12:05 PM EDT, April 27, 2011
We live in a very, very rich country.
Yet we are utterly consumed by the hysteria that we're broke. Historians are certain to look back at this period and wonder why the richest country in history consumed itself in a struggle over how many teachers to fire.
How rich are we?
Just take a look at the latest reports on what the top hedge fund managers haul in. In 2010, John Paulson led the list with a record $4.9 billion in personal earnings. That's a whopping $2.4 million an hour.
Here's a factoid to make you wretch: It'd take the median U.S. household over 47 years to earn as much as Paulson pocketed in just 60 minutes. And every hedge fund manager pays a lower tax rate than the average family.
The top 25 hedge funders took in $22.07 billion in 2010. Thanks to a generous tax loophole, these billionaires paid a top tax rate of 15 percent instead of 35 percent. Closing that loophole on just those 25 individuals — just 25 guys who wouldn't miss a penny of it — would raise $4.4 billion, which is enough to rehire 126,000 laid-off teachers.
Wait a sec. This is America. We don't want to punish the successful who are building up our economy, do we?
Maybe that's a strong argument when you're talking about the CEO billionaires of Apple and other companies that make products we use. But when it comes to financial billionaires, we don't even know what they do for a living.
I ask people and I get the same blank stare: “They invest. They make money.” But how do they make so much? Where does it come from? How can hedge funds with fewer than 100 employees make as much profit as companies like Apple with tens of thousands of employees?
This much we know. They speculate. They place bets. They jump in and out of markets at lightening speeds. And as any state attorney general can tell you, a good number of them cheat by betting with illegal insider tips, front-running trades, sneaking in trades after markets close and so on. The entire industry is barely regulated. Its bankroll of $2.2 trillion comes from enormously rich investors.
I have yet to hear a convincing argument that financial billionaires produce economic value commensurate to what they earn. If they don't, that means they are siphoning off wealth from our nation. Either we do something about it or we'll watch our standard of living crumble.
Blah, blah, blah. We've heard it all before. We know that super-rich financiers are gaming the system. We know they pay low taxes or none at all. But there's nothing we can do about it. We have to learn to live with it. Well, maybe not.
There's a movement underway for something called the “financial speculation tax,” which takes a fraction of a percentage of each financial transaction proportional to the financial transaction's actual costs. It would raise over $100 billion per year in badly needed revenue. This is a substantial sum and manages to skim the fat off of a sector of the economy that can afford to pay it.
By taxing speculation in real time, we reclaim some of the ungodly accumulation of speculative wealth in the financial sector. Everyone knows that the financial sector has grown too large. Everyone knows its size allows it to play fast and loose and with an implicit guarantee of its bets. The financial speculation tax is the perfect way to put that money back to work for the common good.
Furthermore, it's the very best way to make the financial sector pay us back for all the damage it has done to the economy. Before we succumb to financial amnesia we should recall that Wall Street, and Wall Street alone, went on a massive gambling spree that crashed the economy and killed 8 million jobs. To save the system from falling into another Great Depression, we bailed them out and now they are again making record profits. Meanwhile, long-term unemployment remains at record highs and states are in enormous fiscal distress.
A collective of American economists is mounting a petition to put the issue back on the agenda. It says in part: “The financial crisis has shown us the dangers of unregulated finance, and the link between the financial sector and society has been broken. It is time to fix this link and for the financial sector to give something back to society.”
Winning won't come easy, because Wall Street is determined to kill any and all efforts to siphon money away from it. The joke is that when the big boys were on their knees two years ago begging for money, this tax easily could have been a condition for bailing them out. But in truth, Obama is siding with Wall Street and has come up with every lame excuse for why it can't work, even though it's working just fine in places like England.
It's time we have our own Robin Hood movement.
—Les Leopold, who wrote this originally for AlterNet.org.