The G-20 meeting in Cannes got underway this week. The sunny beach resort, playground to movie stars and media moguls was an odd choice for a somber G-20 meeting. As President Obama and Treasury Secretary Tim Geithner touched down in Air Force One, the Greek government was on the verge of collapse, austerity was sweeping Europe and the future of the Eurozone in doubt.
But the first day of talks offered a ray of hope for the entire global economy. For the first time, the 20 most powerful countries in the world sat down to discuss taxing the financial service industry. And for the first time, the U.S. blinked.
Welcome Change of Tune for the US Government
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President Sarkozy of France has long championed a small sales tax on the financial services industry. “At a time when states are making remarkable efforts to restore their public finances… how can the financial sector triumphantly continue to march, indifferent to the world around it, carelessly and without a care for the disorder it has more than its share in causing,” Sarkozy said. Angela Merkel of German agrees.
President Obama too has supported the idea. Ron Suskind revealed in his new book Confidence Men that Obama thought the tax was a no brainer right after the banks collapsed the global economy — until his economic team told him otherwise.
Behind the scenes, the “opponent in chief” has been U.S. Treasury Secretary Tim Geithner who has protected his friends on Wall Street by privately characterizing the tax as unworkable, easy to evade and not likely to bring in much income. Geithner doesn't just oppose the tax for the U.S., he has opposed the tax in the context of the G-20 and as EU member nations move forward to apply the tax in their member states.
Now the White House appears to be changing its tune. Reuters is reporting that the U.S. government is backing down from its long standing opposition to the tax.
An unnamed source told Reuters the United States now seemed “less problematic than the U.K.” in resisting the idea. The U.S. is still opposed to the idea in principle but would not block others from going ahead. The Wall Street Journal confirmed the story quoting White House adviser Mark Froman as saying that the governments had decided to pursue different financial taxes, but: “I think there is broad consensus between the Europeans that the president met with this morning and ourselves about the ability of each to pursue this in their own way, whatever way they see to be most effective.” Translation: Go for it, but the U.S. won’t join you.
The Wall Street Journal editorial board wasted no time, savagely attacking the idea and calling on Geithner for help.
Nurses Hold Geithner's Feet to the Fire
The news reports hit the wire almost at the exact same moment that thousands of nurses took the fight for a fair economy right to Tim Geithner’s doorstep with signs demanding “An Economy for the 99%” and “Tax Timmy’s Friends.” Nurses and other groups are fed up with Geithner's soft pedaling every action that might hold the big banks accountable for the meltdown of the global economy.
The noon rally at the Treasury marks an increased effort by unions to convince the Obama administration that more needs to be done to fix the country’s broken financial system and create jobs. Obama's reelection campaign recently announced that they were hoping to turn anger against Wall Street to their advantage in the next election cycle. Hard to do if the 99% are knocking on your door, calling for meaningful measures to make Wall Street pay. The nurses later fanned out across Capitol Hill, delivering 322,844 petition in support of the idea to Finance Chair Max Baucus and other members of the Joint Select Committee on Deficit Reduction (the Super Committee).
“It is long past time for Secretary Geithner and President Obama to get on board with other world leaders in supporting this common-sense approach to raise badly needed revenues to help fund the critical programs we need to revive the U.S. and other global economies,” said NNU Executive Director RoseAnn DeMoro, who traveled to Cannes to join with nurses from around the world at a press conference and rally close to where world leaders were meeting.
AFL-CIO President Richard Trumka was also in Cannes, quietly pushing the White House to do the right thing. The American labor leader was joined by one of the richest men on the planet, Microsoft co-founder Bill Gates, who presented a paper to the G-20 leaders advocating for the transaction tax to aid the developing world. An increasing number of unions and grassroots groups, including SEIU, AFSCME, Oxfam, Public Citizen, Rebuild the Dream and National People's Action are adopting the tax and campaigning on it, and the Occupy Wall Street crowd has embraced it as well holding small actions across the country October 29th.
The Pope was not present, and neither was the Archbishop of Canterbury, but both men came out for a financial transaction tax as economically feasible and morally right in recent days.
Actor Bill Nighy, the British actor who has long campaigned for the “Robin Hood Tax” as it is called in the U.K. and who did a wonderful video popularize the idea joined the nurses in Cannes. “I heard a banker remark the other day that 'the time for atonement is over'. I must have been out of the country at the time, or looked away momentarily because I don't remember that period of atonement taking place. It would not affect their multimillion bonuses, “ Nighy dryly observed to the Guardian.
Tax Faces Continued Opposition in the United States
While the domestic implementation of the tax faces continued opposition from the U.S. Congress, Geithner and the White House, proponents reintroduced the legislation this week and are rapidly picking up co-sponsors. Oregon Rep. Pete DeFazio and Iowa Senator Tom Harkin introduced a modest version of the transaction tax (HR 3313) in an effort to get the Super Committee to take a closer look. While the financial services industry will work hard to convince Congress that any tax will result in the immediate collapse of the global financial system and that grannie will be hardest hit, the facts are that the modest fee proposed in this legislation is miniscule in comparison to the management fees applied by some mutual funds.
“Wall Street is 40 percent of the economy. They don't make things. They don't feed people. They churn. They create volatility,” said DeFazio. “The first step on the long path to recovery happens when we rein in the excessive speculative activity that has destabilized our financial system.”
Much more work needs to be done to get the Obama administration to adopt the idea, even more work to get it though Congress, but the tax now has a growing list of powerful allies and a simple common sense appeal.
As Trumka puts it: “It is time to put Wall Street to work rebuilding Main Street with a financial speculation tax to create jobs, rein in speculation and lay the groundwork for long-term economic prosperity.”