Econ 101: April 11, 2012

Welcome to ThinkProgress Economy?s morning link roundup. This is what we?re reading. Have you seen any interesting news? Let us know in the comments section. You can also follow ThinkProgress Economy on Twitter.

• Bank of America is suing itself in a foreclosure case. [Huffington Post]

• Prepaid card use rose about 18 percent in the U.S. last year, as consumers abandoned more traditional banking products. [Bloomberg]

• Investors are deserting Spain’s battered banks, as the Eurozone debt crisis picks up steam again. [Reuters]

• According to an analysis by the International Monetary Fund, a buildup of household debt exacerbates recessions. [Bloomberg]

• The National Fair Housing Alliance yesterday filed a suit against Wells Fargo, alleging that the bank is failing to maintain foreclosed properties in minority neighborhoods. [Washington Post]

• Big banks, as they slowly heal their balance sheets, are starting to reenter subprime lending. [New York Times]

• An ex-Wall Street trader has been sentenced to prison for threatening to kill Wall Street regulators. [Huffington Post]

• The Education Department has announced $133 million in funding for a new round of the Race to the Top program. [Education Week]

Add to del.icio.us

Digg this

Post to Furl

Add to reddit

Add to myYahoo!

April 11 News: ‘There’s A War Being
Waged Against Renewable Energy,’ Says Iowa Congressman

Our morning round-up of the latest in climate and clean energy. More links welcome.

The shadow of inexpensive natural gas hovered over the annual meeting of the Iowa Wind Energy Association in Des Moines on Tuesday. U.S. Rep. Bruce Braley, D-Ia., warned the association that ?a war is being waged against renewable energy,” saying that ?the oil and gas industry has enormous influence, and there is an increasingly competitive environment on energy legislation in Washington, D.C.? [DesMoines Register]

According to several leading climate scientists and public health researchers, global warming will lead to higher incidence and more intense versions of disease. The direct or indirect effects of global warming might intensify the prevalence of tuberculosis, HIV/AIDS, dengue and Lyme disease, they said, but the threat of increased health risks is likely to further motivate the public to combat global warming. [Yale Daily News]

Plummeting natural-gas prices are pushing U.S. industries into virgin terrain, even beginning to dislodge cheap Western coal from its once-untouchable perch as the nation’s favorite fuel for power production. [Wall Street Journal]

A conservative political action committee is going up with a new television commercial ? backed by a $1.7 million ad buy ? slamming President Obama’s energy policies. [The Hill]

As horizontal drilling and the controversial extraction technique known as fracking have made domestically produced natural gas more available and sharply cheaper, that gas has been widely embraced by industry, electric utilities and trucking fleets. [New York Times]

A new lab, where technology for the next generation of ground vehicles for the U.S. military will be developed and tested, officially opens today in Warren, as the Obama administration and its Defense Department unveil new programs to promote fuel savings and alternative energy. [Detroit Free Press]

Conservative activists on Tuesday urged Gov. Rick Scott to veto an energy bill pushed by a fellow top Republican, saying the measure violates free market principles by providing tax incentives to solar, wind and biofuel companies. [Palm Beach Post News]

One of the scariest possibilities is that major ocean currents could abruptly stop entirely, plunging areas like Western Europe into an abrupt deep-freeze. It?s happened before, tens of thousands of years ago, and while climate experts doubt that it will happen again anytime soon, they haven?t had especially powerful evidence to back their optimism. But now they do, thanks to a new paper just published in Proceedings of the National Academy of Sciences. [Climate Central]

A European Union law that charges airlines for carbon emissions is “a deal-breaker” for global climate change talks, India’s environment minister said, hardening her stance on a scheme that has drawn fierce opposition from non-EU governments. [Reuters]

A team of researchers will begin flights over Bering Sea ice to answer a basic question about four of the region’s most important species: How many ice-dependent seals are out there? [Associated Press]

Add to del.icio.us

Digg this

Post to Furl

Add to reddit

Add to myYahoo!

‘Justified’ Open Thread: Fathers and
Sons

This post contains spoilers through the third season of Justified.

“He didn’t know it was a state trooper. He just saw a man in a hat pointing a gun at Boyd.”

