The Lifelong Endowment

T99 over at Grim's Hall recently put up a post called "The wages of consent". It points out that:

A welfare state threatens to become a system in which the most valuable service some voters can offer the market is to elect a politician who will drain resources from those who didn't elect him.  The politician pays for this service by routing a fraction of the loot back to his loyal voters.  The welfare state differs from our earliest attempts at state-administered charity in that the politician no longer is commandeering and redistributing only a small fraction of the nation's wealth to a small number of the most desperately needy.  Now he's commandeering from 49% of voters and redistributing to 51%.  Once the politician realizes that that's the path to staying in office (where he makes a handy living by skimming off the top of the redistributed funds), we are well on our way back to a command economy, one in which a centralized power directs where most of the resources shall be routed.  That way lies poverty for everyone.

and asks:

How do we stop a pernicious system of votes for hire?

I believe the ship has sailed as far as ever getting back to a system where people in the United States don't expect money to be taken from some of us to and given to others of us, so the fact that T99 is not asking, "How can we convince 51% of the people that wanting money to be redistributed to them is a Very Bad Thing?" seems to me to be a step in the right direction. That is, she is not asking how we can do the impossible but, rather, whether there's a way to do the maybe-perhaps-possible. There may be.

Quite a while back, someone who read my blog emailed me about a plan he had to address this very issue. Called the Lifelong Endowment*, the plan takes the government out of the equation by setting up a direct transfer of money from those who have more to those who have less. The plan document** detailing the Lifelong Endowment summarizes it thusly:

It assesses sixteen percent of all personal income and retained corporate earnings on a monthly basis, and distributes the full proceeds in equal shares to each adult citizen and quarter shares to minor citizens. Neither the assessment paid nor the benefit received is subject to federal income tax. [snip] Two pieces of companion legislation complete the proposal. The first eliminates the Social Security Old Age, Survivors, and Disability Insurance program (OASDI), and returns all employer and employee payroll taxes to the employee as wages. It also guarantees beneficiaries a total Lifelong Endowment benefit not less than the total OASDI benefit they would otherwise receive. The second measure is a corporate income tax rate reduction sufficient to make the proposal revenue-neutral for corporations.

The math here is simple and lovely. The Lifelong Endowment is:

- Flat in assessment: everyone pays the same percent.
- Flat in distribution: each adult gets the same as every other adult; each child gets the same as every other child
- Perfectly redistributive in effect: the poorer you are, the greater your net positive; once you become rich enough, the effect is a net negative

Thinking about this approach does require that we accept the inevitability of some kind of redistribution and turn our attention to minimizing its ill effects. Anyone who is still attempting to eliminate redistribution itself will not find this approach helpful. I encourage everyone, however, to think about how various scenarios would play out under this approach. When I did that, I usually found that this approach worked quite well even in those situations where I was sure I could find a fatal flaw.

How does the Lifelong Endowment "stop a pernicious system of votes for hire"? By getting the Federal government out of the redistribution business. This happens first because the sixteen percent assessment does not flow to the Federal government. Rather:

The collection of the tax and the apportionment of its receipts occur monthly. It is administered through accounts provided and maintained for that purpose by the banks of the United States, the choice among which is made according to the convenience of each individual.

The government has no control over this money and is unable to "make a handy living by skimming off the top of the redistributed funds". It "has no role other than to enforce [the plan's] operation". There is no reason to offer votes in exchange for loot since the politician has no loot to give. There are thus no special interest groups arguing for greater support for their group.

Second, because they have no control over the money, the government and its employees and sub-contractors also have no control over recipients of the money. In speaking of those who currently "look to … [government programs] to satisfy basic needs", the plan document says:

They must accept the definitions and priorities set by the [government program] for the problems that they face and for the solutions to those problems; but these and all other aspects of the [government program] emerge from public-choice processes that reflect interests unrelated to their own. They must forego productive activity on their own behalf in order to meet program eligibility requirements, but attend without fail to unproductive dealings with executive bureaucracies. Both the [government program] and the relationship of citizens to it depend solely on public-choice and resulting political factors that again reflect interests other than their own; but the possible (or threatened) loss of their [government program]-client status can command their support for those interests nonetheless. Through a combination of requirements, prohibitions, and incentives, current assistance programs are thus destructive of the personal, economic, and political liberties of those who must rely on them.

The Lifelong Endowment removes this power from the government. The money is distributed to everyone equally with no intervention from or direction by the government. Recipients need not adopt or forego specific behaviors in order to be "allowed" to receive this money; they need not support policies they don't like in order to elect the politicians who will continue to "give" them the money they need to keep body and soul together:

Citizens are not beholden for their benefit to the patronage of a political faction, but rely instead on the general prosperity that both their own efforts and the genius of their shared civic endeavor help to create.

The Lifelong Endowment also means that people who need financial assistance but would like to support themselves don't have to worry about losing the assistance when they start trying to help themselves. A young mother can take an entry level job without worrying that she'll lose subsidized day care: she goes right on getting her share of the Lifelong Endowment. Even if a big chunk of her salary goes to pay for child care her family is no worse off than it was before and she has her foot in the door of the work world. If a man with an injury that makes it hard for him to work 40 hours a week at his previous well-paid job finds an easy, low-paying job 15 hours a week, he doesn't have to worry he'll lose his disability payment:

All citizens alike can exercise and develop their personal autonomy, defining and ranking the challenges of life in accordance with their own perceived interests. All citizens have the identical incentive to pursue their economic self-interest through productive and voluntary market exchange.

