The TRUTH about Obama's remarks on wealth redistribution

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. . . BOTH times; probably deliberately. But, he's actually AGREEING with conservatives by stating that social progress is best achieved through legislation than through the courts . . .


October 27, 2008
from Ben Smith's blog at Politico: http://www.politico.com/blogs/bensmith/1008/Obama_advisor_pushes_back_on_redistribution.html?showall



A top legal advisor to Barack Obama, Harvard law professor Cass Sunstein, said today that Obama's 2001 remarks on "redistributive change" -- pushed hard on the right today -- are being misinterpreted, and that he was actually articulating "conservative" legal principles, and that the then-law professor's "law-speak" was being misinterpreted.

Obama's remarks came in a long interview on civil rights and Constitutional law with two other law professors on the Chicago public radio station WBEZ in 2001. (The full transcript is here, and audio is here.) Sunstein argued that Obama is discussing redistribution in a relatively narrow legal context: The discussion in the 1970s of whether the Supreme Court would create the right to a social safety net -- to things like education and welfare. He also noted that in the interview, Obama appears to express support for the court's rejection of that line of argument, saying instead that the civil rights movement should aim for the same goals through legislative action.

"What the critics are missing is that the term 'redistribution' didn’t mean in the Constitutional context equalized wealth or anything like that. It meant some positive rights, most prominently the right to education, and also the right to a lawyer," Sunstein said. "What he’s saying – this is the irony of it – he’s basically taking the side of the conservatives then and now against the liberals."

The first mention of redistribution, which does not appear on the YouTube clip, comes when Obama discusses a 1973 Supreme Court ruling finding that there is no right to education.

"One other area where the civil rights area has changed... is at the state level you now have state supreme courts and state laws that in some ways have adopted the ethos of the Warren Court. A classic example would be something like public education, where after Brown v. Board, a major issue ends up being redistribution -- how do we get more money into the schools, and how do we actually create equal schools and equal educational opportunity? Well, the court in a case called San Antonio v. Rodriguez in the early '70s 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 something and we can't get into."

Later in the interview, Obama seemed to concur with conservative and mainstream liberal scholars on the court's more modest view of its powers:

"Maybe I am showing my bias here as a legislator as well as a law professor, but you know, I am not optimistic about bringing about major redistributive change through the courts," he said. "You know the institution just isn't structured that way. Just look at very rare examples where during he 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 is essentially is administrative and takes a lot of time. The court is not very good at it, and politically it is 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 here could come up with a rationale for bringing about economic change through the courts, I think that as a practical matter that our institutions are just poorly equipped to do it."

Obama did suggest in the interview that he favors "redistributive change," and that it should come though "political and organizing activities," and that's the discussion Republicans are jumping on, arguing that it shows the same philosophical impulse as Obama's now-famous commetn to an Ohio plumber that he favors "spreading the wealth around."

But Sunstein argued that in the context of a long, legalistic interview, the words referred to the narrower forms of redistribution -- education, legal filing fees, legal representation, and other issues -- that had been discussed in the case Obama cited and in discussions around it.

A University of Chicago law professor who appeared on the 2001 WBEZ program with Obama, and who also supports him, Dennis Hutchinson, described the interview as "not a bombshell."

"He's saying you dont achieve stable social change through judicial activism," Hutchinson said. As for "redistribution of wealth," "that's what a progressive tax system does," he said.

"It's two minutes and 17 seconds of what I could say in front of a class," he said, suggesting reporters go back to speculating about Obama's cabinet picks.



The full audio has been posted here: http://www.wbez.org/audio_library/od_rajan01.asp

A rough transcript here: http://www.foxnews.com/urgent_queue/#50041ecb,2008-10-27

[sinkingfeeling]

1. But, but, those criticizing Obama's statement are the experts on "Strict Constitutionalism", surly

they understand what the discussion of redistributive change was about. Or aren't they intellectual enough to understand it?

