Battle4Liberty

Self-proclaimed consumer advocate Ralph Nader posted an interesting op ed in today’s (November 2) Wall Street Journal calling for a “tax on speculation.” This is necessary, as he puts it, to “break the corporate stranglehold on our country.”

The crux of his argument is that financial speculation is too risky and hence destructive to the U.S. economy. A tax in the neighborhood of 0.5% could raise billions while creating a disincentive to the fat cats’ “wheeling and dealing.” But once the clichés are removed and the facts are examined, we are left with another flawed proposal from the left.  The reasons why are many, so I’ll cover the most salient ones as briefly as I can.

1. Nader’s definition of speculation includes all equity trades. Risk is a part of any private investment and is ultimately borne by the investor. Nader is—by definition—casting the entire private sector as destructive and in need of government oversight.
2. Nader is correct when he says that financially punishing a behavior will reduce its frequency. In other words, we get more of what the government rewards (subsidizes) and less of what the government taxes. So why isn’t Nader calling for an end to the endless extensions of unemployment benefits or for reductions in welfare and social spending?
3. Nader’s obsession with risk and speculation doesn’t appear to extend to government speculation, such as government-backed green energy or college student loans. Why is this form of speculation acceptable?
4. Nader infers that speculation is a losing proposition. He fails to acknowledge the obvious—that every stock trade has both a winner and a loser.
5. Any tax revenues produced from such a tax would come directly from private investment, the engine of the economy. Proposing to transfer this investment to the government in the name of job creation or economic development demonstrates Nader’s lack of understanding of economic growth.
6. Most importantly, the federal government has no right or duty to restrict private, legal transactions such as stock trades. Taxing the capital gains generated from income that has already been earned and taxed is bad enough, but taxing the transaction is a front to individual liberty.

Tucked deep inside Nader’s argument is a fundamental flaw, the idea that government—not the private sector—has the moral authority and acumen to determine where the economy should “invest” its resources. It’s the same central planning argument that is constantly recycled to justify and leverage the ongoing class warfare.