The Lifelong Endowment has effects beyond interrupting what T99 calls "a pernicious system of votes for hire". One of the most important is that it undercuts the idea of a limited pie where more for the rich somehow means less for the not rich. Instead we are all tied together: the more money the Koch brothers make, the more money we all get. Everyone now has a rooting interest in policies which encourage making money. The Lifelong Endowment does this by:

… tying the benefit amount directly to national prosperity. It thereby enlists the self-interest of citizens toward the prosperity of their neighbors, and thus toward creating a nation where both they and their neighbors can prosper.

In other words, once the Lifelong Endowment is in place, proposing a plan that would limit the prosperity of anyone in the country would mean limiting the prosperity of everyone in the country. When a politician starts railing against those who are making too much money, everyone in the country can do simple arithmetic to figure out how much of that "too much money" will flow into the Lifelong Endowment and thence to them - and can see clearly that if that "too much money" flows into the government tax coffers instead, everyone will see far less direct benefit from it.

Although the plan document does not mention it, there is another aspect of the Lifelong Endowment I think is important. It brings into sharp focus the question, "How much of my income am I willing to give to other people?" That, after all, is really what's happening with all Federal income support programs: Social Security; disability payments; unemployment benefits; welfare; food stamps; housing subsidies. All of it. I am giving some of my income to other people: I get taxed; you get money. However, the Rube Goldberg contraption that funnels my taxes to your wallet is so opaque that the connection between the two simply can't be grasped. This makes it very easy to agree to an increased benefit for Person A because it appears to have virtually no impact on Person B's taxes - even if Person B is me. If we extend unemployment benefits for another six months, it may cost each of us, I don't know, $1 a year. That seems like a small price to pay to help those who need assistance. But $1 here and $1 there and before you know it you're talking either confiscatory tax rates or a multi-trillion dollar deficit.

WIth the Lifelong Endowment, we're starting from the other end. We aren't asking, "How much money do we want the needy to have?" but "How much money are we wiling to ante up?" If 16% seems like a lot to be assessed but we run the numbers and it turns out that the government is already redistributing the amount of money that a 16% assessment will provide, well, guess what? That means someone somewhere is already chipping in at least 16% to provide that money. Or, more likely, our grandchildren will be doing so here shortly. In other words, this approach also brings into sharp focus the realization that money given to people must be coming from somewhere and that somewhere is other people, either currently existing or soon to be born into crushing debt.***

I do have some concerns about the Lifelong Endowment as currently proposed. First, the plan leaves intact existing Federal income support programs. Since the Lifelong Endowment would leave most of the people currently receiving them above the means-testing line, the idea is that those programs would be unused without ever being repealed. I have serious reservations about this. I believe eventually the poverty line for participating in those programs would simply be raised and we would end up with a Lifelong Endowment and massive Federal income support programs. (The framework for that is already in place with the trend toward redefining poverty from an absolute condition to a relative one.) I would prefer that the existing income support programs be discontinued.****

That said, the plan document is not just about defining the Lifelong Endowment: it is also about building a coalition to pass it. Leaving the existing Federal income support programs in place may be necessary to build that coalition:

… the continuing availability of current aid programs … serve[s] to reassure voters that their support of the proposal carries little risk.

I am also hesitant about the proposed distribution formula; I lean toward simply giving each adult a full share and children no share. My concern here is about children being seen as little ATMs, whether we're talking about families getting more money the more children they have or divorcing couples whose child custody fights suddenly get much uglier. However, I can see the appeal of providing shares for children so I go back and forth on this issue.

Then there is the assessment on retained corporate earnings. I am leery of corporate income taxes in general so this makes me uncomfortable. However, again, the plan is designed to build a coalition to actually enact the Lifelong Endowment. It may be that the assessment on corporations is necessary to make the Lifelong Endowment large enough to be embraced by a "hyper majority" and/or that requiring corporations to "pay their fair share" may be required to garner support on the Left. Furthermore, the plan envisions an offsetting income tax reduction so the effect on corporations is neutral. We should be aware, however, that once we go this down this road it will probably be impossible to ever remove the Lifelong Endowment assessment against corporations. That means we will always have, a minimum corporate income tax (at least one retained earnings) of 16%.

Finally, what keeps the same "pernicious system of votes for hire" from kicking in and resulting in politicians increasing Lifelong Endowment assessment from 16% to 18%, then 20%, then 25%?

Nothing. Which is why it would be nice to set this up as a Constitutional amendment if possible.***** The plan's author takes the long view here:

The proposal envisions that some variant of a Lifelong Endowment would eventually be adopted as a constitutional amendment. An effort to curtail government powers rather than expand them has the advantage of tactical flexibility: this and other restrictions of government spending can proceed at first through legislation, and their effects can be studied and debated, before the more difficult task of adopting a constitutional remedy is ever attempted.

My own shorter view is that while this type of assessment creep will be a danger if the Lifelong Endowment is enacted through legislation, I believe it is less of a danger when how much is really being paid for a benefit is front and center. It can sound very reasonable to say, "Poor people need more money. Let's increase everyone's food stamp allowance." It can sound even more reasonable to say, "Poor people deserve better food. Let's loosen up requirements for food stamps on top of Lifelong Endowment shares." It should sound pretty unreasonable, however, to say, "Getting 16% of your money isn't enough; poor people need 20%." And if that doesn't sound unreasonable, we're pretty much toast anyhow.

So. Comments, questions, problems, screams of outrage?

*****

Notes:

* I like the name "Lifelong Endowment" because it removes the word "redistribution" and the word "entitlement". It emphasizes the idea that we are all in this together. It removes the stigma of government handouts. It also removes the implication of charity which is a serious consideration if a plan is going to garner support from the Left.

