Inequality is Weakening Social Security. Here’s How We Fix That.
When Congress set the cap on Social Security contributions in 1983, they didn’t anticipate forty years of rising inequality. And it’s cost us — a lot.
Candidates this fall are taking plenty of pokes at the financial industry’s best and brightest. But they could be doing a lot more than poke. They could push to start taxing Wall Street.
All those political ads flooding our media are smacking dozens of different targets. One particularly: Wall Street. From mid-April to mid-September, Ad Age reports, $1 of every $10 spent on campaign ads has blasted bankers.
And these ads haven’t just come from Democrats. The list of “big anti-Wall Street spenders” even includes the Republican National Committee.
Campaign strategists are placing these anti-Wall Street ads for an obvious reason. Wall Street’s greed grab, they understand, has deeply angered America.
Last week brought still more cause for that anger. New York’s state comptroller, Thomas DiNapoli, revealed that average annual pay on Wall Street has shot up 16 percent over the last two years to $362,950.
Financial industry pay in New York is now running 5.3 times higher than pay in the rest of the private sector. In 1980, Wall Streeters only averaged twice the private sector’s take-home.
The typical employee on Wall Street isn’t, of course, making $362,950. Wall Street secretaries don’t sit anywhere near that lofty total. But investment bankers and traders are making millions above it, and Wall Street’s “greater concentration” of these “most highly compensated positions,” as New York’s comptroller puts it, wildly skews the overall average.
What are these “most highly compensated” doing to earn their millions? They’re running a casino. They take bets on stocks, currency, and commodities — and while away the hours designing ever more exotic financial “innovations” to bet on.
On every bet, Wall Streeters take a cut, just like the “house” at any casino. And sometimes they rig the game and place their own bets on the sure-winners.[pullquote]Wall Street has essentially placed our entire economy on a risky roller coaster.[/pullquote]
This endless gambling impacts us all. Wall Street has essentially placed our entire economy on a risky roller coaster. On the ups and downs, crashes — even Great Recessions — become unavoidable.
Most Americans have at least a vague sense of these dynamics, and candidates are seeking to exploit this public unease with all those anti-Wall Street campaign ads. But we don’t need ads from candidates. We need commitments from them — to rein in our economic casino.
How could these candidates start reining? They could enact what analysts call a financial transaction tax, a tiny levy on every “trade” — every gamble — that Wall Streeters take.
Gamblers throughout the U.S. financial industry currently pay no tax on their wagers. All other gamblers in the United States do. Out of every $2 racetrack bet, a tax comes out. But Wall Street wheeler-dealers who can routinely bet billions pay no taxes whatsoever.
A growing number of lawmakers in Congress are aiming to change this 1 percent-friendly status quo. They’ve introduced over a dozen different financial transaction tax bills. The latest — from Rep. Keith Ellison of Minnesota — would place a 0.5 percent tax on every stock trade and somewhat smaller taxes on every trade of bonds, derivatives, and currencies.
Wall Street movers and shakers are predicting economic doom, not surprisingly, should a financial transaction tax ever become law. Traders will merely, they argue, shift their trading abroad.
But if these traders should flee, they’ll have a hard time outrunning financial transaction taxation. Last week, 11 European nations, led by France and Germany, agreed to implement a new tax on stock, bond, and derivative trading.
This landmark new victory for financial transaction taxation in Europe figures to give Ellison’s bill some substantial momentum. Some 130 organizations, part of a “Robin Hood tax” campaign, have already endorsed it.
These Robin Hood campaigners don’t have a fraction of the cash spent so far on all those anti-Wall Street political campaign ads. But they do now have solid legislation to push — and an equally solid determination to keep all those anti-Wall Street candidates honest.
To encourage your representative in Congress to co-sponsor Rep. Keith Ellison’s new Robin Hood tax, click to this online action center.
Veteran labor journalist Sam Pizzigati, an Institute for Policy Studies associate fellow, writes widely about inequality. His latest book, The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, will appear this fall.