A New, Groundbreaking Plan to Fix Finance

Release Date: 
January 5, 2016

New Demos Proposal Details How to Direct Capital Investments into America’s Long-Term Infrastructure and Sustainability Needs

Wall Street’s obsession with quick and certain profit is fundamentally at odds with the long-term investment our society needs. Changing this imbalance can unlock our ability to address the nation’s most pressing challenges—including rebuilding our nation’s crumbling infrastructure, supporting robust job creation, and expanding sustainable energy. The Financial Infrastructure Exchange (FIX), a new proposal developed by Demos President Heather McGhee and Demos Senior Fellow Wallace Turbeville and unveiled in the new edition of Democracy: A Journal of Ideas, provides the solution.

Included as one of the magazine’s 16 for ‘16 bold ideas, the FIX is a fully-funded federal policy designed to direct capital investments into long-term infrastructure and sustainability needs. Read the full report “From Short-Term Gains to Long-Term Needs: Financial Infrastructure Exchange” here.  

The FIX functions as a tax-and-subsidy program, taxing short-term activities such as high-frequency trading to subsidize necessary long-term investment. For instance, at the end of 2014, America’s retirement capital was approximately $24.7 trillion, including $5.2 trillion in public pension assets. Over the last five years, those public pensions invested roughly $6 billion in infrastructure, but, of that, $5 billion is invested in other countries, mainly in Europe and Asia. However, by correcting market short-sightedness, the FIX would flip that spending. It will empower Americans to invest in their own roads and bridges without penalizing their retirement savings, support communities in building the sustainable energy systems they want and need, and all while creating thousands of good, well-paying jobs.

“Current financial models value short-term price and liquidity over long-term value creation,” said Turbeville. “By taxing these ultimately unproductive trading activities, we can divert short-term gains into more socially beneficial uses of capital.”

Under the FIX, subsidies go directly to investors, meaning that the shareholding community determines and prioritizes qualified long-term investments. Additionally, the tax revenues garnered through FTTs will go directly to the FIX, bypassing congressional budgets and creating the opportunity for more decentralized, regional and local governance structures to set standards for prioritizing and targeting fix investments where they are needed most. 

“The FIX is more than an infrastructure finance policy,” said McGhee. “With its emphasis on community involvement, operating outside the whims of government taxation or budgetary politics, it is also a new and potentially game-changing platform for inclusive economic development.”