November 4, 2011Sarkozy and Merkel lean on Obama for a levy on financial transactions
What happens when you get George Soros, Tom Harkin, Bill Gates, Ralph Nader and the Archbishop of Canterbury together in a French hotel room with a stick of incense and a magnum of champagne—and turn off the lights?
Answer: the Tobin Tax.
OK, so we need to work on our punchlines. But a tax on financial transactions is exactly what these characters have all endorsed in one form or another as the miracle cure to the world's economic ills. French President Nicolas Sarkozy and German Chancellor Angela Merkel have also picked up the cause, and they are leaning on President Obama to endorse it at this week's G-20 summit in Cannes, France.
So here we go again.
Like bell-bottoms and wide lapels, a financial-transaction tax is a fad that goes back to the 1970s. It started as Nobel laureate James Tobin's idea for reducing currency speculation in the 1970s. It then became a rallying cry for the anti-globalization crowd in the 1990s and resurfaced again three years ago as a way of taking out aggression on bailed-out bankers.
The basic idea is to impose a seemingly small tax—between 0.01% and 0.1%—on trades of stocks, bonds, derivatives, foreign exchange and the like. Depending on the justification du jour, this magic tax would discourage speculation, penalize bankers, pay for bank bailouts, or raise large amounts of revenue for cash-strapped governments.
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