President George W. Bush's effort to repeal the estate tax has revealed contradictions in the nonprofit sector and confusion about what it values and where it stands.
At Brazil's "counter-Davos," democracy was in; elitism, corporations were out.
The loudest applause during George W. Bush's first budget address to Congress--a thumping, shouting, jump-to-your-feet outpouring of enthusiasm--erupted in response to his first mention of his proposed $1.6 trillion tax cut. Coming at the end of a masterful but deceitful description, with more concealed trapdoors than a funhouse ride (they have the fun and we get taken for a ride), of how he could do everything from funding Social Security to paying down the debt and have money "still left over," Bush's proposal argued for returning that money "to the people who earned it in the first place."
The country is not buying. The latest Pew Research Center poll finds that only 19 percent of Americans think the current budget surplus should be used for a tax cut, and 79 percent believe the proposed Bush tax cut will most benefit the wealthy. Meanwhile, 60 percent want any surplus used for domestic programs as well as Social Security and Medicare.
Why, then, was the response to Bush's tax cut proposal so enthusiastic? Perhaps for the same reason that the words "campaign finance reform" never crossed Bush's lips, an omission Senator John McCain wryly noted in a CNN interview. The Wall Street Journal reported the morning after the speech that industry groups have formed a coalition to push the tax cuts in what one White House adviser described as "the largest PR campaign this party has ever conducted." The same adviser went on to say that the effort "will test if we can use the power of the White House and congressional control and the lobbying world to work our will."
With the cat thus out of the bag, Bush's budget should be pronounced dead on arrival. Now is the moment for the minority party to put forth a sensible alternative: No new tax breaks for the wealthy. An earlier, bigger check--either in the form of a tax credit or a "prosperity dividend"--for middle- and low-income earners, to jump-start the economy. Prescription drug coverage for seniors and affordable healthcare for all. Investment in schools and teachers' salaries. Investment to combat the growing shortage of affordable rental housing. Electoral reforms that will insure that every vote is counted.
In opposition, Democrats find it difficult to speak with one voice. A few have already thrown in their lot with Bush. Others are looking to deal. Still others seem stuck on paying down the debt as their prime concern. Thus it is vital that progressives in the party--and the increasingly vibrant base of the party that is central to its electoral hopes--speak out independently to force the debate. Here the Progressive Caucus has done well by pushing its prosperity dividend, which would give every American a $300 check in contrast to Bush's tax giveaway to the rich. Responsible Wealth has done remarkable work organizing the statement by about 120 of America's richest men and women against estate-tax repeal. The large coalition of groups convened to fight the tax cuts--under the leadership of progressive unions, civil rights groups and the public interest community--will help stiffen the backbone of faltering legislators. The Campaign for America's Future's plan for creating a progressive leadership organization will help define and broadcast the choice we face.
Bush has benefited, of course, from the continuing press focus on former President Clinton's tawdry unpardonables and his legacy of political timidity and tactical retreat. Now, progressives must force Democrats to shed that defensiveness. The country did not vote for the Bush agenda, and the vast majority will not benefit from it. Time to go on the attack. This is a fight that can be won.
His dream is an open northern border. But first, he must end southern poverty.
As proven by this pardon,
Two facts of life prevail:
The rich have got the money
And everything's for sale.
For more than two years, the antisweatshop movement has been the hottest political thing on campus [see Featherstone, "The New Student Movement," May 15, 2000]. Students have used sit-ins, rallies, hunger strikes and political theater to demand that garments bearing their institution's logo be made under half-decent working conditions.
From the beginning, the major players were students and administrators. While some progressive faculty members--mostly from sociology departments--offered the students early support, economists, who like to think of their discipline as the queen of the social sciences, kept fairly quiet.
That changed this past July. After colleges and universities made a number of visible concessions to the students over the spring, a group of some 250 economists and lawyers released a letter to administrators, basically complaining that they hadn't been consulted. The letter, initially drafted by Jagdish Bhagwati of Columbia University and burnished to perfection by a collective of free-trade zealots calling themselves the Academic Consortium on International Trade (ACIT), reproached administrators for making concessions "without seeking the views of scholars" in relevant disciplines. Judging from their letter, the views of these scholars might not have been terribly enlightening. On page 24 of the magazine, the ACIT missive appears with some comments (see "Special" box, right).