There’s a lot to discuss in the season finale of Justified, an outstandingly strong episode of television that significantly redeemed the overstretched season that came before it?Jere Burns Emmy-worthy performance as Wynn Duffy, the sociology of Noble’s Holler, the question of what Raylan’ll be like as a mostly-absent parent. But for me, the third season of Justified comes down to precisely this shattering question: what happens when parents and children fail to fulfill their obligations to each other and replace the unsatisfying partner with a more compelling one? It’s one that takes on bitter connotations in Harlan, but that, for an anti-hero melodrama, has surprising resonance for a country only beginning to come to terms with a rising dementia epidemic.

There’s no question that Arlo hates his son, and Raylan doesn’t have much use for his father, even if Arlo took a moment to apologize to Raylan at the moment of his transition from free man to soon-to-be convict. Even that admission comes less out of charity and repentance than Arlo’s desire to quite his own raging mind. “Not an easy thing for me to say,” he admits to his son, before explaining the delusion that lead him to it. “But she insisted. I know she always was your favorite…But you don’t know how she can nag.” But Raylan hates his father, too, telling Limehouse after the latter man addresses him as Mr. Givens that he’s “Deputy Marshal. I’m not my father and I don’t care to be confused with him.”

Much of this episode is an illustration of how Raylan’s abrogated any duties he might have been expected to carry out as a son. Raylan hasn’t had much idea where his father is, much less that it’s Boyd Crowder keeping track of whether his father takes his medications. “I been trying,” Arlo tells Boyd fretfully when called to account for whether he’s sticking to the schedule. “But she hides ‘em where I can’t find ‘em…Thinks it’s funny watching an old man chase around his pills.” And even when it’s suggested that Arlo, in his dementia, might have let one of Boyd’s crimes slip, Boyd behaves more like a caretaker than a man bent on vengeance. “I want you to take one of these pills in front of me. Go on,” he tells Arlo, a father and a child switching places, two criminals reduced to vulnerable patient and patient caretaker.

And what Raylan ultimately doesn’t get, ruminating on the rotten apple and the barrel later (Boyd’s “Well, Raylan, I think even in a little town like Harlan, the apple barrel is obsolete,” and Raylan’s weary “But the expression ain’t, because of the truth contained therein” is one of many great poetic moments in this season, one of the few of television that could without question qualify for literary awards.) is that Arlo’s evil is ultimately less consequential than the opportunity he afforded Boyd. “I’ve connected to Arlo in ways I was never given a chance to do with my own family,” Boyd explains. Whether he’s a coot, a criminal, or simply a sick old man, Arlo afforded Boyd the opportunity for tenderness and for mercy. And Boyd could see what Raylan, who believes that “Arlo’s a criminal, never been anything else,” could not: a man who responded to care and to be treating as if he had something of value left to offer.

That Arlo responded to Boyd’s care, and that ultimately he would have killed for him, is ultimately less proof of his hatred of Raylan than of Raylan’s demotion to mere mortal status in the eyes of the man who bore him. It’s not that Arlo had a clear choice between Boyd and Raylan and chose Raylan. It’s that he chose Boyd as his son against all other men. In that moment, Raylan was indistinguishable from the mass of men. And whether you’re a deputy marshal or an ordinary person caring for an aging parent, that’s the ultimate nightmare of watching a person you love vanish into dementia.

Add to del.icio.us

Digg this

Post to Furl

Add to reddit

Add to myYahoo!

The Morning Pride: April 11, 2012

Welcome to The Morning Pride, ThinkProgress LGBT?s daily round-up of the latest in LGBT policy, politics, and some culture too! Here?s what we?re reading this morning, but please let us know what stories you?re following as well. Follow us all day on Twitter at @TPEquality.

- Sen. Chuck Schumer (D-NY) has promised an investigation into allegations of anti-gay discrimination by the Library of Congress.

- The National Organization for Marriage’s Facebook, Twitter, and blog have apparently been hacked, offering apologies for the race-baiting tactics and a commitment to “turn things around for the better.” The blog is now “down for maintenance.”

- On Saturday, April 21, join others in thanking Starbucks for supporting marriage equality.

