Dean Baker's ideas are stupid.

I'm not even going to pretend to be polite about this matter: Dean Baker's tax ideas are ridiculous. (He's also lost when it comes to another topic, which is open source software development. Most open development is largely backed by corporate interests -- not government. He wants to loot tax-payers to fund open models.)

From Bob Herbert's filth in the NYT:

"The economist Dean Baker is a strong advocate of a financial transactions tax. This would impose a small fee — ranging up to, say, 0.25 percent — on the sale or transfer of stocks, bonds and other financial assets, including the seemingly endless variety of exotic financial instruments that have been in the news so much lately."

All this will do is transfer money to the government and remove liquidity from the market. Baker acts as if speculation is some evil act that contributes to volatility.

Baker's an idiot (with regard to his tax) because speculators provide liquidity. Do we really want to roll back progress to the days of fractional increments in stocks? Today, you can invest in stocks cheaply and get a fill almost instantaneously for just the cost of a few pennies. You no longer have to pay a half-point spread in many of the best stocks just to pick up shares in a company. Even if legislation spares market-makers the tax, Baker's proposal would make it far more difficult and expensive for customers to re-balance and adjust their portfolios to market conditions.

Lack of liquidity, in my opinion, is what makes the housing market such a nuisance to invest in. You can't get in and out whenever you want, regardless of the state of the market. Yahoo's stock, for example, you can get in and out in good times and bad. With a house, you could be posting an offer for months and get no hits.

In short, Dean Baker wants us to to be illiquid and wants to kill our markets so the volume leaves and heads to some other, more progressive nation.

Summary: Don't take Dean Baker seriously, ever.

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