** The Lifelong Endowment plan does not exist in a website although a summary of it can be found in this comment to a PJ Media post. When I quote the plan, I am quoting with the author's permission from our correspondence, including an approximately thirty-page document detailing the plan. Throughout this post, I have snipped specific dollar calculations and amounts when I quote from the plan document. They are not the focus of my post and they are based on older data and need to be updated.

*** I disagree with the statement by Fabius Maximus here that "Proposals like this are dross unless we see the numbers". If the plan is a way out of our current situation then we figure out if the numbers can work. If it causes more problems than it solves then the numbers are irrelevant.

**** I believe health care/insurance issues must be handled separately so I would treat Medicare and Medicaid separately.

***** In the form of the plan outlined at the comment to a PJ Media post, the author proposed a variable rate, set by an independent board. This proposal was not part of the plan document I have. I am extremely leery of a variable rate since such rates seem to travel in only one direction.

Mendacious names and a magic number

When you read outraged denunciations of the AIG retention bonuses, the writers almost always state that the bonuses went to “executives” or “managers”. Google aig+bonus+executive and you see lots of references to the “executives” who got these bonuses. Or browse through these snippets (emphasis always mine):

AIG is paying out millions of tax dollars in bonuses to their incompetent senior management [snip] like you and unlike AIG managers, I have to work for a living (Bitch PhD)

defending multimillion-dollar bonus payments for the people who run the small division that brought down the company. If the government doesn’t let them have their money, they will walk away, Mr. Liddy says, and nobody else will know how to clean up their mess....

Nothing highlights the fiction of performance-based pay quite so well as retention bonuses. It turns out that, at least for chief executives, retention bonuses are almost entirely unnecessary. (Brad DeLong)

strict limitations on the executive compensation paid by bailed-out companies (
Glenn Greenwald)

It’s much easier to despise these bonuses - and the people who got them - if we can make them all executives and managers, part of that parasite class that doesn’t really work for a living but instead feeds off the sweat of the brow of those who actually do something. However even if you grant that mangers are useless (and I most emphatically do not do so: aggravating, yes; useless, no) it’s not really accurate (or, um, true) to say that only “managers” lounging in their “executive” suites got these bonuses.

Look first at AIG’s Employee Retention Plan. It points out that:

In the first quarter of 2008, AIGFP adopted a retention plan for about 400 employees that provided guaranteed payments to employees if they worked through specified payment dates (or either resigned for good reason or was terminated without cause before the relevant dates). [snip]

AIGFP has gone from about 450 employees in five locations in early 2008 to about 370 employees today.

So of the 450 people who worked for AIGFP in early 2008, 400 signed retention contracts. Does anyone believe this entire division has 400 executives and managers and only 50 “employees”? Furthermore, 80 employees have left. Even if all 80 employees who left were from the 400 who signed retention contracts, there would still be 320 employees left who also signed such contracts. In other words, at least 320 AIGFP employees must have gotten retention bonuses. Not all of them could have been executives and managers. At least some of them must have been actual workers.

The Deal Professor at the New York Times has reviewed the actual retention contracts (he doesn’t like them - be sure to read his whole write-up) and notes something that was also in the AIGFP Employee Retention Plan (emphasis mine):

These bonuses are payable regardless of performance and are calculated at 100 percent of 2007 compensation for all employees except senior management, who receive 75 percent of 2007 compensation.

Donkeylicious prints part of an email (again, a must read) that explains why paying the bonuses was necessary. One of his bullet points begins, “Imagine you're a trader at AIGFP.” Not manager, not executive. Trader.

The Washington Post actually visited AIGFP in Connecticut and found both executives and employees to talk with. The employees quoted in the article talked about AIGFP employees leaving if they had to return their bonuses and about how friends and relatives they haven’t heard from in years were calling to say, “'Oh, my God, you work for that place?”

The executives took a broader view. One said:

Guys have worked their [tails] off to try to get value for the taxpayer. This isn't money that's being advanced to us. People have performed the work and done it exactly as we asked them to do.

Gerry Pasciucco is AIGFP’s Chief Operating Officer, brought in by CEO Edward Liddy to close down Financial Products in an orderly fashion:

"Everybody, including my secretary and including the guy down the hall that serves lunch, gets a payment," said Pasciucco, who added that he received no retention payment and has no contract.

Secretary, yes. Lunch guy, yes. COO, no.

You can certainly argue that no one at AIGFP should get any bonuses, retention or otherwise, but it is flatly dishonest to insist these bonuses are only for “executives” or “management”. Such insistence is simply a rhetorical device to further whip up outrage - especially when the writer is contrasting the bonus-receiving “management” with the UAW “workers” whose contracts with the auto companies were renegotiated as part of their bailout.

It’s pretty clear that what really angers most people is not that bonuses were given to useless higher levels but that everyone at AIG makes “too much” money. How much is too much? Two-hundred fifty-thousand dollars, that’s how much. We know that because $250,000 is the Magic Number in H. R. 1586 , “An act to impose an additional tax on bonuses received from certain TARP recipients”, also known as the 90% clawback.

Once I deciphered 1586, the bottom line was this (ignoring the issue of “Married Filing Separately” just to keep things simple):

If your base salary is more than $250,000, then the Feds are going to calculate your additional 90% tax on your whole bonus.
If your base salary is $250,000 or less and your bonus puts you over $250,000, then the Feds are going to calculate your additional 90% tax on the amount by which your income exceeds $250,000.
If your base salary is $250,000 or less and your bonus does not put you over $250,000, then the Feds are going to pretend you didn’t get a bonus and you just pay regular tax on your entire income, base and bonus combined. No additional 90% tax applies.

Short version: if you make $250,000 you’re making plenty and you shouldn’t have gotten a bonus.

