Wednesday, November 12, 2008

"Where Obama Can Be Bold"

In keeping with our policy of offering unsolicited advice to world leaders, here is a copy of our latest letter to the Washington Post which, in common with virtually other media outlet throughout the globe, is giving truckloads of advice to President-elect Obama. The only difference is that our advice is good.

Dear Sir(s):

While phrasing it in terms of a "what if," Michael Gerson got it right in his column in today's Washington Post ("Where Obama Can Be Bold," A19). The best and wisest form of reparation is to open up equal opportunity to acquire and possess income-generating assets. This would be fully justified not as reparations for slavery, per se, but as fair compensation for the barriers imposed by our social structures on descendants of slaves.

The issue then becomes, should the taxpayer be required to pay? No. That would be as unjust as the barriers a government-funded reparations program would presumably be designed to lift. No one alive today was a slave owner, and most Americans are not descendants of someone who owned slaves in the Antebellum South. Further, the immense demands placed on the taxpayer in the current financial crisis leave no room for something as potentially divisive and costly as cash reparations.

There is, however, a solution — one that would benefit all Americans, and help put the country itself back on a sound financial footing. Consistent with the principles of Keynesian economics, Mr. Gerson assumes that the seed money for a tax-free savings account can only come from existing accumulations of wealth, i.e., the tax base, or savings borrowed by the government.

The fact is, however, that 1) investment can take place without first cutting consumption and saving, and 2) without the necessity of a class of very rich people who can afford to save enough to finance the capital needs of an economy. In his 1935 monograph The Formation of Capital, Dr. Harold Moulton, then president of the Brookings Institution demonstrated that between 1830 and 1930 the bulk of the financing for capital investment did not come from savings, but from the extension of bank credit. The loans were repaid out of "future" or "forced" savings after investment, instead of financed by cutting consumption before investment. In 1958 Louis O. Kelso invented the Employee Stock Ownership Plan ("ESOP") as a means whereby ordinary people could become owners of capital without first having to cut consumption and save, ideally financing the acquisition by proper use of the commercial banking system and a central bank.

Kelso's program, which the Center for Economic and Social Justice later developed into a proposal called "Capital Homesteading for Every Citizen," from the book with the same title, would provide financing for tax-deferred (not free) investment accounts — savings, as every economist knows, equals investment. By financing all of America's capital needs in this way, at present rates of growth, a child born today who received an annual equal right to borrow newly-created money for capital investment could accumulate in the neighborhood of $500,000 of income-generating capital assets by age 65, and increase gross taxable dividend income over the same period by nearly $2 million. Under the tax reforms recommended under Capital Homesteading, a "typical" family of four would pay no income or payroll taxes until aggregate family income exceeded $100,000.

In the initial stages of a Capital Homesteading program it would be perfectly feasible to double, even triple the amount that individuals whose median net worth fell below a certain threshold could borrow for vetted, financially feasible investments. This would build in an automatic reparations feature without forcing anyone through the humiliating and possibly impossible process of proving that they or their ancestors were sufficiently oppressed to meet bureaucrats' preconceived notions.

Finally, of course, this could all be done without a cent of taxpayer money. It even has the potential to get the government out of the bailout business, thus taking the immense load off the back of current and future taxpayers.

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).


James said...

You write that even "fair compensation" for what happened to the descendants of slaves in our society should not be financed with taxpayer money, because "most Americans are not descendants of someone who owned slaves in the Antebellum South."

While this is true, strictly speaking, I think it is misleading.

The fact is that a great many Americans are descended from those who owned slaves in the antebellum North or South. We often forget that slave owning was not usually the province of wealthy plantation owners, with scores or hundreds of slaves, as was the case with Senator John McCain's family. Instead, most commonly, a middle-class family would own one or two slaves.

The issue you raise, however, isn't exactly how many Americans owned slaves. It's whether most American families benefited from slavery. The answer is a strong "yes." Speaking for the moment only of families in the country before the Civil War (which encompasses most Americans alive today), all such families benefited significantly from the economics of slavery.

