Notes from the Left Coast

Drummond Pike’s Blog

The Chronicle on Philanthropy reports on their website this week that the leaders of the Council on Foundations and Independent Sector have come out publicly in opposition to the President’s budget proposal that proposes in 2011 to reduce the tax savings on charitable gifts from top rate-payers’ current 35% to 28%, the lower rate of taxation paid by the vast majority of taxpayers. The example is often given for the high income donor giving $100,000 to a charity of her or his choice; under current law, the donor would save $35,000 in taxes, and in the future regime, this would be reduced to $28,000 for the same gift. The argument of our colleagues in philanthropy is that this will lead to a reduction in charitable giving, though I haven’t seen a study that supports this empirically. If true, I suspect the influence would be most likely marginal; market changes are far more of an influence on charitable giving practices. And, to be sure, no one is suggesting a change in the most important factor: the avoidance of capital gains when gifts are made of appreciated stock.

Let’s look at the other side of the equation. What’s so wrong about doing this? Let me start with the matter of basic equity. Why should two taxpayers, both giving the same $10,000 gift to the same charity, receive differing tax benefits because one earns more money than the other (and therefore pays a higher tax rate)? In some ways, the lower-earning individual is giving away more value relative to net income (and likely net worth as well).

Second, let’s look at just what this proposal is intended to help – the creation of a program for universal health coverage in America. This would address a profound social tragedy, and the deep shadow of embarrassment in which the US lives internationally, if we could achieve it. Wouldn’t it make sense if the philanthropic sector, contrary to expectation, embraced this policy initiative and asked, instead, “how can we help?” Perhaps sacrificing a bit of the privilege we experience, living outside the realm of the taxable economy as we do, in order to contribute to the final outcome would connect us to the deeper social good. After all, aren’t we really supposed to be about the public good?

Let’s instead support the proposal. If it succeeds, 45 million Americans will, for the first time, have access to health care – something that all our grants for many years could never finance.

Also of interest:

hr676.org:

According to news reports and analysis the Bush Administration believes it reasonable for the people’s employees in the Executive branch to be permanently exempt from having to testify before the people’s representatives about their activities while in office….even long after they have departed the government. The matter at hand has to do with Harriett Miers and Karl Rove and the Congressional inquiry into the famous firings of US Attorneys who failed what is largely understood to be a test of partisanship. That US Attorneys are supposed to be above the partisan fray in upholding federal law would hardly seem controversial, but for the past 8 years, we’ve seen the most severe challenges to this idea one can recall.This is a matter where I think the progressive community must speak up. It is not clear that the Obama White House, so clearly wanting to “look forward,” will want to see John Conyers and others pursue these matters. But there is such an important principle at stake – the fundamental balance of powers. If members of the Executive Branch cannot be held to account, especially after any vulnerability to executive action has ceased with advent of a new administration, we might indeed end up with the “imperial presidency” as some characterized the Bush/Cheney regime.We should watch for the outcome of the US Court of Appeals case involving Harriett Meirs and Josh Bolton on the US Attorney’s firing inquiry in the House. They have asserted this “absolute” privilege and the new Administration will have to present their position on privilege at this early moment in their tenure. Something worth speaking up on, that’s for sure.

For years, we’ve lived with this crazy idea put forth by conservatives that “class warfare” is a terrible thing that Democrats often fall back on and it only divides America. In January, 2003, then-President Bush decried critics of his tax cut proposals as agents of “class warfare,” despite the diminutive response the proposals were receiving from the opposition. It was an aggressive, in-your-face statement that set the stage for the bi-elections later that year. What would have been more appropriate would have been for him to be talking into a mirror, for few can now doubt what Bob Borosage of the Campaign for America’s Future has been arguing for years – namely that the signature accomplishment of the Bush years has been to drastically weaken the lot of working Americans. Everything from tax cuts that gave 90% of the benefits to the already wealthy to coddling of Wall Street at every possible opportunity that arose, most notably in the deregulating of the financial markets. 