This number raises a couple of questions. If $250,000 is plenty of money for anyone, why did the House only claw back bonus money from AIG employees? Shouldn’t it claw back all compensation over $250,000? Under 1586, if any AIG employee makes $600,000 in base salary and got another $400,000 in retention bonuses, the Feds will take 90% of the $400,000 but only the standard amount of the $600,000. Why not slap the 90% tax on everything over $250,000? Let the guy pay the usual tax on the $250,000 he deserves and then take another $675,000 to remind him he shouldn’t have gotten that extra $750,000. He’ll get to keep $75,000 of the “excess” which means he’ll make $325,000. Surely that’s enough to compensate anyone for any kind of job.

And, besides, where did they get the $250,000? (Rhetorical question. I do actually know where they got it but work with me here.) Maybe it’s not enough. If we look at the 2009 individual income tax rates, $250,000 isn’t in the top tax bracket. Maybe we should let people make the $372,950 that puts them just below that top bracket.

On the other hand, maybe $250,000 is too much. Why should the any employee of a TARP recipient make more than national average? If we look at the tax information I dug up for my post on the Federal individual income tax, we’ll see that in 2005 (the last year for which I could find information) the average pre-tax income for households in the Middle Quintile was $58,000. Maybe we should decide that something closer to that number is enough income for anyone. Besides, the average pre-tax income for the Highest Quintile is only $214,500 so, yeah, clearly $250,000 is way too much. Let’s get serious here. Amend H. R. 1586 to insure that no one who works for a company that got TARP money can make more than, say, $60,000 all in. (We’ll round up a little to show our generosity.)

In all seriousness, there is no way I would have approved of any bill designed to take back the AIG bonuses; I would always have believed any such bill to be unconstitutional, hasty, petty, cruel, and dangerously precedent-setting. But if the House bill had said simply, “Any bonus money you get, we’re going to tax at 90%” I could at least have understood the rationale and found it sympathetic if not convincing: the bonus money is taxpayer money and you shouldn’t be getting extra of it at a time when so many taxpayers are hurting and your company is partly to blame.

By adding in that Magic Number of $250,000, however, the House has made it clear that it objects not to where the money came from but to how much people are being paid - and believes it has the right to translate that objection into law. That’s the most dangerous precedent of all.

Missing the point

There has been a lot of chatter about what Barack Obama is really saying in that January 2001 radio show about “The Court and Civil Rights.” I think most of the chatterers - on both the Right and the Left - are missing the point. Unsurprisingly, the Left is understating how much the show reveals about the continuity of Obama’s commitment to spreading the wealth. I do not necessarily consider this deliberate. If you believe that Obama is a mainstream, moderate, liberal politician, it is quite easy to make the case that what he says in that radio show isn’t terribly significant. Equally unsurprisingly, the Right is overstating how much the radio show reveals about Obama’s commitment to spreading the wealth. More troublesomely, the Right is misstating - and I suspect misunderstanding - what the radio show actually does reveal.

The Right’s general argument has been that Obama wants to use the Supreme Court in particular and courts in general to redistribute wealth and that his comments in the radio show reveal his disappointment that the Warren Court did not do more to effect this redistribution. The Right-leaning commenters than go on to talk about how Obama will thus appoint Supreme Court Justices (and lower judges) that share his redistribution tendencies and how those appointees will then proceed to move money around faster than a roulette croupier at Monte Carlo.

As I explained, I believe this is a grievous misreading of Obama’s remarks. Furthermore because this misreading is easily rebutted by the Obama campaign simply pointing to what Obama actually said, interpreting Obama’s remarks in this way has blunted what could have been an effective Republican attack on Obama. Two examples of the argument the Right - and particularly the McCain campaign - attempted to make and the relatively easy push-back against that argument by the Obama camp can be found in a Washington Post Fact Checker article and a FOX News article. Both articles reported segments of McCain campaign spokesman Douglas Holtz-Eakin’s response to Obama’s remarks:

The American people continue to learn more about Barack Obama. Now we know that the slogans "change you can believe in" and "change we need" are code words for Barack Obama’s ultimate goal: "redistributive change." In a previously uncovered interview from September 6, 2001, Barack Obama expressed his regret that the Supreme Court hadn’t been more "radical" and described as a "tragedy" the Court's refusal to take up "the issues of redistribution of wealth." No wonder he wants to appoint judges that legislate from the bench – as insurance in case a unified Democratic government under his control fails to meet his basic goal: taking money away from people who work for it and giving it to people who Barack Obama believes deserve it. Europeans call it socialism, Americans call it welfare, and Barack Obama calls it change.

Leaving aside the fact that Holtz-Eakin got the date of the interview wrong (“The Courts and Civil Rights” aired on January 18, 2001; on September 6, 2001, Obama was part of another radio show on the same station called “Slavery and the Constitution”), he is making a case that simply cannot be backed up by listening to the January 2001 radio show. In fact, his case cannot be backed up even if all you listen to are the segments of the show that were made into a YouTube video attacking Obama. The Washington Post Fact Checker article makes this point quite convincingly. The FOX News article (which makes some very tenuous claims of its own regarding Obama’s remarks) included Obama spokesman Bill Burton’s effective push-back:

Here are the facts. In the interview, Obama went into extensive detail to explain why the courts should not get into that business of “redistributing” wealth. Obama's point -- and what he called a tragedy -- was that legal victories in the civil rights led too many people to rely on the courts to change society for the better. That view is shared by conservative judges and legal scholars across the country. And so Obama's point was simply that if we want to improve economic conditions for people in this country, we should do so by bringing people together at the community level and getting everyone involved in our democratic process.

