View previous stories
	Redistributing income from the very rich to the middle class and poor by Robert Reich, Dean Baker USA   Tornadoes and hurricanes are natural disasters. Epidemics occur because germs mutate and spread. The BP oil spill occurred because of the recklessness of a giant oil company in pursuit of profit.   And what has the nation learned from all this? The same lesson we’ve known for decades, according to the President. We must end our dependence on oil. But if we’ve known this for decades, why haven’t we done anything about it? The President endorsed the cap-and-trade bill that emerged from the House (without calling it cap-and-trade) but didn’t call for the only thing that may actually work: a tax on carbon.   Whether it’s Wall Street or health insurers or oil companies, we are approaching a turning point as a nation. The top executives of powerful corporations are pursuing profits in ways that menace the nation. We have not seen the likes since the late nineteenth century when the “robber barons” of finance, oil, railroads and steel ran roughshod over America.   Now, as then, they are using their wealth and influence to buy off legislators and intimidate the regions that depend on them for jobs. Now, as then, they are threatening the safety and security of our people.   This is not to impugn the integrity of all business leaders or to suggest that private enterprise is inherently evil or dangerous. It is merely to state a fact that more and more Americans are beginning to know in their bones.   I am sure our president knows it too. He must tell is like it is, not with rancor but with the passion and conviction of a leader who recognizes what is happening and rallies the nation behind him.   Feb 2009 (Extract)   It"s about time a presidential budget uneqivocally redistributed income from the very rich to the middle class and poor. The incomes of the top 1 percent have soared for thirty years while median wages have slowed or declined in real terms.   As economists Thomas Piketty and Emanuel Saez have shown, in the 1970s the top-earning 1 percent of Americans took home 8 percent of total income; as recently as 1980 they took home 9 percent. After that, total income became more and more concentrated at the top. By 2007, the top 1 percent took home over 22 percent. Meanwhile, even as their incomes dramatically increased, the total federal tax rates paid by the top 1 percent dropped.   According to the Congressional Budget Office, the top 1 percent paid a total federal tax rate of 37 percent three decades ago; now it"s paying 31 percent.   This Mini Depression is partly the result of a widening gap between what Americans can afford to buy and what Americans when fully employed can produce. And that gap is in no small measure due to the widening gap in incomes.   * Robert Reich was the 22nd Secretary of Labor and is a professor at the University of California at Berkeley.   Mar 2009   A Win-Win Solution. Tax the Rich, by Dean Baker. (Extract)   The quest to increase taxes on the wealthy is not a gratuitous attack on upper income households; it is driven by the need to raise more revenue to run the government.   The vast majority of the income gains in the United States over the last three decades have gone to the richest 5% of the population, largely as a result of policies that were explicitly designed to redistribute income upwards. Therefore it is far more appropriate to tax the richest 5% who have prospered than the broad middle class who have suffered.   Of course taxes can be designed in a better or worse manner. One way to increase taxes on the wealthy, in addition to allowing the Bush tax cuts to expire, would be to apply a modest financial transactions tax (FTT).   There is a long history in both the United States and the rest of the world with FTT. Until 1964, the United States imposed a tax of 0.12% on new stock issues and 0.04% on stock trades. Britain still has a tax of 0.25% on each stock sale or purchase, raising five billion pounds a year. This would be equivalent to roughly $30 billion a year in the American economy. A scaled set of FTT on stock, futures, options and other financial instruments could raise approximately $150 billion a year. This would help bring the long-term budget deficit down.   A FTT would be progressive. While many middle income families own stock, their holdings are dwarfed by the holdings of the wealthy. Furthermore, few middle income families are active traders. Their intention is to hold their stock to support their retirement or their kids education, not to shuffle it around on a daily or hourly basis.   Most of the burden of the FTT will fall on the wealthy individuals who are active traders and also on the financial industry itself. By raising the cost of trading, the tax will discourage the trading that only provides revenue for the financial industry.   There also is a powerful element of justice in imposing a FTT in the current situation. The main reason that the financial situation has deteriorated so much in the last two years has been the damage caused by the irresponsibility and greed of the financial industry.   In short, there is a very good argument for increasing taxes on the wealthy given the current budget situation. The alternative is taxing those who are not wealthy.   * Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). Visit the related web page
	Democracy & the Great Recession by John Keane Centre for the Study of Democracy   Eighteen months into the deepest economic slump since the Great Depression of the 1930s, one thing is abundantly clear: the world economy is once more suffering the incalculable shock effects of a massive market failure.   The bursting of the global credit bubble, predictably, is paralysing virtually all market sectors in most countries, even those (like Japan) that took earlier measures to fit "bank proof" shock absorbers to their economies.   Governments have been dazed by the scale of corporate debt issuance and "securitisation" - the risky bundling of debts on such things as mortgages and credit cards. Panicked reactions and contradictory stopgap measures are multiplying.   Trying to calm jitters, the International Monetary Fund"s Dominique Strauss-Kahn has recently pronounced that the world faces a "great recession".   Suddenly, as if through overnight conversion, politicians rail against "greedy" bankers and corporate fat cats. Moralists are out in force. Scapegoats such as Bernard Madoff have become household names. So have words like "bail out", "toxic debt" and "rescue packages".   Of significance - Obama"s 2009 budget points in this direction - is the appearance of first-stab efforts to formulate redistributive policies that protect citizens against unemployment, loss of savings, deteriorating public infrastructure and other effects of the bursting bubble.   Such moves against the old free market consensus resemble slamming shut the gates after the horse called Equality has bolted. Among the documented effects of the credit bubble is that most democracies experienced a 30-year widening of income and wealth inequality.   The whole trend - toward hour-glass shaped societies - has been bad for democracy. It has spawned an underclass. Middle-class people were deluded into thinking they were growing richer by the day. The spirit of solidarity so necessary for citizenship was corroded by market selfishness.   The present bursting bubble is deepening these undemocratic trends. In poor countries, according to the World Bank, only a quarter of governments have the resources to cushion their citizens against the great recession; net capital flows in their direction have fallen to less than a fifth of the level two years ago.   In richer countries, where "de-leveraging" is rife, mortgage defaults among the poor are rising. Private wealth levels are plummeting (the Asian Development Bank has estimated that the equivalent of a year"s global economic output has so far been lost in financial assets alone).   Pension funds are threatened; in Britain alone an estimated 90 per cent of final-salary schemes are technically now under-funded. As companies slash dividends, preserve cash and reduce employment, trade unions find themselves challenged. Bank bailouts and other mega-forms of government intervention have sharpened the sense of many citizens that while the rich get billions the people get pennies.   Then there is the most worrying threat to equality posed by the bust: that when the huge rescue package bills are finally presented, governments will try to rebalance public finances through spending cuts and increased taxes that have further socially regressive effects.   Hence the searching question posed recently by Richard Bruton, the Finance spokesperson for Ireland"s opposition Fine Gael party: "The banks bailed out the developers, the government then bailed out the banks, today the taxpayer is being asked to bail out the government once again. The question I ask is: who is going to bail out the taxpayer?"   To the extent that democratic institutions have failed to live up to their own standards of citizen equity we can speak of democracy failure.
	View more stories