Wall Street is upset. Sure, they were handed a trillion dollars. Sure, their industry was pulled from the toilet, propped up, dried off, and allowed to return to its never-ending party. Sure, they're looking forward to what may be the biggest bonus year ever while the rest of us are dealing with a little thing called a recession. But hey, they are upset that people have been talking mean about them. They don't like that. They don't like that so much that they're pouring record levels of money into Republican campaigns, just to make sure that Democrats get the point.
After all, being "too big to fail" means never having to say you're sorry. Heck, it means never having to face up to the fact that you failed at all. It certainly means that guys wearing Alexander Amosu suits don't have to say thank you to the people digging ditches, flipping burgers, or sweating out a stint of unemployment. You know, the people who chipped in so that the Wall Streeters could keep their jobs. Being too big to fail means being able to go on pretending that you're a tough, take care of yourself, fiscal conservative and that this little bump never happened. It certainly means that you don't have to be the least bit contrite, or demonstrate any sense of either guilt or gratitude.
And I absolutely agree. They don't. There's only one thing I want from these guys -- I want to tax the holy crap out of them.
I'm not suggesting this because it would be satisfying (though it would), but because it would be a good thing to do. The right thing to do. Not just to start repairing the hole these guys drove through the federal budget, but good for the whole economy. Even good for Wall Street.
Over the last four decades, we've become a nation where the Laffer Curve is hardwired in our brains. A nation that believes in always carrots, never sticks. Republicans have pushed the idea that reducing taxes is an universally effective way of growing the economy. No matter what the problem, there's bound to be a tax cut to solve it.
The problem is, that's nonsense. Always has been nonsense. Continues to be nonsense. The truth is that cutting taxes is the least efficient way of addressing economic issues.
The nonpartisan Congressional Budget Office this year analyzed the short-term effects of 11 policy options and found that extending the tax cuts would be the least effective way to spur the economy and reduce unemployment. The report added that tax cuts for high earners would have the smallest "bang for the buck," because wealthy Americans were more likely to save their money than spend it.
Not only is extending the Bush tax cut an unfathomably stupid idea, the tax cuts that President Obama has proposed for business? Also a bad idea.
Corporate lobbyists have been seeking these tax cuts, because corporations are investing in automated equipment and software. These investments are designed to boost profits by permanently replacing workers and cutting payrolls. The tax cuts Obama is proposing would, therefore, make such investments all the more profitable.
Get that? The exact tax cuts Obama is proposing would make it easier for businesses to permanantly get rid of employees. Not only that...
Obama's whopping proposed corporate tax cuts help legitimize the supply-side dogma that the economy's biggest obstacle to growth is the cost of capital, rather than the plight of ordinary working people.
Tax cuts are not the solution. In fact (if you're a conservative you may need to sit down for this) tax cuts the problem.
The current structure of our tax system exerts so little incentive on wealthy individuals and corporations to do anything with their wealth other than roll in it, that we've gestated a nation peppered with Smaugs, each of them perched atop their private hordes and ready to defend every jeweled goblet. The amount of wealth held by the top 1% of individuals is at record levels. The amount of money that corporations are sitting on is at record levels. So tell me, how will reducing taxes so they can made another Scooge McDuck dive into the gold pool help things? The inequality that now exists is harmful in multiple ways, but we're still nodding along with the same nonsense that put us in this spot.
The idea that sending money to the wealthy is helpful was once recognized as idiocy even inside the Republican Party. George Bush -- sans 'W' -- knew "voodoo economics" when he saw it. But along with the sanctification of Ronald Reagan we seem to have absorbed this conservative fairy tale so throughly that leaders both 'left' (at least what passes for left in Washington) and right can recite it in their sleep: if you start taxing someone so much because he's wealthy, he'll stop trying to make more money.
You know what? I believe that idea. I also believe that's a very, very good thing.
When someone is looking for a spot to park the third Ferrari, allowing them to take home more of their money should be the least of our concerns. In periods when there were higher taxes (including top rates that exceeded 90%) the incentive was there for CEOs and company owners to stop padding their own paychecks and turn more of the funds back to expanding their companies and rewarding their employees. That incentive is long gone.
By reducing the top tax rate we have driven a philosophy of short term profit, disregard for product quality, mistreatment of employees, and disdain for community relationships. We have directly rewarded the worst possible behavior. There's not one shred of evidence low top tax rates have ever been beneficial, and there's every indicator that they have proven a long term disaster.
The low tax rates on the wealthy are directly responsible for the rapid concentration of wealth, the stagnation of the median income, and the decline of the middle class. It's not something mysterious. It's not something that's being inflicted on us. It's something we are doing to ourselves.
The problem is that we've forgotten something -- you can't run a country on carrots alone. Every situation can't be addressed by giving someone a prize. Sometimes you have to reach for a stick. When the nation was founded, Washington and Hamilton were faced with deficits at the federal level and a group of states on the brink of bankruptcy. Their reaction was not "gee, maybe we give wealthy planters more money and hope they use it to buy extra wigs and waistcoats." Instead, they raised both taxes and tariffs. We seem to have forgotten that such an option even exists.
In the case of Wall Street in 2008, there was little choice but to rescue these "captains of industry" from their own sinking ships. They don't have to be grateful, but we aren't required to be stupid. If we don't start structuring our tax system in such a way that some of the gold gets dragged out of the hoards, we'll soon find ourselves in an even bigger dilemma -- one that we won't be able to repair, no matter how many working class people cough up.
In the meantime, how about trying one of the ideas to stimulate the economy that wasn't rated worst on the list. If you want to increase employment, . Government jobs are no less real, no less honorable, and no less necessary than those created by private industry. No matter what Republicans may say.