The Midmorning Refill: While we feel the pain, Wall Street laughs its way to the bank
Today’s Flickr photo
If you read one thing today . . .
Economist Dean Baker in the Talking Points Memo builds the case for a financial speculatin tax on stock market trades — a move that could raise $150 billion a year from Wall Street banks. It only seems fair that when the rest of us are worrying about our jobs and making mortgage payments that Wall Street “share the pain.” Not likely. Despite the recession, the banks, thanks mostly to a government bailout, are turning out huge profits and once again ready to pay out obscene bonuses.
What is really great about a financial speculation tax is that the Wall Street banks would pay almost the entire tax. The economics on this is very simple. If a tax makes trading shares of stock, options, or other assets more expensive than people will trade less. For example, if a tax doubles the price of trading shares of stock, research shows that people will trade roughly half as much.
This means that investors will spend roughly the same amount on their trading with the tax as they did without the tax. They will pay twice as much per trade, but since they trade half as frequently, they end up paying the same amount on their trading.
Instead the cost of the tax will be born by Wall Street. The banks will have to absorb pretty much the full cost of the tax. This explains why prominent people in Washington have so little interest in financial speculation tax.
Adam Liptak in the NYT looks at the U.S. Chamber of Commerce’s success arguing cases before the U.S. Supreme Court. Not surprisingly, big business has done extremely well.
“The Roberts court appears to be a mainstream, traditional, modern Republican, conservative court,” said Bradley W. Joondeph, a law professor at Santa Clara University and a former law clerk to Justice Sandra Day O’Connor. “Part of its constellation of commitments is against the regulation of business and, in particular, the regulation of business through litigation.”