Don’t Balance the Budget on My Back – Ken Gross

We all understand we have a massive deficit. The Iraq War was costly – but the rescue of the banking and financial industry from the economic recession along with the Economic Recovery Act and the trillion dollar bailout of Fannie Mae and Freddie Mac are, without question, the major causes why our country is so far in the red.

Having the benefit of over 2 years since the Great Recession tumbled Wall Street and our country in the latter half of 2008, it is commonly accepted that the cause of the debacle rests with the greed and avarice of the banking and financial institutions. Had President Bush and President Obama not rescued the banking industry at the pinnacle of the crisis, most economists agree that the world economy would have totally unraveled. So on this point, let’s give credit where credit is due and compliment our government for having the guts and willingness to take dramatic action in a short term  urgent situation.

That being said, let’s roll the clock forward to today. We just witnessed over the last two weeks Congress bogged down in gridlock on approving the budget so that a shutdown of the federal government could be avoided. In the end, they were fighting over $40 Billion of funding and the biggest event that occurred was Washington D.C’s right to spend its own funds on abortion funding was blocked in a compromise between the Republicans and Democrats to avoid the shutdown. Immediately after, the focus has now shifted to the fight over raising the $14.294 trillion debt ceiling and arriving at an acceptable agreement to resolve the budget deficit, which is currently estimated at $1.5 trillion for 2011.

So far – whether the discussion is about a State’s economic woes or the Federal deficit – every proposal I hear has one common thread. The cost of deficit reduction is to be borne by the U.S. citizen – through higher taxes (assuming the Bush tax cuts are not continued), Medicare, Medicaid, Social Security, Health Care and on and on. Now don’t get me wrong – somewhere and somehow you have to either increase revenue (i.e. taxes or and expanding economy) or cut spending to restore fiscal integrity to the system.

My question is this. If the Great Recession was caused by the greed of the Financial Industry, which was saved from economic death by the Government and the taxpayers and the recession is the cause of the deficit problem we now face, shouldn’t those responsible for the problem be called upon to bear the expense of resolving the problem? After all, as reported in The Wall Street Journal on March 25th, U.S Finance Profits are soaring and have jumped back to $426.5 billion in the 4th Quarter – nearing their high levels in 2006. Isn’t that nice? They get bailed out, saved from falling off the face of the earth – and now they are back to where they were before the recession. At the same time, the Administration and the Republican platforms are advocating budget restraints on the backs of the U.S taxpayer. My question is why us – and not them? Whatever happened to the notion of laying blame where blame belongs and making those at fault bear the cost of their actions? It doesn’t seem that difficult to me. The corporate profits of the Financial companies are presently running at an annual rate of $810 Billion. Here lies a simple solution. For the next 10 years, impose a 30% financial sector “Get Well Tax.” Assuming growth rates of 10% annually for the financial sector, the revenue increase would be $3.868 Trillion over 10 years. As a measure of protection so that the financial wizards that rule our great nation cannot weasel out from the tax, Congress needs to assess the tax on financial institution profits before officer compensation in excess of $250,000 per officer.

So what do you think – is it reasonable to make those responsible pay for resolving the problem – or should we just let our representatives continued to be influenced by the greed of Wall Street and saddle the U.S Taxpayer with the cost of resolving the problem created by the financial sector?

Ken Gross is an attorney with THAV GROSS PC (www.thavgross.com) and hosts The Financial Crisis Talk Center (www.fctalkcenter.com), a radio program that airs weekly at 9 AM on Saturday mornings on WDFN “The Fan” 1130 AM.

4 Responses to Don’t Balance the Budget on My Back – Ken Gross

  1. Reply buy silver says:

    ………………………….A financial system is only as strong as the governing practices and institutions of its participants. The challenge to build efficient and accountable financial institutions that promote confidence is a problem that financial sector executives and policymakers confront together. In this context Financial Sector Governance takes a clinical approach to governance challenges in emerging and developed markets in each industry capital markets private banks state owned banks asset management companies public pension funds and mutual funds.

  2. Reply Mary Stiegel says:

    Great idea! Many economists and journalists have stated the same thing for a while now. But exactly HOW can we hold them responsible? That just cannot, and will never be done. It’s IMPOSSIBLE.

  3. Reply David Smith says:

    I like your proposal; chances are, however, that it won’t happen. Too much money & polital power on Wall Street.

    All illegal profits should be clawed back in my opinion. That would make a serious dent in the debt. Furthermore, those who are responsible should be in jail. Unfortunately, I doubt if these will ever happen either.

    We definately need to cut spending. US deficit in 1993 was “only” $4 Trillion. Yes, the war(s) were costly, but there is a lot more waste that needs to be eliminated. Current debt equates to over $30,000 for every American (and growing by the minute). Washington needs serious reform. I hope it happens for our children and grandchildrens’ sake.

  4. Reply Michael Carabini says:

    Bernanke argued that several Wall Street giant financial firms such as Lehman Brothers failed because he had too little legal power to bail them out. In this case to significantly affect monthly payments and other measures of housing affordability the FOMC likely would have had to increase interest rates quite sharply at a time when the recovery was viewed as jobles and deflation was perceived as a threat…In essence Bernanke told investigators for the Financial Crisis Inquiry Commission that he cant be blamed for building a bubble with his interest rate suppression because he was under political pressure to do so…The problem Bernanke told investigators was not a cowardly Federal Reserve making decisions to help politicians rather than trying to correct systemic problems in the economy but private industries that were too big to fail. The massive increase in federal debt securities just as the financial crisis was breaking soaked up all the private investment that could have been used to finance a recovery.

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