A Wall St. Tax and an Independent Workers Movement
the REAL NEWS.com, 5/2/12
Robert Pollin is Professor of Economics at the University of Massachusetts in Amherst. He is the founding codirector of the Political Economy Research Institute (PERI). His research centers on macroeconomics, conditions for low-wage workers in the US and globally, the analysis of financial markets, and the economics of building a clean-energy economy in the US. His books include A Measure of Fairness: The Economics of Living Wages and Minimum Wages in the US and Contours of Descent: US Economic Fractures and the Landscape of Global Austerity.
RoseAnn DeMoro is executive director of the National Nurses United, the nation's largest union of nurses. DeMoro is also executive director of the California Nurses Association, which is well known for igniting the campaign that upended one of the world's most famous celebrity politicians, Arnold Schwarzenegger, dropping his public approval from 70% to 35% in the polls. Under DeMoro's stewardship, NNU and CNA is also renown as the leading national advocates of single payer/Medicare for all healthcare reform.
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Washington.
A financial transaction tax on Wall Street—that's become one of the main demands of the Occupy movement, many unions, and many progressives, and other people around the country. And one of the driving forces behind this demand has been Rose Ann DeMoro and National Nurses United, which is the country's largest union of nurses. Rose Ann is the executive director, and she now joins us. DeMoro is also executive director of the California Nurses Association. And on the side of economics, one of the main voices for this tax has been Bob Pollin. He's the founder and codirector of the PERI institute in Amherst and, as everyone that watches The Real News knows, an often-contributor to The Real News. Thank you both for joining us.
ROSE ANN DEMORO, EXEC. DIRECTOR, CNA/NNOC: Thank you for having us on.
ROBERT POLLIN, COFOUNDER, POLITICAL ECONOMY RESEARCH INSTITUTE: Thank you very much, Paul.
JAY: So, Rose Ann, why don't you kick us off? And why have you, a union that's organizing all over the country—you're involved in contract disputes and organizing issues, servicing your members, yet you're making this a very big preoccupation and you're putting significant resources behind this financial transaction tax. Why?
DEMORO: With the financial transaction tax, we needed to find—we have so many struggles, and the nurses are at ground zero of a lot of the fallout in the economy. And what they see every day and what they feel every day is the pain and suffering (they're nurses) that go with their patients, that come with their patients. The patients are presenting in a very different way these days. You've got young people with adult diseases. You've got people with enormous stress and despair. There's a crisis in families that transcend the illness that is causing families to be sick. And what the nurses do is they're patient advocates. They try to fix the patient, they try to help the patient. And what they're seeing more and more and more are patients slipping through what should be a security in a society.
JAY: That could suggest you might fight for more state funding for hospitals or, you know, something much more directly linked to the health care sector. But you're really leading this national campaign about taxing Wall Street. So why that?
DEMORO: We can talk about health care and we can talk about foreclosures and we can talk about the fact that there's no jobs and the environment's being polluted and we can talk about all of that, but the sophistication now of the political class has been to essentially diminish our voice by saying, well, there's no money. And so now we have the solution. There is money. It's concentrated at the top. We're asking for a financial transaction tax that's minimal and to basically jumpstart the economy and to have real reform within the economy. And they can't hide from that one.
JAY: So, Bob, give us—before we get into the politics of this, give us a little bit of a description of what this tax would look like. How much revenue would it generate?
POLLIN: Okay. So the basic idea of a financial transaction tax is that it's the equivalent of a sales tax. Right now if you go down the street and you buy a bicycle, if you buy a car, if you buy chewing gum, if you buy a baseball hat, you're going to pay 6, 7 percent on your sale. So $100 sale, you're going to pay $6. Right now, every single financial transaction on Wall Street and throughout the world—that is, every purchase of the stock, every purchase of a bond, a derivative, foreign exchange—goes untaxed. So this is an enormous potential source of new tax revenue, even to just come up to something like a degree of fairness relative to a sales tax.Now, if we start with a very modest tax on stocks of 0.5 percent, that would mean $.50 on a $100 purchase of stocks, which would then mean, say, $0.25 for the buyer and the seller, $0.25 on a transaction of $100 of stock. Then if we also tax bonds and derivatives at much lower rates, you can generate around $350 billion a year within the United States. Three hundred and fifty billion dollars a year, that's more than one-third of the entire federal deficit. It's more than three times more [than] all the states' deficits and the austerity programs that they are being forced into. You could cover those three times over just by implementing a financial transaction tax.
