‘Patriotic Millionaires’ Call for Higher Taxes and Wall St. Regulation
Morris Pearl, the chairs of an association of millionaires who advocate for a more equitable economy, assesses the economic plans of Trump and Clinton
Morris Pearl, the chairs of an association of millionaires who advocate for a more equitable economy, assesses the economic plans of Trump and Clinton
PAUL JAY, TRNN: Welcome to The Real News Network, I’m Paul Jay, in Baltimore. Patriotic Millionaires, that’s an organization formed in 2010 to urge President Obama to let the Bush tax cuts expire. They’re a group, now, of about two hundred millionaires. You gotta have at least a million bucks to get in. And they advocate economic and social equality, and tax reform. Tax reform, essentially, that rich people should, in fact, pay more taxes, meaning the members of this organization are saying they should pay more taxes. Well, how did that organization and its chairman react to the debate, on Monday night, where we heard both Trump and Clinton suggest what their tax ideas and programmatic ideas for the economy would be.
Now joining us from New York City is Morris Pearl, he currently serves, as I said, as chairman of the Patriotic Millionaires. Previously, he was at BlackRock Inc., where his work included the Maiden Lane Transactions and assessing the government’s potential losses from bank bailouts in the United States and in Europe. And I guess you must be a millionaire, thanks for joining us, Morris.
MORRIS PEARL: Well, thank you. Great to be in your show.
JAY: So, you issued a statement after the debate on Monday night. You were critical of the host, Mr. Holt, suggesting he should have asked questions that went unasked and thus unanswered. What didn’t he asked that you wanted asked?
PEARL: We believe the fundamental problem in America, is that a small group of wealthy people, like one of the candidates, who’s using their money to get more political power, using their political power to get more money. And that’s the problem is that political power is being concentrated in a very small number of people. We’d like to see and hear what the candidates, if they approve of that, if they think that’s a good thing or a bad thing. If they think it’s a bad thing, I’d like to know what they can do about it or what they propose to do about it, as President of the United States.
JAY: Now, to be fair, both candidates would easily join your organization, the Clintons are multi multi multi-millionaires, perhaps not billionaires, of course we’re not really sure how much money Trump actually has. Some people suggesting he doesn’t have as much as he says he does. But they’re both quite wealthy, just to make sure.
PEARL: That’s true.
JAY: So, if you had been moderating, what would question would you have asked and then what would you have liked to hear, as an answer?
PEARL: Well, I’d like to know what they can do to allow more people to participate in our democratic process. Part of our problem is that we have so many, so much money needs to be raised, the candidates have to be very responsive to these major donors. They’ve spent a lot of time fundraising and they have to spend a lot of time with the few rich people who donate most of the money. I don’t know if its true or not but the Boston Globe said that I’m number six hundred and seventy-four on the donor list. Believe me, I’ve spent a lot more time with senators and congress people than the average American does. And I’d like to see a system that we can get more people participating in the system. Participating, not just walking to the voting booth and voting, but actually having the same kind of access to their elective representatives.
Something like we have in New York City. Where a person who wants to run for City Council has to get a thousand people or so to donate only a hundred or two hundred dollars and then get some matching funds. That’s a few hundred thousand dollars to use to run a campaign. That system has allowed, since its been initiated a few years back, has led a whole different group of people to run for City Council. We no longer have a big representation of people involved in real estate development but we’ve a much larger representation from minorities, from people who are less well-to-do, from people who come from less well-to-do neighborhoods and backgrounds. That’s really changed the face of the City Council, here in New York. Things like that have been successful in other places like Maine, Connecticut, Seattle. That’s the kind of thing I’d like to see.
JAY: Now, you start by saying the core of the problem is too much wealth in too few hands, if I understand correctly. But do you find either Trump or Clinton really seriously addressing that? Clearly, Trump was talking about massive tax cuts for the wealthy. But is Hillary Clinton talking about much more than that.
PEARL: She’s talked about a few things. Just in terms of, for instance, the estate tax. The estate tax is what makes America, a meritocracy instead of an aristocracy. Its what prevents the small number of billionaires just having families that remain rich forever without having to work. Mr. Trump wishes to remove the estate tax, altogether. That would mean, essentially, his descendants would never ever have to work for a living or pay taxes, forever.
Ms. Clinton wants to make the estate tax larger so that only ninety-nine point seven percent of the population is exempt from it. But that zero point three percent of the population is the wealthiest and would have to pay an estate tax as the wealth moves from one generation to the next. That, and she would actually increase the amount of it so that people who leave wealth, to their children, of over a billion dollars would have to pay a higher rate than they do now. We think that’s correct. That billionaires should pay more taxes.
JAY: I know there’s been a great debate on the estate tax about what’s the threshold for paying a tax. I think, at one point, during the Eisenhower years, the estate tax was ninety percent. If my memory serves me right, the threshold was about, max, maybe a million, may be less. Then, some people were pushing for five million. I don’t really know the Clinton proposal, very well. What is her threshold? Is it at a billion? She doesn’t have a eliminate estate taxes at levels of five million and more, does she?
