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Will Congress Never Learn?

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April 19, 2010 – Comments (5)

Those who ignore history are doomed to repeat it.

Ok, I have no idea who the above quotation should be attributed to, but this article on the current Senate debate over bailout legislation has me scratching my head with wonder.

Resolution authority: In the Wall Street overhaul bills, lawmakers would create a pot of money funded from a tax on the largest banks - a $50 million fund in the Senate bill and a $150 billion fund in the House measure passed in December. Federal regulators would use the money to pay the costs of breaking up or liquidating giant financial firms whose collapse threatens the financial system - solving the so-called "too big to fail" problem.

What a fantastic idea!  I mean, tax the banks and financial instutions, and when they mess everything up, use the tax money they paid-in to clean up the mess they left behind.  Our financial landscape gets protected, and Joe Taxpayer doesn't have to pay for it, the ones with the potential for making the mess do.  Why didn't anyone think of this before?

Oh wait, maybe they have.  Maybe I'm way off base, but when I read this, one word pops into my brain.

Superfund.

You know, that big huge pot of money that's supposed to pay for the clean-up of the country's biggest environmental messes.

Where does that money come from anyway?  Oh yeah, it was supposed to come from taxes on the chemical and petroleum industries, wasn't it?  Right, tax the chemical companies, pool the money into a fund, and when the chemical companies make a mess of things, use the money to clean it up.  Brilliant!  Only....

The Superfund program receives funding from two annual appropriations: general funds from the Treasury and balances in the Superfund trust fund. In earlier years, revenues for the trust fund came from three dedicated taxes (on petroleum, chemical feedstocks, and corporate income). Those taxes expired in December 1995, however, and the amount of unobligated money in the fund gradually declined to zero by the end of fiscal year 2003. The Superfund trust fund has been funded almost entirely through general revenues ever since. (link)

Note to Congress:  We've tried this before.  It didn't work.  The Superfund has long been plagued with funding problems, and, in the end, Joe Taxpayer has ended up with the bill.

But things will somehow, magically, be different this time, right?

Regards,

Russell (a.k.a. TMFEldrehad)

5 Comments – Post Your Own

#1) On April 19, 2010 at 9:23 PM, HarryCarysGhost (99.70) wrote:

This saying appears in many different forms, but the earliest version
is probably that of the poet and philosopher George Santayana: "Those
who cannot remember the past are condemned to repeat it."

"Notable Quotations from George Santayana
'Those who cannot remember the past are condemned to repeat it.'
Life of Reason, Reason in Common Sense, Scribner's, 1905, page 284"

Collecting and Editing the Works of George Santayana
http://www.iupui.edu/~santedit/

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#2) On April 19, 2010 at 9:46 PM, ChrisGraley (29.69) wrote:

Joe taxpayer paid the tax to begin with. The nice thing about taxing corporations, is that they love to pass it on. 

Get ready for the "Standing in line with bad posture!" fee at the banks. 

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#3) On April 20, 2010 at 10:01 AM, TMFEldrehad (99.99) wrote:

Joe taxpayer paid the tax to begin with. The nice thing about taxing corporations, is that they love to pass it on.

Absolutely true. To what extent they (chemical companies or banks) are able to pass it on depends on the elasticity of demand, but there's no question that they will pass on as much of it as they possibly can.

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#4) On May 31, 2010 at 2:33 PM, tomlongrpv (75.78) wrote:

Actually Superfund (really the Comprehensive, Environmental Response, Compensation and Liability Act "CERCLA" as amended by the Superfund Amendment and Reathorization Act "SARA" codified I think at 42 USC 9601 et seq.) was not funded by a tax at all.  It was funded by strict liability provisions through lawsuits.  The law was cobbled together at the last minute with a very poor legislative history.  The result was (at first) most of the money being spent on litigation.  Eventually things got sorted out and the workings of the law improved.  But you are correct that it is a good example of how not to do something.  But the new financial regulatorny scheme is not like Superfund.  It may (or may not) be a mistake or have problems but I don't think they will be the same problems as Superfund.

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#5) On May 31, 2010 at 2:40 PM, tomlongrpv (75.78) wrote:

I should clarify--taxes have funded orphan shares (liable parties with no assets) but the original concept of CERLA was that the polluter pay.  And often the polluter does pay.  The real problem with the law was not the taxes but rather the poorly written standards in the law and the absence of a legislative history, both of which spawned litigation that consumed upwards of 60 percent of the trust fund at times and led to the need for the taxes to cover orhpan shares.  Hopefully the new regulations avoid that mistake.  In any event the new revenue is needed if we are to continue the FDIC.  A world without the FDIC would be a bit different--like 1933 USA with 28 states having no banks perhaps.

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