- Another black religious leader has come to NOM’s defense, but as Alvin McEwen points out, Bishop McKinney avoids addressing the race-baiting scandal head on.

- Phoenix, AZ has opened its first LGBT high school.

- It seems that British same-sex couples are much less likely to divorce than their opposite-sex couple peers.

- Australian churches are fighting for the right to continue discriminating against LGBT employees.

- Justin Bieber has lent his song “Born to be Somebody” to the documentary Bully.

- Athletes and coaches from New York University say, “It Gets Better”:

Add to del.icio.us

Digg this

Post to Furl

Add to reddit

Add to myYahoo!

NOM To Endorse Donor Mitt Romney

The National Organization for Marriage — which has been using race as a wedge in the marriage debate — will endorse presumptive Republican presidential nominee Mitt Romney this morning, Politico reports. “Now is the time for all people who recognize the importance of marriage to come together to support a true champion, Mitt Romney, against an incumbent who has done virtually everything in his power to undermine the institution of marriage,” the group’s President Brian Brown will say in a statement.

Romney has secretly given the group $10,000 to advocate for Proposition 8 in 2008 and signed-on the group’s pledge to strongly oppose the advancement of LGBT equality:

NOM is funded by the Catholic Church hierarchy and its affiliates like the Knights of Columbus. Following the now-infamous memos leak, LGBT equality groups have called on the Church to immediately stop supporting NOM and its ?race-baiting, ethnic exploitation, division, and anti-gay campaigns.?

Add to del.icio.us

Digg this

Post to Furl

Add to reddit

Add to myYahoo!

On This Day In History April 11

Cross posted from The Stars Hollow GazetteThis is your morning Open Thread. Pour your favorite beverage and review the past and comment on the future.Find the past "On This Day in History" here.April 11 is the 101st day of the year (102nd in leap years)[...]

Read The Full Article:
http://www.docudharma.com/diary/29584/on-this-day-in-history-april-11

Add to del.icio.us

Digg this

Post to Furl

Add to reddit

Add to myYahoo!

Chill. The Jews Aren't Voting Republican.

Forecasts of the Great Jewish Shift began as soon as the presidential campaign did: This year, we are told, Jews will finally vote Republican, or at least significantly more of them will than have done so in many a decade, perhaps forever. The predictions are a quadrennial ritual. They are made most often by Jewish Republicans, speaking in the bright voice of a compulsive gambler who knows that on this spin, the little ball will absolutely land on the right number. They are made by social scientists certain that reality will finally behave according to their models. They are made by Jewish Democrats as unable to control their anxiety as someone is to stop a tic. This year's minor variation is the explanation that Jews will switch because they are upset with Barack Obama's attitude toward Israel.

As an Israeli political writer, I admit, I am particularly conscious of this ritual, because the Great Jewish Shift (GJS) is the second thing that people want to discuss with me as soon as I get off the plane in America, after they ask me if Benjamin Netanyahu will bomb Iran and before I have put down my suitcase. I do not know if Netanyahu will bomb Iran; he does not tell me such things. However, I submit that there is considerable public evidence that the GJS will not happen this year. A newly released survey of American Jews provides the latest data. History and the Republicans' demonstrative cluelessness about Jewish voters provide more.

The survey, conducted by the non-partisan Public Religion Research Institute (PRRI) in Washington, found that 62 percent of Jewish voters want to reelect Obama, compared to 30 percent who'd vote for a generic Republican. Let's reframe that: 92 percent of Jews say they've made up their mind. Of them, just over two-thirds would vote for the incumbent, and one-third for the GOP challenger.

Yes, this would be a drop-off from the 78 percent of Jews who voted Obama last time around, according to exit polls. It would not be a vast historic shift. Republican contenders won between 31 and 39 percent of the Jewish vote in four out of the five elections between 1972 and 1988. But the poll results do not actually suggest even that much of a change since the 2008 election. "Current levels of support for Obama among Jewish voters are nearly identical" to those "at a comparable point in the 2008 campaign," says the PRRI polling report. Between the spring of 2008 and November that year, Obama's Jewish support rose. Was that a result of one-time, nearly accidental circumstances, such as John McCain's choice of Sarah Palin? Probably not. Suspected of moderation, McCain needed a running mate to satisfy the Republican base?and even a more qualified ultra-conservative would have been a deal-killer for wavering Jewish voters. Massachusetts Mitt Romney will face similar pressure to reassure his right flank. Besides, I suspect that Palin was a pretext, rather than a cause, for many Jews to return to the fold. 

