“America’s Taxation Tradition”: Public Policy Should Seek To Limit Inequality For Political As Well As Economic Reasons
As inequality has become an increasingly prominent issue in American discourse, there has been furious pushback from the right. Some conservatives argue that focusing on inequality is unwise, that taxing high incomes will cripple economic growth. Some argue that it’s unfair, that people should be allowed to keep what they earn. And some argue that it’s un-American — that we’ve always celebrated those who achieve wealth, and that it violates our national tradition to suggest that some people control too large a share of the wealth.
And they’re right. No true American would say this: “The absence of effective State, and, especially, national, restraint upon unfair money-getting has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power,” and follow that statement with a call for “a graduated inheritance tax on big fortunes … increasing rapidly in amount with the size of the estate.”
Who was this left-winger? Theodore Roosevelt, in his famous 1910 New Nationalism speech.
The truth is that, in the early 20th century, many leading Americans warned about the dangers of extreme wealth concentration, and urged that tax policy be used to limit the growth of great fortunes. Here’s another example: In 1919, the great economist Irving Fisher — whose theory of “debt deflation,” by the way, is essential in understanding our current economic troubles — devoted his presidential address to the American Economic Association largely to warning against the effects of “an undemocratic distribution of wealth.” And he spoke favorably of proposals to limit inherited wealth through heavy taxation of estates.
Nor was the notion of limiting the concentration of wealth, especially inherited wealth, just talk. In his landmark book, “Capital in the Twenty-First Century,” the economist Thomas Piketty points out that America, which introduced an income tax in 1913 and an inheritance tax in 1916, led the way in the rise of progressive taxation, that it was “far out in front” of Europe. Mr. Piketty goes so far as to say that “confiscatory taxation of excessive incomes” — that is, taxation whose goal was to reduce income and wealth disparities, rather than to raise money — was an “American invention.”
And this invention had deep historical roots in the Jeffersonian vision of an egalitarian society of small farmers. Back when Teddy Roosevelt gave his speech, many thoughtful Americans realized not just that extreme inequality was making nonsense of that vision, but that America was in danger of turning into a society dominated by hereditary wealth — that the New World was at risk of turning into Old Europe. And they were forthright in arguing that public policy should seek to limit inequality for political as well as economic reasons, that great wealth posed a danger to democracy.
So how did such views not only get pushed out of the mainstream, but come to be considered illegitimate?
Consider how inequality and taxes on top incomes were treated in the 2012 election. Republicans pushed the line that President Obama was hostile to the rich. “If one’s priority is to punish highly successful people, then vote for the Democrats,” said Mitt Romney. Democrats vehemently (and truthfully) denied the charge. Yet Mr. Romney was in effect accusing Mr. Obama of thinking like Teddy Roosevelt. How did that become an unforgivable political sin?
You sometimes hear the argument that concentrated wealth is no longer an important issue, because the big winners in today’s economy are self-made men who owe their position at the top of the ladder to earned income, not inheritance. But that view is a generation out of date. New work by the economists Emmanuel Saez and Gabriel Zucman finds that the share of wealth held at the very top — the richest 0.1 percent of the population — has doubled since the 1980s, and is now as high as it was when Teddy Roosevelt and Irving Fisher issued their warnings.
We don’t know how much of that wealth is inherited. But it’s interesting to look at the Forbes list of the wealthiest Americans. By my rough count, about a third of the top 50 inherited large fortunes. Another third are 65 or older, so they will probably be leaving large fortunes to their heirs. We aren’t yet a society with a hereditary aristocracy of wealth, but, if nothing changes, we’ll become that kind of society over the next couple of decades.
In short, the demonization of anyone who talks about the dangers of concentrated wealth is based on a misreading of both the past and the present. Such talk isn’t un-American; it’s very much in the American tradition. And it’s not at all irrelevant to the modern world. So who will be this generation’s Teddy Roosevelt?
By: Paul Krugman, Op-Ed Columnist, The New York Times, March 27, 2014
“The Chris Christie Scandal Just Got Worse”: Amid New Gale Force Winds, Will Christie Be ‘Stronger Than The Storm’?
When there is still snow on the ground past St. Patrick’s Day, thoughts turn longingly to the beach. Say, the Jersey Shore. Which in turn brings to mind the extreme yet comically ham-handed efforts of Governor Chris Christie’s administration to keep secret the process that led to the controversial selection exactly one year ago of a firm to run a $25 million ad campaign for last summer’s tourist season touting the Shore’s comeback from Superstorm Sandy.