What could be more reasonable? Obama said the courts should not redistribute wealth. (Okay, actually he said they “could” not but I’m sure Burton’s huge change in meaning will be overlooked in light of the much more obvious errors made in Holtz-Eakin’s statement.) In fact, Obama is saying we shouldn’t rely on the courts to make things better but instead on the democratic process. It’s hard to argue with any of that and the McCain campaign made a huge mistake when they tried to do so.

However, there is an argument that could have been made from the January 2001 radio show. It requires more patient elucidation than simply saying “Obama judges will take your money” but it could have been made and it would have gone something like this:

In the January 2001 radio show, Obama is not advocating use of the courts to redistribute wealth. However, it is clear from listening to his remarks that he considers the redistribution of wealth to be a good thing. In particular, his comment that he is “not optimistic about bringing about major redistributive change through the courts” demonstrates both of these points: redistributive change - in fact, major redistributive change - is desirable but the courts are not the appropriate venue.

Obama does make clear how this major redistributive change is to occur: through “the political and community organizing and activities on the ground that are able to put together the actual coalitions of power through which you bring about redistributive change.” Given Obama’s career path - community organizer, State legislature, United States Senate, President - and his remarkable grass roots organization while pursuing that path, it is clear he is putting into practice what he talks about in the January 2001 interview. He is not pursuing major redistributive change through the courts but through the very “democratic process” Burton says he considers appropriate for such endeavors.

Although the January 2001 discussion of major redistributive change occurs within the context of a discussion on civil rights, Obama’s current campaign makes two things clear. First, he has maintained a continuity of purpose and still supports major redistributive change: his “tax cuts” for 95% of Americans and his comments about spreading the wealth make this crystal clear. Second, his current push for major redistributive change is not race-based: he promises to take money from the more successful of all races and give money to the less well-off of all races.

Although Obama will not appoint judges specifically for the purpose of effecting this major redistributive change, his appointments will nonetheless reflect his long-standing commitment to such change. In that same January 2001 radio show, Obama says “the Court can certainly be more or less generous in interpreting actions and initiatives that are taken by the legislature.” Given his desire to spread the wealth around, Obama will certainly appoint judges who are more generous in their interpretation rather than less generous.

Does this mean Obama is a socialist? That’s a meaningless question. Socialism is not a yes or no proposition. Here’s a reasonable definition of “socialism”:

An economic system in which the production and distribution of goods are controlled substantially by the government rather than by private enterprise, and in which cooperation rather than competition guides economic activity. There are many varieties of socialism. Some socialists tolerate capitalism, as long as the government maintains the dominant influence over the economy; others insist on an abolition of private enterprise. All communists are socialists, but not all socialists are communists.

In other words, those who claim our economic policy already redistributes wealth or is already socialist have a point: there are redistributive, even socialist, elements in that policy. We do not have - and most of us do not want - untrammeled capitalism. For example, we want some government control over the production of goods by private enterprise in the form of regulations to keep us safer both physically and economically and in the form of intervention to prevent supposed competitors from conniving to manipulate the market. We want some government control over the distribution of goods in the form of safety nets for the less fortunate: we pay taxes to support Social Security and Medicare for the old and food stamps, welfare, and Medicaid for the poor. We want some government control over the distribution of goods in situations where that will benefit society as a whole: we pay taxes to provide college aid so all qualified students can go to college.

So, yes, the United States economy does have socialist elements but there are two important points to remember. First, in general we support those redistributive elements in pursuit of other goals. We tax ourselves to help the elderly because we don’t want them to suffer. We tax ourselves to help everyone attend college because we believe that helps our society as a whole. We don’t support redistributive efforts based solely on the idea that everyone should have the same or that those who have more should be forced to share.

The second important point is that degree matters. A society can be more or less redistributive, more or less socialist. So the question is not whether Obama is a socialist; the question is whether Obama’s proposals lead our economic system in a more socialist direction. The answer to that can only be “Yes”. By proposing a redistribution of wealth based on the idea that everyone should have the same, that those who are more successful should be forced to share, he is explicitly advocating changing the system so that the government has greater control over the distribution of goods.

Obama's proposals are neither un-American nor anti-American. So long as we are governed within the constraints of the Constitution, Americans can choose whatever path they want and that path is - by the very virtue of their choice - American. However, Obama’s approach does present voters with a remarkably clear choice of paths. Although Americans have chosen to tax themselves to provide safety nets and societal good, they have also been wary of too much drift toward socialism and have preferred to preserve capitalism, recognizing it as the engine of economic growth and economic freedom. Choosing Obama as President means choosing to move much further down the socialist path. Obama is quite correct in his belief that the democratic process is the right way to make the choice between his path and John McCain’s path but he is quite incorrect in his belief that his path is, in fact, the right choice to make.

There you are. The accurate and, I believe, persuasive argument that could be made from that January 2001 radio show. There are two problems in making it, however. First, my argument took about 900 words. That’s close to stump speech length but I don’t know what you could pull out of there as a sound-bite and I’m darn sure those 900 words would never fit on a bumper sticker.

Second, it is probably impossible for the McCain campaign to make this argument at this late date. Holtz-Eakin’s egregious misstatements in his first response frittered away the impact Obama’s words could have made if handled correctly. Any attempt to go back now and say, “Well, what we really meant about what Obama really meant...” is almost certainly going to be ignored and justifiably so.

Furthermore, I don’t have any sense that the McCain campaign has been making a continuous, coherent case against Obama on the economic front. The January 2001 radio show - like Obama’s remarks to Joe Wurzelbacher - have focused attention on this issue and provided specific Obama quotes to shore up McCain’s case against Obama’s economics. However, it’s not like this is news. Obama’s tax policies and spending programs - both those he has voted for in the past and those he is proposing in his Presidential campaign - are not new. The McCain campaign should have been making this argument all along. Than when the gifts of Joe the Plumber and a public radio show fell in their laps they would have been prepared to use them effectively.