It's one thing to register under-satisfaction with the Democratic candidate by telling a pollster in the spring you'll vote Republican. It's another to defy upbringing and instinct to mark the ballot that way in November, especially while imagining your brother or aunt asking you over Thanksgiving dinner how you voted.

If Obama does lose some Jewish support, Israel won't be the reason. Only 4 percent of PRRI's respondents listed Israel as the most important issue for them in the election, and only another 5 percent listed it in second place. Some of those were already in the Republican camp, perhaps most. Anyone who is terribly impressed that Mitt Romney and Benjamin Netanyahu are old friends from their days as apprentice robber barons was not a likely Obama voter to begin with.

The historic context for reading the poll goes back further than 2008. Those elections in the 1970s and 80s actually represent an unusually high level of Jewish support for the GOP, which has dropped off significantly since. Even in 2004, when the Republican predictions of the GJS were particularly manic, George W. Bush managed to get just a quarter of the Jewish vote.

If the GOP is even less popular among Jews than it was a generation ago, the reason is apparent: the party has become ever more rigid and homogenous in its economic and social conservatism, and its tests of ideological purity send none-too-coded messages to Jewish voters.

The party's anti-abortion stance is not only an attack on reproductive freedom, it is an obvious demand to base law and policy on the beliefs of conservative Protestants and Catholics about when life begins. It broadcasts disdain for a religion-neutral polity. The party's nativist orthodoxy toward immigration projects fear of difference, of anyone outside a narrowly defined "us." Opposition to same-sex marriage encodes both messages at once. These are not messages designed to attract Jewish voters. Jewish comfort and safety in America?unique in Jewish history?rest upon cultural openness and religious neutrality.

As for economic issues, look again at the PRRI poll: 81 percent of respondents supported the Buffett Rule for increasing taxes on millionaires. Nearly three-fourths agreed with the statement that the American economic system "unfairly favors the wealthy." A majority of those with household incomes over $125,000 a year said they'd be willing be pay more taxes to support programs for the poor. This is not a target audience for the Ayn Randian policies of the 2012 GOP.

Yes, the standard disclaimer is in order: Anything could happen before November: renewed recession, an Iranian nuclear test, $10 a gallon gasoline, an unexpected White House scandal. What affects the non-Jewish swing voter can also sway the uncertain Jewish voter. But the primary campaign has served to sharpen the Republican political identity: against economic equality, for faith-based policy, against difference. No matter how much Mitt Romney would like to shake his Etch A Sketch, neither the Obama campaign nor the GOP base will allow him to drop the Republican brand. And the Republican brand is not engineered to produce the Great Jewish Shift.

Add to del.icio.us

Digg this

Post to Furl

Add to reddit

Add to myYahoo!

Chill. Jews Aren't Voting Republican.

Forecasts of the Great Jewish Shift began as soon as the presidential campaign did: This year, we are told, Jews will finally vote Republican, or at least significantly more of them will than have done so in many a decade, perhaps forever. The predictions are a quadrennial ritual. They are made most often by Jewish Republicans, speaking in the bright voice of a compulsive gambler who knows that on this spin, the little ball will absolutely land on the right number. They are made by social scientists certain that reality will finally behave according to their models. They are made by Jewish Democrats as unable to control their anxiety as someone is to stop a tic. This year's minor variation is the explanation that Jews will switch because they are upset with Barack Obama's attitude toward Israel.

As an Israeli political writer, I admit, I am particularly conscious of this ritual, because the Great Jewish Shift (GJS) is the second thing that people want to discuss with me as soon as I get off the plane in America, after they ask me if Benjamin Netanyahu will bomb Iran and before I have put down my suitcase. I do not know if Netanyahu will bomb Iran; he does not tell me such things. However, I submit that there is considerable public evidence that the GJS will not happen this year. A newly released survey of American Jews provides the latest data. History and the Republicans' demonstrative cluelessness about Jewish voters provide more.