As you may recall, Christie came under criticism during his reelection campaign last summer for having inserted himself and his family into the rousing “Stronger than the Storm” ads encouraging tourists to come back to the Jersey Shore. The ads had been funded by federal Sandy recovery aid, and it seemed eyebrow-raising, at the least, for them to feature beaming pictures of a governor in the middle of a reelection campaign, rather than just your average smiling New Jerseyans. The eyebrows shot up quite a bit further when it emerged that the firm that had gotten the job after proposing to feature Christie in its ads, public relations giant MWW, had bid at a much higher price—$4.7 million versus $2.5 million—than a well-regarded New Jersey ad firm that had proposed ads that did not feature the governor. Making matters even more interesting was that the award had been made by a selection committee led by Christie’s very close longtime aide, Michele Brown, whom Christie appointed to run the New Jersey Economic Development Authority, a $225,000 post. Also noteworthy was that MWW had hired just a few months earlier the former executive director of the influential Burlington County Republican Party. (It was also hard not to notice that MWW’s founder and CEO, Michael Kempner, who is normally a loyal Democratic donor, was not writing any big checks to Barbara Buono, Christie’s opponent, last year.) New Jersey congressman Frank Pallone, a Democrat, in January asked the inspector general of the U.S. Department of Housing and Urban Development to audit the awarding of the job to make sure federal contracting rules were followed.
Further raising the intrigue around the “Stronger than the Storm” ads has been the lengths to which the Christie administration has gone to keep secret the relevant documentation. When Shannon Morris, the president of the New Jersey company, Sigma Group, that came in second to MWW, last summer requested the state’s evaluations of the proposals to better understand why her firm had lost, she received almost nothing in response. “Typically when you have a state-run bid like that you have…it fully transparent, it’s all posted online,” Morris told me. “There was nothing like that in this case.” When Asbury Park Press reporter Bob Jordan made an open-records request for the scoresheets that the selection committee members filled out to rank the ad proposals, the state returned to him in January the scoresheets—with the names of the committee members redacted.
Knowing this, I was heartened to find that my own request for the scoresheets was returned to me later in January with the names of the committee members fully disclosed. I planned to include details from the scoresheets in a cover story on Christie that I was in the process of writing, but the piece’s main thrust veered away from the Sandy ads, and I decided to revisit that issue later. This week, when I went to do just that, I discovered that the Internet link the Economic Development Authority had given me for the reams of documents I had requested was no longer operable. I asked that the documents be resent. They were, and lo, this time the names of the committee members were redacted from the scoresheets. When I asked the authority’s legal officer, Shane McDougall, about the discrepancy, he replied that “if the original documents had been disseminated without these redactions, it was done inadvertently.” He added that the redaction of names was done “on the basis of the advisory, consultative, and deliberative privilege, the expectation of privacy and the protection of the competitive bidding process.”
This retroactive redaction might have been maddening were it not so ineffective: I had seen enough between what had been sent before and what was in the newly redacted documents to piece together the story behind the evaluation process. Put simply, there was no contest whatsoever between MWW on the one hand and Sigma Group and the two other finalists on the other hand. In fact, reading the scoresheets is a bit like looking at the scores of the East Bloc figure skating judges at the Olympics during the height of the Cold War.
The average score the six committee members gave MWW’s proposal, out of 1000 possible points, was 953. The average score for Sigma Group’s proposal was 718.
And as I had taken note of when I had first seen the unredacted scoresheets, the differential was the largest of all in the evaluation by Michele Brown, who has a very long history with Christie: she is a longtime close neighbor of his in Mendham Township, she traveled extensively with him when she worked alongside him in the U.S. Attorney’s Office, she received a $46,000 loan from him in 2007 that he failed to report on his income taxes, and she took the lead in screening open-records requests for his tenure as U.S. Attorney while he was campaigning for governor in 2009. In her new role as head of the Economic Development Authority, she was in charge of the selection committee for the Sandy ad. And she, more than anyone else on the committee, made sure to put MWW far ahead of the competition—she gave MWW a score of 970, above even the high average score it received overall, and she gave Sigma Group only 590, by far its lowest score. (A spokesman at the Economic Development Authority did not respond to a request for comment from Brown.)
