8 Well-Intentioned Ideas That Occupy Wall Street Should Reject
The "General Assembly" would do well to say no to the latest ill-conceived proposal to codify its agenda
Where is Occupy Wall Street headed?
It's too early to know for sure, but I've glimpsed one possible future. Over email today, Barry D. Bernsten, onetime electric car entrepreneur, has set about publicizing his "Occupy America Doctrine," a wide-ranging list of demands that he is circulating inside the movement in hopes that its "general assembly" adopts them. He sent me a copy of the eight point plan, which has also been posted in the Web based Occupy Forum, and I appreciate his effort and enthusiasm. Agree or disagree, it's admirable for a citizen to offer up ideas and subject them to scrutiny.
Let's take them seriously.
Were I camped out in Zuccotti Park, I'd speak up against the approach that he suggests. There are glaring problems, both practical and philosophical, in his recommendations. As one voice among the 99 percent of Americans that Occupy Wall Street purports to represent, I hereby submit the following critique to the general assembly. Seriously. In pointing out the flaws in this specific proposal, I hope to show why it's a bad idea to adopt anything resembling them, because they embody the sorts of bad ideas to which a left-leaning populist movement is especially vulnerable -- ideas that impose well-meaning, top down policies without recognizing the unintended consequences that are certain to result. Let's ponder them in the order they're presented.
Item one on Bernsten's list:
Financial Crisis-Responsibility: Every Board Member and member of the Executive Management Team of any and all companies that had any knowledge of the lending abuses of the last decade should resign from those companies without severance pay and be banned from the banking/lending business for minimum period of 10 years. If the resignation does not occur by December 31, 2011, these Board and executive members will be prosecuted for fraud. If the State and Federal governments do not finance or support the suits, the members of the OWS will finance the suits on behalf of public interest and the shareholders of said companies.
This is, first of all, confusing. Occupy Wall Street cannot finance criminal fraud prosecutions that the government is unwilling to bring. Civil fraud suits against the banks that could succeed in court need no non-profit funding. And the shareholders of Goldman Sachs, for example, will hardly assent to OWS filing a suit "on their behalf."
The second problem is that "knowledge of lending abuses" is hopelessly vague (a reckless flaw when you're calling for the force of the criminal justice system) and at the same time too narrow. Some of Wall Street's most objectionable behavior had nothing to do with "lending abuses," and everything to do with the derivative market for mortgage backed securities. Finally, it is noteworthy that the single proposal aimed at Wall Street does nothing to solve any of the problems that OWS is ostensibly critiquing. What happens if every board member resigns, which they won't? New board members will sit in the same chairs and operate within the same flawed regulatory framework and perverse system of incentives.
Item two on Bernsten's list:
Short & Long Term Stimulus: Any Senate or House member that does not support (vote in favor) of immediate and long term programs to put Americans back to work, will be asked to resign from their seats by December 31, 2011. If the members of the Senate and House do not vote to create jobs, the OWS will organize to support any new candidate for the next election in the incumbents city, district, or state. The OWS will organize to support such opposition candidates and will actively recruit supporters to get the vote out against said incumbent.
If you're going to use the formulation, "Do this or we'll oust you from office," your litmus test had better be less vague than "support programs to put Americans back to work." Every last Member of Congress claims, and perhaps even believes, that the Keynesian stimulus or payroll tax cuts or drilling for domestic energy or regulatory reform they support meets that definition. And besides, it's damaging to your credibility to make threats that you obviously cannot make good on. Why not target one House or Senate member who has bestowed on Wall Street particularly egregious giveaways after taking lots of their money?
Item three on the list:
Reallocation of Funds: The OWS is insisting that there be an immediate pull out of all troops and equipment from Iraq and Afghanistan. The Senate and the House of Representatives will reallocate all the funds (budget) the Government was spending annually on the two wars, for rebuilding highways, bridges (infrastructure), schools, and for teachers salaries and school supplies as the school systems require.
While I happen to agree that American troops ought to leave Iraq and Afghanistan, allocating all the funds (money that we're now borrowing!) to infrastructure and schools, both sensible places to spend money, is unwise. Tying the hands of the legislature by earmarking huge sums for particular things just makes a mess of budgeting (See California). Instead why not insist that the Pentagon budget be cut, ensure that the money isn't spent on new wars, and add a separate plank insisting that no corporate entity receive subsidies from the federal government?
American Jobs & Trade: The USA should not allow any imports (dollar for dollar) to be exported into the USA unless the U.S. companies can ship an equivalent of American made goods to those same exporting countries. Import and Export trade is to be monitored dollar for dollar. (Ex. If China exports USD $1 Billion in goods to USA, then USA must be allowed to ship the same USD $1 Billion to China. China will not be able to ship $1 more of goods or services than what the USA ships to China). The tariffs, duties, taxes, tax incentives for all trading parties cannot exceed the USA tariffs, duties, taxes, and tax incentives, dollar for dollar.