As the proverbial curtain rises on the Bush era in national politics, it's hard to know just how pessimistic progressives should be about the new President's aims and intentions. On a rhetorical level, we were greeted with an inaugural address that with a few minor adjustments could have been given by an incoming president of the NAACP. Look at the substance, however, and we find nominees at the Justice and Interior departments who could have been vetted by the John Birch Society, if not the Army of the Confederacy. The two warring sides of the Republican psyche were neatly illustrated recently at a dinner sponsored by the Philanthropy Roundtable at the Regency Hotel in New York, where two current stars of the Republican rubber-chicken circuit, Weekly Standard editor David Brooks and American Enterprise Institute "research scholar" and Olin fellow Dinesh D'Souza, held forth after a nicely Republican red-meat repast.
Brooks is still riding the wave of his bestselling work of "comic sociology" about America's new elite, Bobos in Paradise: The New Upper Class and How They Got There. His talk, like the book, is mostly affectionate ribbing of this class for its bourgeois consumption habits and bohemian self-image. Though he'd be loath to admit it, Brooks is an old-fashioned liberal Republican, not unlike Poppy Bush before he got the bit of presidential ambition in his teeth and found his principles run over by a Reagan landslide. (Just what Brooks is doing in a party dominated not by Prescott Bush and Elliot Richardson but Dick Armey and Tom DeLay is a question for another day.) A self-confessed Bobo, Brooks has only one problem with this tolerant, secular-minded and self-satisfied elite--its lack of civic consciousness.
There are no poor people in the Bobo world--even illegal Guatemalan nannies are treated as if they are taking care of your children and cleaning your bathroom as a lifestyle choice rather than out of economic necessity. "The new elite," as Brooks explained to the assembled philanthropists, "has no ethic of chivalry." Charitable giving as a percentage of assets has not remotely kept up with the unprecedented explosion of wealth in the United States during the past decade.
The virtues of such selfishness, on the other hand, have never escaped Dinesh D'Souza. The young Indian immigrant made his name in this country giving eloquent voice to the most morally repugnant aspects of Reagan-era Republicanism. He began his career as an obnoxious Dartmouth undergrad, publishing crude racist attacks in the off-campus conservative newspaper, followed by a stint at a Princeton magazine where he delighted in exposing details of female undergrads' sex lives. His first book was a loving appreciation of aspiring ayatollah Jerry Falwell.
D'Souza became a national phenomenon with a book attacking PC culture at universities, which was defensible, if overstated, and an apologia for American racism, which he termed "rational discrimination." With its pseudointellectual patina, D'Souza's work, even more than Charles Murray's, seems designed to offer solace to those who miss the good old days of Jim Crow laws and late-night cross burnings. Segregation, he argued, was designed to protect African-Americans and "to assure that [they], like the handicapped, would be...permitted to perform to the capacity of their arrested development." It would end when "blacks as a group can show that they are capable of performing competitively in schools and the work force."
D'Souza is touring for a new work, The Virtue of Prosperity: Finding Values in an Age of Techno-Affluence. (It is a measure of how well-funded are right-wing arguments that I have so far received four unrequested copies.) The thrust of his argument is the opposite of that of Brooks. Simply put, wealth has no obligations to poverty except to avoid it. As he once argued for the logic of racism, he now speaks for the morality of parsimony. The United States, he asserts, is "probably the best society that now exists or has ever existed."
D'Souza is the kind of moral philosopher who pays more attention to the musings of the Ayn Rand-spouting entrepreneur T.J. Rodgers, who races his BMW over speed bumps while attacking the moral probings of the clergy, than he does to the combined works of John Rawls and Richard Rorty. (Terming the latter "Rip Van Rorty" is what passes for wit in these pages.) Reinhold Niebuhr receives no mention at all.
Of course, it's not exactly hard to find billionaires who think of themselves as altruists regardless of the obscene amounts of wealth they accumulate. But it is much more cost-effective to induce "intellectuals" to say it for them. D'Souza fills this purpose not only by celebrating mass wealth but by abolishing poverty. "Poverty," he argues, "understood as the absence of food, clothing, and shelter, is no longer a significant problem in America." His evidence for this breathtaking claim is that even poor people have refrigerators these days, and many of them are fat. That 30 million Americans still struggle beneath the poverty line and 42 million lack the benefit of health insurance represent, to D'Souza, mere speed bumps on our highway to capitalist utopia.
When Bush père was inaugurated, he too made a great show of what was not yet called "compassionate conservatism." He acknowledged that poor people exist and that somebody should do something about it, but as a society, he warned, we had "more will than wallet." (And anyway, his contributors were demanding a cut in the tax on capital gains.) Dubya closed his inaugural with a similar flourish, in which he promised to work "to make our country more just and generous."