JAY: Well, Rose Ann, it seems a no-brainer, but are you getting any traction politically? Are you—you know, in theory at least, you'd think there'd be some real buy-in from the Democratic Party on this at least. But are you getting any?
DEMORO: We've done a tremendous amount of education with our nurses on the financial transaction tax, and they've actually become quite conversant and articulate on the financial transaction tax. We were at a rally in Washington, D.C., with 1,500 nurses, and we decided to fan out through the legislature in D.C. and talk about the financial transaction tax. And it was—in terms of political education of the nurses, it was perhaps the best exercise. The legislators, and even the progressive legislators, were so cynical. And they are dismissive of working people in this country. They basically laughed at the nurses. And it has been a huge mistake for anyone to laugh at a nurse, because, you know, in one case, a progressive—and I emphasize progressive to show you the corruption—a progressive legislator said to one of our nurses, well, you nurses (like, you little nurses) know so much about finance, and, you know, the nurse came back and said, I don't know a lot about finance, but I know when I buy something I pay a tax on it, and I believe that Wall Street should do the same, a minimum tax. And then another nurse in another conversation with a different legislator approached the legislator about the financial transactions tax and immediately—and I love it because it's become the rallying cry of the do-nothing political class—well, you nurses need to lower your expectations, and the nurse turned to the legislator and said, would you like me to say that to you as I'm prepping you for surgery?
JAY: Bob, you know, in a sense this is not that radical a notion, and you're even seeing some European finance ministers supporting this kind of a tax. But you see—I don't see any traction at the political levels here. But it's not like it's something way off the charts here. Am I not correct on that?
POLLIN: It's not the least bit off the charts. In fact, in the United Kingdom right now they operate with a financial transaction tax exactly as I just described on stocks. It's 0.5 percent of a sale on every single stock transaction in the United Kingdom. The transaction tax there has been around forever. In fact, in the seven countries in the world that have the most rapidly growing stock markets—China, Taiwan, South Korea, Indonesia—they're all operating, themselves, right now, with financial transaction taxes. The United States has had a significant financial transaction tax in the past. It ended in the mid-1960s. But we do still operate today with a small financial transaction tax that is large enough to finance the operations of the Securities and Exchange Commission. In 1987, after the Wall Street crash then, the financial transaction tax was introduced in Congress in more or less the way I just described, by the speaker of the house, then Jim Wright, a Democrat, but it was supported by people in the Bush administration, Republicans, including Nicholas Brady, who was Treasury secretary, including Richard Darman, who was the head of the budget under the first president George Bush. So, no, this is by no means a radical proposal. It's a quite moderate proposal for generating revenues in a fair way, in a progressive way, and also dampening down excessive speculation on financial markets.
JAY: Rose Ann, in the end it's really a political question. And you say, you know, much of the trade union movement supports this, and I think they do. But on the other hand, the main leadership of the trade union movement, certainly at the AFL-CIO, most of them are giving what amounts to unconditional support for the reelection of President Obama. And, you know, some of these demands, like this, for example, one would think the union movement would have some leverage in saying, well, we'll support you, but, you know, we want something. You know, I mean, you say, we're going to build a movement, but still, at the end, you've got to have somebody who is elected, in power, and pass a law, right?