There may be good reasons not to devote taxpayer money to addressing the present-day consequences of slavery and discrimination, but unfortunately, the idea that most American families didn't knowingly benefit from slavery isn't one of them.

bloguista said...

related link: Reparations and the Churches: Share in Production Better Plan
by Louis O. Kelso and Patricia Hetter

Michael D. Greaney said...

James, you're unfortunately leaving out a basic principle of justice: I cannot justly be punished for something you did, nor can I seek reparation from you for something that never happened to me. Descendants of slave owners can no more be held liable for their ancestor's acts than the granddaughter of a Mafia Don can be executed for the "hits" her grandfather ordered.

Further, the U.S. Constitution prohibits "ex post facto" laws, that is, punishing someone for something he or she did that was perfectly legal when it was done. Like it or not, slavery was legal. It would be unjust to punish actual slaveholders for doing something that the law allowed, or to require taxpayers even at the time to foot the bill for some kind of payment, especially since many of them had lost relatives who paid with their lives to free the slaves, such as my own great-great-grandfather.

It shocks many people to learn that the last country to legally abolish slavery, Mauritania, only did so in 1980 -- that is not a misprint, 1980. (Dr. Keven Bales of the U of California, Berkeley, maintains that slavery in Mauritania was legally abolished, but remains effectively in place. The only difference is that, if the courts would enforce the law, slave owners could be punished for owning slaves after 1980, but not before.

The bottom line is that you can't inherit guilt for a crime, even if your robber baron father paid for your Harvard education with his ill-gotten gains. Nor can you inherit victim status, and claim that the son of the murderer who killed your mother should be hanged because of the effect the murder had on you, from which the son of the murderer presumably benefited.

James said...

Michael, I agree that no one should ever be punished for something they didn't do.

However, it's another matter when you say that reparation can never be sought for something I didn't do. You seem to want to consider any attempt to set things right as punishment, and this isn't about punishment.

For instance, suppose your family had a priceless painting, by one of their ancestors, stolen from them by the Nazis, and given to my grandfather for his service in exterminating the Jews.

Surely you would be right to ask me for the painting back? Even though I never did anything, and inherited the painting without any wrongdoing on my part? And even though the wrong wasn't done to you?

If you disagree with this, you must be gravely disappointed by how the crimes of the Nazis have been handled in the last couple of decades.

If you do agree with this, then you can still raise all sorts of reasonable objections to particular proposals for dealing with the sins of slavery. I don't agree with proposals for slavery reparations, myself, on moral and practical grounds. But the basic principle of asking for property to be returned would be sound, wouldn't it?

The fact is that our nation and its citizens possess tremendous benefits from the practice of slavery. Meanwhile, our black citizens still suffer the consequences of their ancestors being enslaved, and then freed with nothing for their troubles.

Further, the U.S. Constitution prohibits "ex post facto" laws

The constitutional prohibition on ex post facto laws applies only to declaring someone a criminal and imposing punishment. It does not apply to spending taxpayer money to address wrongs committed by the federal government, which is what reparations for slavery would be.

As for losing relatives to free slaves, that was quite rare. You seem to be referring to the Civil War. The vast majority of Union soldiers joined up to fight for their country and preserve the Union, and not to free the slaves, which wasn't even a Union war aim until well into the conflict. So few, if any, soldiers were dying to free the slaves. In any event, this was a price the nation paid for engaging in slavery. It could hardly be said to atone for slavery, any more than a murderer can promise to stop killing people, and thus be said to have made up for his actions.

It shocks many people to learn that the last country to legally abolish slavery, Mauritania, only did so in 1980

It also shocks many people to learn that slavery is still widespread in the world, and that more slaves were trafficked last year than at the height of the transatlantic slave trade.

Michael D. Greaney said...

James, "reparation" is defined as "the act of making amends, offering expiation, or giving satisfaction for a wrong or injury; something done or given as amends or satisfaction; the payment of damages; indemnification." There can be no reparations unless something has been done that requires reparation, and liability or guilt cannot be transferred, or we admit the validity of the concept of "collective guilt," which denies individual sovereignty and free will.