The survey, conducted by the nonpartisan Public Religion Research Institute (PRRI) in Washington, found that 62 percent of Jewish voters want to re-elect Obama, compared to 30 percent who'd vote for a generic Republican. Let's reframe that: 92 percent of Jews say they've made up their mind. Of them, just over two-thirds would vote for the incumbent, and one-third for the GOP challenger.

Yes, this would be a drop-off from the 78 percent of Jews who voted Obama last time around, according to exit polls. It would not be a vast historic shift. Republican contenders won between 31 percent and 39 percent of the Jewish vote in four out of the five elections between 1972 and 1988. But the poll results do not actually suggest even that much of a change since the 2008 election. "Current levels of support for Obama among Jewish voters are nearly identical" to those "at a comparable point in the 2008 campaign," says the PRRI polling report. Between the spring of 2008 and November that year, Obama's Jewish support rose. Was that a result of onetime, nearly accidental circumstances, such as John McCain's choice of Sarah Palin? Probably not. Suspected of moderation, McCain needed a running mate to satisfy the Republican base?and even a more qualified ultra-conservative would have been a deal-killer for wavering Jewish voters. Massachusetts Mitt Romney will face similar pressure to reassure his right flank. Besides, I suspect that Palin was a pretext, rather than a cause, for many Jews to return to the fold. 

It's one thing to register under-satisfaction with the Democratic candidate by telling a pollster in the spring you'll vote Republican. It's another to defy upbringing and instinct to mark the ballot that way in November, especially while imagining your brother or aunt asking you over Thanksgiving dinner how you voted.

If Obama does lose some Jewish support, Israel won't be the reason. Only 4 percent of PRRI's respondents listed Israel as the most important issue for them in the election, and only another 5 percent listed it in second place. Some of those were already in the Republican camp, perhaps most. Anyone who is terribly impressed that Mitt Romney and Benjamin Netanyahu are old friends from their days as apprentice robber barons was not a likely an Obama voter to begin with.

The historic context for reading the poll goes back further than 2008. Those elections in the 1970s and 1980s actually represent an unusually high level of Jewish support for the GOP, which has dropped off significantly since. Even in 2004, when the Republican predictions of the GJS were particularly manic, George W. Bush managed to get just a quarter of the Jewish vote.

If the GOP is even less popular among Jews than it was a generation ago, the reason is apparent: The party has become ever more rigid and homogenous in its economic and social conservatism, and its tests of ideological purity send none-too-coded messages to Jewish voters.

The party's anti-abortion stance is not only an attack on reproductive freedom; it is an obvious demand to base law and policy on the beliefs of conservative Protestants and Catholics about when life begins. It broadcasts disdain for a religion-neutral polity. The party's nativist orthodoxy toward immigration projects fear of difference, of anyone outside a narrowly defined "us." Opposition to same-sex marriage encodes both messages at once. These are not messages designed to attract Jewish voters. Jewish comfort and safety in America?unique in Jewish history?rest upon cultural openness and religious neutrality.

As for economic issues, look again at the PRRI poll: 81 percent of respondents supported the Buffett Rule for increasing taxes on millionaires. Nearly three-fourths agreed with the statement that the American economic system "unfairly favors the wealthy." A majority of those with household incomes over $125,000 a year said they'd be willing to pay more taxes to support programs for the poor. This is not a target audience for the Ayn Randian policies of the 2012 GOP.

Yes, the standard disclaimer is in order: Anything could happen before November: renewed recession, an Iranian nuclear test, $10 a gallon gasoline, an unexpected White House scandal. What affects the non-Jewish swing voter can also sway the uncertain Jewish voter. But the primary campaign has served to sharpen the Republican political identity: against economic equality, for faith-based policy, against difference. No matter how much Mitt Romney would like to shake his Etch A Sketch, neither the Obama campaign nor the GOP base will allow him to drop the Republican brand. And the Republican brand is not engineered to produce the Great Jewish Shift.

Add to del.icio.us

Digg this

Post to Furl

Add to reddit

Add to myYahoo!

Cheers and Jeers: Wednesday

From the GREAT STATE OF MAINE?

