Taxing Wall Street Speculation

There's another, better way to go after the 1 percent than the Obama administration's proposed "Buffett rule."

This piece is the third in a six-part series on taxation, and a joint project by The American Prospect and its publishing partner, Demos. As the White House mounts a major campaign to sell the “Buffett Tax” this week, there is another, better tax on the 1 percent that Washington should be considering: A financial-transaction tax—better known as a financial speculation tax (FST). A financial-speculation tax has been discussed, from time to time intensely, ever since the financial crisis of 2008 riveted attention on the markets that drove the economy to the edge of a Great Depression-quality abyss. One motivation was to make the perpetrators pay, as the public focused on bonuses at levels befitting Croesus and callous disregard for the responsibility borne by the banks for the great recession. But the financial-transaction tax is also good policy. Under the concept, financial transactions—purchases and sales of equity shares and bonds and the execution of derivatives—are taxed based, at...

Reintroducing the Buffet Rule

Later this afternoon, in Florida, President Obama will make his push for the Buffet rule, a policy which would ensure a minimum 30 percent tax rate for individuals making more than $1 million per year. There’s no chance that it will pass either chamber of Congress, but that’s not the point; the proposal is meant to place Democrats on the side of tax fairness and present the GOP as tied to the interests of the wealthy Americans. The Republican response is that this is an attempt to draw attention away from the economy and its sluggish performance over the last three years. In a great post, Greg Sargent notes the extent to which the Obama campaign is hoping to tie its argument about the direction of the economy to an argument on economic fairness: The GOP hopes to neutralize the tax fairness issue by separating it from the economy’s performance. But Obama’s case is that there is no separating the fairness issue from the economy’s performance or from people’s economic suffering. He is...

Write Down the 11 Million

Underwater homeowners aren’t backing down—they’re standing up and fighting back. And we need to stand with them.

We’re entering the 99 percent spring, with escalating actions starting across the country next Tuesday targeting America’s biggest tax dodgers. On April 24, shareholder actions will begin at General Electric, Wells Fargo, Bank of America, and dozens of other corporations. Americans are renewing the fight to fix our economy and to hold the big banks accountable for the misdeeds that have left millions out of work and out of homes. Last month in The Nation , I wrote about three issues that allow us to thread different strands of activity through a common analysis of how Wall Street, big banks, and corporations have profited by tanking and then reorganizing the economy: housing, student debt, and the devaluing of work. Of those three issues, the bravest activists—and the highest stakes—may be found in the housing crisis. Right now in America there are nearly 11 million homeowners who are threatened by foreclosure or are underwater— 11 million— who collectively hold nearly $800 billion in...

A Glimpse at the "Opportunity Society"

Whenever Paul Ryan speaks on the need to reform the welfare state, he declares that what the United States needs is a social safety net , and not a hammock. The idea is easy to understand: A net is meant as a last resort, to keep you from serious danger; a hammock, by contrast, is designed to keep you comfortable or—in Ryan’s words—“lull able-bodied people to lives of dependency and complacency.” Each of the Republican presidential candidates have made similar declarations, and to that end, each has promised to cut social programs until we are left only with what’s necessary. As Mitt Romney put it in his speech last Wednesday, “I want to restore the values of economic freedom, opportunity, and small government that have made this nation the leader it is.” The striking thing about this rhetoric is that it drastically overstates the extent to which we have a social safety net at all. Writing for the New York Times , Jason DeParle describes the shape of the welfare state for many...

Washington, We Have a Revenue Problem

Why taxes have to go up—by a lot

This piece is the first in a six-part series on taxation and a joint project by The American Prospect and its publishing partner, Demos. The United States has a revenue problem. Taxes at all levels of government are too low to balance budgets and, more important, to ensure America’s future prosperity and cope with an aging population. While many political and policy leaders argue that future revenues should reflect “historic norms,” this is a flawed assumption on which to base long-term fiscal planning. Tax revenues have accounted for around 18 percent of GDP since World War II, and 18.3 percent over the past 30 years. The budget released by Paul Ryan and the House Budget Committee proposes average revenue levels at this same level—18.3 over the next decade. (Although an analysis by the Tax Policy Center found that the average would in fact be 15.4 percent.) The Simpson-Bowles plan, released in late 2010, proposed average revenues of 19.3 percent through 2020. Meanwhile, the Obama...