Ponder the unintended consequences that would follow if this plank were passed into law. All over the world, people in extreme poverty would lose their jobs, being fired from Honduran textile factories, for example, when America discovered that, although our companies and consumers benefit from our presence there, the people of Honduras are too poor to buy a commensurate amount of our goods. Both countries will lose. In fact, trade wars will break out all across the planet as the international regime of free trade treaties, painstakingly negotiated by diplomats over many years, are suddenly cancelled via the unilateral action of America. For our relationship with China, this will prove particularly fraught, since one factor that eases geopolitical tensions with that rising power (which also holds enough of our debt that we don't want to anger them) is that presently we each benefit too much from our trade relationship to want to fight.
Finally, do you really want to tell an American inventor or entrepreneur or chef, "Sorry, I know you need that part or substance or wine from France to earn your living as you'd like, but the numbers don't work out this year -- you're out of luck." How do you decide which firm gets precedence for the limited amount of trading with France that can be done in a given year? Does the government decide? Do you think that just maybe the most powerful corporations will be advantaged?
Reinvigorating the housing industry: Housing is the back bone of the U.S. economy. The U.S. Government must guarantee home loans for any American with a job at a rate of a maximum of 1% over a 40 year payment term, with a maximum down payment of 5% for any and all "existing" homes (not new homes). In exchange, the Government will maintain a 25% equity interest in all homes in the program. The government will forfeit their equity interest if the homeowner does not default within the first 20 years (240 months) of said loan.
This isn't thought through very well. It is problematic for housing to be the backbone of the American economy. The goal should be transitioning away from that reality, insofar as it is true, not artificially re-inflating the housing bubble! And locking up the nation's capital in 40 year mortgages that repay the folks holding them -- that is, Americans with money in the bank -- at 1 percent? Would you lend someone $200,000 at 1 percent interest for 40 years? Would you lend it to me?
Lastly, why would an Occupy Wall Street participant favor redistributing wealth from the unemployed to the employed and from people who don't own houses to homeowners?
Education: Any elementary, middle or high school that improves their "proven and verified" test scores by a minimum of 10% for the entire student body will reward the teaching staff, office and support staff with a bonus at the end of each school year in the amount of 10% of the base salary. If the same school increase the overall test scores by 15%, then the bonus will be equal to 15%. This incentive will be instituted for a minimum period of ten (10) years. For every high school that reaches a 90% acceptance rate for their graduating seniors to a junior college or better, will receive a 10% bonus from base salary from the State for the high school teachers, office and support staff of that high school.
Among folks on the left, the role that test scores should play in education generally, and teacher pay specifically, is hotly contested. Yet here is a proposal, ostensibly being submitted to "the 99 percent," that would establish test scores as the metric that determines a huge percentage of take home pay for educators. And if it proves to be failing miserably after 5 years? Sorry, it's locked in for a decade. What if the people of a town are unanimously against the program, perhaps because their public schools are already performing well, and they're reluctant to change a system that is already educating their children? Sorry, Occupy Wall Street has an idea, and it wants to impose it federally, because lobbying localities to adopt it from the bottom up is just too much work.
Think what would happen if "every high school that reaches a 90% acceptance rate for their graduating seniors to a junior college or better, will receive a 10% bonus from base salary from the State for the high school teachers, office and support staff of that high school." Suddenly every high school would hire a bunch of college counselors to fill out applications for students to junior colleges that admit everyone (or begin to as soon as their teacher buddies in the public schools explain how much money is at stake.) And, of course, the proposal would redistribute money from schools in rich neighborhoods where 90 percent of kids already go to college from the poorest neighborhoods where the dropout rate is far too high to meet the target.
Oil Dependence: a) Auto Companies: They will be required to provide the American public, vehicles that provide 60 MPG no later December 31, 2014, or be charged a fuel tax of $2000 for every vehicle sold in the USA. b) Major Oil Companies: Charged an import fee of 25% of all net profits generated from U.S. sales generated from imported oil sold in America. Circumvention will be punished and treated as Treason. c) Federal Tax credit for oil companies for 35% of the cost to find/locate oil generated from the U.S. territories.
Briefly, this will drastically increase the cost of both cars and energy at a time when lots of working people are already having trouble paying for transportation. And the idea of starting to declare violations of tax law as treason -- it's the kind of talk that ought to be anathema to every American, both because Treason is already defined in the Constitution, and because it is imprudent to trust any movement that embeds extremist jingoism into its lawmaking and rhetoric.
Taxes: Reform the U.S. Tax code no later than December 2012. Amnesty for any individual or company for repatriating any funds/profits presently located overseas. Reduce taxes to zero (0) for anyone making less than $25,000/year. Instituting a flat tax for individuals, and corporations to encourage investment in America.
After the shocks of numbers one through seven, I find myself apathetic about number eight. But you've now seen the whole proposal. It is, in sum, a misguided and less than informed package of reforms that no group should adopt.