Redistribution and the Constitution

A YouTube video featuring clips from a 2001 Barack Obama interview is making the rounds. You can view it here. This video is about four minutes long and concludes with the clip of Obama talking to Joe the Plumber about spreading the wealth. I’ll write later about some of the claims that others have made with regard to what Obama’s comments mean but in this post I want to analyze what Obama does and does not say in this interview.

The four minutes in the YouTube video are pulled from an interview that is much longer: 53 minutes and 22 seconds. This interview took place on January 18, 2001. It was entitled, “The Court and Civil Rights” and was a segment of a program called “Odyssey” on WBEZ, a public radio station in Chicago. The interview was hosted by Gretchen Helfrich and her guests were:

Susan Bandes – Professor of law at DePaul University and the editor of the book, “The Passions of Law”
Dennis Hutchinson – The William Rainey Harper professor in the college, senior lecturer in the law school and editor of the Supreme Court Review at the University of Chicago
Barack Obama – Illinois State Senator from 13th district and a senior lecturer in the law school at the University of Chicago

The redistribution issues are covered in approximately the last 20 minutes of the interview. The entire interview is interesting if you have time but to evaluate what Obama is saying you can focus on the last 20 minutes. You can find the complete interview here apparently in RealAudio format.

I’ve transcribed much of those last 20 minutes below so if you want to read the actual interview before I discuss it, just page down until you see “Partial Transcript” then come back here for my analysis.

Let me talk first about what Obama does not say. First, despite claims to the contrary, it is crystal clear that Obama is not suggesting the United States Supreme Court can or should be the vehicle for redistributing wealth in the United States. On the contrary he explicitly rejects the Court as such a vehicle partly because he feels the task is beyond its capabilities, partly because it raises separation of powers issues, and partly because he recognizes the difficulty of legitimizing such action by the Court. Earlier in the interview he also discusses the fact that the Supreme Court cannot or will not get too far ahead of the general social consensus and this may enter into his determination as well. Obama explicitly regrets that the civil rights movement focused so heavily on the Supreme Court (or possibly courts in general) that it gave short shrift to political and organizational activities that offered a hope of effecting redistributive change in a way litigation did not.

Obama is a little fuzzier on the issue of whether State Supreme Courts can be effective in this regard and speaks about how San Antonio v Rodriguez seems to have resulted in issues of redistribution and wealth being litigated at the State level with mixed results. Nonetheless he certainly does not make an argument that litigation at the State level is an appropriate or desirable approach to achieving redistribution of wealth.

Second, Obama does not think the redistribution of wealth is an “administrative task”. He speaks of administrative issues as part of the separation of powers issues you run into if you attempt to use the Court to achieve wealth redistribution.

On the other hand, I believe the interview does make clear that Obama considers the redistribution of wealth to be a desirable goal and seems to consider such redistribution a component of - or possibly a precursor to - “more basic issues such as political and economic justice”. I know that this is not exactly news - see Joe the Plumber - but the focus in this interview is subtly different. In speaking with Joe the Plumber, Obama said:

It’s not that I want to punish your success, I just want to make sure that everybody who is behind you, that they’ve got a chance for success too. I think that when you spread the wealth around, it’s good for everybody.

In that formulation, redistribution of wealth is to help less successful people become more successful. This could be interpreted as a carelessly rendered version of George Will’s description of conservatives: they believe in equality of opportunity. That is, Obama can argue he is redistributing wealth to help the less wealthy achieve more wealth themselves through, for example, a better education financed through more tax dollars.

Obama’s views in the January 2001 interview are somewhat different. He does speak of the redistribution ramifications of truly implementing Brown v Board of Education and that could again be interpreted as using more tax dollars to achieve better education to in turn help the less wealthy achieve greater wealth. However, he also speaks of the Supreme Court “invest[ing] formal rights in previously dispossessed peoples” but not “venturing into the issues of redistribution of wealth and more basic issues such as political and economic justice”; about the need to “put together the actual coalitions of power through which you bring about redistributive change”; about the fact that he is “not optimistic about bringing about major redistributive change through the courts”. (That word “major” really bothers me.) This seems to lean more toward the idea of redistribution of wealth as a good thing in and or itself rather than as a necessary condition for - or a side-effect of - other specific policies like equalizing educational opportunity. In this interview, Obama seems more like George Will’s description of liberals: they believe in equality of outcome.

Is this a hairsplitting difference? I don’t think so. For example, in writing about the YouTube video (not the interview itself), Ann Althouse says:

Now, there remains the question of how much he would want the legislative branch to do in the name of economic justice, and obviously, the phrase "redistribution of the wealth" gets people going. But that's the same old question we've been talking about for months. [snip]

But we don't know how much, so we're back to where we were before we listened to this clip. Obama favors some degree of progressive taxation and some programs to benefit people in lower income groups and so forth ... as do the great majority of Americans, including John McCain.

I favor progressive taxation but not because I explicitly want to redistribute wealth. Rather I believe that, for example, a 10% tax rate imposed on someone making $15,000 per year is far more of a burden than a 10% tax rate imposed on someone making $150,000 per year and so the person making more can afford to pay a greater percentage of his income in taxes with less pain. The effect may be partially to redistribute wealth but my rationale for a progressive tax rate is not redistribution of wealth. (I suppose you could characterize it as a type of “economic justice” but it has nothing to do with a civil rights aspect of such justice. Although not at all religious, I’ve always found the Parable of the Widow’s Mite compelling.)