PEARL: No, it would be a zero through around three-point something million. Then forty percent and then for a billion dollars it would go up to sixty-five percent.
JAY: Well, that’s significant. That would be a mix of state and federal? Or just a straight federal tax?
PEARL: Federal. Just a federal tax, I’m talking about. Certain states have estate tax, I think most states don’t have estate taxes, anyway, here in the United States.
JAY: What else would you like to see? Either you’re hearing it from Clinton or what would you like to be hearing that you’re not hearing?
PEARL: Well, I would like to see a variety of things. I’d like to see, for instance, mandatory disclosure of corporate money that’s used for politics. I don’t think its right that corporations — the managers of corporations — should be allowed to use their shareholders money in politics without even the shareholders themselves who own the corporations knowing what they’re doing. We’ve talked about a number of reasons why that’s bad and its come to really hurt companies when the shareholders of some of the pharmaceutical companies, that make a lot of money selling contraceptives, found that their management was using their money to help candidates who are trying to ban their products. That caused some backlash. And some of those owners were not happy with what was going on. We think that’s the kind of thing that should not be allowed.
We think the president could and should require disclosure of political spending by federal contractors. Its obviously ripe for corruption, when someone is trying to make money by selling something to the government and is giving money to government officials. That just seems like something the public should know about. So we think there’s a variety of things that could be or should be done to improve the situation between disclosure and some kind of funding arrangement so more people can run for office without needing so much money.
JAY: One of the debates between Sanders and Clinton, during the primaries, and one of the critiques Sanders made of Clinton, he asked her to make a pledge that she wouldn’t have her finance team come from Wall Street. He never came out and said “the way President Obama did,” I guess for tactical reasons, he didn’t wanna critique President Obama, but clearly the ‘07/’08 crisis dealt with by President Obama, with a finance team that came from Wall Street; much of it the former Bill Clinton team. We know that since the supposed recovery, ninety percent of post recovery income has gone to one percent of the population. Which has a lot to do with how the crisis was managed. Sanders challenged Clinton not to have that kind of team, which she wouldn’t. A lot of the disparity in wealth – and concentration of wealth – has happened because of the power of finance. Do you see from Clinton, or what would you like to see any real measures that would break up that power?
PEARL: I think we’ve made some progress. I think things like Consumer Financial Protection Bureau — which Mr. Cordray is in charge of, he had been the Attorney General in Indiana, previously — is making a difference. I think some of the reforms under the Dodd-Frank rules are making a difference. But I think you’re right. I think there’s some things that President Obama did not do well. I think that appointing Mary Jo White to the SEC turned out to be a major step in the wrong direction, in terms of disclosure of political spending of this sort. She and her husband both came from the corporate finance world.
I’d like to see, not necessarily people who don’t know anything about finance being appointed to these jobs, but I’d like to see people who are responsive to the general public. Even areas where the general public’s interest differs from the interests of the financial services industry.
JAY: What do you make of the team that’s around her, that looks like will be the transition team and the advisors? She’s already received a lot of criticism that is essentially the same kind of thinking that led to Bill Clinton and Bill Clinton’s bubble creation and the growth of the elimination of Glass Steagall — even though I think that, in itself gets somehow overrated about how important Glass Steagall was — but its an indication of how powerful finance was and the promotion of deregulation.
PEARL: Yeah, you can’t say any one law or regulation was the problem. I think that having separated commercial banking and investment banking is probably a good idea. The normal commercial bank, the kind of banks that have ATM machines, where you have your paycheck deposited and you go and take out money, every week, that sort of thing is almost a necessity. Almost like a public utility. That’s as important to you as your cable TV, your local telephone service, maybe not quite the level of your electricity, but close. Whereas investment banking, well, that’s something that doesn’t really need to be regulated as much. So, I think, having the two separated has a lot of merit going for it.
There are people, and Secretary Clinton’s transition team, who do know a lot about these issues, people like, Neera Tanden from Center for American Progress, and hopefully other people who are very well aware of these issues and can put into policy-making place people that can make a difference. I think the president is almost sort of like leading by philosophy. It’s not so much every detailed decision that gets made because most of the enforcement of the rules is done by these sort of independent agencies, like the SEC, which is not at the pleasure of appointment anyway. But the treasury is more of administering this huge body of rules and making decisions at the margin and I think it is important who is advising the president on what policies to pursue, what the goal should be, what the philosophy should be is important.
JAY: Yeah there’s been zero critique by Hillary Clinton of President Obama’s economic handling. Quite the contrary, she more or less promised just to continue that legacy. But that legacy had a lot to do with the way the fed has been shoveling money to the big banks. Virtually, unconditionally, practically at zero interest rate with no requirement to actually invest in the economy. We know a lot of the banks that are borrowing money for practically zero, get involved in this carry trade where they loan money in Brazil and other hot money markets. Make money off the point spread. There’s a tremendous encouragement of this, I don’t know what else you would call it, parasitical speculations, which has become the dominant play in much of Wall Street. If she doesn’t critique that, why would anyone think, she’ll do it any differently?
