I had been amused over the last couple years -- this sense of somehow me beating up on Wall Street -- I think most folks on Main Street feel like they got beat up on -- (applause) -- and I’ll be honest with you, there’s probably a big chunk of the country ... there’s a big chunk of the country that thinks that I have been too soft on Wall Street. That’s probably the majority, not the minority.
If you haven't caught President Obama's townhall meeting on CNBC Monday, the whole event is worth a watch.
A full transcript has been made available by the White House.
Now, here's the full exchange between Mr. Anthony Scaramucci and President Obama. First, the question in the form of whining.
Listen, I represent the Wall Street community. We have felt like a piñata. Maybe you don’t feel like you’re whacking us with a stick, but we certainly feel like we’ve been whacked with a stick. So I certainly think that Main Street and Wall Street are connected, and if we’re going to heal the society and make the economy better, how are we going to work towards that, healing Wall Street and Main Street? Question number one.Ah the tired old "we the rich people create all the jobs so leave us alone" theory. First of all, let's look at just how much it costs to hire someone with a salary with "FICA and health care," assuming family health insurance premium paid entirely by the employer, it would cost about $70,000, not $90,000. The employer pays half the FICA taxes (about 8-9% of salary) and I'm plugging in health insurance at $15,000, above average in the group market for family plans. But this guy told us everything we need to know in the first sentence. "I represent the Wall Street community." Apart from the fact that Wall Street is not a community but a conglomerate, I think we all know why he's pouting.
And then question number two has to do with job growth. I was doing a calculation -- I run SkyBridge Capital; it’s got $7.4 billion under management -- and I’m thinking about hiring new people. A $50,000 worker in New York City, if I want to pay the full freight on the health care plus the FICA and all the other stuff, it’s about $90,000, sir. That woman, man or woman, is going to take home about $35,000. It seems very, very disconnected, and I think that’s one of the main reasons why we don’t have a lot of job growth.
So two questions: When are we going to stop whacking at the Wall Street piñata? And how are we going to fix that arbitrage so that we can create jobs in our society?
And here is President Obama's full response, in which he holds true to the need for reform that he had spoken out about since before he was president:
THE PRESIDENT: On the first question, I think it would be useful to go back and look at the speeches that I’ve made, including a speech, by the way, I made back in 2007 on Wall Street before Lehmans had gone under, in which I warned about a potential crisis if we didn’t start reforming practices on Wall Street.I usually don't use quotes at this length, but I thought it was important in this case. The President's answer does not only show his mastery and grasp of policy, it shows that he has been constantly trying to put working families first. Programs like TARP were necessary to ensure the stability and existence of the our financial markets, without which, millions of more ordinary Americans would lose their entire life savings altogether. To protect those same millions of Americans, it was necessary to reform Wall Street, to reform student loans and take the middle-man (bank fees) out of the question, and to reform the credit card industry.
At the time, I said exactly what you said, which is Wall Street and Main Street are connected. We need a vibrant, vital financial sector that is investing in businesses, investing in jobs, investing in our people, providing consumers loans so they can buy products -- all that is very important and we want that to thrive. But we’ve got to do so in a responsible way.
Now, I had been amused over the last couple years -- this sense of somehow me beating up on Wall Street -- I think most folks on Main Street feel like they got beat up on -- (applause) -- and I’ll be honest with you, there’s probably a big chunk of the country --
Q But people connect us --
THE PRESIDENT: Hold on a second -- there’s a big chunk of the country that thinks that I have been too soft on Wall Street. (Applause.) That’s probably the majority, not the minority.
Now, what I’ve tried to do is just try to be practical. I’m sure that at any given point over the last two years, there have been times where I have been frustrated, and I’ll give you some examples. I mean, when I hear folks who say that somehow we’re being too tough on Wall Street, but after a huge crisis, the top 25 hedge fund managers took home a billion dollars in income that year -- $1 billion. That’s the average for the top 25, which is --
MR. HARWOOD: And yet Forbes Magazine puts on their cover a story saying, “he has an anti-colonial attitude” -- or Steve Schwarzman, a big figure on Wall Street, says, “their approach to the financial regulation and taxation is like Hitler invading Poland.” Where does that come from?
