Derrick Z. Jackson: The nation's social bargain with the rich

An op-ed from the Boston Globe, September 30, 2008

Congress has been rushing to save financial CEOs from themselves with a $700 billion bailout that amounts to a tax of $2,333 on every man, woman, and child in America. This is after three decades of the nation's leaders punishing struggling Americans for their lack of personal responsibility, from Ronald Reagan's assault on "welfare queens" to the bipartisan slashing and capping of welfare benefits by President Clinton and House Speaker Newt Gingrich.

More recently, presidential candidates John McCain and Barack Obama have said undocumented folks should pay fines to get in line for citizenship.

Then, of course, there were the 1.5 million home foreclosures last year and the 2.5 million foreclosures projected for this year by Treasury Secretary Henry Paulson. Many economists and politicians have washed their hands of them, saying, tsk, tsk, they were irresponsible for taking on too much responsibility!

If scapegoating struggling Americans on personal responsibility fails to work, we just ignore them, as sure as the Ninth Ward of New Orleans remains the American Dresden after Hurricane Katrina - while rebuilt Gulf Coast casinos break new revenue records.

All those millions of Americans, facing everything from slashed food stamps to swamped homes, live in a patronizing America where Clinton signs the 1996 welfare bill by saying, "We're going to take this historic chance to try to recreate the nation's social bargain with the poor. We're going to try to change the parameters of the debate. We're going to make it all new again and see if we can't create a system of incentives which reinforce work and family and independence. We can change what is wrong."

No broad parameters are being changed for greedy or incompetent Wall Street CEOs, as the financial sector assures itself a compliant Congress with $2 billion in campaign contributions since 1990 (Obama and McCain have respectively received $25 million and $22 million in campaign contributions from the financial sector in this campaign cycle, according to the Center for Responsive Politics).

Negotiators on the hill do say they will tax bailed-out companies for executive salaries over $500,000, but Wall Street found its way around similar rules in the past.

Yesterday, amid increasing outrage, the House failed to pass the bailout bill.

No bailout should happen without recreating the nation's social bargain with the rich. The nation can no longer afford the disparity where the average American CEO makes 344 times the pay of the average worker, according to the Institute for Policy Studies and United for a Fair Economy. The CEOs and their boards should pay toward the bailout before a penny of that possible $2,333 comes out of the pockets of Americans.

There is more than enough money among the financial elites to pay for the bailout. The Institute for Policy Studies last week calculated that a securities transaction tax of a penny for every $4 invested would add $100 billion a year to the treasury. Had such a tax been in place after the 2001 Enron scandal, it would have added up to the current cost of the bailout.

A wealth surcharge of no more than 3 percent on households worth more than $10 million would add another $300 billion. In response to the news this year that two-thirds of American corporations paid no income tax between 1998 and 2005, a corporate minimum income tax could add another $60 billion.

The institute said a 50 percent tax on salaries of $5 million or more and 70 percent on salaries of $10 million or more - until the bailout is over - would add another $105 billion. Killing overseas tax shelters, loopholes for excessive CEO pay and the sale of mansions, and creating a progressive inheritance tax would add another nearly $300 billion.

Institute senior scholar Chuck Collins said that would be a much more fair way to deal with the consequences, and discourage a worsening of "casino capitalism," than
the rush to dump this on the taxpayer. "Many of these things have been examined, but not implemented," Collins said, "But Congress essentially punted on how to pay for
the bailout."

If Congress is the punter, the people are the football being kicked once again far downfield as Congress and the CEOs high-five with relief from the skybox.