•HCON 301 IH
protect their own currencies; and to provide support for
needed social and environmental programs;
Whereas in the past, central bank reserves were sufficient to
combat any speculation on their country’s currency; now,
however, financial speculators have created a daily mar-
ket volume which dwarfs all of the world’s central banks
combined; and therefore, when a country cannot defend
its currency, it effectively loses control of its monetary
policy;
Whereas such speculative pressure on a currency results in
higher interest rates than is warranted by internal mone-
tary conditions, leading to a lowering of economic growth
and an increase in domestic unemployment with the re-
lated social problems;
Whereas there is overwhelming evidence that the lack of sta-
bility helps to cause financial crises with increasing fre-
quency (1992/93 Europe, 1994 Mexico, 1997 Southeast
Asia, 1998 Russia, 1999 Brazil), even in countries where
basic economic fundamentals are sound, and the market
reacts irrationally to rumors (‘‘herd behavior’’), causing
‘‘speculative bubbles’’ to burst when speculators flee a
particular currency;
Whereas such financial crises can have enormous impact
worldwide; for example, the Asian currency crisis lowered
the world growth projection for 1998 by one percent and
increased worldwide unemployment by 10 million; and
unpredictable exchange rate fluctuations create additional
uncertainties for entrepreneurs, making rational planning
more difficult;
Whereas such crises have not only economic impact, including
exacerbation of global economic inequality, but also social
•HCON 301 IH
impact including increased unemployment, price increases
and disruptions, plant closures, poverty, human rights
violations, diversion of resources from sustainable devel-
opment, and social upheaval, which burden poor, indige-
nous, and middle-income populations most heavily;
Whereas such impacts in other nations have a spillover effect
in the United States and elsewhere by contributing to in-
creased trade imbalances, dumping of low-price products
on overburdened markets, and contributing to increased
unemployment, volatility in agriculture markets, and
stagnant or falling wages;
Whereas de facto support by governments and international
institutions of excessive financial speculation may under-
mine desired macroeconomic policies and contribute to
moral hazard and irresponsible market behavior;
Whereas excessive speculation could be curbed by a very
small tax of between 0.1 percent and 0.25 percent on
each cross-border currency transaction (now commonly
called ‘‘Tobin-style taxes’’, as proposed in 1978 by Nobel
prize winning economist James Tobin), or an alternate 2-
tiered version (proposed in 1996 by German economist
and International Monetary Fund consultant Paul Bernd
Spahn);
Whereas such a tax reduces incentives for short-term specula-
tion while remaining small enough to leave longer-term
investments intact, with the resulting increased stability
of exchange rates serving as a stimulus for productive
trade;
Whereas the senior economist of the Federal Reserve Bank
of San Francisco has written, ‘‘. . . if your goal is to
•HCON 301 IH
limit short-term speculation, it is hard to beat the Tobin
tax’’;
Whereas the revenues from such a tax, projected to be be-
tween $50 billion and $300 billion a year, would provide
urgently needed resources to combat global and local cri-
ses;
Whereas concerns voiced about tax havens and the collection
and enforcement of such taxes have been researched by
economists, and plans proposed to answer these concerns,
such as collection at settlement sites to ensure uni-
versality and to track derivative instruments, as proposed
by Schmidt; and
Whereas there is already an international movement in sup-
port of a transactions tax, including passage of a resolu-
tion in the Canadian Parliament, introduction of resolu-
tions in the European Parliament, the French Par-
liament, and British House of Commons, substantive dis-
cussion of the issue in the European Parliament and the
parliaments of Switzerland and Germany, plus a chapter
in the current Finnish Government rules: Now, therefore,
be it
Resolved by the House of Representatives (the Senate
concurring), That it is the sense of the Congress that:
(1) the United States should show leadership by
enacting, in concert with the international commu-
nity, transaction taxes on short-term, cross-border
foreign exchange transactions to deter speculation
and that the adoption of such Tobin-style taxes
should be done in coordination with a large number
•HCON 301 IH
of nations, in a fully transparent and accountable
manner, with the revenue dedicated to urgent global
needs;
(2) the United States should build support for
and advocate this position at the World Bank and
the International Monetary Fund, as well as within
other regional and international organizations, in-
cluding the Organization for Economic Cooperation
and Development, the G–8, and the newly estab-
lished G–20; and
(3) this should not be done in isolation of other
initiatives for reform of global finance. Instead, the
United States should continue to explore other op-
tions together with the international community.
These options include, but are not limited to tougher
transparency rules, tighter reserve requirements,
creation of exchange rate ‘‘target zones’’ national
currency controls, cash requirements for mutual
funds, and stronger source-country measures such as
disincentives for short-term lending.
Æ