Open Letter to President Obama

Dear Mr. President:

You are a brilliant and disciplined man, and I'm glad you are president. However, I'm concerned about how you see your role in the current economic fight between a wealthy few and the rest of the nation.

Your insistence on bipartisanship and compromise that is not reciprocated hark back to the passive protests of Gandhi and Martin Luther King. You seem to want to be a role model of peace and persistence. They were great men, but you are not called upon to play that role.

Dignity and passive resistance was an effective tool for civil rights in the 1960s because there were powerful people in the government (Harry Truman, JFK, LBJ, the Supreme Court) willing to stand up for the oppressed. As President, you need to step up and be the champion that the middle class has been waiting for.

You have already moved some wealth through the Stimulus and extensions of unemployment, but the wealth redistribution was positioned as other things. Health care was also helpful, but it did not change the fundamental problem. Wealth distribution is an ideological and moral issue--in this it is like Civil Rights--and in our current state of inequality, redistribution is a worthy end in itself. You need to change your language to reflect this.

Studies show that average people think our wealth distribution is closer to Sweden's than what it really is. As Champion, you must bust that myth and decry the economic inequality that exists here today (and do it frequently). You must take advantage of the easy opportunities to put things right and build momentum.

1. Let the tax cuts for the rich expire. The public supports this, and even favors letting all Bush tax cuts expire.

2. Add a greed tax to the large bonuses given to bank employees and the incomes of hedge fund managers. Hedge fund managers have wangled a capped tax that has to go.

3. Don't be afraid to shame Congressmen. Who in Congress would stand up for banker perks if they knew they would be publicly branded for it? I know the media is not your friend, and you have found clever ways to deal with this, but some of them are only after a juicy story. If you can give it to them, they'll switch sides easily enough.

There is one fundamental difference between Civil Rights and the current economic fight. Granting the same human rights to everyone lifts everyone. In contrast, there is only so much money to go around. Giving it to some means taking it from others. More wealth equality does lift the whole economy, but greedy people will never see it that way.

But not everyone is greedy. Warren Buffett has already spoken out against the unfairness of his own low tax rate. There are more millionaires who would be willing to say the same. Use them to spread the word.

It is not enough to stand against something. You need to stand for something the way you stood for health care. You have the power to change how we talk about wealth distribution in this country and to start to undo 30 years of propaganda by conservatives.

Start by refusing to extend tax cuts to the wealthy. This is not negotiable. Bail on this, and you signal that the wealthy own you.

Some Economic Suggestions:

PREAMBLE

The government is in a unique position to influence the economy through its actions. Nudging the interest rate nudges the economy. Large tax and spending changes create more substantial impact. These are essential functions.

During the Bush years, the government went into debt to give money to taxpayers at the expense of the overall community and at a time when the economy did not need the stimulation. This contributed significantly to turning an ordinary real estate downturn into an economic meltdown.*

During the last decade, money flowed up to the rich as both tax breaks and big bonuses. When worthless investments disappeared from the economy, jobs and a substantial portion of the nation's wealth disappeared as well. The proportion of wealth held by the rich increased, and money at the poor end started drying up completely. This inequality is bad for the majority of citizens and bad per se for the health of the economy.

SPENDING:

Use the power of government to continue to send money to the bottom 90% of the economy now. Unemployment insurance. Public works jobs. Payment for previously volunteer jobs. Open up poverty programs like food stamps to those with minimal incomes even if they have assets. We want to reward saving and preserve the assets of the bottom 90%, not force them to sell off their retirement.

INVESTING:

Investing bubbles in real estate derivatives, dotcom startups, and junk bonds have been responsible for the last few recessions. One common thread among these is too much risk for the entire market to bear. There needs to be a mechanism to limit the quantity of high-risk investments in the market.

Another related common thread is investing in speculation rather than in growth. Investing in companies contributes to economic growth. Speculating on which way prices will go skims money off the economy and hurts long-term growth investment. Thus, it should not be treated the same as growth investment. Speculation investment should be limited and burdened with a surcharge. This is not as cut and dried as I have made it sound. For example, you can use foreign currency as a hedge against foreign stocks to eliminate currency risk. This should not be surcharged. Or you can speculate in foreign currency on its own, and this should be surcharged. The professionals have the knowledge to sort it out.

High-frequency traders have been gaming the market with bazillions of bids and asks. Easy solution for this is a ha'penny tax on each bid and ask whether or not it goes through. Long-term traders won't notice the difference because they (should) trade infrequently.

TAXING:

Use taxation to get money back from the superwealthy.

Temporarily apply a high estate tax with a $1.5 million exemption

Charge a higher CG tax on speculation (derivatives, etc.) and disallow losses.

Introduce tiered CG tax for growth investments that ties in with income tax. If a retired person is living on $25K in investment income annually, he shouldn't be taxed the same as a person who has $25K investment income on top of a $2MM salary.

Mandatory retirement contribution from salary

Change tax laws so as not to penalize those who are withdrawing retirement funds to live on. Ideally, these people should not have to live on their IRAs or 401ks before retirement at all.

Add annual tax for those who own residential property but don't live in it.

Offer tax credits for landlords who are renting property on a rent-to-own basis. England has had a formal rent-to-own program for years.

Offer tax credits for bringing jobs into the US and for converting location-fixed US jobs to telecommuting US jobs. Telecommuting offers new employment opportunities for people in areas where jobs are scarce and allows them to stay in their homes (which are probably underwater).

*since this isn't about the causes of the meltdown, I'm only touching lightly here