Matching the other scoresheets to the committee members was not exactly a forensic challenge. One of the sheets had an evaluator’s name accidentally left unredacted—Jackie Kemery, a procurement analyst in the state’s Department of the Treasury, who gave MWW a score of 940 and Sigma a score of 750—and it required only rudimentary handwriting analysis to match with a high degree of confidence the other scoresheets with the handwriting on other, unredacted paperwork filled out by the committee members that had been included in records I received. (The other committee members included Maureen Hassett, senior vice president for finance and development at the Economic Development Authority; Sara Maffey-Duncan, deputy director of the authority’s Office of Recovery; Melissa Orsen, chief of staff in the Department of State within the Lieutenant Governor’s office; and Gabrielle Gallagher, director of legal and regulatory affairs at the Department of Community Affairs, which oversees state aid to towns and cities.)
Which raises the question: why in the world was the Christie administration going to such lengths to obscure such basic facts about the selection process as which committee members awarded which sky-high scores to MWW? Morris, the head of Sigma Group, has a pretty good hunch: that the administration is doing anything it can to cover up the fact that the selection process had been essentially rigged from the get-go, which is the thought that came to her when she got to see the proposal from MWW. MWW and the ad firm it was partnering with, Brushfire, had less experience in this realm than did Sigma and the big national ad firm it partnered with, Weber Shandwick; whereas Weber Shandwick had produced comeback ads for New Orleans following Hurricane Katrina, MWW’s application cited Brushfire’s experience making ads for Minwax, Thompson’s Water Seal and DeLonghi cappuccino machines. Given that contrast, Morris thought “we had a slam dunk here” to get the job.
But then she saw MWW’s proposal, and it was far, far beyond what her firm had managed to put together in the four days they’d been given to submit a proposal. Whereas Sigma had basic storyboards for the ads it was proposing, MWW had “fully conceptualized” apps, video games, and other digital components on top of its conventional ad proposal. “It was like looking at a 10-day term paper versus a 150-page book,” she said. “I don’t know how you do that unless someone had a head start.” (MWW did not respond to a request for comment.)
As it happens, Morris did get one communication back from Michele Brown after her repeated attempts to get an explanation for being passed over: Brown sent Morris a form letter congratulating her for being named one of New Jersey’s “Best 50 Women in Business.” The letter urged Morris to reach out to Brown if she ever needed any assistance, so Morris wrote her asking again for an explanation of the contract award.
She never heard back.
By: Alec MacGinnis, The New Republic, March 18, 2014
“Stripping Away The Rhetoric”: Rebuilding The American Dream, One Insurance Policy At A Time
The Republicans give lots of reasons for their opposition to the Affordable Care Act. Only two really matter.
One is politics. The other is money. More precisely, big-business money.
Like Social Security and Medicare, the expansion of health insurance coverage is making voters more predisposed to support the politicians that championed the law — and they’re all Democrats.
Meanwhile, the more Americans benefit from this new law, the more Republicans are being forced to modify and mellow their rejection of it.
Within a few years, it may become as politically suicidal to openly attack the Affordable Care Act as it would be to call for abolishing Medicare.
Of course, Republicans can’t say they oppose the reform law often called “Obamacare” because it boosts the Democratic Party’s prospects. So they say it violates states’ rights. They say it infringes on individual liberty. They say it hurts small businesses. They say it will cost Americans their jobs.
None of these charges is withstanding scrutiny.
The law was written with states in mind. That’s why states can build their own insurance exchanges. It doesn’t erode individual liberty. The Supreme Court said so. And while it will be some time before we know about the law’s full economic impact, the evidence so far suggests that it puts more money into the pockets of people who will spend it, according to a report by the Congressional Budget Office.
Wasn’t that the same report that said Obama’s expansion of health insurance coverage is killing jobs? Indeed, many news outlets reported exactly that. But that’s a misreading of the report.
The CBO found that some workers — mothers with small children, students, and those close to retirement — have voluntarily left the workplace, because they didn’t need a job to maintain access to quality health care anymore.
Once the Affordable Care Act began to take effect, these workers exercised their newfound economic freedom by choosing to quit. They’re now caring for their kids and grandchildren, focusing on their own education, simply opting to enjoy their golden years, or starting their own businesses.
That’s something to celebrate. The critique that the Affordable Care Act somehow reduces the incentive to work doesn’t stand up to scrutiny.