DEMORO: No, the labor movement is supportive of the financial transaction tax, and they say the right things, and they've been allied with us on some protests across the United States—and globally, actually. But the truth of the matter is it's not what the White House wants. I mean, if you look at the composition of the cabinet of the president of the United States, it is essentially Wall Street. I mean, Wall Street has occupied the White House, and it's sort of like the Occupy movement is kind of the offset.The labor movement ultimately plays a game of pure survival at this point in time, it seems to me, and that is the least of the worst in terms of who we elect. The problem is that they become part of the betrayal to their own members when we elect these people and then they turn around and essentially do nothing to help working people and in fact do everything to bolster the people who are oppressing working people. The labor movement has adopted the language of the right. They talk about—everyone talks in the labor movement now there's no working class, so they don't make a distinction between us and them like they used to do years ago. We used to be part of a working class that was part of a resistance movement, and what we've always said is that the 1 percent—we didn't call it the 1 percent at the time, but the 1 percent has the money, but we have the people.Now, the labor movement shifted, and this has been a conscious shift on the part of the [incompr.] The neoliberal agenda has been very good in terms of defining the terms of the war with labor. And so what happens is what labor's done is to run to try to identify as part of the broadest class of—we are one is their mantra, we are one. So that means you could be a Wall Street financier or you could be a person who's on welfare, but we are one.
JAY: Well, this has been one of President Obama's big messages—no red states, no blue states, just the United States.
DEMORO: Right, we are one, because if you—if there's no distinction, there's no resistance. Who are you resisting? And so this is how working people come to feel some—that I talked about initially, so much shame. If there's nothing wrong with the system, then there must be something wrong with me. And the nurses, in full circle, the nurses see that as it presents itself in terms of illness and shame. And so what it does is it diminishes the voice and the fight of working people. And, honestly, the labor movement needs to go to a different school of thought other than the influence of the neoliberal agenda. It's pretty disheartening to watch, to have to sort through the language of labor and look for the concept of the working class. It's all about the middle class, we're all middle class. We're not middle class. In fact, the middle class isn't even middle class anymore. There's no money in this economy, and people are suffering pretty severely, and we aren't all one.
JAY: Bob, you know, the amount of money, $350 billion, sounds like a lot, but the truth is, if you're talking about Wall Street and derivatives trading and such, you know, it's not lunch money, but it's not a lot. On the other hand, Wall Street really doesn't want this. And I suppose one reason they wouldn't want it is 'cause it might start off at 0.5 and it could get bigger. But I wonder if another reason it really doesn't want it is that there would be more transparency about what's going on on Wall Street, 'cause if you're going to tax stuff, you're going to have to have a more accountable system, especially on the derivatives side. I mean, how much is that an issue?
POLLIN: Well, as I said, there is already a financial transaction tax on stocks, so these records are already there with respect to stocks. You are right that the derivative market today is largely unregulated, unrecorded, and that is part of the Dodd–Frank reform that's supposed to get implemented, which is to bring derivative trading onto exchanges and their trading gets recorded. And a lot of the revenue would come through derivative trading, because derivative trading at this point swamps stocks, swamps bonds. It's the biggest source of trading. And, by the way, those calculations that I have, $350 billion, that assumes that trading actually falls by 50 percent. So I'm not saying that we impose this small tax and then people just keep trading the same way. I'm assuming that we impose a small tax, and on top of that we allow that trading falls by 50 percent. And we still get $350 billion. But we do have to tax the derivatives a very small amount, like 1/100th almost of the amount that we would tax the stocks.
JAY: So it's—not only is it more revenue, but it opens some light into what they call the dark markets, which is certainly something that's sort of a win-win, you would think. Rose Ann, just finally, what are you planning in the next few months?
DEMORO: We are doing an action on May 18 in Chicago, a large action, where there's going to be thousands of people both nationally and internationally from a lot of different movements. Everyone is on the financial transaction tax internationally with the solution. We're all suffering from the same problems. The austerity budgets in some of these countries, the countries' financial sectors are—you know, have destroyed their countries. But the United States financial industry has had overreach in their countries as well. But, ultimately, to discuss worldwide hunger, to give a new vision for the world. And what's nice is that this isn't—you can't look at a financial transaction tax in isolation in one country, because you have to look at what's happening in our world. And it really redefines—it defines a new moment in history. Occupy will be joining us. We've got buses of Occupiers coming from different states. It's going to be quite a good rally. But it's also the beginning, I think, of an elevation of the movement itself.
JAY: Normally in my interviews I try to challenge my guests with a counterargument. The problem is I don't know what this one is. What is the counterargument to this financial transaction tax? So maybe, viewers, you can write me and tell me, 'cause I don't get it. Thank you both for joining us.
POLLIN: Thank you.
JAY: And thank you for joining us on The Real News Network.
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