Jubilee for Wall Street?
The Bush administration believes this should be a "time of Jubilee" for Wall Street speculators, a time of debt forgiveness. But the current proposal would only place additional debt shackles on the next generation.
There is no confession of error or spirit of repentance here. Treasury Secretary Henry Paulson's three-page bailout proposal to Congress could have been written on a cocktail napkin: "Hand over $700 billion and don't tie my hands."
As Congress debates the terms of the bailout, the unspoken issue is who will pay for the mess. The assumption is we will borrow the funds and raise the national debt ceiling to a whopping $11.3 trillion, up from $8 trillion a year ago.
It would be wrong and unethical to have our children and grandchildren pay for the greed and speculation of Wall Street. If we are going to spend money, let's make sure that we help those who have been most hurt by the mortgage meltdown, as proposed in Sojourners' action alert.
Instead of additional borrowing, Congress should develop a "pay as we go" plan. The lion's share of funds should come from the Wall Street gamblers and the wealthy CEOs who profited from the casino economy.
A fair plan to pay for the bailout should include a modest Financial Transactions Tax on the purchase and sale of stock and other financial products. A penny on every $4 invested would generate $100 billion a year. Other European countries tax stock transactions, and they discourage speculation.
In August, the Government Accountability Office reported that two-thirds of U.S. corporations paid no income taxes between 1998 and 2005. These corporations paid nothing toward our shared expenses of environmental protection, public health, and education. Ordinary taxpayers should not be left holding this bag. A minimum corporate income tax, targeted to Wall Street financial firms, should contribute toward the bailout.
Many of the speculators have taken the money and run. They've bought extra houses and private jets and moved some of their money into off-shore accounts in countries like the Grand Cayman Islands. Lehman Brothers went bankrupt last week and will probably be laying off 25,000 workers. But their CEO, Richard Fuld, is set for life after being paid $354 million over the last five years. Congress should work to recapture and "disgorge" some of these ill-gotten pay packages.
A portion of bailout cost should be financed with an emergency income tax surcharge on incomes over $5 million. Wealthy investors were the big winners in the unregulated bubble economy, watching their incomes and assets skyrocket over the last 25 years. Meanwhile, President George W. Bush has cut their taxes for seven years. Instituting a 50 percent tax rate on incomes over $5 million and a 70 percent rate on incomes over $10 million would generate $105 billion a year until the bailout is paid for.
Congress should close down corporate tax havens that allow corporations to game the system and cut their taxes to zero. This would generate $100 billion from profitable companies that have paid no taxes over the last decade.
As taxpayers, we subsidize excessive CEO pay to the tune of $20 billion a year. Congress should close these loopholes, including the accounting gimmicks that permit companies to report one set of earnings to shareholders and another lower number to Uncle Sam.
In the end, we'll all be stuck paying for Wall Street's speculation binge. But a bailout that fails to require the Wall Street superrich to pay more would be another assault after the robbery.
Chuck Collins is co-author of The Moral Measure of the Economy (Orbis, 2008) and a Sojourners board member. He is senior scholar at the Institute for Policy Studies, where he coordinates the Working Group on Extreme Inequality.