Vonnegut!

Kurt Vonnegut died five years ago today at the ripe old age of 84. (I like to think his last words were, "So it goes.") In his memory, some bits of Vonnegoodness:

True terror is to wake up one morning and discover that your high school class is running the country.
-
I really wonder what gives us the right to wreck this poor planet of ours.
-
Laughter and tears are both responses to frustration and exhaustion. I myself prefer to laugh, since there is less cleaning up to do afterward.
-
Human beings are chimpanzees who get crazy drunk on power. By saying that our leaders are power-drunk chimpanzees, am I in danger of wrecking the morale of our soldiers fighting and dying in the Middle East? Their morale, like so many bodies, is already shot to pieces. They are being treated, as I never was, like toys a rich kid got for Christmas.
-
Those who believe in telekinetics, raise my hand.
-
1492. As children we were taught to memorize this year with pride and joy as the year people began living full and imaginative lives on the continent of North America. Actually, people had been living full and imaginative lives on the continent of North America for hundreds of years before that. 1492 was simply the year sea pirates began to rob, cheat, and kill them.
-
Let us devote to unselfishness the frenzy we once gave gold and underpants.
-
Another flaw in the human character is that everybody wants to build and nobody wants to do maintenance.
-
Son---they say there isn't any royalty in this country, but do you want me to tell you how to be king of the United States of America? Just fall through the hole in a privy and come out smelling like a rose.

I tell you, we are here on Earth to fart around, and don't let anybody tell you different.

If you're in New York City, tonight there's a celebration of his life and work at Housing Works. Details at Vonnegut.com.

Cheers and Jeers starts below the fold... [Swoosh!!] RIGHTNOW! [Gong!!]

Add to del.icio.us

Digg this

Post to Furl

Add to reddit

Add to myYahoo!

Taxing Wall Street Speculation

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 least in part, on the size of the transactions. As a revenue source, it has great potential: An FST could easily raise over $150 billion a year, according to some estimates, depending on the details of the tax and trading volumes in a post tax environment.

The FST could rein in some of the worst excesses of financial markets that too often operate like casinos. By increasing the costs of placing trades, the tax would moderate trading actively generally, but it would most strongly deter short-term trades rather than longer term investments. Importantly, for example, an FST could reduce the profitability of high-frequency trading, whereby computerized trading system enter and exit trading markets many times during the day?a practice that regulators worry gives an unfair advantage to some firms and increases market volatility.

Adopting an FST does not involve a leap of faith. From 1914 to 1966, the U.S. imposed a small tax on all stock trades, and Congress more than doubled the tax in 1932 to raise revenues during the Great Depression. The Securities Exchange Commission still exacts a fee equal to .00257 percent of each equity transaction traded on an exchange that funds the agency off-budget. In the UK, the government imposes a ?stamp tax? equal to 0.5 percent of each equity transaction. About twenty-nine other countries also impose some form of an FST. In these jurisdictions, markets have survived and even thrived, even though trading in other jurisdictions without an FST is available. Most notably, financial markets in the UK have grown considerably since the early 1990s even with an FST in place.

The FST should be an attractive alternative for politicians, since it raises serious revenue from an unpopular sector at a time of urgent fiscal needs. Yet proposals for an FST that grew out of the financial crisis have not yet been implemented. Nowhere has an FST  been more seriously considered than in Europe, where the idea has backing from the German and French governments. But European finance ministers recently failed to reach agreement on enacting the tax in the face of a UK refusal to go along unless there is a global tax, meaning the U.S. would have to enact an FST as well as the EU.

The irony of the UK position is maddening since it already has a tax on equity trades and a stock market that is one of the world?s largest. Various leaders have suggested that the FST be imposed in the euro zone only, but there is opposition based on fears that business will migrate to the UK. The best case is that the FST will be considered in the European Parliament, where there is greater sympathy than among the finance ministers, but only after the French presidential election in June.
In the United States, legislation was introduced in 2009 by Senator Harkin and Representative De Fazio to impose an FST on equities, bonds and derivatives. While it was not successful, the concept is likely to be a consideration in future tax discussions. Most recently, the Congressional Progressive Caucus proposed an FST focused on derivatives and foreign exchange trading that it estimated would raise tens of billions of dollars a year.

