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Paul Jay and Bruce Fein discuss the battle in Wisconsin, income tax, estate tax and health care in the US

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PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Washington. And joining us again now to continue exploring libertarian political philosophy and views is Bruce Fein. Bruce was an associate deputy attorney general under President Reagan. He’s author of the book American Empire: Before the Fall. He’s now a co-counsel for the Turkish American Legal Defense Fund. And he’s consulted with and worked with Ron Paul. Thanks for joining us.


JAY: So we’ve had a couple of conversations about foreign policy issues. Let’s talk a little bit more about domestic issues. Let’s start with the fight that took place over whether or not to extend the Bush tax cuts. What did you think of the tax cuts to begin with, and what do you make about extending them?

FEIN: Well, I don’t have any general objection to tax cuts. I think the government is vastly bloated. We say–I think we can probably cut $900 billion out of the Defense Department. We shouldn’t tax people for money that isn’t needed. And I think also if you see the current furor over all these exorbitant pension, health costs that go to government employees, and lesser perhaps at the federal level but still there, that the public clearly, in my judgment, is supporting, it shows that we’re spending much too much in government already. I do object to the fact, however, that it was indiscriminate. We still are taxing, like, capital gains, hedge funds, people who make vast sums of money as though they’re not earning income like you and me, ’cause they get involved in trading certain kinds of financial instruments–all their profit is viewed as a capital gain. That seems to me almost obscene, given the profits they’re making. But it’s the nature of politics oftentimes that you get indiscriminate elements in a tax bill. But overall I don’t see any need with the government to have more rather than less money, given the amount of bloat that’s out there.

JAY: Now, what’s talked about, pension funds and such, and I guess you’re referring to state workers, now, I’ve seen several studies now that show that state workers compared to private workers at anything above the minimum level, where they’re more or less the same, when you start getting to higher levels of education, state workers are making about 8 percent less than people in the private sector, and the higher, the more educated they are, the more senior their position, the less they’re making–the gap between what you make in the public service and the private sector even widens. I mean, isn’t there a kind of a mythology going on here,–

FEIN: Well, I don’t know about that, Paul.

JAY: –especially when you compare it to what isn’t getting taxed at the high end [inaudible]

FEIN: No–well, no, I don’t necessarily believe so, because if you look at, you know, its–its health and pension benefits oftentimes are not included in the base salary.

JAY: No, [inaudible] talking about are.

FEIN: But moreover you have to ask–there’s another element, the risk. You know, in private sector, you take risks. You get laid off. The risk of being laid off in the public sector is very, very tiny. And even more important, you ask–how much you’re getting paid depends upon how much product you’re contributing to social welfare and the public good. That’s basically how we get compensated. My view is you can’t–you ask, well, what are they doing in there that is contributing as much to social well-being and consumer satisfaction as the people who are in the private sector? And the reason–and that’s–

JAY: Oh, come on. Come on. You’ve got to–.

FEIN: –in my judgment they’re way overpaid. They’re way overpaid.

JAY: Oh, come on. Someone picking up garbage or teaching kids has got to be contributing more to the private sector than a professional basketball player–I mean to the public social good; it’s not the private sector.

FEIN: Yeah, but you can–you have–private contractors can collect garbage. You can contract that out. You don’t need a government employee to collect garbage.

JAY: I’m not saying you need that. I’m just picking up your argument about remuneration should be based on social good. We don’t have any of that in our society. The people running hedge funds are not doing social good.

FEIN: No, I know. But we define–the only way that we have any common standard of what social good is being done is by what people will voluntarily pay for if they have free-market transaction, even if they have market power. It’s true. I mean, some people would pay, Paul, $100 million for a Monet painting, and I wouldn’t pay a penny for it. Well, it’s still worth $100 million to someone who’s willing to pay for it.

JAY: But we vote in a system that says that we’re going to pay a certain amount of taxes. It’s as voluntary as going out and buying something.

FEIN: That’s ridiculous. If you don’t pay your taxes, you get sentenced to prison. If you don’t buy a Monet, no one does anything to you.

JAY: No, but we vote for that system that says that. It’s not coming from a king.

FEIN: Yeah, but–yeah, but it’s–I know, but it’s not a plebiscite. It’s not like–no one is able to vote and say, I have to buy a Monet and I’ll get punished if I don’t. And, moreover, in the voting system, unlike the individual consumer choice, yeah, you have a right to vote, but you don’t have a right to prevail. If you’re outvoted by other people, you lose, and you accept that as part of the rules of the game. So you may end up with a system that you don’t approve of, but you understand the overall due process requires you to accept law.

JAY: Which includes taxes.

FEIN: Which includes taxes. But that doesn’t make taxes like going out in a free marketplace and deciding what to buy in it.

JAY: No, it probably makes it more participatory, because in the free marketplace is not very free these days.

FEIN: But anyway, you have–you get to choose–

JAY: You get to choose between–Coke and Pepsi is not a big choice here.

