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Sunday, September 28, 2008

After the Bailouts: Preparing the Way for a New Deal 2.0

Thom Hartmann's alternative to the Bailout proposals on offer is, of course, what Atrios refers to as a "Pony Plan" -- an abstraction that isn't even remotely under practical consideration and so can contribute only marginally to the discussion of the merits and problems of the policy plans that actually are on offer, come what may. The point is well taken, especially when we contemplate just how much righteous energy and needed intelligence has been squandered over the last thirty years -- in the face of, first, the neoliberal and then, next, the neoconservative onslaught -- into abjectly useless third parties (yes, they are!) and online manifestos and precisely bullet-pointed proposals no legislators ever read and so on.

But it seems to me Hartmann's plan does indeed usefully point the way forward, and in a crucially clearheaded way, for the changed circumstances that will prevail if (once! I mean, once!) we win the White House with a progressive mandate and loudmouthed fighting liberals holding newly-elected feet to the fire and with the deeper majorities in both Houses to push real, sane, forward-looking solutions through next year and in the years to come.

Writes Hartmann:
We should [c]reate a [new] agency to fund the bailout, loan that agency the money from the treasury, and then have that agency tax Wall Street to pay us (the treasury) back. It’s been done before, and has several benefits. In the United Kingdom, for example, whenever you buy or sell a share of stock (or a credit swap or a derivative, or any other activity of that sort) you pay a small tax on the transaction.

We did the same thing here in the US from1914 to 1966 (and, before that, we did it to finance the Spanish American War and the Civil War). For us, this Securities Turnover Excise Tax (STET) was a revenue source. For example, if we were to instate a .25 percent STET (tax) on every stock, swap, derivative, or other trade today, it would produce –- in its first year -– around $150 billion in revenue. Wall Street would be generating the money to fund its own bailout. (For comparison, as best I can determine, the UK’s STET is .25 percent, and Taiwan just dropped theirs from.60 to .30 percent.)

But there are other benefits… John Maynard Keynes pointed out… such a securities transaction tax would have the effect of “mitigating the predominance of speculation over enterprise.” In other words, it would tamp down toxic speculation, while encouraging healthy investment. The reason is pretty straightforward:

When there’s no cost to trading, there’s no cost to gambling. The current system is like going to a casino where the house never takes anything; a gambler’s paradise. Without costs to the transaction, people of large means are encourage[d] to speculate –- for example, [to] buy a million shares of a particular stock over a day or two purely with the goal of driving up the stock’s price (because everybody else sees all the buying activity and thinks they should jump onto the bandwagon) so three days down the road they can sell all their stock at a profit and get out before it collapses as the result of their sale…. Investment, on the other hand, is what happens when people buy stock because they believe the company has an underlying value. They’re expecting the value will increase over time because the company has a good product or service and good management. Investment stabilizes markets, makes stock prices reflect real company values, and helps small investors securely build value over time….

Franklin D. Roosevelt, as part of the New Deal, put into place a series of rules to discourage speculation and promote investment, including maintaining -- and doubling -- the Securities Transaction Excise Tax… [I]mportant benefit[s] of immediately re-instituting a STET in the USA, [include] that it would raise enough money to bail out the banks and billionaires (and after that crisis is covered, could pay for a national healthcare system)… that it would encourage [sound] investment and calm down markets. Those are all strong benefits[.]

Hartmann makes a wonderfully clear and compelling case here. His account is all the stronger for the historical contextualization he provides for it -- for all of which you should follow the link up top and read the whole piece. I sure hope that proposals in this vein bubble up to the forefront of public consciousness when the time comes to create new financial institutions in a way that isn't beholden to the criminal desires of the Killer Clowns currently in power. More than just hope, progressives should simply do the work of repetition and reformulation online and elsewhere that produces this result ourselves.

But I do think it's quixotic and even a bit counterproductive to measure the current actually-offered proposals against this enormously sensible plan (which is not to say I am pleased by what I am hearing getting leaked about the current Bailout Plan that Dems have their hands in). I say this because even sensible and sympathetic Democrats are coping with an ideological universe of Republicans and Blue Dogs in an Election year the pragmatics of which are simply exerting different pressures than will the optics of a new Presidential mandate after a Change Election with Democrats thronging every layer of government and confronting vast challenges attributable -- not perfectly fairly -- to the defeated party and -- perfectly fairly -- to the corporate-militarist philosophy of the debased and debauched Reagan-Bush epoch.

I can imagine any number of righteous ripostes to this point, and sympathize with most of them, hell I've made most of them myself under different circumstances, but the question is not whether one directs radically democratic critiques against neoliberal and neoconservative policies, but where and when so to direct them to achieve the best most democratizing effects. It's a risky business to choose those wheres and whens, and I've often been wrong in my choices personally, but I do know that to refuse such choices in the name of ideological purity is to confuse moralism for politics.

I'm glad that Paulson's blank check got vetoed, and I'm glad to hear about the more Doddlike details of the plan afoot, but I still think this is all the beginning rather than the end of the financial catastrophes and that we will be revisiting these measures in months to come with Obama in the White House, with strong Democratic majorities in both Houses (again, I hope against hope for the coat-tails to get us to sixty in the Senate, implausible though that may look), with the example of European nationalizations and re-regulations and strongly progressive tax reforms before us, and with a vast popular resentment directed at irresponsible and predatory corporatists to nourish a New Deal 2.0 in the nick of time.

I'm not advocating keeping progressive powder dry -- that tired old tune that rationalizes Democratic corporate-militarist complicity without end -- but recommending that we get Democratic asses in seats of government and organize to hold their asses to the fire, and not confuse the different demands of those two equally necessary tasks in this moment, literally days before the Election that gives us our best, and possibly only, real chance to do what needs to be done to be equal to this historical challenge.

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