Right idea, wrong target

The vote in the House to impose stiff taxes on the bonuses for derivative traders is a sign that the elected elite is beginnng to get a clue.

Taxing the bonuses doesn’t make much difference though.

The real game changer is to use this opportunity of clarity to fix a number of problems with the Obama budget and the markets, by adding an excise tax of much less than 90 percent on securities transactions, particularly derivatives.

As we noted in an earlier post, a fee of less than a quarter of a percent would be enough to add $500 billion in federal revenues yearly, enough to cover the cost of the bailout, which should be a minimum goal that is quite politically possible now.

A full percentage point, which is nothing compared to the ten percent sales taxes we have to pay on most of the things we buy, would close the federal deficit.

If Congress looks beyond today’s headline, then perhaps we’ll be able to thank the AIG traders for really fixing the economy they screwed up.


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