In many ways, we have been at this since “supply-sider” Ronald Reagan assumed the presidency. He quite straightforwardly sought to shrink government while embracing the free market cheerleaders who believe in unfettered markets. Tax cuts became the answer to everything. Reduced federal spending was close behind. Outside of the military, real progress in the evolution of governance in America came to a standstill for the past 28 years. So perhaps it is no great surprise that the barons of Wall Street are having a bit of difficulty adjusting. One loves the story about John Thain, recently dethroned from Merrill Lynch after revelations that he spent $1.2 million of the firms money to “redo” his office about a year ago. While the meltdown hadn’t taken full force then, it was well understood that the financial giant was in trouble and had been losing money for some time. It has, of course, ended up in the dumps, recently purchased for a song by B of A. What I love about the story is the simple idea that he apparently thought the role to model (as all CEO’s realize that role modeling is a core requirement) was that of potentate not worker bee. Having an antique “commode” worth tens of thousands of dollars somehow conveyed a message he cared about. 

Thain is hardly alone. It seems as though the titans of industry, whose bonuses long ago departed any connection to the overall financial performance of their companies, view the ascension to pinnacle roles as a license to take all they can get away with. Reading that 2008 Wall Street bonuses amounted to some $18.4 billion in the worst financial period since the Great Depression is simply astonishing. If not illegal, it is certainly the moral equivalent of stealing. So, I say a pox on all their houses. Let’s “claw back” everything we can, but let’s also bring these people back to earth. Maybe establish a legal limit on the ratio of highest paid to lowest paid employees? In my organization that ratio is about 8 to 1. So the non-profit world is a bit different. Let’s set it for 20 to 1 in the for profit world. I bet there would be a lot more well paid folks on the low end of the scale. So, what was wrong with the idea of class warfare?

As we celebrate the dawn of a new day in Washington, change is happening in other places as well. One – Vancouver, BC – elected a new mayor just days after President Obama was elected. I think you will find his Inaugural Address, copied below, deeply inspiring.

Gregor Robertson stepped down two years ago from the Tides Canada Board before running for the Provincial Legislature, prior to the Mayoral race, but he is an honored friend and great supporter. Like Obama, he is a confirmed and deeply committed family man, and he shares an openness to new ideas, many traditions, and fresh approaches. It’s really worth a read….

“Deep Local

Welcome. We’re gathered today in the traditional territory of the Coast Salish people, and I want to begin by thanking them.

As we honour one tradition, we renew another: bringing the inauguration out of City Hall and into the community.

I want to thank the residents of South Vancouver for welcoming us all to the Sunset Community Centre. This is one of my favourite places in the city, beautifully designed by Vancouver architect Bing Thom. His design draws on our farming history, as well as our cultural diversity and the grid of our streets and avenues today. But it’s also open: to the people, to the community, to the future. It’s one of Vancouver’s greenest buildings. I can’t imagine a better place to begin this new chapter in our city’s story. (more…)

There was a most intriguing article in the NY Times Business section last Friday, just below the fold. It recounted the story of what happened in Sweden when they hit a major banking fiasco in the early 90’s. The go-go 1980’s had precipitated the crisis, but their solution – advanced and executed by right of center political leaders – was to nationalize the banks, wiping out the shareholders, and to put the “toxic” assets into what they called the “bad bank” (later named Securum) to hold until economic conditions changed enabling a sale. Portions of this strategy were borrowed from the US when we hit that terrible crisis in the S&L industry in the late 1980’s. Instead of calling it a “bad bank” we called it the RTC (Resolution Trust Corporation). Defunct S&L’s were placed under the control of the RTC, and their assets sold off to bargain-hunters. A very large part of the “bailout” was repaid through these sales. As important, the equity of the risk-taking shareholders of the S&L’s was wiped out.

In the Swedish case, Securum took over nearly $3 bn of assets and ended up repaying the national treasury nearly 60% of what had been invested. Importantly, the creation of the “bad bank” instilled fear among some of the large banks that didn’t want to fall under government control. SEB, one of the larger banks that was controlled by the Wallenberg family, set up their own “bad bank” into which they placed the bad assets, allowing the remaining parts of the bank to recover and thrive. This private bank did the same as the government enterprise and sustained losses, to be sure, but it was done entirely outside of the government’s program.

