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Home Publications Blogs Beat the Press The Pro-Stimulus Crowd Is Very Enthusiastic About a Financial Speculation Tax

The Pro-Stimulus Crowd Is Very Enthusiastic About a Financial Speculation Tax

Tuesday, 08 June 2010 06:13

The lead Washington Post editorial complained that the pro-stimulus crowd is not supporting its plan to cut Social Security benefits or to raise taxes on the middle class as a path to deficit reduction, insisting that this means they are not serious about reducing the deficit in the long-term. In fact, many progressives have supported measures that would address the long-term budget problem with items like a financial speculation tax.

There are also measures that would substantially reduce health care costs like publicly funded clinical drug trials which could allow all drugs to be sold as generics for $4 per prescription. This would save hundreds of billions annually in spending on prescription drugs. We could also allow Medicare beneficiaries to buy into the more efficient health care systems of other countries, with the government and the beneficiaries splitting the savings. This could save trillions of dollars in the decades ahead.

However, the Post does not even want these ideas discussed since they could hurt the powerful interest groups whom they favor. Rather, the Post insists on measures that will low and middle income families.

It is also worth noting that the reason the deficit has soared in the last few years has been due to the collapse of the housing bubble. If the Post had not almost exclusively on economists who could not see an $8 trillion housing bubble as its sources and for its oped page content, it is possible that policymakers would have noticed the bubble and acted to rein it in before it grew large enough to wreck the economy.
Comments (12)Add Comment
pay me now or pay me later
written by frankenduf, June 08, 2010 9:04
not to mention the straightforward reasoning of some of the 'crowd' that is unemployed- the stimulus is temporary spending to alleviate the suffering of the recession, until a relative recovery can increase revenue, thereby then rationalizing cutting in spending- the deficit hawks induce the worst of both worlds: contractionary spending increasing suffering and extending the recession into a relatively longer term- have these people ever heard of the lost decade?- or are they wealthy enough to be insulated regardless?
written by Fraud Guy, June 08, 2010 9:07
Rather, the Post insists on measures that will [what?] low and middle income families.
written by izzatzo, June 08, 2010 9:20
When running up an escalator that's going down, it's important to focus on running at a faster rate than the escalator, lest one ends up on the bottom floor in a double dip recession.

The energy used up in a Keynesian Sprint running upwards does create a deficit, but it also creates more replacement food available after making it to the top floor.

This should not be confused with deficits that make all escalators run slower, even ones that go up as well as down during more normal times of full employment, which cannot be overcome with Keynesian Sprinters and must be addressed by banning Overweight Debtors from escalators altogether.
written by alex, June 08, 2010 9:25
Dean Baker: "the Post does not even want these ideas discussed since they could hurt the powerful interest groups whom they favor"

Dean, you're indulging in he same error that you often rightly criticize reporters for. In fact you do not know _why_ WaPo doesn't discuss these ideas. It could be because powerful interest groups that they favor don't like them, or it could just be because they're idiots. In the bigger picture it doesn't matter why, but you shouldn't make assumptions about it.
Fraud Guy
written by Ethan, June 08, 2010 10:29
"hit" "impact" "screw" take your pick.
written by AndrewDover, June 08, 2010 12:09
The first two paragraphs ( capital exchange taxes, health care reform ) I can agree with.

All of the objections to financial transaction taxes also apply to the tax on the exchange of labor for capital called income tax.

The last two paragraphs ( Post paranoia, missed bubble ) don't add anything.

The Post has a point though- there really have not been any deficit reduction measures enacted yet that apply in the out years. Also what has been enacted, like Medicare fee containment to inflation rates keeps getting deferred. In other words, lots of talk, no action.
written by skeptonomist, June 08, 2010 3:06
Low-income people pay little or no income tax and probably will not pay more under anyone's plan, although they pay their full share of SS taxes and should not have their SS benefits cut. Those middle-income people who are employed are not suffering hardship, if they did not buy a house during the bubble or speculate in housing. But because the outlook is poor, they may be hoarding, and those who make business decisions are holding back on employment and investment. It makes perfect sense that upper-middle class employed should be taxed more, on both economic and humanitarian grounds. A good lower boundary for increased taxes would be the upper limit of SS payroll taxes. As for upper-income people they are grossly undertaxed presently, especially as regards speculative income, to the point where incentives are grossly distorted.

alex: The Post has shown a consistent pattern of phony alarmism about social security and other entitlements - we really don't have to guess at their real objectives, or ascribe pro-forma motivations on the basis of supposedly benevolent ideology, as the media habitually do in the case of politicians. The bread of the main-stream media as a whole is buttered on the side of big-money interests.
written by Nick B in DC, June 08, 2010 5:47
Wow, busy day in the world of refuting all the newspapers economic "reporting". You should just title this blog "Beat the Economic Press". Heck you could probably publish an entire newspaper daily that just tackles all the problems in the reporting on economics in the major media.
written by Queen of Sheba, June 08, 2010 9:00
The Post posits a very good question:
"But as analysts ponder the mystery of weak private-sector hiring despite signs of economic growth...."

Why ISN'T the private sector hiring? The stock market is up (well, it's gone down a bit in the last couple days, but mostly because of the turmoil in Europe, so the market watchers are telling us), and isn't that the most visible gauge of fiscal health? We regular Joes and Janes out here have been told so. And the banks have been telling us that they have begun, slowly, to lend.

So who's lying to us here? Either the stock market rebound is all smoke and mirrors or the banks aren't really lending. Maybe the banks would lend if anyone in business in real-life land had enough customers to consider expanding, but there is no demand...so...where are these "signs of economic growth" coming from?

No one I know has had a raise in three years, but their health insurance premiums have risen 30-40%, and stress over their household budget has begun to take its toll on them. Some of them live with the constant worry that they will lose the job they have. Others I know are unemployed, and they live on the edge of panic every day.

So who has the money? And what are they doing with it? They're not starting business, hiring people, creating jobs, creating demand. I guess they're all just standing around with wads of $100 bills bulging their pockets talking about how we have to cut the deficit.
written by diesel, June 09, 2010 2:49
I'm completely in favor of the idea, but could you imagine anything less likely to happen than medicare beneficiaries being allowed to buy into the "more efficient health care systems of other countries". It's such an eminently sensible yet absurdly remote idea that it makes me laugh out loud. Nothing this simple and straightfoward can ever possibly come to be. Allowing this would be a concession of defeat by those who loudest proclaim our flawless health care system and glorious free markets--the crowning irony.
Re-read slowly for missed words
written by catclub, June 09, 2010 10:02
I have a pretty good idea what words are missing, but there were a lot of them missing.
National News Media Agendas & Local News Media Agendas
written by Jerry Jones, June 09, 2010 12:24
Examine how news media enterprises are funded.

As a former local TV news reporter, I learned from my station's sales manager that roughly half of my employer's revenue came from local car dealership commercials. Therefore, I was prohibited by my TV station management from mentioning the name of the local car dealerships that had been publicly disciplined by my state's office of the attorney general. One of the car dealership representatives threatened to stop buying TV station advertising. Always be aware that news organization are "bought." So it doesn't surprise me that we're essentially being misled by the Washington Post when it comes to Social Security. Bottom line: DO NOT TRUST ESTABLISHED NEWS MEDIA OUTLETS.

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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.