Jan. 16, 2010
It’s a challenge to put it politely – one of the nation’s leading economists says the bank tax promoted by President Obama is a sham.
“President Obama is at it again-pandering to rich and powerful political supporters, while portraying himself the guardian of the exchequer and champion of the little guy,” asserted Peter Morici, Ph.D., in a commentary. “The president says his proposed tax on the capital of the largest banks and financial institutions is intended to recoup the TARP money that has not or will not be repaid.”
Dr. Morici believes it amounts to a public relations gimmick to confuse voters in two ways:
“First, the banks the president would tax are repaying their TARP money with interest to the Treasury,” he explained. “Though not all of the TARP money given to the banks has yet to come back, the government will get it all back with a significant profit because the government was paid such generous interest under the terms of the TARP.
“Second, the president misused the TARP money by investing in GM and Chrysler, and GMAC, and that is where the government will lose money,” he added.
If you do an online search of his name, you’ll see Dr. Morici is a widely quoted business professor at the University of Maryland and former chief economist at the U.S. International Trade Commission in the Clinton Administration.
“If President Obama were to tax anything to recoup lost TARP funds, it should be cars,” he said. “However, that would anger the UAW, staunch supporters of the president and Democrats running for Congress.”
What I enjoy about this economist is that he understands the numbers, explains the impact of events and does it candidly.
“The bank tax is in response to public outrage over the $150 billion in bonuses paid in 2010 on 2009 bank earnings,” Dr. Morici contended. “The tax would only raise $9 billion in 2010 – a pittance compared to the bonuses.”
He points out the Wall Street bonuses were supposedly earned when the firms were bailed out by loans with interest rates at “near-zero.”
“The bankers are screaming about a death wound when the tax is merely a paper cut,” he said.
“The tax is a bad idea,” the economist maintained. “It won’t fix the banks, who continue trading complex derivatives, energy futures and repackaging old mortgage-backed securities instead of making new loans to worthy homeowners and businesses.”
Here’s the first of two more disturbing and disingenuous developments:
“The president’s tax would let the bankers, who contribute mightily to campaigns of congressional Democrats and President Obama, keep their bonuses after they nearly wrecked the global economy with irresponsible risk taking on the public’s tab,” said Dr. Morici. “This is horrible public policy and demagoguery.”
“The proposed bank tax is meaninglessly small, serves no purpose toward reforming the banks, and is merely an attempt by the president to appear on the side of the auto industry and against the banks, when he is really on the side of union organizers and the bankers,” he wrote. “As with the union exemption from the Cadillac tax in the proposed health care reform compromise, the president is putting his political debts ahead of public purpose.”
Dr. Morici indicated the president would be well-advised to push for a 50 percent tax on bonuses exceeding a quarter of a million dollars, as is the case with British Prime Minister Gordon Brown.
“Instead, the president lets the bankers keep their money, and sends Democrats calling for contributions,” he concluded. “It’s all very insidious.”
“Politics, it seems to me, for years, or all too long, has been concerned with right or left instead of right or wrong.”
Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.