The voluntary exit of more than 2 million workers from the American labor force will benefit many people. These workers are free to follow their dreams. If they are providing care, they will ease our caregiving deficit. And other Americans seeking work may finally find a job.
At the same time, money saved on health care can be spent on things that small businesses sell. Yes, I know. Republicans claim higher wages are bad for small businesses, and because small businesses are the engine of the economy, Obama’s expansion of health insurance is a job-killer. That’s just wrong.
Wages aren’t the top concern of small businesses. Taxes and poor sales are. So with more money in more pockets, sales receipts should climb.
When you strip away the rhetoric and take a good hard look at what the Affordable Care Act actually does, it sure looks like the new law raises wages and increases workers’ bargaining power.
By: Jonathan Stoehr, Managing Editor, The Washington Spectator; The National Memo, March 17, 2014
“An Outsized Voice”: There’s A Big Difference Between Union Money And Koch Money
For dozens of readers, our editorial this morning on the Democratic criticism of the Koch brothers left out something crucial: the big financial muscle of unions in backing liberal politcians.
“As the editors of The Times must know, unions in America far outspend the Kochs in their funding for Democratic candidates,” wrote Yitzhak Klein of Jerusalem wrote in the comments section. “What Harry Reid is doing is cheap demagoguery. Also this editorial.”
Mr. Klein, like many other commenters (some of whom are prominent) has his figures wrong. As the Washington Post and the Center for Responsive Politics recently reported, unions poured about $400 million into the 2012 elections. That almost matched the $407 million raised and spent by the Koch network in that same election cycle.
But think about what those numbers mean. Two brothers, aided by a small and shadowy group of similarly wealthy donors, spent more than millions of union members. The fortunes of just a few people have allowed them an outsized voice, and they are openly trying to use it to turn control of the Senate to Republicans.
The Koch group Americans for Prosperity has also joined the right-wing drive to reduce union rights and membership around the country, with the goal — made explicit at last week’s Conservative Political Action Conference — of muzzling the voice of union members in politics.
The Times has long deplored the vast amount of cash that is polluting politics, whether it comes from the right or left. (And we were critical of a Democratic donor who plans to spend $100 million this year against candidates who ignore climate change.) But for the most part, unions, unlike the Koch network, don’t try to disguise their contributions in a maze of interlocking “social welfare” groups. Their contributions on behalf of candidates or issues may be unlimited, thanks to Citizens United, but they are generally clearly marked as coming from one union or another. (They want Democrats to know which unions raised the money.)
Union members aren’t coerced into giving political money, either, despite the claims of several commenters. Thanks to a 1988 Supreme Court case, workers have the right not to pay for a union’s political activity, and can demand that their dues be restricted to collective bargaining expenses. The union members who contributed to that $400 million pot in 2012 opted into the system.
That’s still too much money. But there’s a world of difference between a small group of tycoons writing huge checks, and a huge group of workers writing small ones.
By: David Firestone, Taking Note, Editor’s Blog, The New York Times, March 11, 2014
“Washing Koch As White As Snow”: No Matter The Camouflage, Things-Don’t-Go-Better-With-Koch
Joe Scarborough recently got into quite a huff—and got the Morning Joe crew to huff with him—over Harry Reid’s attacks on David and Charles Koch, the billionaire industrialists who fund dozens of conservative causes and Republican campaigns. Reid had said, rather catchily for him, that Senate Republicans “are addicted to Koch.” The Senate majority leader also said the brothers “have no conscience and are willing to lie” in political ads, and that they’re “un-American” for trying to “buy America.”
Reid said he doesn’t begrudge the Kochs their wealth, but “what is un-American is when shadow billionaires pour unlimited money into our democracy to rig the system and benefit themselves and the wealthiest 1 percent.”
That might sound hyperbolic unless you have followed the long list of ways the Kochs are indeed buying America. For starters, while their Koch Industries is the one of the nation’s largest air polluters, their money is a huge factor in blocking climate change progress and spreading know-nothing denialism; they fund ALEC and its stand-your-ground political agenda; and they’re waging a multimillion-dollar war against the Affordable Care Act, trying to convince young people, through ads like the one with the creepy Uncle Sam gynecologist, that they should be afraid, very afraid of Obamacare. Through innumerable think tanks, PACs, nonprofits and dark-money trap doors, Koch money has formed a veritable “Kochopus” that reaches deep into academia, industry, state legislatures and Congress. (For more, see here and here.)
