needs to start finding ways to balance the budget that don’t hurt tens of millions of Americans in the process.
After slogging through weeks of pretend negotiations the United States is bracing itself against the first wave of nearly $1.2 trillion of blunt budget cuts over the next decade. The so-called “sequester.” These cuts will slow economic growth, if not reversing it entirely, and are generally seen as precisely the wrong thing to do during a recession.
Professional economists are in near-unanimous agreement: this economy needs more money, not less of it. The quickest way of injecting money into the economy is through expanded government spending. Budget sequestration is just the opposite.
Economists also generally agree that at some point the United States is going to have to seriously address its enormous national debt while also trimming its budget deficits. We do not need to balance the budget next year, but we do need to take steps toward deficit reduction in years to come. The only way to bring the budget into balance is by cutting spending–which will hurt the economy–or by raising taxes–which will hurt workers (some significantly moreso than others).
If only there were a compromise solution.
On February 28, with the automatic sequester just hours away, Senators Tom Harkin (D-Iowa) and Sheldon Whitehouse (D-RI.) held a joint press conference with Representative Peter DeFazio (D-Ore.) to announce their own plan to bring the budget closer to balance without reaching into the pockets of working families. Their solution: the “financial transactions tax.”
According to George Zornick of The Nation, the tax would generate nearly $352 billion in revenue over the next ten years. These billions would be drawn directly out of the financial markets at a barely-perceptible rate of three pennies per $100. Rather than forcing budget austerity onto working and middle class Americans who are still barely making ends meet, this structure would collect its revenue from the one sector that is not suffering the effects of recession: Wall Street. In fact, on March 5 the Dow Jones Industrial Average topped its previous all-time high set in 2007.
Wall Street has enormous sway over Washington politics–multi-trillion dollar international corporate banking operations can buy a lot of influence–but taxing the finance industry is very popular with the American people. Rather than continuing our hands-off approach to big business, it is time the people demanded that these companies pay a fair share.
Corporate America, under the guise of the astroturf front organization Fix the Debt, is lobbying nationwide to cut health and retirement allocations for seniors and the very poor. They don’t just want the sequester ($1.2 trillion in spending cuts over ten years), they want $2.5 trillion in cuts coupled with raising the retirement and Medicare age and limiting access to Medicaid. All of us have seen our wages stagnate and our tax deductions get cut over the past few years. We cannot afford to let the ultra wealthy and powerful take even more. The financial transactions tax could fund vital government programs, to which all Americans are entitled, while leaving only the slightest dent on corporate bottom lines.