Most people are now familiar with President’s Obama’s proposal to cut Social Security by reducing the annual cost of living adjustment. While the final formula is somewhat convoluted, the net effect is to reduce benefits by an average of roughly 3.0 percent.
Since Social Security benefits account for more than 70 percent of the income of a typical retiree, this cut is more than a 2.0 percent reduction in income. By comparison, a wealthy couple earning $500,000 a year would see a hit to their after-tax income of just 0.6 percent from the tax increase that President Obama put in place last year.
While President Obama is willing to make seniors pay a price for the economic crisis, his administration his unwilling to impose any burdens on Wall Street. Specifically, it has consistently opposed a Wall Street speculation tax: effectively a sales tax on trades of stock and derivatives. The Obama administration has even used its power to try to block efforts by European countries to impose their own taxes on financial speculation.
If the idea of taxing stock trades sounds strange, it shouldn’t. The United States used to impose a tax of 0.04 percent until Wall Street lobbied to eliminate it in the mid-1960s. Many countries, including the United Kingdom, Switzerland, China, and India already impose taxes on stock trades.
Oh, wait, it’s simple:
Wall Street bankers have a lot more political power than old and disabled people who depend on Social Security. That is why President Obama is working to protect the former and cut benefits for the latter.
At the risk of sounding like a broken record, let me repeat two things I’ve said often before:
1. We need a Tobin Tax too.
2. Consider this administration the flowering of the Nelson Rockefeller wing of the GOP. Obama governs like the moderate-liberal Republicans of my youth — a species now all but extinct in its original habitat, but thriving like red lionfish in their new home.