Economic Leadership: Pete DeFazio

I’ve been looking around for leadership on this economic issue that the government is Chicken-Little-ing on. I believe I’ve found it in Oregon. This is from a letter to his Democratic colleagues by representative Peter DeFazio, one of the brave ones who voted against this trillion-dollar tragedy:

We Cannot Afford a $700 Billion Bailout:
Another serious consequence is the $700 billion hole in the budget deficit this bailout will create. If we Democrats have the House, Senate and White House next year, we will be unable to initiate new proposals that we have campaigned on, reverse the failed Bush polices of the past eight years, and chart a new course for our nation. For years, we Democrats have been championing the goals of universal health care, middle class tax relief, investments in education and our nation’s infrastructure, and a real commitment to dealing with climate change and energy independence. Now, after 8 years of gross mismanagement and wrongheaded priorities, we are about to have the Bush administration in one of its last acts, put those goals out of reach for years. The Bush tax cuts blew the surplus created by the last Democratic Administration and the Bush/Paulson bailout will prevent the next democratic administration from truly implementing its change mandate.

It Must Be Paid For:
If Democrats continue to back the basic questionable premise of the Bush/Paulson bailout, then we must pay for it. The $700 billion is to protect Wall Street investors, therefore the same Wall Street investors should pay for this infusion of taxpayer money. I have proposed a minimal securities transfer tax of ¼ of one percent. A securities transfer tax would have a negligible impact on the average investor and provide a disincentive to short-term traders. Similar tax proposals have been supported by many esteemed economists such as Larry Summers, John Maynard Keynes and Nobel prize winners Joseph Stiglitz and James Tobin.

There is considerable precedent for this. The United States had a similar tax from 1914 to 1966. The Revenue Act of 1914 levied 7a 0.2% tax on all sales or transfers of stock. In 1932, Congress more than doubled the tax to help finance various programs during the Great Depression. In 1987, Speaker of the House Jim Wright offered his support for a financial transaction tax. And today the UK has a modest financial transaction tax of 0.5 percent.

Our Constituents are Not Fooled:
If your district is anything like mine, there is an overwhelming opposition to the $700 billion Bush/Paulson bailout. My office has been inundated by thousands of phone calls, emails, and faxes in opposition to the Bush/Paulson bailout. In contrast, I can count on one hand the number constituents who called in favor of the Bush/Paulson bailout.

We must stand with the working class America we have always fought for. Democrats cannot walk away from our base to join hands with President Bush and Wall Street. And we cannot let the Republicans disavow President Bush and appeal directly to our base of working America.

What I thought was particularly compelling was his 12 Reasons to Vote No on the Bailout:

1. The Recoupment Clause Will Not Recover Any Lost Funds: It merely says a future President 5 years hence shall propose a plan to Congress to possibly recoup any losses. (Sec. 134) [Page 89] [1]
2. Foreign Company Loophole: The bailout has been opened up to foreign companies with “significant operations in the United States”(Sec. 3 (5)) [Page 4]
3. Foreign Central Bank Loophole: The bailout has been opened up to foreign central banks that hold bad assets from failed or defaulted financial institutions. (Sec. 112) [Page 32]
4. Taxpayers Can be Saddled with Assets of Any Type: The bailout has been expanded to include car loans, auto loans and any other financial instrument as determined by the Secretary. (Sec 3 (9)(B) [Page 5]
5. Severely Limited Judicial Review: Courts are prohibited from issuing any injunctions or relief on the basic premise of the legislation and the conflict of interest rules. (Sec. 119(a)2(A)) [Page 58]
6. Executive Compensation Loopholes: Multiple loopholes for corporations to escape the limitations on golden parachutes, incentives, bonuses, and corporate deductions for executive salaries. (Sec. 111 and Sec. 302) [Page 29-32 and 98-109]
7. No Fix of the Underlying Regulatory Failures: The next administration is required to send numerous reports to Congress. Unfortunately, Wall Street will have already received its bailout and have no incentive to support new reforms. (Sec. 105 [Page 17]
8. $700 Billion Cap Loophole: The Secretary can sell assets and continue to buy more assets as long as the total purchase value remains under $700 billion. Any losses during the sale of assets are not considered. (Sec 115(b)) [Page 40]
9. Foreclosure Mitigation is Voluntary: The taxpayers are being saddled with all the risk, but the lender is “encouraged” to minimize foreclosures (Sec. 109(a)) [Page 24]
10. Full Authority to Spend $700 Billion: Congress has a mere 15 calendar days to object to the Secretary spending the second half of the $700 billion bailout. The President can veto the measure requiring the customary 2/3 to override. Besides this bailout, when is the last time we passed anything that fast? (Sec. 115(a)) [Page 39-40]
11. Insurance Rates are Not Required to Follow Risk: The Secretary “may” (as opposed to the mandatory “shall”) set insurance premiums based on risk. Not setting premiums based on risk could leave the insurance trust fund seriously underfunded and leave taxpayers liable. (Sec. 102 (c)2) [Page 10]
12. Money-Making Mergers: A loophole allows corporations to use a merger or acquisition to buy up troubled debt at below market rates and sell to the taxpayer at the higher government rate.

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