THE PRESIDENT: I don’t know where that comes from. That’s my point. I guess -- it is a two-way street. If you’re making a billion a year, after a very bad financial crisis where 8 million people lost their jobs and small businesses can’t get loans, then I think that you shouldn’t be feeling put upon. The question should be how can we work with you to continue to grow the economy.
A big source of frustration -- this quote that you just said, this was me acting like Hitler going into Poland, had to do with a proposal to change a rule called “carried interest,” which basically allows hedge fund managers to get taxed at 15 percent on their income. Now, everybody else is getting taxed at a lot more. (Laughter.) The secretary of the hedge fund is probably being taxed at 25, 28 -- right? And these folks are making -- getting taxed at 15.
Now, there are complicated economic arguments as to why this isn’t really income, this is more like capital gains, and so forth, which is a fair argument to have. I have no problem having that argument with hedge fund managers, many of whom I know and went to school with. And I respect their business acumen. But the notion that somehow me saying maybe you should be taxed more like your secretary, when you’re pulling home a billion dollars or a hundred million dollars a year, I don't think is me being extremist or being anti-business. (Applause.) And that's the confusion we get into.
I do want to be fair about your other point, which is the cost of workers. One of the things -- one of the laws that we passed this year was the HIRE Act, which said we’ll give you a tax break if you hire a new worker, to try to reduce some of those costs. And in some high-cost places like New York City, the costs for the average worker maybe be even higher than it is if you are in some other places.
President Obama is right. Most folks on Main Street do feel they got beat up on, because we did. By Wall Street's fat cats and their cronies up in Capitol Hill for the better part of a decade. Actually, for the better part of three decades. People on Wall Street - hedge fund managers were a big part of it - created the mess, and they are now very very annoyed that they are being asked to pay precious little to clean it up. Hell, they are pouting because the President is not treating them with kid gloves in his speeches. And here's what Hedge Fund managers are really peeved about. Obama - cover your ears - wants to tax them the same way as their secretaries!
Obama would like to tax the portion of profits paid to managers of hedge funds and private equity funds as ordinary income rather than as a capital gain. That would subject it to much higher tax rates than the 15% capital gains rate currently imposed. The White House estimates the measure would raise $24 billion over 10 years.Oh, noes! We can't have that! We must follow the Republican roadmap of continuing to pay (rich) people not to work.
The fight we are facing isn't between business and labor. It isn't even necessarily between Wall Street per se and Main Street per se - as the President says, they're connected. The fight we are facing is between the greed on Wall Street vs. the necessities of ordinary Americans on Main Street. Taxes in a democracy are not a matter of punishment, as the Wall Street fat cats see them. They are the price we pay to live in a free and just society. It's what we pay to invest in ourselves and our country. That is why a fair distribution of taxes with the greatest burdens on the widest shoulders is so necessary. We have tried socializing the losses and privatizing the profits, and it got us here. When the American middle class does well, everyone does well, including the ultra rich. Wealth trickles up, not down.
It's an important fight, in fact, in many respects this is the fight that defines us as a progressive movement. I think that the President knows this. That is why he's not backing down on his middle class tax cuts (and letting the Bush tax cuts on the ultra wealthy expire), is proposing raising taxes on the Hedge fund managers while giving tax breaks to small business, and has already delivered on important reforms, including Wall Street reform which empowers regulators to liquidate institutions that are threatening financial security and pay for them by levying fees on the banks themselves.
And that is why we must continue to fight for more reforms, and for a fairer tax code. What the President did on Monday is tell us that he understands our values. That our values are his values. And we need to help him. So let's do it. On to November!