Rule By The People or By Wall Street
By Ron Forthofer
09 March, 2010
Countercurrents.org
The corporate media tout the end of the Great Recession and suggest that we have survived the current economic crisis. The media point to the stock market that has recovered much of its losses as evidence the economy is on the right track. As further evidence of the recovery, the media point out that Wall Street firms are still able to pay huge bonuses. However these outrageous bonuses are primarily due to the highly troubling bailout of the financial sector that resulted in the transfer of vast amounts of wealth from taxpayers to some of the richest people in the country.
Those who learn from history are hoping to repeat it
Unfortunately, unbridled greed still rules. For example, Wall Street has kept Congress from enacting any strong reforms that would reduce the chances of yet another collapse. In fact, since these Wall Street firms and banks now know that they will be bailed out in a future crisis, they are pursuing the same and even riskier strategies than those that helped to create the 2008 disaster. By continuing to provide almost free money to the banks, the Federal Reserve is again fueling the growth of another risky bubble that is likely to dwarf the ongoing crisis.
I've got mine -- forget about yours
Now that the financial sector has reaped trillions of dollars from its takeover of the U.S. government, this sector has begun raising concerns about budget deficits and long-term debt. According to many politicians and pundits, we don't need another large stimulus to create jobs or to help states with their budget problems. It doesn't seem to matter to them that the real economy is still in trouble, that millions of people have lost their jobs, their homes, their retirement money, and are unable to afford healthcare coverage. Making matters worse, President Obama and many who were quiet about President Bush's deficits are now targeting Social Security, Medicare and Medicaid for cuts. At the same time they won't even consider the vast amounts of corporate welfare in the budget.
Bonuses and maldistribution of wealth
Wall Street's financial incentives, particularly the bonuses, played a role in the 2008 financial meltdown. The financial sector used a short-term planning horizon and risky behavior that led to huge incomes for a relatively few at the expense of the many. Additionally, the immense bailout increased the U.S. maldistribution of wealth, already one of the worst among developed nations. Supreme Court Justice Louis Brandeis pointed out the danger of this massive accumulation of wealth by a few: "We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both." The bank bailout, the inability to enact strong financial reform, and the healthcare debacle demonstrate that Brandeis was right.
Rethinking taxes -- the price we pay for a civilized society
One way of addressing the problem of risky behavior as well as the concentration of wealth problem is implementing a highly progressive income tax. The tax could range from, for example, from 1% for incomes under $50,000, stepping up to 95% on income amounts over $5 million. If we did away with all deductions, the tax code could be reduced to one page and the loopholes would be closed.
Another way of decreasing the risk from speculation and high-speed trading is to impose a small fee of 0.5% on every financial/currency trade. To provide additional stability and to reduce other speculations, credit default swaps should be limited to those who have an insurable interest.
We can also reduce the long-term debt by increasing the income to Social Security through the elimination of the cap on the amount of money that is taxed for Social Security. This tax should also be applied to unearned income over, for example, $50,000.
Another key step is to reduce the budget deficit and the long-term debt is to end military occupations and to cut the Pentagon's wasteful budget, bloated by corporate welfare to the weapons industry and to mercenary forces, by 50% over a five-year period. At current spending levels, this would save about $400 to $500 billion annually.
Conclusion
These ideas are a few examples of proposals that benefit democracy while simultaneously reducing risk to the economy. These ideas are usually quickly dismissed inside the Washington Beltway. To change this situation, we must create a movement that can pressure Congress to represent public interest instead of serving Wall Street and large corporations. To help build the movement, please contact the Rocky Mountain Peace and Justice Center at 303-444-6981.