But what’s really gotten Harry Reid to put up his dukes is that the Koch-funded PAC Americans for Prosperity (AFM) has spent more than $30 million, and counting, on ads attacking Democratic senate candidates in the upcoming midterm elections. To defeat Senator Kay Hagan of North Carolina, for instance, AFM has already dropped $8.2 million on TV, radio and digital ads. As Politico puts it, that’s more “than all Democratic outside groups in every Senate race in the country—combined.” Koch money could easily flip the Senate to a Republican majority, leaving little but presidential vetoes to blunt the GOP House’s politics of cruelty.
Joe Scarborough understandably fumed at the “un-American” charge, but he framed the Koch’s power quite differently.
“Let’s first tell the truth about them and what they do, put some perspective in it,” he said Thursday. “It’s unbelievable what they’ve done for cancer research, what they’ve done for the arts, what they have done for education.”
Indeed, you can tell by the way the bros have been slapping their names on cultural institutions that they think they can get their reps fixed wholesale. In New York City alone, the New York State Theater at Lincoln Center has become the David H. Koch Theater. As you enter the Metropolitan Museum of Art, signs tell you you’re standing on the new David H. Koch Plaza. David Koch’s name had also been elevated by his contributions to WNET, the city’s PBS affiliate. That ended last year, however, when WNET ran an independent documentary critical of him. To placate Koch, they axed a second similar film, but Koch resigned from the board and took his money with him.
But by emphasizing the Kochs’ philanthropy—which, come on, is the least two men worth $40 billion each and tied at number four on the Forbes rich people list, can do—Scarborough was providing exactly what their largesse was intended to produce: praise and a media force field that can deflect political criticism. Not that Joe is terribly adverse to their politics, but the point of his outrage in the Morning Joe banter was to shift focus away from Koch policies to Reid’s breach of polite discourse. Willie Geist said that the “addicted to Koch” line “seems beneath the office.” Former congressman and nominal Democrat Harold Ford sniffed, “There’s no need for that kind of vitriol.” Only Donnie Deutsch got close to the heart of the matter, asking whether the “Koch brothers spending a billion on advertising is good for democracy.”
Training your eyes on an oligarch’s philanthropy and away from what it camouflages is to accept in some way the essential justness of great wealth. As if to second that notion, Governor Chris Christie said at CPAC last week that Reid was “rail[ing] against two American entrepreneurs who have built a business, created jobs, and created wealth and philanthropy in this country. Harry Reid should get back to work and stop picking on great Americans who are creating great things in our country.” Some of those great things include millions in donations to the Republican Governors Association, which Christie (still) heads.
Reid’s attacks are part of a larger Democratic pushback, which includes TV spots and sites like KochAddiction.com and StopTheGreedAgenda. The strategy is transparent: link GOP candidates to the Kochs and make the Kochs into villains.
Creating a visible villain is, of course, a time-honored political activity. The Dems have vilified Newt Gingrich and more recently Mitt Romney’s Bain Capital, while the Republicans’ demons include Nancy Pelosi, the Rev. Wright and Bill Ayers. As for “un-American,” a few years ago Glenn Beck falsely portrayed George Soros, the closest big-time funder progressives have to the Kochs, as a Nazi collaborator.
But beyond a bunch of liberals who follow the Koch trail, will voters know or care about what the billionaire brothers do with their money?
Paul Waldman in The American Prospect doubts it. And so far, he says, the Democratic ads aren’t up to the job. In this very busy spot, running in Michigan, the Koch brothers appear as barely identified ghosts amid a jumble of hard-to-follow words.
For what it’s worth, the things-don’t-go-better-with-Koch message is getting across, at least with focus groups. Democratic pollster Geoff Garin told the Times, “Our research has shown pretty clearly that once voters recognize the source of the attacks [on Democratic candidates], they tend to discount them substantially.” Focus groups, he said, had an “overwhelmingly negative” reaction to the Kochs’ political involvement and believed that the Kochs’ “agenda will hurt average people and the undermine the middle class.’”
Billionaire venture capitalist Tom Perkins might have been only kidding when he said that democracies should be run more like corporations: “You pay a million dollars in taxes, you get a million votes.”
But if you pay for enough misleading ads, that is, in effect, what a million bucks can do. And the more the media unthinkingly hail your charitable giving, the more mileage a million dollars will get you.
By: Leslie Savan, The Nation, March 10, 2014
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