Double-Digit Unemployment Doesn't Have to Continue

[one...two...tree 2,762]

By Dean Baker and Sarita Gupta

There is a depressing complicity among much of the political leadership about the recession. Many politicians seem prepared to accept that we will have sky-high rates of unemployment for the indefinite future. Projections from the Congressional Budget Office and other authoritative forecasts show the situation improving little over the next few years.

At the moment, this means 15 million people unemployed, 9 million under-employed and millions of other workers who don't even get counted because they have given up hope of finding a job and stopped looking. It is outrageous that we have this situation. Allowing high unemployment to continue for years into the future is unacceptable.

We know how to get the unemployment rate down.

Part of the story should include programs like the Local Jobs for America Act that will save and create jobs in areas of high unemployment. This will be a way to give young people a decent start to their working careers in areas like Detroit where the youth unemployment rate is close to 50 percent. These workers can help maintain and clean up parks, schools and other public facilities.

We should also build on the successful parts of President Obama's American Recovery and Reinvestment Act of 2009, by increasing their size. ARRA includes tax credits that will provide incentive to weatherize hundreds of thousands of homes. The target should be weatherizing millions of homes. This puts people to work in the short-run and reduces energy use in the long-run.

We also need to do much more to improve the country's infrastructure. Modernizing the electric grid would both make the grid more efficient and also reduce the number of people who lose power every time we have a storm. We also need to modernize our transportation system, most obviously by increasing the use of mass transit and building the type of high-speed trains that have been operating in Europe and Japan for 40 years. The $50 billion the president has recently proposed for infrastructure spending is a good first step, but more can be done.

This is an affordable agenda. In the short-term, the deficits are clearly not a problem. Investors from around the world are lending their money to the United States at extremely low interest rates. In other words, the people with big money on the line are not worried that the U.S. government is going bankrupt.

This is for good reason. In the short-term, spending from the government is making up for the lack of spending from the private sector. The reason so many people are unemployed is that spending by the private sector plummeted after the collapse of the housing bubble. Construction spending has been cut by more than half. Consumption spending is also a way down, as homeowners who lost trillions of dollars of housing equity realize they must now save more. Spending to create jobs will simply be filling the hole left by these cutbacks, making the economy stronger, not weaker. Leaving people who want to work without jobs is simply a waste from an economic standpoint.

Over the longer term, we will likely need more revenue. The best place to look for money is the root of the crisis: Wall Street. A modest tax on Wall Street financial speculation can raise an enormous amount of money, by some calculations more than $150 billion a year or more than $1.5 trillion over the next decade.

This tax would have very little impact on the sort of investing that middle-class people do to save for college or retirement, but it would impose a substantial cost on fast-paced financial speculation. The money raised would go a long way toward funding a serious jobs agenda.

With the unemployment rate more than double its pre-recession level, jobs should be at the top of the national political agenda. Tens of millions of people are suffering each month the downturn persists, and the pain gets worse over time. What makes the situation more infuriating is that this crisis was entirely preventable if the people running economic policy had done their jobs. In the same way, we can get the unemployment rate down to more reasonable levels if Congress will just do its job.

Dean Baker is a co-director of the Center for Economic and Policy Research. Sarita Gupta is the executive director of Jobs With Justice.

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[Obama 2012 1,714]

advocating stealing more money to create fake jobs? cmon now.......

[scandal 951]

A modest tax on Wall Street financial speculation can raise an enormous amount of money, by some calculations more than $150 billion a year or more than $1.5 trillion over the next decade.

This tax would have very little impact on the sort of investing that middle-class people do to save for college or retirement, but it would impose a substantial cost on fast-paced financial speculation.

Please define the term "Wall Street financial speculation" and how one proposes to apply a separate tax upon it versus "the sort of investing that middle-class people do".

I bet you'll find that an exceedingly difficult thing to do, indeed.

[one...two...tree 2,762]

Please define the term "Wall Street financial speculation" and how one proposes to apply a separate tax upon it versus "the sort of investing that middle-class people do".

I bet you'll find that an exceedingly difficult thing to do, indeed.