FEIN: –you get to choose whether you–you get to choose whether to surrender any money out of your pocket or not. You don’t have that when it comes to taxes.

JAY: Okay. Let’s move on to another thing.

FEIN: Okay.

JAY: One of the other taxes that more or less got eliminated, or certainly so reduced, was estate tax.

FEIN: Yes. Now, I’m–clearly believe that there ought to be estate taxes. I just think–.

JAY: You’re for estate taxes.

FEIN: I’m for estate taxes. I think it corrupts a culture to develop a whole slew of people who inherit vast wealth from their parents. The true test of character and mettle and developing the strength you need in a citizenry is accomplishing it on your own, not just having it handed to you by somebody else, so that I–my judgment–you know, there’s no greatness in saying, well, we shouldn’t have any estate taxes so certain wealthy people can let their children grow up as doted-on–.

JAY: So isn’t that a bigger issue than what’s happening in the public service and the public sector? And I’ll give you a very concrete example. In Wisconsin in 2008, at the very end of the federal estate tax–because in 2010 there actually wasn’t one, and it begins–there’s a new deal to have a lower one in 2011 and ’12. But Wisconsin collected $158 million dollars in estate taxes in 2008; then in ’09, next to nothing; and ’10, zero. That’s more, significantly more, than the kind of concessions they’re trying to get out of the public sector workers, which is only going to net them about $30 million. Why aren’t–?

FEIN: But I’m opposed to all of it. I mean, I agree. There’s no reason–.

JAY: But why not put the emphasis there? Why not make the attack on the estate taxes? Why make the attack on public sector workers?

FEIN: I deplore both of them. You know, people have different choices. One doesn’t exclude the other. You don’t have to say, well, since one is $150 million and another $40 million, you should forget the $40 million. Forty million is too much to–I’m against waste in anything, even one penny.

JAY: Okay, but that isn’t where most libertarians are putting their resources and time to talk about. If you take your cuts to the military budget and you put a real estate tax on it, even just get back to 2001 estate tax levels, which were traditionally there for 85 years, most of these cuts that are being talked about now in the House–. Everyone’s for getting rid of waste, but I don’t think you can call food programs and fuel subsidies for the poor a waste. So we wouldn’t have to do any of that if–.

FEIN: No, we don’t know how they’re–we don’t know how they’re administered, Paul. You could say food given to North Korea’s not waste. Well, what do you mean it’s not waste? It ends up in the military. It’s–there’s a huge amount of waste that gets diversion into fraud.

JAY: We’re not talking about–I’m not talking about food to North Korea. I’m talking about fuel subsidies for poor Americans.

FEIN: No, I understand. But I’m just saying that in the administration, in the administration of any program, there’s vast amount of excess.

JAY: I’m talking about where do you–. Listen, there’s going to be waste. Anything that’s big, no matter who’s running it, is going to have waste and inefficiencies in it. The question is: where do you put your focus? And most of the libertarians–and I don’t include you or Ron Paul, but to some extent I do with Ron Paul–is they’re putting their emphasis on these cuts on social programs, when the big elephants in the room is not only the military but the estate tax, and that there’s so much money to be gotten there that it would easily balance the budget.

FEIN: Well, the military, I sure agree. But it’s–I think you’re being disingenuous to say, if you look at Medicaid, Medicare, and social security, those aren’t huge sums. That’s over $1 trillion a year. So that’s obviously not a tiny amount. You’re just talking about a very, very tiny slice, which is, alright, how much health and pension payments go to local and state employees. But that’s not really where the huge spending is on the social programs.

JAY: No, the real spending is the cost of health care.

FEIN: Part of health care, but social security, too. Those two combined. Social security has pension elements in there.

JAY: Well, let’s separate them, ’cause there’s different questions with each one of them. Take health care. I mean, if you saw evidence that you could see a single-payer, government-administered health care plan was more efficient and cheaper overall than the current model or any–or a non-Obama health care [inaudible] go back to the status quo, would you agree–would you accept such a thing simply ’cause it was more efficient?

FEIN: I’m in favor of having government do things that cost less rather than more. Why would anyone want to spend more to accomplish the same thing than less? That’s just nonsense.

JAY: So what did you think of the health care debate? ‘Cause the single-payer people were agreeing with you that the Obama plan didn’t really lower the cost of health care.

FEIN: But the single-payer people just had a model, too. Paul, you and I have been in Washington for long, long decades, and how many models–.

JAY: Well, you have. I haven’t. You have.

FEIN: Anyway, I’ve been here 43 years, and I’ve seen hundreds of models that turned out the opposite of what they project, because we know the people behind the models have political agendas, so they always forecast something that’s going to be different than what it actually turns out to be. And so I wouldn’t believe any of those models farther than I could throw a stone. You know? We know that they’re concocted up there for political reasons. I’m not going to put up a model, then say, well, if single-payer was so great [inaudible] everybody in the world who had an option at every state level, local level, internationally would have a single-payer option, ’cause it must be clearly the superior–. But that’s not how all the programs operate in health care area, and that’s why I wouldn’t believe that. After all the nonsensical economic projections–.