To show that Dubya is even remotely serious about his agenda for the poor, he and his Administration will have to ponder the kinds of questions raised by Brooks about the moral obligations of wealth. That is, after all, about the best one can expect from Republicans. But to the degree that he wishes to prove what his enemies insist to be true--that all this compassionate conservatism is simply a frilly frock in which to clothe the Reaganite Republican values of top-down class war--expect to hear plenty more from Dinesh D'Souza.
Something doesn't add up about the new Treasury Secretary nominated by George W. Bush. The supply-side conservatives who live for more big tax cuts on capital and upper-bracket incomes are actively leery about Alcoa chairman Paul O'Neill. Some grumble that he may be a talented corporate manager but that he's ill equipped for the top economic post in the Bush Administration. Meanwhile, George Becker, president of the Steelworkers union, loves the O'Neill selection. "I'm not an economist, I just go on gut beliefs," Becker said. "But Paul is a person working people and labor people can talk to. He is an industrialist who believes in the United States and has maintained a strong industrial base in the United States. I think this is far better than having another bond trader in that job."
Bush's choice has startled many quarters, including Wall Street, because O'Neill comes to the job from old-line manufacturing and with a reputation for independent thinking, albeit in the moderate Republican manner. Above all, he is not a banker or financier--the first Treasury Secretary since the Carter Administration to originate from the business realm that actually makes things (aluminum, in O'Neill's case). Yet, oddly enough, O'Neill is also a government pro. He spent sixteen years as a systems analyst and budget economist in the federal government, rising to deputy director of the Office of Management and Budget under Gerald Ford, before a brilliant business career at International Paper and Alcoa (both multinational companies are reviled by environmentalists--he's not Ben & Jerry's). But unlike the laissez-faire crowd, O'Neill understands the power of activist government to intervene in the private economy and has demonstrated a taste for doing so. At a minimum, he represents a refreshing shift from the free-market mantra that has ruled at Treasury for the past two decades.
"I negotiated with Paul for years--he's very tough but fair--and we've always been able to get a fair, decent contract," said Becker, whose union represents 22,000 Alcoa workers. "I had people I could talk to in the Clinton Administration too. They would listen and tell me how much they understand our pain. Then they went out and deep-sixed us. I like [former Treasury Secretary] Bob Rubin, but Rubin killed us in steel. He would say, Let the marketplace decide. Except, when financial firms got in trouble, they went to the rescue."
In contrast, as a business executive, Paul O'Neill artfully engineered a worldwide rescue for the aluminum industry and persuaded President Clinton to make it happen. Prices were collapsing in 1993 because the former Soviet republics were flooding the world market with cheap aluminum--devastating US producers like Alcoa. The temporary agreement amounted to a government-negotiated cartel--every producing nation reduced its output to prop up world prices--and it worked. Yet the political deal was done so skillfully that few in the media even noticed. And nobody complained about the scheme's contradicting Clinton's free-trade rhetoric. O'Neill knows where the levers are located and how to pull them.
While it would be nice to imagine that the Bush/Cheney team is sending a message about new ideological priorities with this appointment, their motivation is probably more pedestrian--personal trust, not policy. O'Neill comes from the same "old boy" circle of policy advisers that includes Dick Cheney, Donald Rumsfeld and, yes, Alan Greenspan during the Nixon/Ford years. He is a familiar old friend to all of them, experienced and capable, above all loyal. During George Bush Senior's ill-fated presidency, O'Neill took Alcoa out of the US Chamber of Commerce in order to endorse Bush's deficit-reducing tax increase--the one that got the President into permanent trouble with the party's right-wingers. Around the same time O'Neill proposed a $10-a-barrel tax on oil to force greater energy conservation. He supported Bill Clinton's more modest energy-tax proposal, which failed in 1993. He is quite willing, in other words, to break eggs over the GOP's antitax doctrine.
In another season, these qualities would have made for intriguing possibilities, but O'Neill's strongest asset--he's not from Wall Street--might also become a handicap in present circumstances, because the Bush Administration is assuming power amid a breaking storm--the collapsing stock-market bubble and deteriorating economic growth worldwide. Whether this event turns out to be good luck for Dubya or the ruination of his presidency will depend crucially on the smarts of O'Neill and a team of White House economic advisers that includes former Federal Reserve governor Lawrence Lindsey as principal counselor and, presumably, Stanford economist John Taylor at the Council of Economic Advisers. The old boys from business and finance gathered at the governor's mansion in Texas to throw in their advice, a private conversation that did not include the press and public.
