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Home Publications Blogs Beat the Press David Brooks Says Financial Speculation Taxes Are Under Consideration

David Brooks Says Financial Speculation Taxes Are Under Consideration

Tuesday, 04 January 2011 05:45

Yep, Brooks said that proposals to raise $150 billion a year from Wall Street banks and speculators are now on the national political agenda. So are alternatives to patent monopolies for supporting prescription drug research and international Medicare vouchers that will allow beneficiaries to take advantage of the more efficient health care systems in Germany, Canada and elsewhere, with the government and the beneficiary splitting the savings.

Brooks told readers this morning that "...the exciting thing about this moment is that everything is on the table," so all of these policies must be under consideration. Okay, Brooks probably didn't really mean this, but we can still have fun.

He should also correct his characterization of big versus small government. He seems to use government spending as a share of GDP as a measure of whether government is "big." In fact, a government that spends less as a share of GDP can easily have more control over the economy than a larger government. For example, a government can mandate private expenditures such as the purchase of health care rather than pay for health care through direct spending. Or, it can grant monopolies like patents and copyrights instead of paying subsidies. It can also give out tax expenditures, like the mortgage interest deduction, instead of paying out subsidies.

The government can also squeeze large segments of the workforce by having the Federal Reserve Board pursue policies  that push up interest rates and therefore unemployment. Such policies would also have the effect of squeezing state and local governments, forcing them to cut back spending and/or raise taxes. In short, there is little direct relationship between the government's share of GDP and its impact on the economy.

Comments (5)Add Comment
Gridlock Broken: Brooks Agrees With Baker on Who Is Your Nanny
written by izzatzo, January 04, 2011 7:57
In an unforgettable transformational moment of the Obama administration, the entire base of political ideology in the USA was turned on its head when both political parties declared that liberalism no longer meant redistribution from the rich to the poor, but from the rich to the rich.

Once this was understood, apparently gleaned from some readings of an obscure quack economist who kept saying there was a housing bubble, both parties decided it was in their own interest to put everything on the table to reduce the size of government, or in Alan Simpson terms, 'there ain't no pound of flesh so essential that we won't pinch it off your overweight subsidized commie liberal scum torso of a bloodsucking socialist leech'.

Brooks was so excited, when asked what the difference was between big government and powerful government, he blurted that a Nanny is a Nanny, whether in size or authority, and if the Nanny State doesn't keep the rich rich by preventing them from competing with each other, socialist corporations would fail under the competition forced onto others and destroy the very foundation of trickle down capitalism.
finance tax
written by pete, January 04, 2011 11:08
This is a nice regressive tax, should not be too distortionary since it is broad based, and will simply lower the rate of return on investments like 401Ks and pensions a tiny bit. Almost as efficient as the head tax (oops, the fine for being an uninsured human being) that the health care reform imposes.
A transaction tax really only affects traders.
written by Lyle, January 04, 2011 4:30
If you trade a lot you will pay a lot of transaction tax, if you buy and hold you won't pay much. Yes the market will likley become a bit less liquid, but so be it. If the average time a stock is held is as low as 22 seconds as some claim, then this would be an excellent source of income as no companies outlook really changes in 22 seconds. Actually we should go a bit further by making long term for cap gains 5 years, and adding a surtax on holdings of less than one month, being as trading does not do a lot for the real economy.
who pays the tax...ah thats the question
written by pete, January 04, 2011 5:08
Well, day traders, i.e., market makers, and their big counterparts, hedge funds, must make a return on capital invested. The tax will go into the price which they will trade at, lower bids, higher offers...lowering the effective return to long term investors. Could also cause increased delinking of markets due to a higher cost of arbitrage. But, that's really secondary. Primary is that investors will pay the tax indirectly in lower returns as the tax is passed on, just like corporate taxes.
written by David, January 05, 2011 6:32
What happened to our simple government? It is all to confusing for the normal American. You almost need a PHD to understand it all. This is how they get one over on all of us. We must remember that they work for us, not the other way around. All taxes should be subject to the will of the people when the government does not take their people into consideration poker sites

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.