Austerity – the imminent, existential threat to the American people
With the 2012 election settled, Washington and Wall Street have focused their attention on deficit reduction, emphasizing deep cuts into the entitlements and necessities of the American people. Looting Social Security, Medicare and other threads in our fragile social fabric is not only grossly unjust – it won’t work! The current sequestration process is bad enough. The so-called “Grand Bargain” represented by the recommendations of Simpson, Bowles and others threatens to unleash a death spiral of unemployment and poverty which our nation is not certain to survive.
Make Wall Street Pay!
Our immediate demands must go beyond “No Cuts.” We must answer Wall Street’s question, “how will you pay” for the public sector? Americans have not forgotten who caused this dilemma. Wall Street and associated centers of predatory finance capital have been responsible for decades of deregulation, globalization and deindustrialization culminating in the 2008 financial panic – not to mention their receipt of untold trillions in Federal Reserve bailouts.
With this in mind, the UFAA proposes two immediate, leading-edge demands:
1. A 1% Wall Street Sales Tax to pay for on-budget social programs. Known under various names (Tobin tax, financial transactions tax, Robin Hood tax), a tax on the sales of stocks, bonds, futures, options and other derivatives is key both to generating trillions in revenue and to reducing the burden of predatory financial speculation.
Such a tax was passed in January 2013 by 11 EU member-nations, including Germany, France and Italy. The Wall Street Trading and Speculators Tax Act, re-introduced in February 2013 by Senator Harkin (IA) and Rep. Peter Defazio (OR-4), provides a template for the US, and is quickly gaining support among economists and activists.
The turnover (transactions) in question, including stocks, bonds, options, futures and derivatives, is estimated to exceed five quadrillion (5,000 trillion) dollars per year. While working class families pay an average of 7% in sales tax for clothing, utilities and even food, hedge fund operators pay nothing. The EU tax and mainstream proposals in the US tax these transactions at anywhere from 0.005% to 0.1% (advocated by Robert Reich). This is not enough! Harkin and Defazio estimate tax receipts of $300 billion over 10 years. In this same period, the Simpson-Bowles commission intends to cut $4 trillion from the budget, mostly from Medicare and other social programs.
The UFAA demands a full 1% Wall Street Sales Tax, to generate trillions in needed revenue. We recommend a $1 million exemption to protect household-level investment, and a requirement that all transactions must be sold over public exchanges and taxed in order to be legally valid.
2. Nationalization of the Federal Reserve System to provide 0% credit for production. America's monetary and credit policy is controlled by a clique of unelected, unaccountable Wall Street bureaucrats. Many right-libertarians wish to “End the Fed” in favor of a gold standard, competing currencies and other schemes. This would be a case of “out of the frying pan and into the fire,” as history shows.
The power and capabilities of the Fed are exactly what is needed to fund a recovery program. But in the hands of Wall Street, cheap credit flows to Wall Street predators and is denied to infrastructure, industry, agriculture and other areas of physical production. We must seize control of Federal Reserve policy to these ends, reconstituting it as a National Bank for financing the long-overdue recovery of the real economy and full employment therein.
Opposition to austerity is growing – but real demands are needed
Effective critiques of austerity and deficit hysteria have been offered in recent months by a growing list of progressive economists and commentators. But what has been absent in this advocacy is an effective, hard-hitting and complete program for economic recovery. What good will it do to preserve the social fabric for another year while leaving tens of millions unemployed and facing poverty, foreclosure, bankruptcy and hopelessness? The proposals on offer generally don’t produce the needed revenue, don’t address or correct the causes of our crisis, and can’t produce full employment or economic growth.
Worse yet, America’s growing anti-austerity movement has already been infected by the foundation-funded “green” lobby, with some groups seizing the crisis to demand carbon taxes, or that a Wall Street Sales Tax goes to reducing CO2. This is at best deeply misguided and at worst designed to derail the movement.
Toward a political realignment
One promising trend of the 2012 elections was the modest growth of an anti-Wall Street, pro-labor faction in the Democratic party, typified by the defeat of Tea Party Senator Scott Brown at the hands of vociferous Wall Street critic Elizabeth Warren. Most voters are not, strictly speaking, left, right or center. As the AFL-CIO poll shows, this is still New Deal America.
The economic policies and goals of America’s greatest and most accomplished national leaders – Hamilton, Lincoln, FDR, JFK – were those of “The American System” of political economy. This system should not be understood as “socialism” per se, but as an arrangement combining; National Banking, protective tariffs and public investment in infrastructure and science drivers; a pro-labor, pro-industry, anti-Wall Street regulatory environment; and a robust social safety net. FDR’s proposed “Second Bill of Rights” express this system exactly.
The despicable Republican party will be swept back to a regional party in the former Confederacy and other reactionary strongholds. The conditions caused by Republican policy, combined with national demographic changes, opens the door to a long period of Democratic rule at the national level. This is an opportunity for, but not a guarantor of, good results.
The Democratic Party, in contrast, has betrayed its own hard-won traditions. It is no longer a viable labor party, as it has participated in decades of free trade, deregulation and privatization. It can't be the party of economic progress, as the scientific optimism of Kennedy has been replaced with Malthusianism, “communitarianism” and obsession with divisive issues like global warming and social politics.
By opposing austerity, we must not simply hold a line – but wage a counter-offensive to encourage the formation of a New Deal Coalition. Many leaders already exist in government and business to make this possible, but they need to be bolstered with public support for bold ideas. We must not simply oppose austerity – but the conditions that lead to it: Wall Street’s control of public credit, their permission to run roughshod over the real economy, their prevention of development and production, and the erosion of the public sphere.
The United Front Against Austerity
Occupy Wall Street named the right enemy, but lacked the methods and will to defeat them. Our methods are simple: 1) A United Front representing a defined set of broadly popular demands; 2) A Program of economic demands, starting with a 1% Wall Street Sales Tax and Nationalization of the Federal Reserve System; 3) Leadership and an Organization that continually develop as the United Front grows.
Who will be the victims of this crisis – poor and working families, or the financial parasites who stole our jobs, our homes, our government and our future? The choice is yours. The United Front Against Austerity has the methods, program and resources you need. Spread the word – No Austerity, Make Wall Street Pay!