So far, as Paul Krugman has been arguing, neither the Congress nor the Obama administration has indicated much interest in this alternative, though George Soros and other observers have been increasingly vociferous that this will be a necessary part of a successful intervention. The fear that he and others have is that the more centrist economic appointments (Summers, Geitner, Furman) may not be willing to stare down their friends and colleagues in the financial world and wipe out the shareholders of the likes of Citibank. If they don’t, however, we may end up in the mire for a good deal longer.

Also of interest:
“George Soros on America’s New Engines of Growth” (2:24):

Like vast numbers of Americans, I watched with awe and tears this morning as President Obama was sworn in as the 44th President of the United States. It is a remarkable event I never expected to see in my lifetime. I was an adolescent when the Civil Rights movement came of age. I watched television news of non-violent protesters being attacked with Police dogs and fire hoses. I was horrified when the FBI was sent to Mississippi to find, and then confirm the deaths of, 3 young civil rights workers – none older than my brother who had signed up for a “freedom ride.” And, I watched the triumph of one of the greatest legislators the US presidency has ever known – Lyndon Johnson – in passing the Civil Rights Act and, later, the Voting Rights Act. But I have also watched the grinding poverty of inner city communities and the intentional ignorance that nearly 30 years of conservative rule has fostered, only making things largely worse for young African Americans. Rhetorical flourishes such as “No Child Left Behind” give the lie to the slow, inexorable dismantling of government programs intended to address structural inequities resulting from the centuries of slavery and discrimination that is our history. And yet, here we sit with a new President whose parents literally could not have lived in many states at the time of his birth because of their different races. It is truly amazing. But, as Martin Luther King III said just yesterday, his father’s dream has not now been realized. It is still a dream. But it is a dream that now has legs. It is more than an abstraction to say that opportunity to attain the highest office in the land is a real thing. Barack did achieve it, so others can follow in his example. But the obstacles are still huge and will remain so for the next person to attempt what he has achieved. There is so much more to be done, and I can’t think of anyone who is not inspired to redouble our efforts, recommit to our goals, and rekindle our dreams of a world that we would be proud to call our own – just, righteous, compassionate, and peaceful. It is closer today than it was yesterday, and tomorrow, we need to get back to work to help realize that dream.

Also, of interest:

“In Honor of Madelyn Dunham: To Dream from MLK to Obama Inauguration”:

 “Barack Obama on the Inauguration”:

Like many, I’ve been entranced with the unraveling scandal involving Illinois’ governor and his crude attempt to leverage his power to appoint a replacement for the President-elect’s former Senate seat. US Prosecutor Fitzgerald, well known for his successful conviction of Scooter Libby, has adopted all the proper outrage that Blagojevich would so crassly seek recompense for this appointment. And it was crass. Stupid might also describe it, since he had quite publicly been the target of investigations for years. Evidently hubris can overwhelm almost any elected person, or so it seems. 

What’s missing from the debate, though, is a little realism. We have an electoral system that is so dependent on big fundraising as to be absurd. Senators from big states, it has been estimated, must raise $20,000 per day in office in order to finance their reelection campaign. This is not a friends and family affair, folks. People in office raise money from anyone they can just to survive, hoping they miss the taint of someone crooked in the process. The problem with Blagojevich is that he said it just so directly. But does anyone out there think that people write big checks for the fun of it? No, they write checks because they want something. 

Now, sometimes what they want is is better policy on an issue. I have a friend who is a big donor in politics. What she cares about passionately is that we end the “drug war” and all of its terrible effects on communities of color who bear the greatest burden of incarceration despite the fact that drug use is roughly the same across racial lines. She simply wants a voice for reason in a debate that is full of knee-jerk responses from politicians too scared of being attacked for being “soft” on crime when what we are dealing with is a public health problem fueled by a criminally controlled black market. 

But for every person like my friend who wants to do some good, there are legions of selfish, private interests trying to change policy for their own benefit or that of their businesses. Anyone who doesn’t try to connect money in politics and the 1990’s deregulation of the financial industry is just being foolish. Blagojevich’s scam to get others to contribute to his electoral funds is minor and almost innocent compared with the influence wielded by Big Oil, the defense industry, and Detroit over the years. They used money and influence to foster war, privatization, and unbelievably short-sighted fuel efficiency standards, all of which are costing us billions. 