Similarly, I am not willing to let old people starve or lack for medical care so I support Social Security and Medicare. I am not willing to let poor people - especially poor children - live on the streets or go hungry or do without health care so I support food stamps, some type of income assistance, and Medicaid. I believe the country as a whole benefits when everyone who is qualified can get a college education so I support government assistance to students. All of those policies require some redistribution of wealth but I’m willing to accept that redistribution in order to achieve specific goals, whether moral or practical. That is far different from pursuing a goal of redistribution of wealth for its own sake, which is what Obama seems to be advocating in the January 2001 interview.

Is Obama advocating a strictly racial redistribution of wealth? After all, this discussion is taking place within the context of the civil rights movement and Obama segues into wealth redistribution and social and economic justice by talking about what the Warren Court did not do in its expansion of those rights. This question is hard to answer because it is so difficult to disentangle the 2001 Obama the Constitutional lawyer from the 2008 Obama the candidate. I believe that if I had listened to this interview in 2001 I would have first thought Obama was talking about transferring wealth to improve educational opportunities for African-American children but by the end of the interview would have moved to thinking he was proposing some type of reparations for African-Americans. However, I do not believe the 2008 Obama the candidate thinks of wealth redistribution strictly along racial lines. Certainly his tax plan is targeted solely by income and has no racial component. He advocates the redistribution from the wealthy of every race and ethnicity to the less wealthy of every race and ethnicity. You may oppose his plan but you must give him credit for color-blindness.

In what is for me a more serious issue, the January 2001 interview raises questions about how Barack Obama views the Constitution. Certainly the views he expresses in this interview can be interpreted as a conviction that it is desirable to “break free from the essential constraints that were placed by the founding fathers in the Constitution ... that generally the Constitution is a charter of negative liberties”. However, it is also possible to argue he was speaking of what the Warren Court did - interpreting the Constitution as it had always been interpreted - rather than of what he wishes it had done or wishes the current Court would do.

I would probably be less concerned about this issue if I had not listened to another interview Obama did with WBEZ on September 6, 2001, where the discussion was about “Slavery and the Constitution”. The remarks that concern me begin about 45 minutes into the interview. After Richard John, one of the other guests on the show, talks about his view of the Declaration of Independence and the Constitution, the host (Gretchen Helfrich again) asks Barack Obama what his views are on those documents.

Obama: I think it’s a remarkable document.

Helfrich: Which one?

Obama: The original Constitution as well as the Civil War amendments but I think it is an imperfect document and I think it is a document that reflects some deep flaws in American culture, the Colonial culture nascent at that time. African-Americans were not, first of all they weren’t African-Americans. The Africans of the time were not considered a part of the polity that was of concern to the Framers. I think that as Richard said it was a nagging problem in the same way that today we might think of environmental issues and some other problems where you have to balance cost benefits as opposed to seeing it as a moral problem involving persons of moral worth. And in that sense I think we can say that the Constitution reflected an enormous blind spot in this culture that carries on until this day and that the Framers had that same blind spot. I don’t think the two views are contradictory: to say that it was a remarkable political document that paved the way for where we are now and to say that it reflected the fundamental flaw of this country that continues to this day.

I can’t figure out what this means and perhaps only another Constitutional lawyer could. I certainly understand that the Constitution's original treatment of people of African ancestry living in what became the United States was a moral problem but I’m uncertain of the leap from there to environmental issues. What exactly is the “enormous blind spot”, “the fundamental flaw” in this culture and country that Obama sees so clearly? I very much wish someone would sit down with Obama, read his comments to him, and ask him to expound on them.

In summary, the January 2001 interview is not the redistribution bombshell some pundits believe it to be but it does put a different slant on Obama’s “spread the wealth” argument, making it seem more like a long-standing and freestanding goal and less like a well-within-the-mainstream variation on the sort of redistribution Americans find acceptable in order to implement desirable policies. In particular his apparent (although probably deniable) desire to “[bring] about major redistributive change” (emphasis mine) is troublesome and in the right hands (about which I’ll write in that later post) could be political dynamite.

The Constitutional concerns raised by the January 2001 interview and exacerbated by the snippet from the September 2001 interview are far more serious. I would very much like to be reassured about Obama’s views on the Constitution and how he believes it should be interpreted and perhaps modified. I’ve just spent eight years with a President who does not share my understanding of the meaning, primacy, and enduring value of the United States Constitution. I’d really hate to end up with another President who hails from a different party but is nonetheless cut from the same cloth.

*****

Partial Transcript beginning about 34 minutes into the interview

Obama: After Brown v Board of Education a major issue ends up being redistribution, how do we actually get more money in the schools and how do we create equal schools and equal educational opportunity. Well, the [Supreme] Court in a case called San Antonio v Rodriguez in the early 70’s basically slaps those kinds of claims down and says, “You know what? We as a court have no power to examine issues of redistribution and wealth inequalities with respect to schools. That’s not a race issue, that’s a wealth issue and we can’t get into this.”

Hutchinson: And the Federal Constitution doesn’t provide any warrant for intervention.

Obama: Exactly. So now but what’s interesting is a whole bunch of folks start bringing these claims in state courts under state constitutions that call for equal educational opportunity and you see state courts - with mixed results - being more responsive to it. The reason I think that’s relevant is not to say that I’m not worried about the lack of protections coming from the Supreme Court but it is to say though that you’ve got a cultural transformation that changes how states operate and how states think about the protection of individual rights in ways that didn’t exist prior to the Warren Court and that I think is an important legacy to keep in mind.