The problem is that none of Bush's lead advisers have displayed any special feel for financial markets--especially markets that are scared and imploding. The conservative financial experts I talked with all delivered the same warning. "O'Neill needs to have a serious banker at his side, someone who has done a lot of financial restructurings and bankruptcies," one of them said. "Because that's what is coming."
O'Neill has been relieved of an obvious first challenge--coaxing the Fed chairman into cutting interest rates--because that job was done for him by the frightened financial markets. Falling stock prices and market interest rates, along with plummeting sales and production, delivered a message of terror--the markets' fear that Greenspan was dangerously behind events. He was thus compelled to start cutting rates. Many market players figure it's already too late, however, and Greenspan's wizard status is swiftly evaporating, at least among those who understand what's happening. So Bush's team will begin by blaming Clinton/Gore for the rising unemployment and corporate bankruptcies, while privately nudging Greenspan to keep on easing credit terms. A deep distrust toward Greenspan lingers in the Bush family--a sense that he broke promises and allowed high unemployment to linger much too long after the 1991 recession, effectively dooming George père's re-election campaign in 1992. This time, they will not wait passively on the chairman's wisdom, and Bush Jr. has real leverage he can apply. The seven-member Federal Reserve Board has two vacancies and a third one expected. The White House can surround Greenspan at the boardroom table by appointing friendly critics and even a possible successor.
A recession that comes early in a new President's term--and is over well before he's up for re-election--can wind up as smart political timing, but Bush may lose his Congressional majority in the process. While Ronald Reagan enacted a radical conservative agenda during his first year in office, his popularity sank as the ugly recession worsened; Democrats picked up twenty-seven House seats in the off-year election of 1982. By 1984, however, it was "morning again in America," and the Gipper won in a landslide. If Bush's advisers are as shrewd as they appear, they will push hard for their big ideas up front and, meanwhile, do whatever they must to reverse the economic bloodletting.
The more ominous possibility facing the Bush presidency is that given neglected realities inherited from the Clinton years, this downturn could renew globalized financial crisis in Asia, Latin America or elsewhere. Only this one could not be blamed on "crony capitalism" or other establishment canards. The $360-billion-a-year trade deficit in the United States has kept Japan and many developing countries afloat in recent years, though a long way from genuine recovery. If the United States becomes mired in recession, Americans will buy far fewer imports, and that will reignite financial failures in the exporting nations. Their panic can flow right back into the US financial system, with banks and brokerages demanding another round of IMF bailouts. O'Neill and company may find themselves standing in a circle of bonfires.
The specter of bad times coming does, of course, add momentum for major tax-cutting legislation--a centerpiece in Dubya's campaign--but it's not obvious how Bush's retrograde measure would actually help the economy (40 percent goes to the very wealthy, as that fellow Gore kept reminding us). Some elements, like abolishing the inheritance tax, may even generate drag on economic activity. The Bush team talks like conservative Keynesians, but in the real world, economic stimulus requires steeply progressive tax cuts--putting money in the hands of people who will promptly spend it. That means quick rate cuts or temporary tax credits that skip over the upper brackets for a change and deliver the money to the bottom half of the income ladder. Democrats are wrong-footed by events too. After several years of indulging in Coolidge-Hoover pieties about paying down the national debt, Democrats must scurry now to come up with a progressive--don't say liberal--tax-cutting proposal of their own. Clintonism is over, and they had better shake out the cobwebs quickly, because their choices on who needs tax relief and who doesn't will define them for the 2002 election and beyond.
The essential handicap in using fiscal policy to restart the economy (one that has always burdened Keynesian economics) is the problem of timing. In the best circumstances, it can take six or eight months to enact a major stimulus package, and even if the tax cuts are postdated to January 1, the money arrives too late to stanch the contraction. If Democrats are alert and public-spirited, they will propose a quick, emergency reduction in paycheck deductions with a commitment to support a second, broader tax measure later in the year. They should also call for stand-still protection for those working people drowning in debts who lose their jobs--a temporary safety net that keeps them out of bankruptcy until the economy revives. These and other measures are, of course, way beyond the present imagination of either party. More likely, the tax bill will turn into a special-interest bidding war in which both parties compete to pay back their accumulated obligations to lobbyists and contributors.
The new Republican majority, already frail and dubious, has been taken hostage by these economic portents even before it assumes power. A "normal" recession of brief duration might be manageable. A longer, more profound unwinding will shake the foundations of Republicans and Democrats alike.
We do need government regulation—not to build socialism but to save capitalism.