In the case of a painting stolen by the Nazis, if the original party from whom the painting was stolen is still alive -- not his or her heirs -- then there is a claim ... unless the current possessor of the painting is a "holder in due course," i.e., someone who acquired the painting and was unaware of the "defect in title." (This does not apply to land, for which there are separate rules.) In that case, a court may decide that the painting should be restored to its original owner -- but that reparations must be paid to the holder in due course for the loss of his or her property. In the case of Nazi war loot, such reparations have usually been assumed by the German government, the Bundesrepublik.

Where the heirs of the individual from whom a painting was stolen seek to recover from a "person" (the cases we read about are usually museums, which count as "corporate persons," or individuals who are alleged to have had some knowledge of a defect in title when it was acquired or inherited), they have to prove that the holder in due course is in fact no such thing, that he, she, or it was aware of the defect in title.

Where neither of the original parties is alive or exists, there is no case. When Japanese American citizens were interned in World War II and many lost all their property, only those who actually suffered internment were entitled to reparations, and then it was only a token amount. Their heirs were not so entitled. Even the reparations themselves were paid only because the act itself was illegal at the time it was done -- American citizens were imprisoned without trial, just cause, or due process. Justice Black simply signed an internment order "for their own protection."

Slavery, again, was legal. You can't, under the U.S. Constitution, pass laws punishing people for something that wasn't illegal when it was done. Such laws are called, "ex post facto" ("after the fact") laws, defined as, "a law passed after the occurrence of a fact or commission of an act, which retrospectively changes the legal consequences or relations of such fact or deed," or "every law that makes an action, done before the passing of the law, and which was innocent when done, criminal, and punishes such action."

The purpose of the law is to make something whole again, subject to such things as holder in due course, the absence of the doctrine of collective guilt or liability, and so on. If a victim or presumed victim cannot prove specific damage resulting from a specific act done against him or her personally, then there is no question of reparation, punishment, guilt, or liability.

As for the cause of the Civil War being other than slavery, we need only refer to the speeches, rhetoric, and newspapers of the day, along with the memoirs, diaries, and letters of the soldiers themselves. Regardless of what Southern apologists might say, the war was fought solely because of slavery. The Confederate Constitution makes it clear that they were virtually obsessed with property in human beings, while the national anthem of the Confederacy, "The Bonnie Blue Flag," refers to property, which everyone was fully aware meant property in slaves. The memoirs of John W. Urban ("Battlefield and Prison Pen, or, Thrice a Prisoner in Rebel Dungeons"), who I believe was in the same regiment as my great-great-grandfather, make it clear, among many other similar offerings that the ordinary Union soldier, as well as the slaves themselves, were also fully aware of what the war was about. The seven states that seceded during Buchanan's lame duck session also made it clear why they separated from the Union, as did the others after Lincoln took office. The South had been convinced by David Christy's 1855 economic treatise, "Cotton is King" that their economic survival, even that of the entire United States and the British Empire, depended absolutely on the slave cultivation of cotton. Whole passages of Christy's work were read into the Congressional Record, while the Confederate government in Richmond used Christy's book as a guide for its economic policy, even backing its currency, in part, with cotton. (Of course, they didn't count on Egyptian or Indian cotton, which, along with the moral crusade against slavery, kept the European powers from recognizing the Confederacy or sending it aid.)

The bottom line, again, is that you can't justly be punished -- and having to pay a fine or reparations of any kind is a punishment, or attempt to "make whole" -- for something you didn't do.

bloguista said...

"it's another matter when you say that reparation can never be sought for something I didn't do. You seem to want to consider any attempt to set things right as punishment, and this isn't about punishment." James, you are not reading the whole thing. Michael proposes something to really set things right.

Read the subtitle of the text I had linked.

James said...

Michael, when the United States offers reparations, which has happened in the past, it's a statement that the U.S. has engaged in actions which require compensation.

