This week’s announcement that at least 11 European countries will press ahead with a financial transaction tax has barely registered with the UK or American media. But it could prove a significant milestone in the quest for a Robin Hood tax to ensure that banks pay their fair share to repair the damage done by the economic crisis on Wall Street.
Europe is Walking the Walk
The European version is not as comprehensive as my own One Penny Solution, but it addresses part of the problem of Europe’s long-term debt. If only American politicians were more focused on real solutions rather than re-elections, we could be the leader of the free world we Americans so often claim despite evidence to the contrary. And all the lapel pins and sweatshirts with the “PATRIOT” on them doesn’t mean that we walk the walk, just talk the talk.
At a time when George Osborne was insisting on a further £10bn in cuts to the safety nets of the UK poor, the European 11, (which includes the big economies of Germany, France, Italy and Spain) were lining up to give a clear message that it is time finance worked in the interests of society rather than the other way around.
Despite increasingly negative rhetoric, the official position of the British prime minister and his chancellor remains that they favor a global FTT but that introducing such a tax without the US would mean the City of London and therefore the UK economy would lose out. This is wrong on numerous counts.
First, a number of the world’s leading financial centers already have FTTs. England has a “stamp duty” on share transactions that raises about £3bn a year for the British Treasury. Hong Kong already taxes derivative transactions. Neither has forfeited its star status.
Austerity is failing, as I and the vast majority of American economists have proven, to bring the public finances under control in Europe.
The Financial Transaction Tax, as laid out for America in my One Penny Solution, is a policy that would not only raise billions, but would help curb casino capitalism and particularly the computer-driven high-frequency trading that is contributing to disquieting instability in world markets. That’s why a thousand economists and 50 leading financiers wrote to Britain’s David Cameron and other world leaders calling for an FTT, and why it is supported by Bill Gates, George Soros and Warren Buffet, and numerous others billionaires who place a higher emphasis on true patriotic solutions as opposed to right-wing greed and deception.
In Britain, it offers an opportunity you would expect Labour to enthusiastically seize. There is vast working class support for the Robin Hood tax among the Labour party supporters, as well as Labour MPs. It is hugely popular with the British public. Yet Democratic leadership in the U.S., as well as the weak-kneed Democratic public remains either uneducated or unwilling to add this reasonable and sensible solution to their list of positions. And for England, an FTT would simply not work without US support that Republican hoarders will certainly oppose despite their “stated” but unproven desire to reduce the U.S. deficit if it doesn’t fit their party ideology(read money-suppliers).
Real progress in Europe could be a game changer, despite the reaction that I’m sure will come from Republicans and Norquistlians (is there a difference?).
It will surely come, even though the One Penny Solution is:
- Virtually untouchable by politicians unless 80% of both houses of Congress and the President agree that there is a sufficient war-time emergency to tap the revenue stream that the FTT would create solely for long-term debt reduction.
- An immediate and meaningful stream of revenue that addresses the long-term debt.
- The only solution to address the fact that neither Republican nor Democrat administrations (or Congresses), have reduced the U.S. long-term debt since Calvin Coolidge (1923-1929), other than a brief two-out-of-eight year Clinton Administration.
- Neither Romney/Ryan, nor Obama/Biden have realistic plans that will address the long-term debt immediately if at all.
- Is designed to increase the rate of debt pay-down as the economy experiences growth cycles(increases in GDP) and dial back when the economy inevitably experiences slow-downs (recessions or simple decreases in GDP), but continues paying down the debt regardless.
How is it that the Euro zone countries, with all their disparate heritages, fiscal policies, and monetary policies can come together to find real solutions and the U.S. cannot when it comes to responsible finances?
This is a tax whose time has come.