No Need for Cliff Dive: Support Prosperity not Austerity

Mike & Friends Blog

Donna Smith

Donna Smith, American SiCKO, is executive director of the Health Care for All Colorado Foundation

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November 16th, 2012 4:36 PM

No Need for Cliff Dive: Support Prosperity not Austerity

It seems like only moments ago when we were still hearing the polling about how close the Presidential contest was and our phones were ring incessantly with robo calls courting our votes. Then with lightning speed following the elections, the horrors of falling off the impending fiscal cliff were all that we heard.

Raising taxes, slashing social safety nets, looming recession. Scary, scary stuff. But these are not the only solutions to the federal budget woes. These are simply the only solutions being presented. There is another way. How about healing Main Street by taxing Wall Street? How about making those who broke the economy and profited wildly from the mess actually pay to make it whole again? The Robin Hood Tax would do that.

Economists estimate that HR6411, the Inclusive Prosperity Act also know as the Robin Hood Tax, would raise more than $350 billion each year. Those billions could be used to shore up the social safety net, create jobs, address our failing infrastructure, provide real healthcare through an improved and expanded Medicare for all for life system, work on climate change, and much more. There really is an alternative to cutting Social Security, Medicare and Medicaid. That alternative is already introduced in Congress and has 18 co-sponsors. It is well past time to check it out and demand that Congressional members and President Obama do the same.

The Inclusive Prosperity Act would also moderate the dangerous practice of automated high frequency trading which increases the levels of tail risk while providing little utility to companies or society. A small tax would make high frequency trading unprofitable and help reduce the excess speculation on commodities like food and oil that drives up prices. This tiny tax would tamp down market volatility, which in turn would protect the market and economy from computer-generated collapses such as the flash crash on May 6, 2010, when the market suffered the largest one-day point decline in Dow Jones Industrial Average history, and the more recent flash crash on August 1, 2012 caused by Knight Capital Group Inc., when $440 million in equity was wiped out in minutes on 140 stocks.

More than thirty nations have some form of a financial transaction tax. The United Kingdom has had a tax on stock trades for decades, and it has not had any negative impact on trading volume there. On October 9, 2012, European finance ministers from 11countries agreed to move forward toward creating a European bloc financial transaction tax.

Until 1966, America had a financial transaction tax, as envisioned in HR6411. It is a small tax – just half a penny on a dollar on most trades of stocks, bonds, derivatives and other transactions. In case you forgot how much this tiny, tiny tax could raise – it’s $350 billion per year. We could surely use that revenue. Among those who have called for reinstatement are businesspeople such as Bill Gates and Warren Buffet, and more than 1,000 economists, including Nobel Laureates Joseph Stiglitz and Paul Krugman.

And our elected officials need to choose whose side they are really on: Main Street or Wall Street?

This week in Europe, we watched as millions of people staged a general strike in protest of the austerity measures that still haven’t been enough to bring the Eurozone economy back to life. Working class Europeans have had enough. Why would we want to follow the path that led them to such a place? Extraordinarily high unemployment rates, deep cuts to public services and programs, and the loss of opportunity have pushed Europe to the brink. Police are firing on the citizens who have paid the taxes that have paid public wages – and taxes are rising. Why would we seek that direction?

Eleven countries in the Eurozone have voiced support for the Robin Hood Tax – even a global financial transaction tax to help stabilize their economies and bring some common sense to the economic conditions that seem to be swirling out of control.

We have the chance to create an economy that is balanced and taxes the right things without harming out citizens. Why are we talking about the fiscal cliff when we could be celebrating economic sanity? Would the President and Congress rather push seniors over the cliff than tax Wall Street interests? Let’s help answer that question for them. HR6411. The Robin Hood Tax. The Inclusive Prosperity Act. Prosperity not Austerity.