The Obama administration is attempting to tap into populist anger with a scheme to tax the banks. Headlines are reading "we want our money back". Obama with comments like "I am the only thing between you and the people with pitchforks."The so called progressives believe in the scheme to tax banks to get their money back. Unfortunately this is just another hairbrained scheme pushed forward by a President long on rhetoric and fearmongering but short on ideas and plans.
The bank tax is a scheme to trump up populist anger. The populists are frothing at the mouth with anger over the annual trillion dollar deficits Obama has requested. The populists will not research the underlying problems while they are seething with anger. Unfortunately the populists will lash out and support anything they believe will punish the big awful banks and corporations. The shortsightedness of the punishment and revenge meme will do nothing to curtail the trillion deficits and may make the economy even worse.
The proposed tax will force banks that did not require a bailout to payback funds taken by banks and corporations that were bailed out. Rather than force the companies just to pay back the funds the took in bailout cash Obama comes up with a scheme that sounds good on the campaign stump but doesn't really accomplish anything. The Obama plan is really a shell game that will cost the taxpayers even mor emoney in fees and interest rates and cost the country jobs. This scheme may sound like a good idea to those foaming at the mouth. However, how will the banks pay this tax i the real question.
Banks will do two things. First they will increase fees and interest rates on the consumers. The cost of banking for the average person will multiply greatly. Rates on Credit cards and fees for doing normal day to day banking business have already increased as banks are in the mist of crawling out from under bad debt. Now this tax scheme will only force banks to further increase fees to generate revenue just to pay taxes. In effect the consumers will be paying the tax to themselves. That all sounds good, unfortunately the tax payers won't be receiving the benefit as Obama and the Democrats will just take the tax and spend it somewhere else. So while the banks are being taxed, the populist anger will be fed, and the government will be able to spend even more money on pet projects.
The second thing banks will do is hold down hiring. Beyond the populist belief that businesses are in business for the people and in business to provide jobs nothing could be further from the truth. Businesses are in business for one reason and one reason only and that is to make profits. When businesses stop making profits they close their doors and go out of business. One doesn't require a Harvard education to understand that. The first thing a business does when costs increase is scale back costs. Labor is always the easiest and most cost effective way to reduce the cost of doing business. Increasing taxes, reducing bonuses, and reducing profits for any business does not promote economic growth, in fact these measures stifle growth.
The bank tax is a scheme to appease an angry mob of liberal progressives. This scheme will do nothing for them and in fact will make things worse for them. However, the short sighted progressive will feel better that they exacted revenge and worry about the unintended consequences later. This scheme may in the short term make the liberals feel better but in the long run this scheme will only prolong their economic misery. One final comment, even the Europeans (who Obama wants America to emulate) are against the great Obama bank tax scheme.