August 29, 1993
"Wall Street may not have played an active part in this irresponsible deception,
but its complicity in voodoo economics is unquestionable. The famous
Laffer Curve - which pretended to show that the new investment created by a tax cut would alone generate enough revenues to balance the federal budget -
was the object of jokes among economists who were themselves beneficiaries. Talented financiers like Michael Milken, Charles Keating and Lewis Ranieri almost instantly saw opportunity in this new moral climate, putting taxpayer-backed deposits and tax-free pension money to work as junk bonds, savings-bank loans and mortgage-backed securities.
Taxpayers should 'understand how money was really made in this country in the last dozen years, and their interesting, indirect but lucre- bestowing role in that process,' says Michael Thomas, the Wall Street veteran who writes a weekly column for the New York Observer. 'The people who brought us the 80s tended to make out best in the 80s and they ought to pay for the 80s.'
He proposes an additional 10 per cent 'deficit-reduction' surcharge on the wealthy, and the partial 'publicisation' of the profits of ventures that have benefited from implicit taxpayer guarantees, such as federally guaranteed mortgage bonds.
If Mr Clinton is unpopular now on Wall Street, one can only imagine the reactions to such measures. But doing the right thing is proving as thankless a job on Wall Street as doing the opposite was wildly popular.
Most investment strategists believe that the economic stagnation that has accompanied austerity will soon
force him away from deficit reduction.
If he defies their expectations and maintains his fiscally responsible policies through to 1996, says David Shulman, chief equity strategist with Salomon Brothers in New York, 'Wall Street would build a statue in honour of Bill Clinton. But he still would not get its vote, nor Main Street's for that matter.'"
