Robert Reich has a piece up on TPM about the rise of angry populism in the face of the coming bailout. The public knows all too well that it is being fleeced by the financiers of Wall Street. At this point it may not be possible to craft a more progressive alternative to the Paulsen plan that embraces a bottom-up bailout, but the Democrats must make it clear that, even if taxpayers are forced to pay a ransom to save the economy right now, they will take steps to recapture the loot from the people who profited from the Ponzi schemes of the last eight years. In addition to effective restrictions on executive pay, a small transaction tax on stock trades, and bankruptcy reform, how about opening that Overton Window a bit to include the idea of a luxury tax and income-based fines for misbehavior?
The growing inequality of income over the past 40 years has been linked to political polarization, a situation memorably described by Paul Krugman in the New York Times Magazine a few years back. We are now tasting the fruit of that polarization. Angry citizens who don't have an immediate stake in the stock market or the fancy derivatives cooked up by our financial overlords don't see the credit crisis as anything they should be called upon to solve. The Paulsen bailout is perceived as aggravated theft on top of an underlying swindle. Before Democrats get tarred as accomplices to the crime, they must make it clear that they are taking steps to retrieve the ill-gotten gains. While they may not have a sufficient majority to pass the measures now, they should at least put the ideas on the agenda for the new Obama administration.
Executive compensation. Martin Sabo, Keith Ellison's predecessor from my old district back in Minnesota, proposed the Income Equity Act, which would restrict tax-deductibility for executive salaries greater that 25 times the minimum wage. It is time to resurrect that bill.
Luxury tax. Since the loot has already been taken and converted into assets, the only way to get at it is by imposing a luxury tax on non-productive wealth, such as yachts, limousines, and extra homes (like the third or seventh or eighth home).
Income-based fees and fines. The huge gap in income and wealth can make it hard to adopt fees and fines high enough to deter undesirable behavior, like driving solo at rush hour or parking in front of a fire hydrant. In Scandinavia, traffic offenses carry fines stated as dagsböter, an amount equal to a multiple of your daily income. This means that when some billionaire brat decides to endanger everyone by speeding, he can get fined over $100,000.
Once Democrats once again focus on the goal of economic equity, they can start to shed the elitist label that the Republicans have so effectively pinned on them for the past 30 years. If they don't, they may be the victim of angry populism before they are able to undo any of the damage done by the Republican regime.