Somehow, amidst the din of the holidays, a true gem of an idea is taking flight. And, if it works, we may be looking at a way to (finally) fix what’s wrong with the money system in the US. And, again if it works, it should please all those anti-regulatory conservatives out there who somehow seem to think the Great Recession was caused by working folks who borrowed more than they should have to buy houses. Like all those Wall Street suits had nothing to do with it. But that’s another story.
Taking a cue from the healthy foods crowd who brought us the idea of buying locally, that sneaky duo of Rob Johnson and Ariana Huffington have been pushing this new idea…. “Move your Money.” What a concept! Green your money!…well, I suppose it’s already green, but it’s not Green. It’s not local. So, how to get this across?
It turns out that one of the mainstays of our holiday season is a wonderful film called, cleverly, It’s a Wonderful Life.
Initially considered a flop in 1946 when it came out, it has emerged as perhaps the best loved American holiday film ever. And the enduring story has such strong parallels to today’s financial crisis, it’s scary. If you haven’t seen it, do yourself a favor and do so. If you have, I don’t need to remind you about how a community-based bank can prevail over all those avaricious Wall Street sharks. And the real point is, let’s remember, and then act like, George Bailey in the film, or rather his customers. Let’s put our money in locally based banks that know us. Let’s take all those savings out of banks that are “too big to fail” because, in fact, they HAVE failed. Were it not for us taxpayers, they wouldn’t be in business today, much less enjoying record-setting bonuses that seem to suggest an inverse relationship between financial performance and executive compensation.
So check out http://moveyourmoney.info and consider the option. The four minute clip, largely from the movie, captures it all so well.
The Wall Street Journal reports that the effort to extend the current Estate Tax regime through next year has failed. As part of the Bush tax cuts, the exemption, above which taxes are due, has been slowly rising. The Conservative plan, put in place in 2001, phases out the tax entirely next year, and then, in the following year, reverts to the 2001 rates and much lower exemption. They couldn’t make it permanent then, as they wanted to do, because it simply cut too much revenue out of the equation, even for the then-dominant Republican leadership on both ends of Pennsylvania Avenue.
Beneath the din of the healthcare debate, and Joe Lieberman’s stunning profile in cowardice and betrayal of his constituency, the inexorable process of displacing taxes from the super-wealthy to the middle class continues its stealthy pace. It is stunning to me that in these particularly dire economic times, the progressive majority in both the House and Senate has squandered the opportunity to extend current year provisions into next year. Neither the House nor the Senate could muster the will to adopt the extension. Lieberman-type leadership at its best?
And the conservatives – wow, they are a whole other kettle of fish. Cynical beyond measure, they figure a bankrupt government is better than no government at all. (Remember that stellar statement by neo-conservative, Grover Norquist: “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.” So helpful in tough times.)
But this Estate Tax matter is really serious for the non-profit sector – not that you’d really understand that from the way many in philanthropy have used their considerable resources. The Council on Foundations, for instance, does support making permanent the current estate tax regime, though the matter shows up way down their list of public policy priorities, and one has rarely if ever heard the Council’s leadership making the case for the Estate Tax. Even with the more broadly-based, and often far more insightful, Independent Sector, this issue has not really achieved traction with the membership despite the best efforts of its leadership to remind us all of its importance.
Best estimates suggest that the sector will lose $25 billion each year, if the estate tax is abolished. The incentives for the creation of new foundations or the making of very large testamentary gifts to churches and non-profit organizations shift from financial to purely altruistic. In other words, without the tax deductions, people give less. And it means that if a billionaire expires during the next calendar year, she will pass down that entire fortune to her children or other beneficiaries intact. No taxes. No obligation to share with the society that enabled the accumulation of that fortune in the first place. As Bill Gates, Sr. has often commented, these huge fortunes are not easily assembled in other parts of the globe. The infrastructure, educational systems, regulated financial markets (okay, so we still have some work to do!), transportation systems, and everything else that contributes to the creation of successful businesses needs to be supported somehow, and the Estate Tax is a valuable tool for this.
Even more compelling to me, though, are the tragic social and economic consequences evolving from the advent of a new, permanent Upper Class. Declining family size almost ensures that fortunes of $100 million or more can become self-perpetuating fiefdoms in economic terms. In a manner similar to the nobility of the Middle Ages, who reigned over their lands with impunity through primogeniture (i.e. the oldest son gets the whole thing), the new economic elite will become sequestered and insulated from the broader society. Taxes on the income or realized gains from a large fortune will hardly dent its ability to be self-perpetuating. I just fail to see how this benefits society, this diverse and dynamic set of economic and social forces that has created so much in the world. In Kevin Phillips’ Wealth and Democracy, the author draws out the inextricable tie between social equity and the vibrancy of our democratic practice. The fact is inescapable – government must dampen the accumulation of “super-wealth”, and use the proceeds to create opportunity for “the many,” for, after all, the latter is what has always produced the best that America has achieved.
Among European progressives, there is a strong rallying cry for financial reform through the closing of tax havens. A French leader was just at the PES Congress podium decrying the loophole – perhaps in the EU? – that permits tax havens to escape more stringent regulation because there 12 of them and they have treaties with one another. If one has 12 such treaties, then you are somehow off the hook. I clearly need to learn more about this! It’s fascinating that progressives in the US aren’t more focused on this issue. This recent case with HSBC where the IRS finally has acquired access to a list of thousands of American holders of offshore accounts only addresses part of the problem and hardly serves to take the issue off the table.
It is an interesting thing, as I’m becoming more familiar with the issues before the PES Congress (http://www.pes.org/), to begin to understand the confusion European progressives seem to be experiencing in their failure to gain more traction with the voters even in this period of economic dislocation. It’s vaguely reminiscent of the confusion plaguing the Republicans these days – they are so certain they were right, they just can’t understand why folks don’t respond. Perhaps it’s just the natural swinging pendulum.
Just now, a French leader is decrying the failure of Europeans to address the financial crisis because of their ongoing failure to leave national agendas at the door and address the system as a whole.
She’s then followed by the Finance Minister (I think) of Austria who argues that the financial crisis is not over because the stock market is rising – instead, the true measure is when the unemployment rate declines. He went on to push for an aggressive requirement that the financial industry be required to finance an insurance pool that will preclude the need for taxpayer funded bailouts in the future.
Next up is the head of the Czech Socialist Party who argues for a unified surveillance program or capability as well as the Tobin Tax (http://en.wikipedia.org/wiki/Tobin_tax) that has gotten a good deal of attention at this Congress.
Last, Javier Moreno Sánchez – Global Progressive Forum’s new leader – announced a new campaign for financial reform – get rid of toxic products, pass a Tobin-like Tax, and implement a regulatory regime; the campaign is called the Europe Campaign for Financial Reform. Unlike the US, where energy seems to be flagging to get these ideas in front of a Congress preoccupied with healthcare and other matters, Europe seems more prepared to address this thorny issue. Not the first time, I should think.
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As the PES Congress winds down, delegates slowly head for the trains or the airport. In a slowly emptying hall, a couple of fascinating speeches concluded the gathering.The first, by a French leader whose name I didn’t catch, noted the absence of elected officials from the crowds. In part, he said, this reflected the electoral challenges experienced by social democrats and socialists in the recent EU elections. But in part, he argued, this resulted from the struggle of progressives to establish a clear identity. As with the first day, this sounded much like an echo from the post-2004 US experience.
Poul Nyrup Rasmussen then returned to conclude the proceedings. His remarkably personable way of communicating helped him accent the plan that gave rise to his runaway election to another term as President of the PES: grow the activist base of the Party from 20,000 to 50,000 by the next Congress, strengthen the structure of the organization, and run campaigns that clarify what progressives stand for: job growth, a green economy, and financial reforms. I conclude that we will see much more of this man over the coming years.
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After lunch, I was sought out for a meeting with Javier Moreno Sánchez, the new Secretary General of the policy organization associated with the PES, the Global Progressive Forum, and several of his staff. Having delivered a speech in the morning, and otherwise been running ragged for the duration of the Congress, he looked tired but happy. His talk, referenced above, reflected his dominant policy interest – the passing of effective financial reforms for the EU. It turns out they had been hoping that Rob Johnson, my good friend who is now heading up a new program on economic policy with the Roosevelt Institute, would have been with us today to deliver a speech, but missed his plane. Needless to say, it would have been warmly received.
As we explored the ways the GPF and Tides might collaborate over the coming period, and there were many, I had the sense that this wild-haired idea of coming so far was indeed a stroke of good fortune for us both. Our nascent project to establish a presence in Europe will get a real jump-start as we build this relationship on the many topics of mutual interest: financial reform, immigration policy, Afghanistan, gender equity, and advancing the possibility of a green economy. The PES/GPF network is comprised of our European counterparts, and we should look forward to getting to know them over this next period.
As the only American attending this conference (so far as I could tell), I wondered if the boatloads of our colleagues, jostling one another for a glimpse of the official sessions as the meetings in Copenhagen commence, will be as fortunate. Somehow, I doubt it.
Thanks for taking one for the team. It is so unbelievably absurd to experience the power of the rightwing attack machine, especially when what you are doing is so basically decent, and smart, and intended to help everyone, even the morons who went after you.
We know one thing about dealing with these people. Facts don’t matter. Fear matters. Whatever they can do to twist things to make you into a scary force intent on destroying our way of life, they will do. And they will do it in what Charles Blow so aptly describes as “talking in bumper stickers.” These are the same people who deride the President as being racist, who belittle anyone who tries to address global warming or poverty (not to mention healthcare), and who have literally nothing to offer other than wild conspiracy theories of a vast leftwing plot, though a plot to do what is always vague.
Now that you have stepped down, I wonder whose turn it will be next for the sick game of character assassination directed at pretty much anyone advancing ideas of social justice or sustainability. I agree with many of the voices responding to your resignation – it’s time we stand up against the McCarthyism and hateful speech that’s being thrown our way – and especially yours. It is un-American and anti-democratic.
Anyway, here’s to you and all you stand for in this world. I know you will land somewhere very soon doing critically important work. In the meantime, sleep, rest, and play with the kids. While we all know you didn’t leave to “spend time with the family”, it’s not such a bad idea.
I came to Yokohama, the historical port for Tokyo, to give a talk about our new GreenSpace enterprise to support development of new green, Nonprofit Centers. The occasion is the “TBLI” (Triple Bottom Line) Conference that occurs regularly each year in Europe and Asia.
The trip turned into a wonderful opportunity to reprise my time in Japan nine years ago, lecturing to those active in the nascent movement to create a nonprofit sector in Japan. A new law was passed in 1998 creating the possibility for these corporate structures which hadn’t previously existed in Japan. Since, there have been three refinements in the law, and there is much work being done to expand the applicability for tax deductibility. Only some 300 NPO’s are deductible out of the 36,000 that have been formed, and there are other aspects to the question of establishing clear boundaries for appropriate NPO activity in the advocacy sphere. It’s a vibrant time in this small sector of Japanese social landscape, and it holds so much potential.
One of the most interesting conversations I had was withProfessor Kanji Tanimoto and a small seminar group at Hitotsubashi University (in Tokyo) comprised mainly of executives with multi-nationals and banks (Microsoft, HSBC, etc.). We spent a good deal of time talking about Katherine Fulton’s premise that the for-profit and nonprofit sectors are converging toward each other. The old paradigm where business really ONLY cared about the bottom line is giving way to a new paradigm where success in business may in fact be more linked to practices that incorporate ESG (environmental, social, and governance) aspects into HOW businesses do business. In Japan, it would seem, the NPO sector can play a role in working with businesses to embrace this emerging awareness.
This discussion was a wonderful connector back to the TBLI Conference that had brought me to Japan in the first place. More on that in another blog post. Let it suffice to say that while our friends on the right continue to see Tides and progressives in a very limited light, there is an expanding and fascinating world out there in the business community that ties together strands of creative private enterprise and deep commitments to addressing social justice and global sustainability. The inanity – and occasional tragedy (witness the assassination of Dr. Tiller) – of the right / left divide simply must give way to a new synthesis.
Japan has unique characteristics as a society – a very different and non-western society – that may enable it to make significant contributions to this evolving possibility. A more homogeneous society, Japanese have the ability to forge a new consensus and move quickly to pursue implications of a changing awareness.
Madoff. What more is there to say. Pretty soon, we’ll be saying “so-and-so pulled the most amazing ‘madoff.’” Poor Mr. Ponzi may end up being left by the wayside, eclipsed by the shear scale, the unreal duration, and the depth of betrayal exhibited by the now jailed Bernie. But, as we all rue his very birth, I think it worth asking a question about just how and why so many charities and their assets went down the drain.
These charities that invested much or, in the case of several, all their assets with the now notorious Mr. Madoff have exposed just how poorly they oversaw the investment process. Two questions emerge. How could regulators have failed to expose the fraud long before it was made public? Second, are the standards for charities in this regard adequate for the quasi-public nature of charitable funds? The first I will leave to the myriads of people addressing it (though I will be avidly consuming every article I can find on the subject). The second question, though, fascinates me. My conclusion? The answer is a simple “no.”
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.
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?
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 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.
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