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2. I hit them for their intellectual dumbness in the original title

Is it deliberate or is it just stupidity; or both?

[deaniac21]

3. What's wrong with socialism? I thought most of us were cool

with that....?

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4. da!

[DangerDave921]

5. progressive tax and redistribution

A progressive tax is not redistribution. A progressive tax merely means that the higher income earners pay a disproportionately higher portion of the revenue taken by the government. It does not assume that the government then redistributes that money to others.

By contrast, redistributing means taking something from one person (in this case money) and giving it to someone else. That IS what Obama is planning, at least with respect to his proposal to give refundable tax credits to those who do not currently have any federal income tax liability.

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10. There's a big difference between lower income workers taking advantage of the earned income break

. . . and lowering their tax burden and corporations and wealthy paying next to nothing through loopholes and the like.

The folks who Obama wants to give a tax benefit have taxes withdrawn from their checks every week. It's just dishonest to make the distinction you do between the benefits received and insist that one is 'progressive' and the other is some sort of giveaway.

[DangerDave921]

13. Not dishonest at all

I've never claimed to be a die-hard progressive. I'm more of a free-market, capitalist Democrat. So right there we may disagree.

Second, if a person currently has ZERO federal income tax liability, I cannot get behind the notion that that person should then get a check from the federal government (unless it's the traditional welfare safety net which I am all for). That is a give-away.

Your statement that these working people have taxes taken out misses the point. Once they file their return, they get that money back in a refund.

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16. They only have zero liability because of the earned income tax break

Many corporations have what amounts to zero liability because of their manipulation of tax breaks, but you, apparently, feel they are more deserving of more tax relief.

Why is it a 'giveaway' to give more money to lower income tax payers and acceptable to you for businesses who are able to manipulate loopholes and tax breaks to effectively eliminate their tax burden?

One example may be the way that the mortgage interest deduction was adjusted to exclude many homeowners while remaining in place for wealthier homeowners.

If you are going to make these comparisons, you need to include ALL the benefits corporations, stock-holders and those with substantial savings are advantaging themselves of, all from that same pot of money that those without still contribute to. There really isn't a situation, like you imply, where there is some untenable burden on the wealthier 2-3% of Americans who have received some 70% of the benefits of the Bush tax breaks.

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18. Most corporations, including the vast majority of foreign companies pay NO income taxes

Most corporations, including the vast majority of foreign companies doing business in the United States, pay no income taxes, according to a Government Accountability Office report released in August.

During the eight-year period covered by the report, 72 percent of foreign-owned corporations went at least one year without owing taxes, and the same was true for 55 percent of domestic corporations.

Small companies were much more likely to pay no taxes than larger companies. Still, more than 3,500 large domestic corporations - with more than $250 million in assets or $50 million in gross receipts - did not pay taxes in 2005.

The report said about 80 percent of the companies studied paid no taxes because they didn't generate any profit after expenses. Money-losing companies can legitimately owe no tax, and others can use provisions of the tax code to lower or eliminate their liability.


http://www.truthout.org/article/most-corporations-dont-pay-income-taxes

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11. I can't argue this freehand, but I can read and try and understand

an argument on progressivity from the Center on Budget and Policy Priorities: http://www.cbpp.org/9-27-06tax.htm


Myth: The tax cuts have made the tax system more progressive.

“The President’s tax cuts have made the tax code more progressive, which also narrows the difference in take-home earnings.” — Council of Economic Advisers Chair Edward Lazear and Katherine Baicker, then a member of the Council of Economic Advisers, May 8, 2006


Reality: The tax cuts have made the distribution of take-home pay more unequal — at a time when inequality in before-tax income has also increased.

A progressive tax change, like a progressive tax system, is one that reduces inequality. In Lazear and Baicker’s terms, it is a tax cut that “narrows the difference in take-home earnings.” Take-home earnings consist of a person’s income after taxes have been paid. So a progressive tax cut would be one that raised after-tax incomes for those at the bottom of the income spectrum by a larger percentage than for those at the top, increasing their share of total take-home pay.