It's not a statement that any of our living citizens has committed any wrongdoing.

When the U.S. offered reparations for interning thousands of its citizens in concentration camps in WWII, was it seen as necessary that any of the officials responsible for this policy be alive? No.

You seem to have strong disagreements with national policies towards Nazi-seized assets, since you disagree with returning those assets to their rightful heirs without compensation.

You should be aware that a holder in due course does not always have the legal right to retain possession. That depends on the circumstances of the case, on a variety of legal contingencies, and on the laws of the particular jurisdiction.

You also misremember the reparations given to Japanese-Americans. Where the original victims were not alive, the legislation provided that reparations would go to their descendants.

As for a "token amount," the total was $1.6 billion. That came out to a significant sum per person.

Furthermore, the internment was considered perfectly legal at the time. The policy was authorized by all the relevant officials under the terms of the law, and the Supreme Court held the policy to be legal in the Korematsu case.

The constitutional prohibition on ex post facto laws doesn't apply here. That rule prevents legislation aimed at particular people, deeming them guilty of crimes and imposing punishment. None of that is the case here. Just because you're uncomfortable with the implications of the U.S. offering to atone for its past policies on slavery doesn't mean that any citizens, alive or dead, are being held accountable.

The fact that the Civil War occurred in part because of slavery proves only that the nation paid a terrible price for its misdeeds. It doesn't mean that soldiers on either side died for the cause of ending slavery; they were fighting for their homes, families, and to preserve their nation. Lincoln didn't even decide to seek the end of slavery as a war aim until most had joined up, meaning they chose to fight for other reasons.

The bottom line, again, is that you can't justly be punished -- and having to pay a fine or reparations of any kind is a punishment, or attempt to "make whole" -- for something you didn't do.

You seem to be convinced that I'm talking about individuals paying reparations. This simply doesn't apply if the government is choosing to offer reparations as a matter of policy--whatever you may think about that idea.

Michael D. Greaney said...

James, most of what you're saying is not consistent either with the philosophy of law or U.S. Constitutional law. Rather than continue to go over the definitions of ex post facto (taken from Black's Law Dictionary, 1952 edition), I have been strongly urged by an individual who is a Japanese American who was in the camps during the war and her daughter to set you straight on your facts.

The amount paid out to surviving people -- not in any case their descendants -- was a fixed $20,000, a token amount, especially considering that the property they lost amounted to far more. In the case with which I am personally acquainted, the grandfather was a third owner of the company that became "Chicken of the Sea," owned a number of fishing trawlers in San Francisco, three or four restaurants, and founded the straw flower industry in Redwood City, an industry today worth millions. Again this individual received not one cent in reparations or restitution before his death, and his descendants received not one cent, not even of the bank accounts that had been frozen. The principle of justice remains constant, regardless which jurisdiction you're in: you cannot be forced to pay for something you didn't do. When the government pays anything, it means the taxpayers are paying, not some amorphous collective; there are actual people involved.

James said...

James, you are not reading the whole thing. Michael proposes something to really set things right.

Thanks, but I did read that.

Leaving aside the issue of whether this proposal is feasible, and it's obviously highly unorthodox, you quoted me on a specific point--that Michael keeps returning to the idea that for Congress to pay out reparations would amount to "punishment" of the taxpayers, in a sense that would be unconstitutional or a violation of accepted legal principles.

The government is the responsible party, and would be choosing (under legislation now pending in Congress, in fact) to spend taxpayer dollars on restitution.

That may be a bad idea, or unfair to taxpayers. How it's punishment of the taxpayers is beyond me, as is how this principle would justify Japanese-American reparations or spending for Native Americans on reservations, or virtually any other spending.

bloguista said...

"You seem to be convinced that I'm talking about individuals paying reparations. This simply doesn't apply if the government is choosing to offer reparations as a matter of policy--whatever you may think about that idea."

James, "Share in Production Better Plan" than individuals or organizations or government paying reparations.