What Occupy Wall Street Gets Wrong About Inequality
Protesters in Lower Manhattan are missing the point. The so-called "one percent" actually does a lot of good. It's Washington's willingness to bailout banks that is the real problem.
Compared with other developed countries, the United States has very low taxes, little income redistribution, and an extraordinarily complex tax code. If it wanted to, the government could raise taxes without crippling growth or productivity. Tax reform is ultimately a political choice, not an economic one -- a statement about what sort of society Americans want.
The protestors taking part in the Occupy Wall Street demonstrations around the country, despite their disparate backgrounds, seem to have settled on a recurring theme: fairness. It is not fair that Wall Street employees got a bailout and still have their jobs while so many workers in the United States have neither. It is not fair that the rich are not taxed at higher rates. It is not fair that some people are far richer than others.
Complaints about the bailout and jobs are ironic, because it did not have to be this way. Indeed, it is a tribute to the bad execution, not the bad intent, of policy that the Occupy Wall Street movement exists in the first place.
In 2008, when it was first conceived, the Toxic Asset Relief Program (TARP, now simply referred to as "the bailout") was supposed to save jobs across the economy -- not by bailing out banks but by solving the problem of toxic assets, the mortgage-backed securities at the heart of the financial crisis. This did not mean handing taxpayer dollars to banks. At the time, Senator Christopher Dodd (D-Conn.), then the chair of the Senate Banking Committee, called the proposal "stunning and unprecedented in scope and lack of detail." He went on, "It would allow the Secretary of the Treasury to intervene in our economy by purchasing at least $700 billion of toxic assets. It would allow the Secretary to hold on to those assets for years and to pay millions of dollars to hand-picked firms to manage those assets." Notice that there is no mention of a bailout: the focus was not banks but toxic assets anywhere in the system.
Congress held hearings to consider the TARP proposal, during which Henry Paulson, then Secretary of the Treasury, testified that "the $700 billion program we have proposed is not a spending program. It is an asset purchase program, and the assets which are bought and held will ultimately be resold, with the proceeds coming back to the government." Ben Bernanke, chair of the Federal Reserve, concurred, saying, "The Federal Reserve supports the Treasury's proposal to buy illiquid assets from financial institutions."