Robert Reich on the socialization of risk and privatization of gain

From
http://quote.yahoo.com/expert/article/stockblogs/94661

• Former Secretary of Labor Robert Reich has some harsh words for policymakers. He says that "socialized capitalism of the sort the Fed and the Treasury are now practicing, consisting of private gains and public losses, is untenable. On the other hand, giant Wall Street investments banks as well as Fannie Mae and Freddie Mac are too big to fail." How to reconcile the two? Reich has an intriguing proposal - that "[w]hen taxpayers insure a giant entity against loss, the entities must agree that for the duration of the bailout, their top executives can't be paid more than the President of the United States; and the government gets 5% of their current valuation as shares of stock (roughly representing the benefit to their shareholders of the federal insurance) -- so that if and when the entities become profitable again, taxpayers are compensated for the risk they've taken on."

This sounds like a decent proposal to me.

We as a society need to think long and hard about this injustice (the privatization of gain and socialization of risk) should be addressed.

In prior times the centerpiece of dealing with this issue was a progressive income tax system but this has been rejected because it punishes the hardest workers, the most talented and the biggest risk takers. But our system clearly does not give it's highest rewards to those people now so we are back to square one! Who we reward in America in 2008 are those whose imprimatur is on things whether they have anything to do with gains or not - or even if they fail!

We were told that one of the biggest reasons to flatten the tax system was that a progressive tax punished those who "took the risk" yet we know now that those who claimed to be taking the risk (the CEO's and business elite) were in fact not taking the risk - as illustrated spectacularly on Friday.

Perhaps a better way would be to
a) identify real risk takers (starting with those who put their *own* money on the line) and tax gains that come from that lower.
b) If we want lower taxes on those who work hard how about a lower rate for overtime.

I'm sure there are other ideas...this is just a start.