Representative Peter DeFazio (D-OR), Chairman of the House Subcommittee on Highways and Transit was joined by 22 of his House colleagues today in introducing new legislation that assess a miniscule tax on Wall Street securities transactions.

.....

The legislation assesses a small securities transaction tax on Wall Street. . A securities transaction tax is applied to:

• Stock transactions (tax rate will be 1/4 of 1 percent--0.25%),
• Futures contracts to buy or sell a specified commodity of standardized quality at a certain date in the future, at a market determined price (tax rate will be 0.02%)
• Swaps between two firms on certain benefits of one party's financial instrument for those of the other party's financial instrument (tax rate will be 0.02%)
• Credit default swaps where a contract is swapped through a series of payments in exchange for a payoff if a credit instrument (typically a bond or loan) goes into default (fails to pay) (tax rate will be 0.02%)
• And options, which are contracts between a buyer and a seller that gives the buyer the right, but not the obligation, to buy or to sell a particular asset on or before the option's expiration time, at an agreed price (at the rate of the underlying asset)

A transaction tax has the support of over 200 economists, including Paul Krugman business leaders like John Bogle, the founder of Vangard, and labor and consumer organizations such as AFL-CIO and Americans for Financial Reform. It will provide a disincentive for excessive speculation. Much of the excessive risk on Wall Street is in the form of high-volume short-term speculative trading. The tax could raise approximately $150 billion a year.

To ensure the tax is appropriately targeted to speculators and has no impact on the average investor and pension funds, the tax will be refunded for:

• tax-favored retirement accounts
• mutual funds
• education savings accounts
• health savings accounts
• the first $100,000 of transactions annually that are not already exempted

Half the revenue generated by this transaction tax (approximately $75 billion) would be deposited in a Job Creation Reserve to fund the creation of good paying jobs and put Americans back to work rebuilding our nation’s infrastructure. Each $1 billion of Federal infrastructure investment creates or sustains over 34,000 American jobs and $6.2 billion in economic activity. The Surface Transportation Authorization Act of 2009, which would will create or sustain over 12.5 million family wage jobs, would be partially funded through this tax.

The second half of the revenue generated by this transaction tax (approximately $75 billion) would be used to directly reduce the deficit.

http://www.defazio.house.gov/index.php?option=com_content&view=article&id=531%3Adefazio-introduces-legislation-invoking-wall-street-transaction-tax&catid=60&Itemid=70

[SuperDuper! 230]

I think Steve should start his own news website, and call it the Fudge Report!

[ready4ONE 5,400]

Corporations holding on to their money will spend it again when they get their Party back in power. See it for what it is, cruel campaigning for Rethuglicans.

[Obama 2012 1,714]

Corporations holding on to their money will spend it again when they get their Party back in power. See it for what it is, cruel campaigning for Rethuglicans.

yeah, that's it

small businesses drive an economy, not corporations. Despite the rhetoric.

[Ban Hammer 13,394]

"Double-Digit Unemployment Doesn't Have to Continue"

yeah, but good luck convincing obama to resign.

[scandal 951]

“I voted against the absurd bank bailout” DeFazio continued

Glad he's got his bona-fides right out there. Rather than the "absurd" bank bailout, Mr DeFazio would rather the capital markets and global economy should have tanked completely in 2008. It is from this great maven of the marketplace that we should take the following advice, yes?

To ensure the tax is appropriately targeted to speculators and has no impact on the average investor and pension funds, the tax will be refunded for:

* tax-favored retirement accounts

* mutual funds

* education savings accounts

* health savings accounts

* the first $100,000 of transactions annually that are not already exempted

Ah, I see. So a middle class "investor" is one who trades a notional value of less than $100K in an after-tax account. And a "speculator" is one who trades more than $100K notional. Got it.

Do you realize how artificial and low that threshold really is? I am not a day-trader, nor do I consider myself a "Wall St speculator", and yet I could easily trigger that rule in my after tax account. $100K notional can be triggered by just a few aggregate hedged trades on a modest account. Buy a few hundred shares of GE or MSFT, hedge it by selling a some calls or buying a straddle, and presto you'll hit that limit.