PEARL: I think your point is well taken. I remember, Michael Douglas as Gordon Gekko, said “Greed is Good.” That’s sort of been the philosophy for the last thirty or forty years. Well, greed is good, the invisible hand can solve problems, that’s not true. The invisible hand cannot solve all the problems, some problems need government direction or government regulation. I don’t know what’s gonna happen in the next election.
JAY: So Trump is successful who wants to, essentially, if you listen to what he’s saying, get rid of virtually all that kind of regulation. And have tax cuts that most people would say benefit people at the upper tier. What does that lead to?
PEARL: It would lead to more inequality. That would lead to fewer people participating in our society; both civically and financially. That would be bad for the members of my organization. What we say isn’t so much that we’re altruistic all the time, what we say is that we want to live in a country with a robust middle-class. If you wanna sell expensive ice cream, as Ben Cohen says, we need people who can afford to buy chunky monkey. And if you wanna sell shoes, like our member Arnold Hiatt, well he needs a lot of people who can afford to spend money on expensive shoes. We need a robust middle-class filled with people who can spend money. What’s more important to us, as business people and investors, is all of our customers getting raises.
What’s less important is whether we pay a little bit more or less in taxes. We need people who can make money. What I’d like to see, is lots of people getting raises, who can spend money, and therefore help all these businesses grow.
JAY: So, you’re trying to recruit people for your organization. You’re talking to lots of millionaires. Not everybody you talk to, joins. What you just said is such a no-brainer that if people don’t have consumer purchasing power, its gonna paralyze the economy and if too much money is in too few hands there’s only so much money wealthy people can actually spend. This idea of Trump that if you have tax cuts they’ll put all this money into investment and all that. There’s already tons of money in people’s hands and all the rest they invest.
PEARL: It’s a no-brainer for you and for me.
JAY: So what’s the mentality, though? When you talk to other millionaires and such, how do they not get the need for more purchasing power when they seem to think the real objective is to have as low wages as possible?
PEARL: Well actually not a lot of people think that. Most people I talk to are fairly receptive to my case. Frankly, the biggest problem I have in recruiting members is people ask me, “How is this gonna help elect Hillary Clinton to be the next president?” We’re nominally a non-partisan organization, though most of our members are obviously more progressive. I think that what you and I see as no-brainers, though, the people who don’t understand it are over in the Dirksen building and the Hart building, the Republican office suites on the Senate side. What we can do, which our organizations don’t, is walk into a meeting with some of these twenty-something year old economic policy staffers and explain to them, that business people, when they start businesses, do not start with the bottom line and work their way up. They start with how much they can sell, what they need to pay their workers and then figure out what the profit is in the end. Republicans seem to think that businessmen start with how much profit they wanna make and then from that figure out how much they can spend on wages, taxes and everything else.
JAY: But to a large extent, people in Congress and such, they’re responding to lobbying efforts. Like you said, people that donate to them and get their phone calls picked up. In the auto industry, part of their restructuring of the auto industry was the starting wage. This whole idea of the two-tiered wage system. So, now, workers are starting at the big three, start at fourteen bucks an hour, they used to start at twenty-six bucks an hour, all through the auto parts industry. Many of the big manufacturers have started two-tiered wages where they’re getting starting workers to work at half what the starting wage used to be. Like the drive to lower wages, the drive to paralyze wage, increases. If most big corporations, even mid-sized ones, wanted wages to go up, it wouldn’t be hard for them to raise wages. I mean Walmart had this big fight, if you remember Elizabeth Warren had hearings on this, and the guy from Costco made your argument. But the Walmart guys sure don’t make that argument. They try to lower them as much as they possibly can get away with.
PEARL: Yeah, that is true, not everyone agrees with us. And some people are more greedy than others. Some people are short-term greedy. Other people are long-term greedy and that makes a difference in how you look at these policies. I don’t think that too many people want the government involved in making every decision about wages and whatnot. But the government has been involved, a lot, over the last, during the latter part of my life time. Sort of regulating unions. I think the decline of organized labor, has had a lot to do with the decline of wages in these sectors that you’ve mentioned. In the mid-west automobile makers, there’s sort of the power of organized labor that’s declined. As its been more and more regulated by the administrations.
JAY: And you can see organizations like ALEC that go around promoting exactly this kind of legislation everywhere, are funded by big-corporate donors, that’s who funds ALEC.
PEARL: Yeah, that’s all too true. Somehow, a majority of people in Wisconsin were somehow convinced that the financial crisis was caused by teachers unions. You can argue about philosophies of schools all you want but I think that teachers are an important part of what you’re doing. And getting rid of unionized teachers is not good for kids.
JAY: Discussion to be continued. Thanks for joining us.
PEARL: Thank you very much. It’s a pleasure to be in your show.
JAY: Thank you for joining us on The Real News Network.
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