JAY: Okay. Well, here’s where you get to get my query, then, about the whole libertarian outlook, then. If the government’s out of it, and you just let the free market decide, how do you prevent monopolization?

FEIN: Yeah, if you have the antitrust laws–it’s not the government’s totally out. You prevent price fixing, mergers that are too big. I’m, for example, in favor to prevent another TARP, having limits on the size of banks so they never can become too big to fail. So, clearly, government has a role in ensuring that you’ve got a properly competitive marketplace so monopolistic practices don’t enter into the equation.

JAY: Do libertarians in the House agree with you on this?

FEIN: Certainly many–.

JAY: Like, would they go for a break up the banks, a–.

FEIN: I think there are libertarians who would go for putting size on bank limits, absolutely, ’cause they understand exactly what’s going to happen: too-big-to-fail–Citibank, whatever; the whole economy will tremble; we’ve got to throw in money to prop it up.

JAY: And I don’t hear this from libertarians, the need for more serious implementation of antitrust laws, which will be a critical element if you’re going to have some measure of a free market.

FEIN: Yeah. Yeah. Well, that’s–it’s a fact that it hasn’t been highest on the agenda, but I certainly would be in favor of it. But they may feel that there are other things that are more urgent and pressing.

JAY: Alright. So it gets back to an earlier conversation. There’s some convergence of interest between what you say–and I’m not sure what you say is the same as what some of your Tea Party bretheren in the House say.

FEIN: I’m sure they don’t. Look, listen, it’s not an echo chamber. You’ve been around, Paul. There’s going to be disagreements amongst–in any kind of group. It’s a matter of degree and how willing there is to kind of get some compromise to bridge a difference. But, sure, what I’m saying is hardly going to be, oh, well, everyone gets up and sings like a Greek chorus exactly my same words [inaudible]

JAY: I understand that. But you know that. I’m trying to get a sense of–do you–do most libertarians share your opinion on antitrust laws?

FEIN: I think that most libertarians would understand the need to prevent price fixing and being too big to fail. Now, some would say, oh, you know, that’s–maybe the Koch brothers or something, they want monopolies, but I think that’s clearly a sharp minority. It goes back to Louis Brandeis. He was a Supreme Court justice, and before then he was someone who we might call a public advocate, arguing very strongly in the urgency of small business and a more atomistic, if you will, economy, precisely to encourage innovation and competition and prevent a company from becoming so large politically that no longer do free market forces work.

JAY: Okay. Let’s go back to what’s happening at the state level, quickly. Wisconsin, Indiana, Ohio, New Jersey, all of these states, with the exception of New Jersey, which actually has an inheritance and an estate tax, although it’s relatively low, but in these other states, as far as I understand it, they don’t have anything. They’ve been lowering the tax rates. Isn’t there an issue of going after this vast accumulated wealth, at least before you start looking at public sector workers?

FEIN: I don’t think you have priorities. You have to do it at the same time.

JAY: But they’re making it a priority, ’cause–but they’re not, but they’re not going after this.

FEIN: I know they aren’t, but that’s the real issue. It’s not, you know, is one more urgent than the other. I think estate tax–I think that the federal government is the one that really has the bite on the estate tax, not so much [inaudible]

JAY: And then share–do something to share with the states.

FEIN: And there’s got to be a reevaluation of what we are as a nation. And we talk about, well, [inaudible] plummeting standards of living. The United States earmark is not standards of living; it’s independence, freedom, that the default position in between government and individual liberty is individual liberty. And we all recognize that those values of the United States are what earmark us as a civilization, which is independent of GNP. Suppose that our standard of living, Paul, is no longer 2008 or 2007. Suppose it goes back to 1950. If we still retain our values and our devotion to due process and who we are as a people, and not wanting to dominate people abroad for its own sake, and don’t go abroad in search of monsters to destroy, who cares? Who cares? When we write our epitaph, do we care, oh, well, he had x number of cars in his house or how many video games? No. That’s not what we are as a civilization. The United States wasn’t built on the idea the goal of the enterprise is make us as rich as can be. It didn’t frown on that, no, the goal of the enterprise is to make us live by the better angels of our nature.

JAY: And there’s a place for you guys in the Republican Party? Thanks for joining us. Oh, you can answer my question. I don’t have to have the last word.

FEIN: The Republican Party evolves like any other party, and at some time and place, I hope it will be.

JAY: And not that the Democrats are that different on this score. Thanks very much for joining us. Thank you for joining us on The Real News Network.

End of Transcript

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Bruce Fein is the founder of the American Freedom Agenda. He served in the US Justice Department under President Reagan and has been an adjunct scholar with the American Enterprise Institute, a resident scholar at the Heritage Foundation, a lecturer at the Brookings Institute, and an adjunct professor at George Washington University. He was an advisor to Ron Paul. Bruce is also the author of the book "American Empire: Before the Fall."