Wall St. needs reform, I fully agree. It needs regulators with teeth, it needs risk controls, and most importantly it needs to have mandatory central clearing and exchange mechanisms for the complex OTC derivatives, particularly CDS, that exposed us all to their egregious counterparty risk during the subprime crisis.

But a "speculator's tax"? That is a really dumb idea by a populist politician trying to win votes who really hasn't got a clue. Sorry.

[one...two...tree 2,762]

Glad he's got his bona-fides right out there. Rather than the "absurd" bank bailout, Mr DeFazio would rather the capital markets and global economy should have tanked completely in 2008. It is from this great maven of the marketplace that we should take the following advice, yes?

Ah, I see. So a middle class "investor" is one who trades a notional value of less than $100K in an after-tax account. And a "speculator" is one who trades more than $100K notional. Got it.

Do you realize how artificial and low that threshold really is? I am not a day-trader, nor do I consider myself a "Wall St speculator", and yet I could easily trigger that rule in my after tax account. $100K notional can be triggered by just a few aggregate hedged trades on a modest account. Buy a few hundred shares of GE or MSFT, hedge it by selling a some calls or buying a straddle, and presto you'll hit that limit.

Wall St. needs reform, I fully agree. It needs regulators with teeth, it needs risk controls, and most importantly it needs to have mandatory central clearing and exchange mechanisms for the complex OTC derivatives, particularly CDS, that exposed us all to their egregious counterparty risk during the subprime crisis.

But a "speculator's tax"? That is a really dumb idea by a populist politician trying to win votes who really hasn't got a clue. Sorry.

Could there not be a tax charged in the same way that fees are currently charged for such transactions?

The idea of a Financial Speculation Tax can even be found in the Financial Times:

The idea of a financial speculation tax is getting consideration in many corners of the world, and not a moment too soon. When the UN Summit kicks off next week, an international financial speculation tax to fund the Millennium Development Goals should be at the top of the agenda. Tapping into some of the enormous wealth that international currency traders create for themselves to pay for pressing international needs is the right thing to do.

Sixty nations, including France, Britain, and Japan, have publicly supported taxing currency transactions as a way to fund global development.

http://www.ft.com/cms/s/0/039d3ef8-c67b-11df-8a9f-00144feab49a,s01=1.html

[JohnSmith2007 353]

Could there not be a tax charged in the same way that fees are currently charged for such transactions?

The idea of a Financial Speculation Tax can even be found in the Financial Times:

http://www.ft.com/cms/s/0/039d3ef8-c67b-11df-8a9f-00144feab49a,s01=1.html

The solution to everything is a new tax, right?

[one...two...tree 2,762]

The solution to everything is a new tax, right?

If you actually have a real argument to make, please do so, otherwise refrain from you baiting, please. Thank you.

[JohnSmith2007 353]

If you actually have a real argument to make, please do so, otherwise refrain from you baiting, please. Thank you.

It isn't baiting, it is a serious question. Do you really think a new tax will solve the unemployment situation?

[웃 910]

Could there not be a tax charged in the same way that fees are currently charged for such transactions?

The idea of a Financial Speculation Tax can even be found in the Financial Times:

http://www.ft.com/cm...b49a,s01=1.html

Easy. Big Brother nationalize brokerage firms. Brokerage firms winz no matterz wut.

Avg. commission per trade = $10

Millions of investors make trade with government owned brokerage firms.

10 million trades per day * $10 / trade = Surplus $100 million per day (+$36.5 billion / year).

On top of that gubmint taxes winnings so getz more money too

Edited October 8, 2010 by Lord Infamous

[Heracles 417]

yeah, that's it

small businesses drive an economy, not corporations. Despite the rhetoric.

Small Business hey... Now what does a small business need? Customers or even more tax breaks, considering they already pay negligible tax versus an individual earning less than them.

Money has to be taken out of the hands of businesses or the wealthy that are hording it and put into the hands of people actually working. Trust funds or wealthy families hoarding money does nothing for the Average Joe or the American economy. If it did, like many liberteapartians would have us believe, then third world countries would be killing it. Yet trickle down economics seems to have failed in every single country using it. What is working though, is the exact opposite.