There's been a lot of back and forth in recent days over the terms "bailout" and "rescue."
The truth is, both words are operative. The financial system needs to be bailed out from the consequences of Wall Street's reckless behavior, and Main Street needs to be rescued from the consequences of eight years of trickle-down Republican economics (including the deregulation that made Wall Street's recklessness possible).
Here's the good news in these bad times: Democrats now have the opportunity to do both the right thing and the politically smart thing.
Earlier today, Kos wrote:
[I]t's time to craft a progressive solution to this problem and ditch the GOP.
Reps. Peter DeFazio and Pete Stark have done exactly that:
A group of House Democrats is proposing to make Wall Street companies and investors pay more of the cost of any financial rescue plan through a new tax.
In a letter sent late yesterday to House Speaker Nancy Pelosi, 16 Democrats asked her to ensure any rescue legislation include a ``transaction tax'' on all U.S. stock trades and on other types of trades, such as credit default swaps, options and futures. They are proposing the tax would be at a rate of one quarter of one percent on all trades.
``The same Wall Street speculators and investors who are principally responsible for having caused this avoidable financial crisis and profited from it must now be required to pay for it, not U.S. taxpayers,'' according to the letter, which was signed by Representative Peter DeFazio, an Oregon Democrat, and Representative Pete Stark, a California Democrat.
Economist Dean Baker explains:
The basic point is very simple. We impose a modest transactions tax on all financial transactions, for example a tax of 0.02 percent on the purchase or sale of a future contract or a tax of 0.25 percent on the purchase or sale of a share of stock. (The United Kingdom has had a tax of 0.25 percent on stock sales and purchases for many decades.) Such a tax could easily raise a $150 billion a year, enough to pay for a national health care program or a major clean energy initiative.
A tax of this magnitude will have almost no impact on someone who intends to buy and hold a financial asset.... The only people who will really be hit by the tax are speculators; people who buy futures at 2:00, with the intentions of selling at 3:00....
Let's be clear on what has gone on over the last quarter century. Over this period, there have been enormous gains in productivity, however most workers have seen very little benefit from this growth. Foremost among the big gainers have been the Wall Street crew with compensation packages that routinely run into the tens of millions of dollars. The sector became so bloated that it accounted for more than 30 percent of all corporate profits at its peak in 2004.
The basic story is Wall Street has our money....
We have a historic opportunity to correct one of the major distortions to the U.S. economy if we move now. There is no way to reverse the growth in inequality over the last three decades without attacking the elite Wall Street crowd. Those folks who back away from this task simply are not serious about addressing inequality. They have our money. It's that simple.
Combine it with some tough regulations--including a revival of Glass Steagal and a repeal of Phil Gramm's Commodity Futures Modernization Act of 2000--and progressives can achieve the same type of victory in Bush's final year as they did in Hoover's final year with the Revenue Act of 1932.
UPDATE: In the comments, irishamerican points out that Obama is supporting the transaction fee:
I’ve proposed to institute a Financial Stability Fee on the entire financial services industry so that Wall Street foots the bill – not the American taxpayer.
UPDATE 2: In a diary from earlier today, rhetoricus includes much more background about the Wall Street tax:
[W]e already know it works, because we used it for decades to generate revenue, and it was successfully adopted by the UK, France, Japan, Germany, Italy, Greece, Australia, France, China, Chile, Malaysia, India, Austria, and Belgium.
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And let's make sure America remembers exactly who got us into this mess. Here's my contribution to the effort: