Notes from the Left Coast

Drummond Pike’s Blog

The one thing certain about elected public servants in Washington is that they really, really want to stay there. Regardless of party, the incentives to continue to inhabit the corridors of political power are deep and abiding. The problem for most of them, though, is that they spend too much time walking those corridors and not enough listening to the folks that sent them there. The perks, the deference, the hushed conversations with lobbyists for huge financial interests — they all converge to create a moss-like insulation from the sentiments of the voters. And, surprise, surprise, the voters don’t like that.

Of course, there are those holding safe seats like Sen. Shelby from Alabama who can place a “hold” on every Administration appointment in order to force the Pentagon to alter its bidding specs for a huge new contract for those planes that fuel other planes in mid-air. Turns out his state (Alabama) hosts a partner of European giant Airbus that would assemble some parts of the plane and throw off a few local jobs. This, despite the fact that US manufacturer Boeing would, without Shelby’s tweaks, likely get the entire manufacturing job and employ thousands of American workers. His narrow interest may prevail, courtesy of outdated Senate traditions, as such “holds” are a function of the filibuster rule. Just makes you want to wonder if he is aware that we are in the middle of an economic crisis where sometimes narrow self-interest might yield to broader collective outcomes.

But what’s really frustrating is that issues that really matter to millions, and about which there is broad public opinion support, can’t seem to gain visibility. Take Comprehensive Immigration Reform. Polling suggests that 80% of the electorate supports an initiative that would require our millions of undocumented immigrants to register, pay taxes, and get on the path to citizenship. Even more support the Dream Act which would allow undocumented kids, most of whom have grown up in the US, to also get on the path to citizenship upon graduating from high school by either entering the military or college.

These initiatives are simply waiting to be brought forward for a vote. But even feel-good legislation that has meaning, like the Dream Act, has fallen into the trenches of partisan warfare where the minority party has decided that the best thing they can do is say no to everything. As dismaying as that tactic may be, it is effective in the context of the country’s current mood. But, for all those incumbents on both sides of the aisle who are just hankering to return to DC after this fall’s elections, be fair warned that doing nothing may do you in.

Increasingly, the remarkable possibility is being discussed where Republicans may again assert themselves as majority in one or both houses of Congress. One can be sure that getting things done in Washington will be as hard as it was after the same thing happened in 1994 with Gingrich’s ascension as House Speaker. One remembers his “Contract for America” not for what it accomplished legislatively, but for the toxic atmosphere it created in Washington that continues to this day.

There are rumblings that a huge march for Immigration Reform is being discussed for the spring. Will it remind the DC do-nothing-until-we-have-to folks, that “no” is not an option?

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.