Let’s be real. Politics is a dirty game and no one can figure it out. Conservatives on the Supreme Court ruled years ago in the Buckley v. Valeo case that spending money equated free speech in politics and could not constitutionally be constrained. Since that decision in 1976 during the aftermath of Watergate when efforts to reform political giving were active, it’s been a steady downward spiral.  The fact of the matter is that there are no real constraints on how the game is played. 

The political world is full of quid pro quo arrangements. People just don’t talk about them in that way. If any of us think that Harry Reid or Newt Gingrich never asked any of their supporters to support another politician’s campaign, you are in denial. If you think that by delivering dollars to those politicians Reid or Gingrich did not benefit, you are also in denial. Backs get scratched in politics. If Blagojevich had just publicly said he was “considering” appointing someone and then gone to every major supporter of that person, asking them to have a fundraiser for his Gubernatorial Committee, do you doubt that they would have delivered big time? Of course they would have. You just aren’t supposed to talk about it.

Today, I write about the interrelated topics of justice and compassion. First, justice. Normally, I find myself railing about the plight of the disenfranchised and the powerless, but this piece is about the powerful and how remarkably unjustly they are being treated – the leaders of the great financial and now auto companies whose collective imminent demise is being prevented by the intervention of the federal government that is infusing, or considering the infusion of, public tax dollars to prop up their enterprises. Without argument, almost all of the managers still in charge of these failing institutions remain in charge, and tax dollars in the now famous TARP program are all that may prevent a disastrous devolution of the economy into depression and massive unemployment that will drag down the global economy as well. What is unjust about all of this is that they are NOT being held to account; they are not being dismissed for having failed the interests of their shareholders or employees; and they are not being permitted to learn the lessons of their terrible decisions. 

Like a child caught cheating on his or her homework, failure to apply sanctions may consign them to a future of many more bad decisions. It’s a terrible thing to miss the important lessons of life, and the heads of Goldman Sachs and General Motors should be permitted to miss the experience. After lifetimes of espousing the wisdom of free markets, they rode that wisdom to the brink of social disaster. Wouldn’t it also be a fine thing to have them realize that free markets need to be checked by appropriate governmental regulation? It is not a minor matter that taxpayers will end up getting the short end of things as well if these people remain in power. Shouldn’t bailout funding of these failed enterprises be driven not only appropriate public ownership, but also by enterprise based commitments to social goals: the financing of renewable energy or the development of highly efficient vehicles that must be developed for our climate’s future if humans are to survive? But I digress. In part, my plea for more just treatment of mega-failed managements of these mega-businesses – such as firing them lock, stock, and barrel – is, oddly enough, born of compassion. Without such treatment, they risk a future where their moral compasses and analytical tools will not connect the dots between their failed judgments and their failed institutions.

If they were in high school, it would never be possible to escape that connection between behavior and outcomes. In the words of a classical parent, they will be better for the experience. Speaking of compassion, I must refer you to a most remarkable 3 minute video on the internet inspired by one of the TED prize winners from this past year, Karen Armstrong. It could, and hopefully will, change your life: http://charterforcompassion.com/.

I much enjoyed Pablo Eisenberg’s “A Nonprofit Agenda for the Next President” in the 10/30 issue of The Chronicle of Philanthropy. Nice piece. I even agree with many of the six major points he raises as an agenda for the sector with the next president. But he ends with what, to me, is by far the most important point….”Maintain a strong advocacy role,” and you have to read a long way through to get there. For me, that’s the most important thing the non-profit sector can do. Speak up!

There is a certain civility that extends throughout the sector, sometimes to our detriment. Perhaps it is born of the privileged class of people who create private philanthropies, or maybe it is because the independent sector is so fearful of the government adversely reacting to criticism, but, whatever the antecedents, nonprofits are painfully polite. So when Pablo leaves until last the idea that advocacy from the sector to address the real social ills that we care about, he seems to fall into this pattern.