A number of issues are important to the discussion. First, is the tax collectible? Exchange-traded stocks, bonds and futures can easily be taxed. The greater concern is with bilateral transactions. In this instance, derivative and bonds will be subject to comprehensive information transfers to central repositories. Since each transaction will be ?touched? at this moment, the tax can attach there. This would make evasion more difficult.

The other way to assure reliable collection is to make the consequence of non-payment unacceptable. It makes sense to structure the FST as a ?stamp tax,? like the UK equity tax, so that the transaction that it attaches to is not recordable or enforceable unless the tax is paid. Under this system, it must be clear to all parties to a transaction that the tax has been paid. Exchange traded transactions will not suffer since attachment will be easily demonstrated. Bi-lateral transactions will require assurance that the responsible party has actually paid the tax so they will be burdened by an additional complexity. This is a beneficial outcome, since exchange trading should be encouraged over shadow-market, bi-lateral trades.

The second great question is how should the tax be measured? For equity markets, the starting point is the UK tax. That tax is 0.5 percent of every amount of the price of every trade. But bonds are assets that differ in duration to maturity, so value depends on duration as well as principal amount. And derivatives are bilateral contracts that have no intrinsic market value at inception, but rather accrue value over time as referenced prices change. Clearly, measurement is a difficult question. Professor Robert Pollin of and Dean Baker, among others, have studied the thorny issue of structuring an FST in great detail.

For the tax to work properly, it must be at a level that does not stifle the activity taxed so as to diminish its value as a revenue source. Professor Pollin and James Heintz considered a number of factors, including the elasticity of trading activity in relation to the potential tax at several rate levels. Elasticity is, in large part, related to the size of the tax in relation to the other transaction costs associated with the trade. If the tax is a larger percentage of the total transaction costs, the trading activity will be more elastic. Professor Pollin examined numerous configurations and came up with a plan that makes sense from a revenue generation perspective (See details here.)

The Obama Administration and key Democrats in Congress have yet to support a financial speculation tax, even as pressures grows to raise new revenues and reduce deficits in ways that don?t burden middle class Americans. The Obama Administration has voiced doubts about the enforceability of an FST, as well fears that the costs would be passed along to ordinary investors and overall effect would be raise the costs of capital and hurt growth. These objections are groundless. Enforcement has not proved to be a major problem in the UK as just discussed. And ordinary investors may actually benefit from an FST as fund managers have fewer incentives to engage in excessive trading that increases fees for investors. As Ian Salisbury has pointed out, ?Excessive trading can be a drag on fund performance because funds' brokerage commissions and other costs are deducted from investors' returns. Trading can also pump up capital-gains taxes that investors pay.?  Moreover, the markets may well become more efficient in achieving their primary social function?raising capital for enterprises, as Professor Thomas Philippon has argued. Volume is very different from liquidity, though the Administration conflates the two. Elimination of predatory trading practices that inflate volume to boost profits for traders, best exemplified by high-frequency trading, would be a benefit rather than a cost.

Overall, the biggest obstacle to an FST the outsize clout for the securities and investment industry in Washington, which has made over $350 million in campaign contributions to politicians of both parties since 2007 and spent $400 million on lobbying during this same period.

Yet elected leaders intimidated by the financial industry?s clout need to consider the political pain associated with other avenues for raising revenue?e.g., reducing popular tax breaks for homeowners, cutting popular programs like Medicare, or raising tax rates on middle class households. There are no painless ways to raise significant new revenues for the federal government. The benefit of an FST is that it is sound policy, would raise major amounts of money, and would penalize a very small group of people who are engaged in negative behavior.

One last benefit of an FST is that taxing Wall Street is popular with the public. Americans haven?t forgotten who caused today?s economic mess. Making the financial sector bear a greater burden for fixing America?s economy and fiscal situation is sure to be a winning idea with voters.

Read the rest

Part 1: Washington, We Have a Revenue Problem
Part 2: Making State and Local Taxes Fair Game

Add to del.icio.us

Digg this

Post to Furl

Add to reddit

Add to myYahoo!