What Do You Want For Christmas?

Just as a thought experiment, let's say that the election goes the way it should and the Democratic Party sweeps it in the landslide that really could be. So we, the non-insane portion of the electorate, have control over the federal government and hopefully made some progress unraveling teabag control over so many of the states. What do "we" do? And I guess it has to be stated as what is your wish list of progressive ideas? The number one challenge facing the United States is the Republican Party, for argument's sake let's assume that they have been rendered more or less harmless in the wake of a landslide election for the moment, what is number two? There is such a backlog of issues, such a huge pile of reforms necessary. What would you prioritize if you could have the ear of President Hillary Clinton and Speaker Nancy Pelosi and Leader Chuck Schumer? There is a good chance even with the professional liberal class of Democrats in charge, we progressives will get at least one thing from our list addressed. Last time it was health insurance reform, and judging on what Obamacare has actually done as opposed to what could have been it has made a real difference in the lives of many Americans for the good. This time around the issue that could make a real difference in the long run is the establishment of a financial transactions tax on stocks and bonds.

Of course, the sheer number and depth of problems facing this country and the world is breathtakingly immense. Why start there? My contention is that the force driving all the other problems is rooted in the fact that too few people have too much money and therefore power. Imposing what is in effect a sales tax on the things they buy will begin to drain the swamp of the speculative capital that has wrecked so much havoc on main street. Busting through the obstruction from the parasitic right and the resistance from Democrats who foolishly respect wall street as the paragon of professionalism will be difficult in the extreme, that's why it has to be the first thing done. Riding in a wave election and still beholden to the little people, I think there's a chance to ram it through. First, a tax on financial transactions could be very small, even 0.1%, just the establishment and legitimization of such a direct assault on entrenched privilege would be enough.

Income and wealth equality; a whole package of "social questions" that Thomas Frank, Robert Reich, Bernie Sanders, and so many others have articulated; is the cause of most problems and the impediment to addressing so many others. This country is so flooded with capital that the uber rich cannot find productive uses for it, or perhaps they don't want to. So they buy politicians, both personally while in office and guaranteeing future obedience through lobbyist jobs and other perks. This is just intolerable. The only way to start reducing the bribery, greed, and injustice at the top of our society is to drain that swamp of money that just corrupts people and distorts markets. That is why the financial elite have bought the important politicians in both parties and drive the price of entry into politics so high that only themselves or their servants can have a chance at power.

The primary effect of charging a sales tax on stock exchanges is to slow things down. That is how the original idea of James Tobin's tax was envisioned. He wanted the tax imposed on spot conversions of currency that would penalize speculation against currencies and stabilize economies, especially after computers skyrocketed the amount of speculation that occurs in those markets. That is a good idea too, as global capital now has the power to crush countries with attacks on their currencies. But just in terms of domestic financial markets a small transaction tax would slow down and stabilize markets too. Would the Dow Jones have lost so many points after the "leave" vote was tallied in the UK if people had to weigh paying an absolute tax for impulsive trades? It is likely enough investors would remember that the Brexit was actually non-binding, a momentary loss of reason by the mob that did not need to be repeated in the market.

The practical effect is all upside for the public interest. If trading is slowed down then mutual fund managers will have fewer opportunities to lard up pension funds with fees. Also, it will be more difficult for panics to set in if every investor has to weigh the tax they paid for a stock against the gains, they will on average wait a little longer. Plus, it will absolutely eat into the obscene compensation packages of managers and brokers. When a uniform cost like a tax is levied on all businesses of an industry, if there is any competition between firms they have to eat some portion of it or someone else will and steal all the business. There is a lot of competition between firms on wall street. And we won't even have to take seriously the moans and shrieks of outrage by the fat cats that a sales tax on stocks will sink grandma and grandpa, the usual line of propaganda whenever regulating wall street comes up, because average investors buy long. No, the tax will be borne most heavily by the big players that buy and sell all day, every day.

But the symbolic effect of taking on wall street by a Hillary Clinton administration, even in a way that will encourage stability in the market, will defuse so many of the detractors who say she is too cozy with the fat cats. It will be the first step in democracy finally reimposing regulation over an out of control and very dangerous sector of the economy that has so much power. It is really difficult to find actual dollar amounts for the trading on wall street, but it is likely in the trillions... per day. Therefore, even a 0.1% tax would raise significant revenue for a federal government always strapped for cash. That would amount to a billion dollars for each trillion bought, each day. A billion dollars not available for Goldman Sachs and the rest to lobby, bribe, and extort government. A billion dollars a day "redistributed" from the vultures and pirates who stole it. Maybe for once we could use it for something productive? Shoring up Social Security, Medicare, and Medicaid come to mind. Or, a real Public Option, infrastructure spending, buying back all of the toll roads and parking meters that have been privatized, even getting the cost of education down to what it was when our parents went to college or forgiving student loans. The possibilities are endless, the public needs are great, and once put in place the tax could be raised and lowered as one more fiscal tool to manage the economy.