Instead, I wish he had led with the idea that, with a new administration, NOW is the time to make clear what we hold to be critical, and the ideas we have been working on for how best to address those things. Jim Josephs, whose tenure with the Council on Foundations brought some of the best we have ever seen from that organization, used to talk about the role of philanthropy as being “society’s ‘R&D’ department.” I loved that analogy, for it gave in such a simple fashion, a clear mission for us all. We have the privilege of sitting outside the tax system and, in response, we have an affirmative role to play in solving some of our most challenging problems. We have the resources to think, to experiment, and to imagine new solutions. We also have an obligation to act on them.

So, rather than respectfully asking for an office in the White House, I’d far rather see Bob Greenstein (Center on Budget and Policy Priority) publicly calling for HIS ideas for a new approach to taxation, or Cecile Richards (Planned Parenthood) offering new ideas on how to make reproductive health services broadly available, or Rand Beers (National Security Network) suggesting some viable ways to change our military engagement in the Middle East. That all comes first. Then, well after suggesting a higher payout for foundations, we could say it would be nice to have an office in the White House to help give the sector a higher profile, better accountability, and the like.

An interesting referendum is being considered in California – Proposition 5 – that seeks to expand the availability of treatment alternatives to incarcerating non-violent drug offenders. Opposed vehemently by prosecutors and the deep-pocketed Prison Guards Union, few give it much chance of passage. In a cash-strapped state spending more on prisons than higher education, why would that be the case, especially since the efficacy of alternative approaches have become well established. I think to understand it, one has to reach back in time.

In his wonderful book, A Commonwealth of Thieves, Thomas Kennealy tells the tale of early Australia and how it was settled by convicts transported from Britain to relieve the overcrowded jails. From the early 17^th through the mid-19^th Centuries, British law focused harsh punishment on crime, particularly property crime – theft of even petty amounts of material or money led to death sentences or, if folks were fortunate, to the a humane outcome: transportation to the Colonies. We have all heard of the Australian example – indeed, the transportation of some 150,000 convicts to the shores of New South Wales and elsewhere on the continent has become central to their national identity. It gives Aussies a certain rough willingness to try anything, to dismiss the role of class, and to strike independent positions on many issues.

What I found so interesting in reading this history was a brief comment from Kennealy that the reason for the First Fleet of convicts being sent to Australia in 1789 was because the recent American Revolution had cut off the decades old practice of shipping convicts to America. Indeed, 60,000 American colonists had been delivered from Britain’s prisons by the middle of the 18^th Century. Perhaps this explains Samuel Johnson’s famous remark, immortalized in James Boswell’s biography, describing the colonists in 1769. “Sir, they are a race of convicts and ought to be content with anything we may allow them short of hanging.” I don’t think he was a great fan of the Founding Fathers, but that is a different story.

Two things strike me about this little known aspect of the early immigration to America. First is just that – it is little known. In contrast, Australia, which didn’t have the fortunate stories of the Pilgrims or the Puritans or the Huguenots that permitted Americans the myth of being a land of religious refugees, the idea that most folks sprang from convict stock is deeply imbedded. True as it is of America, though to a lesser proportionate degree, Americans have never seen themselves in this way.

The second has to do with redemption. I’ve always been curious about the deeply held notion of punishment in America. Do something wrong, be punished. There is little credibility given the notion of reform or redemption: three strikes, and you’re out. Again, Australia contrasts starkly. Kennealy writes about a famous Irish pickpocket, George Barrington, who was brought to Sydney in the second flotilla of convict ships (some of which had been diverted from the slave trade). In part due to his notoriety, and in part to his subsequent recognition as Australia’s earliest historian, Barrington helped imbue Australian culture with the idea that one can change for the better if given a decent chance. In Britain, his story became widely known as well.

I have long given up the notion that rational argument results in enlightened electoral outcomes, and I doubt Prop. 5’s future will rise or fall on the economics that may favor it. No, I suspect it will be the cultural notion, so deeply ingrained in our awareness, that suggests offenses require punitive response to teach the pain of breaking laws. If only the response of those poor, addicted souls, whose hollow lives fuel the criminal justice engine, would conform to the approach. Alas, the complex social and psychological dynamics associated with addiction have never been shown to do so.