Mission Accomplished for Top Corporations

Today's Balance Sheet

The New York Times
Although the economy is still improving at a glacial pace, as evidenced by this month's slowing job growth, companies and CEOs have returned to their pre-recession heights, with a stock market at a four-year high to match. In 2007, S&P 500 companies created an average of $378,000 in revenue for every employee. Last year, that number was $420,000 . Top executives are doing okay too—the median income of the top 100 CEOs is $14.4 million . Leading the pack is Apple's Timothy Cook, who makes an astounding $12 per second. The average annual American salary is $45,230. These company riches haven't translated into substantial job growth yet, partly because companies are still "very, very cautious" about hiring as we emerge from the recession, and partly because when they do hire, it is not always domestically. Until companies have the confidence to spend on hiring, job numbers aren't likely to rival corporate profits in the near future. The Latest ‘Super PAC,’ Eyeing General Election,...

+120,000 Jobs for March

Today's Balance Sheet

The economy added 120,000 nonfarm jobs in March—far less impressive growth than February's 240,000 jobs, which were revised upward from last months estimate of 227,000. The unemployment rate dropped 0.1 percent to 8.2 percent, according to today's Bureau of Labor Statistics report. Economists had predicted that 205,000 jobs would be added in March. The numbers released today are far lower than expectations, and the +150,000 threshold needed to keep job growth at pace with population growth. The numbers could be a sign that job growth is slowing—the Federal Reserve has noted that expectations this year should be tempered given weak demand, the still precarious situation in Europe, and gas prices—or that much of the growth of the past few months was seasonal. Manufacturing employment went up by 37,000, boosted by growth in the auto industry; health care, financial services, and professional and business services also posted considerable growth. March also marks the 24th month of...

March's Disappointing Jobs Report

For the March jobs report, economists were expecting another month where the economy grew by more than 200,000 jobs. Instead, what we received—according to the Bureau of Labor Statistics—was a disappointing backslide into the anemic months of last fall. The economy created 120,000 jobs in March, a huge drop compared to previous months. At the same time, however, the unemployment rate dropped to 8.2 percent. This looks good, but it isn’t; the employment to population ratio dropped a tenth to 58.5 percent, and if labor force participation had remained steady from February, then the unemployment rate would have grown to 8.4 percent. On the bright side, the composition of the unemployed has begun to change. Fewer are people who lost their jobs, and more are people who chose to leave them . In other words, a growing number of people feel confident enough about the job market that they will choose a brief period of unemployment to find a better deal. This is in line with the latest measure...

Jobless Claims Drop to Four-Year Lows

Today's Balance Sheet

The New York Times
In the week that ended March 31, jobless claims dropped to 357,000—the lowest they have been in four years, according to new numbers from the Labor Department. Pennsylvania posted the biggest drop in claims—1,956—while Texas posted the highest jump—4,185. The steady gains that have been happening since the fall are likely due to fewer layoffs and the strengthening of the labor market, as proved once again by last month's private-sector jobs numbers. The private-sector hired 209,000 workers in March, according to the most recent report from payroll processor Automatic Data Processing Inc. and consulting firm Macroeconomic Advisers, LLC, adding up to about 2 million new workers in the past year. Economists predict that the government's nonfarm jobs numbers—scheduled to be released tomorrow by the Bureau of Labor Statistics (a more comprehensive jobs report than the one released today)—will show a growth of 203,000 jobs for March, and an unchanged unemployment rate of 8.3 percent. The...

Auto Sales on the Rise

Today's Balance Sheet

The Economist
Auto sales were on the upswing in March, thanks to a thirst for fuel-efficient vehicles and the unseasonably warm weather. Automakers sold 1.4 million light vehicles last month, with hybrids and more efficient models leading the way. General Motors sold over 100,000 models that get 30+ miles to the gallon—accounting for almost half of the 231,052 cars sold in March. U.S. sales on Toyota Prius hybrids jumped 54 percent last month to 28,711 cars—a record for the company. Chrysler had the best month of sales it has had in four years —a 34 percent jump from this time last year. If auto sales stay on the same path, the auto industry could end up selling 14.4 million vehicles, a 1.6 million jump from last year. "The wild card going forward seems to be the price of oil, but it hasn't seemed to slow vehicle sales yet," said Thomas Klier, a Federal Reserve Bank of Chicago economist. "It could be reflective of a more positive sentiment in the economy." The Latest Companies May Finally Be...