Anyway, that's my Christmas wish. If you agree, share this post and let's make it happen.

Defining the Free Market: From Abstract to Concrete,but always a Fallacy

Somewhere along the line, “free market” graduated from the world of abstractions and became an actual thing.  By “thing” I mean an entity, something identifiably self-contained, an object in time-space.   In reality, “free market” is simply a name we gave to an economy characterized by a reliance on market forces to determine value. But for many people, “free market” is more than a label: it is something concrete—at least that is how they talk about it. 

When abstractions are spoken of as real things, we call it reification.  Reification is a semantic fallacy, but its use is sometimes necessary when one wants to communicate complex realities with considerably less words.  However, a semantic fallacy, if not challenged, can go on to support faulty conceptualizations of reality, especially once it seeps into discourse.  The special problem in this case is that the reification complements an ideology, one that rejects the natural and necessary role of the government in the maintenance of the economy.  If expressed as a thing, “free market” can be thought of as being interfered with or kept from its natural activities.  If expressed as an entity, it can be given agency, rationality, and rights.  We often talk about government intrusions in the personal lives of people.  For some, a worse offense is when the government intrudes in the free market. 

But this conveys a faulty conception of reality.  As Robert Reich states: “Government doesn't ‘intrude’ on the free market.  It defines and organizes (and often reorganizes) it.”  In reality, an economy is the product of an infrastructure of law that is created, maintained, and enforced by the government.   It is an extension of the state for the purpose of ordering the complex human interactions that occur with economic activity.  And with the constant growth and complexity of technology, which puts economic relations in flux and opens loop holes for economic actors to exploit, these interactions need to be monitored regularly and the laws adjusted accordingly.  The “free market” is not a thing with a right to existence and freedom from molestation; it is a name for something that does not exist without the state and whose quality is wholly dependent upon the laws that form it.

But we are led to believe that economic regulations are always wrong and lead to a loss of freedom.   This rigidity often pits real people against a reified free market.  How else do we understand how a person who lost their health care through no fault of their own, and who, as a result, has lost their life savings because of an accident, is freer than one who has been helped by an update of the legal infrastructure?  Or, that gross accumulations of wealth at the top demand less taxation for the wealthy and less regulation over the actions of corporations—even when there is no historical evidence that this works?  In both examples, it is the “free market” that has been protected, not people.  And in both cases, rights-bearing people are being sacrificed to an ideology and a faulty conception of reality.

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If one accepts the idea that it is mostly hard work and sacrifice that determines one’s income and success in present-day America, it is impossible to explain the growing concentrations of wealth at the top.  Clearly other factors are involved.  A more satisfying explanation appears with a proper conceptualization of the economy and its contingent relationship to the government.   The reality is that the rules are out of date, the rich have given themselves an unfair and immoral influence over how things work, and we have the mechanism and the legitimacy to fix it.  Framing things this way makes it easier to get beyond the rhetoric, the confusing accusations of socialism, communism, or fascism, and on to clearer solutions and discourse.  This can be fixed, but not by those who think the “free market” can fix itself.


For a deeper understanding of how and why we got into this mess, and what the government can and should do to fix it, I highly recommend the documentary film by Robert Reich, Inequality for All.  


APPENDIX

While the Founders are quite removed from our world, they did understand that wealth discrepancy does not sit well with democracy.  It is interesting to see what they had to say about this, and the solutions they might have entertained.  While this is certainly not exhaustive or definitive, it does seem to suggest that at least some of them did not think it was unconstitutional or destructive of liberty for the government to take some kind of action on the economy.  According to David Cay Johntson, drawing on recent scholarship from The Citizen's Share: Putting Ownership Back into Democracy by  Blasi, Kruse, and Freeman, 

The second president, John Adams, feared “monopolies of land” would destroy the nation and that a business aristocracy born of inequality would manipulate voters, creating “a system of subordination to all... The capricious will of one or a very few” dominating the rest. Unless constrained, Adams wrote, “the rich and the proud” would wield economic and political power that “will destroy all the equality and liberty, with the consent and acclamations of the people themselves."

James Madison, the Constitution's main author, described inequality as an evil, saying government should prevent “an immoderate, and especially unmerited, accumulation of riches.” He favored “the silent operation of laws which, without violating the rights of property, reduce extreme wealth towards a state of mediocrity, and raise extreme indigents towards a state of comfort."

Late in life, Adams, pessimistic about whether the republic would endure, wrote that the goal of the democratic government was not to help the wealthy and powerful but to achieve “the greatest happiness for the greatest number."

R. Miller