There is a brief discussion about Bush v Gore and how the Florida Supreme Court was active in a way that would be preferred by liberals and so a realization that Federalism may have advantages. Then at about 38 minutes in:

Hutchinson: I think the interesting development here is the one that Barack has emphasized and that is that questions of both litigation strategy and political strategy are tending to move more back toward the states now given what the Supreme Court is doing and given Republican control over effectively both Houses of Congress. And so we’re seeing a shift in strategy and a shift in location and it’s important to keep that in mind. I think we can be too Supreme Court of the United States obsessed sometime in thinking they can deliver questions of social justice in kind of an unbroken vector from Brown v Board of Education. And my favorite example that Barack and I were talking about before we went on the air this morning is the question of welfare rights. You know this obsession with the Due Process Clause, thinking if you can just force these welfare administrators to hold face to face hearings before they cut people off from certain welfare benefits will produce more social justice, more money for deserving people, and the like. There was a decision in 1971 that mandated that and what it did of course is to mean that more money earmarked for welfare went to hearings as opposed to benefits. And then the Supreme Court changed its mind five years later and said, “Well, you don’t have to have a face to face hearing, you can just have a paper review of the record.” And the idea that somehow you could use the Due Process Clause for redistributive ends socially that would be stable I think was an astonishing assumption in the mind of litigators about what they could accomplish over time and it just didn’t last very well.

Obama: And it essentially has never happened. I think that if you look at the victories and failures of the civil rights movement and its litigation strategy in the court. I think where it succeeded was to invest formal rights in previously dispossessed peoples, so that I would now have the right to vote. I would now be able to sit at the lunch counter and order and as long as I could pay for it I’d be okay. But the Supreme Court never ventured into the issues of redistribution of wealth and more basic issues such as political and economic justice in this society. And to that extent, as radical as I think people try to characterize the Warren Court, it wasn’t that radical. It didn’t break free from the essential constraints that were placed by the founding fathers in the Constitution, at least as it’s been interpreted and Warren Court interpreted it in the same way, that generally the Constitution is a charter of negative liberties. Says what the states can’t do to you. Says what the Federal government can’t do to you, but it doesn’t say what the Federal government or the State government must do on your behalf, and that hasn’t shifted and one of the, I think, the tragedies of the civil rights movement was because the civil rights movement became so Court (court?) focused I think that there was a tendency to lose track of the political and community organizing and activities on the ground that are able to put together the actual coalitions of power through which you bring about redistributive change. And in some ways we still suffer from that.

The show then took phone calls from listeners. The first two questions were from “Joe” who sparked a brief interesting discussion on the fact that the civil rights movement had a moral/religious base but at the same time there is a feeling of discomfort with religion in political issues. Obama referred to this as a “long-standing contradiction” in “the liberal community”. Then a caller named “Karen” asked a question:

Karen: The gentleman made the point that the Warren Court wasn’t terribly radical. My question is - with economic changes - my question is it too late for that kind of reparative work economically and is that the appropriate place for reparative economic work to take place?

Helfrich: You mean the Court (court)?

Karen: The courts or would it be legislation at this point?

Obama: You know maybe I’m showing my bias here as a legislator as well as a law professor but I’m not optimistic about bringing about major redistributive change through the courts. The institution just isn’t structured that way. You just look at very rare examples where during the desegregation era the Court was willing to, for example, order changes that cost money to local school districts. And the Court was very uncomfortable with it. It was hard to manage, it was hard to figure out. You start getting into all sorts of separation of powers issues in terms of the Court monitoring or engaging in a process that essentially is administrative and takes a lot of time. The Court’s just not very good at it and politically it’s very hard to legitimize opinions from the Court in that regard. So I think that although you can craft theoretical justifications for it legally, I think any three of us sitting her could come up with a rationale for bringing about economic change through the courts, I think that as a practical matter our institutions just are poorly equipped to do it.

Bandes: I don’t necessarily disagree with that but I think it also depends on, much of the time what we see the courts are doing is ratifying the status quo. And in fact the Court makes redistributive decisions or distributive decisions all the time.

Obama: Right

Bandes: Let me give you an example which is that the Court considers whether it’s okay to take a program, a Federal Medicare program, that provides compensation, that recompenses people by insurance for every medical procedure they can have except abortion and it upholds that.

Obama: Right.

Bandes: We can except abortion from that. Well, that’s a decision about what kinds of subsidies we’re willing to uphold and what we’re not.

Obama: Although typically the Court can certainly be more or less generous in interpreting actions and initiatives that are taken by the legislature. But in the example of funding of abortions or Medicare and Medicaid the Court’s not initiating those funding streams. Essentially, what the Court is saying is at some point, “Okay, this is a legitimate prohibition or this is not” and I think those are very important battles that have to be fought and they do have a distributive aspect.

A caller named “Anna”, a community organizer planning to go into labor organizing asks why community organizing was given less emphasis than litigation. Obama answers that community organizing is harder than litigation, saying “it’s difficult to mobilize change at the local level”. Then:

Helfrich: It seems to me that there is a perception abroad that legislative solutions are somehow unstable as a result of the fact that you can then take them to the Court and the Supreme Court is this sort of last word. That you can struggle and struggle and struggle and get something done, get something passed but that may not be the end of the story.

Hutchinson: Well, traditional solutions are unstable, too. Because facts can change. You’re always arguing in a binary situation, there’s always another side to the case. And much of the desegregation efforts proved how hard it was for Federal District judges to continue to superintend how many students go from one section of town to another section of town and, oh, since the demographics have changed the following year we have to look at it again one more time. That doesn’t accomplish stable social change because you always have the intervention of a not clearly predictable actor, that is, the judiciary in play.

The show wraps up with a brief discussion of the limits on the Supreme Court’s power, that it’s all based on reputation, the Court has neither the power of the purse nor the power of the sword.