Well, it's now a week since I sent my proposition to the Guardian. No news yet...
I've had some feedback though. First, I had a comment from Matt Usselman who wished me luck, but bet me a beer that I would never get it published. He has been trying for months to get an article that he wrote on the danger of Credit Default Swaps published - with no success. He's tried the Guardian, the BBC, ZEIT and die Sueddeutsche Zeitung (in German) amongst others. He's now pretty convinced that this sort of stuff is getting blocked. For info, his article is about the fact that Hedge Funds have taken out some 4 billion euros worth of Credit Defaults Swaps that are effectively betting that the Irish government will default on their payments. And if (when?) they do, taxpayers will need to bail out the banks who took on these bets and will have to find something like 54 billion euros to pay them off.
The other bit of feedback was from my son Jonathan (hi Jonathan!) who, despite being fundamentally pro-FTT, thinks that I'm undermining my case by suggesting that large amounts of money can be generated this way. He suggests that I should use the numbers that Stephan Schulmeister uses in a paper that I mentioned a few months ago, called "A General Financial Transaction Tax: A Short Cut of the Pros, the Cons and a Proposal". Schulmeister tries to make some predictions about the effect of introducing an FTT on financial transactions themselves, and assumes (arbitrarilly, it seems) that a 0.01% FTT would reduce transactions by 25%, a 0.05% FTT would reduce transactions by 65%, and a 0.1% FTT would reduce transactions by 75%.
The implication is that with an even larger FTT (up to 1%, as I would propose), that everything might grind to a halt. But my point is that the only things that would grind to a halt would be the transactions that have no real function - like currency speculation. As I mentioned in my "Plan B" posting last week, the BIS report states that "the value of Credit transfers, Direct Debits, Card payments and Cheques in the UK totalled £70.4 trillion". That looks like the real economy at work - not the speculators. And a 1% tax on that really would generate more revenue than all the current taxation systems put together. That means that any extra revenue that can be generated before the speculation stops (which I hope I will) is all good news for the taxpayers.
For me, it is clear that we need to raise revenue from taxes, but that we can choose how we do it. I think that rather than seeing FTTs as a way to punish the banks, I think that the even more positive way to think about it would be to see it as a way to get rid of the current completely outdated systems of taxation. Getting rid of taxes on profits (corporation tax), pay (income tax), employment (national insurance contributions), and sales (via excessive VAT), and replacing them all by a simple, streamlined, easy to implement generalized FTT seems to make so much sense to me.
As it happens, we are also looking at a way to recover the £1.5 trillion that the UK taxpayer has provided to the banks. That won't happen just by cutting back on public spending. A generalized FTT at around 1% on all transactions might well lead to speculative trading either collapsing or moving offshore - and clearly it won't generate 100 times total GDP. But in the six months or so that it would take the financial markets to move elsewhere (or to start doing more intelligent with the money they have), the cost of the bank bailout could be recovered. And the UK taxpayers would no longer be paying £10 billion a month in interest to the banks that they currently have to pay because they have lent money to the banks (yes, it does sound insane).
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