U.S. Manufacturing, Just Gangbusters

Today's Balance Sheet

The Economist
A new report from the Institute for Supply Management shows that manufacturing employment reached a nine-month high in March, and that the manufacturing sector is on a 32-month growth streak. The steady growth in the United States is a marked contrast from Europe, where manufacturing hit a three-month low last month. The healthy manufacturing numbers released yesterday are further fueling economists' predictions that the March jobs numbers—scheduled to be released Friday—will again top 200,000. "It's been just gangbusters for the last 18 months," said Mike McCarthy, president of Bomco Inc., a maker of metal parts for aerospace and industrial equipment. "Even if it flattened out right now, I still have the demand for the expansion I've planned." But manufacturing alone can't make for a healthy economy. “Manufacturing can continue to lead the recovery, but that’s the production side,” PNC economist Hoffman said . “Clearly if what is produced isn’t bought ... then they can’t continue to...

Not World Bank of America

The process for selecting the leader of the international finance organization should give the rest of the world a say.

(Courtesy of the World Bank)
Americans committed to development and to the U.S. playing a positive role on the global stage should encourage President Barack Obama to announce his support for an open, transparent, and meritocratic process in selecting the next leader of the World Bank. In the past, other countries have simply deferred to the U.S. to nominate a new head, whose selection was then followed by a pro forma up-or-down vote by the World Bank’s board. The U.S. has now nominated Dr. Jim Yong Kim, currently president of Dartmouth. In part because of the disastrous consequences of Bush ramming through Paul Wolfowitz, who later was forced to resign, other countries put forward nominees, including the Africans also put forward a nominee: Ngozi Okonjo-Iweala. The current process is a holdover from 1944, when at Bretton Woods the organizations of post-war global economy were negotiated. There was a “gentleman’s agreement” that an American would lead the World Bank and a European would lead the International...

Unemployment Hits 10.8 Percent in the Eurozone

Today's Balance Sheet

The Washington Post
Eurostat—the European Union's statistics agency—says unemployment in the eurozone went up by 162,000 in February. Total unemployment reached 17.134 million—10.8 percent—after ten straight months of rising, the highest recorded figure since the data began being compiled in January 1995. "We expect it to go higher, to reach 11 percent by the end of the year,” said Raphael Brun-Aguerre, an economist at JPMorgan. “You have public sector job cuts, income going down, weak consumption. The economic growth outlook is negative and is going to worsen unemployment.” Debt crises and austerity programs are most certainly a big factor in the job losses—the countries hit worst by unemployment, like Spain (23.6 percent) and Greece (21 percent in December), are also the ones scrambling to stave off default—and economists are divided on the utility of fighting deficits while so many EU economies are in shambles. Germany's unemployment held steady at 5.7 percent in February, highlighting sharp economic...

Will Obama Get Blamed for High Gas Prices?

The good old days. (Flickr/photomatt28)
Everyone involved in politics knows that there is almost nothing the president can do to affect the price of gasoline. Democrats know this. Republicans know this. People in the oil industry certainly know this. But they all, at various times, play a game in which they try to deceive the American public into believing something they know to be false. So right now, an oil industry group is running ads saying the high price of gas is Barack Obama's fault (you'll be shocked to hear that the ubiquitous Koch brothers are involved ). Republican leaders are saying the increasing price at the pump is Obama's fault. And what about the public? Are they buying it? The polls we've seen so far actually show that the answer is, not really. A CNN poll asked how much blame people assigned to various factors, and the oil companies came in first, with 55 percent saying they deserved a great deal of blame. "The policies of the Obama administration" got a great deal of blame from 24 percent, just about...

The Employer Strikes Back

In the lockout era, winning union representation is not a one-time thing.

(Flickr/Darwin Bell)
Becki Jacobson, 48, has worked as a process technician at American Crystal Sugar Company in Minnesota since she was 18. Eight months ago, she showed up for work, but the company refused to let her start her shift. Like 1,300 other members of the Bakery, Confectionery, Tobacco & Grain Millers union (BCTGM) at American Crystal Sugar, Jacobson wasn’t fired. She was locked out. Crystal Sugar is wielding a powerful weapon against its workers: Its right to deny them work for refusing a worse contract after their existing one expired. Jacobson and her co-workers are left with a choice. They can hold out while non-union workers do their jobs, make huge concessions, or dissolve the union. When union negotiations began last May, the beet-processing company asked for major concessions on health-care benefits. They also proposed getting rid of outsourcing protections. Crystal took a hard line. “Every time we went to negotiate,” says Jacobson, “the company refused our proposals and kept going...