New York governor David Paterson has just announced that he will be withholding $750 million in scheduled payments to schools and local governments across the state in response to the state’s fiscal problems. According to an article in the New York Times, schools and social service providers, health insurance payments, and cities and counties will be slapped with cuts of 10 to 19 percent in aid.
Meanwhile, the fat cats on Wall Street are no doubt poring over their holiday shopping lists in anticipation of the massive bonuses they’re likely to rake in. Wall Street bonus payments are expected to balloon by around 40% to $26bn this year. According to an analysis in the Wall Street Journal, when other forms of pay such as salaries and pension contributions are included, overall remuneration in the financial sector could top $140bn, beating the record $130bn payout in 2007. The average employee’s take-home package could reach $143,400. Employees at Goldman Sachs will receive $700,000 each.
Despite the populist ire of the last year, there are no moves afoot to tax these obscene bonuses. The corruption spawned by such super-profits should be fairly obvious by now. As Ruth Sunderland argued recently in The Guardian, “diverting funds on a large scale to star employees promotes instability, as capital that might have been retained in the business bleeds out into the pockets of the lucky recipients… [This] makes it harder for banks to raise equity capital, and encourages them to rely instead on debt.”
Why not follow the lead of the British government and tax these bonuses? What is there to stop Mayor Bloomberg imposing such a tax on Wall Street in order to make up for the shortfall produced by Governor Paterson’s budget cuts? Nothing aside from free market ideology, the bank lobby, and the planet-consuming inexorable-growth structure of capitalism, that is.
In the longer term, activists should be pushing for some form of the Tobin tax — a small levy on financial transactions, designed to claw back some of the excess profits generated by the banking system. This would produce revenue that could be used for good causes such as combating climate change, and would strip some speculative “socially useless” activity out of the system. Britain and France recently announced a joint initiative to support an environmental reparations fund of 2.4 billion Euros per year through precisely such a tax on financial market transactions. Such measures will foster a more stable global financial regime as well as help poor countries adapt to the devastating impact of climate change.
That such steps are not being discussed in the U.S. at present is a symptom of the extent to which the rich are in fact eating the rest of us, rather than vice versa.