The President’s tax policies, however, have widened the differences in take-home pay between high- and low- and middle-income households, according to Tax Policy Center estimates. When the tax cuts are fully in effect, households with incomes above $1 million will receive tax cuts equivalent to an increase of 7.5 percent in their after-tax income. Households in the middle of the income spectrum will receive tax cuts equal to only 2.3 percent of their income. And households in the bottom quintile will gain by less than one percent.

Put another way, households with incomes over $1 million will hold a larger fraction of total U.S. after-tax income than they would have received without the tax cuts, while households in the middle and bottom quintiles will hold a smaller share. The tax cuts thus have widened, rather than narrowed, income gaps, making them regressive. (http://www.cbpp.org/3-11-08tax.htm)

While comparisons of percent changes in after-tax earnings measure the tax cuts’ effect on the distribution of income, the dollar values of the tax cuts received by different income groups are also relevant to evaluating these tax cuts’ overall fairness. For example, over the next ten years (assuming the tax cuts are extended), more than $800 billion will be spent on tax cuts for the 0.3 percent of households with incomes above $1 million, with these tax cuts averaging over $150,000 per-household annually. At issue is whether this represents an appropriate use of scarce public resources. (http://www.cbpp.org/2-4-08tax.htm)

The skewed distribution of the tax cuts is of particular concern given that, since 2001, gaps in before-tax income have widened. As of 2006, the highest-income 1 percent of households held a larger share of total pre-tax income that in any year since 1928. (http://www.cbpp.org/3-27-08tax2.htm).

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6. It's still the ONE THING Obama has said that made me cringe simply

because I knew the reichwingers would run with it. Doesn't matter though. He's going to be our President anyway.

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7. It didn't spark a bit of interest from the majority of Americans

. . . because any fool can see that Bush's tax cuts to the wealthy were the largest distribution of 'wealth' in our history; from the working class to those in the top 2%.

We're still waiting for our money that Bush gave away to his wealthy benefactors to "trickle down" on us.

[DangerDave921]

8. tax cuts went to working class too

I got a tax cut.

So how did Bush's tax cut transfer wealth from working class to the rich?

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9. where did the money for those tax breaks come from?

While Bush's tax cuts shaved only a few hundred dollars off the tax bills of most Americans, they saved the richest one percent more than $44,000 on average. In fact, once all of Bush's tax cuts took effect, it is estimated that those with incomes of more than $200,000 a year -- the richest five percent of the population -- pocketed almost half of the money. Those who made less than $75,000 a year -- eighty percent of America received barely a quarter of the cuts.

In reality, only a few middle-class families received a significant tax cut under Bush. But every wealthy American -- especially those who live off of stock earnings or their inheritance -- got a big tax cut.

The effect of the Bush tax cuts was a shifting of the tax-burden away from the upper-class, moneyed households, to the working class. (I got this from Krugman in 2001)

(edited out the example which didn't make my point)

[DangerDave921]

12. tax burden versus wealth

You're really comparing apples and oranges. If every person got a tax cut, then by definition the government did not take money from the working class and give it to the rich. Because the working class paid LESS than they did before.

You're talking tax burden. Yes, after the tax cuts, the working class paid a higher portion of taxes than before the tax cuts. That's a different issue.

And lastly, when you look at actual dollars (versus cuts in tax rate) the rich will always benefit more from a tax cut because they pay more in taxes.

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17. I don't think you give enough credit to the amount and scope of tax breaks wealthier folks have

. . . available to them, versus the scarcity of avenues for lower income Americans to recover the tax dollars that go out of their checks every week.

And, we're just talking FEDERAL taxes.

The proportion of taxes paid that is a attributed to non-income taxes has climbed sharply over time (e.g. sales tax, property tax).

State and local taxes have changed little. As a result, the entire tax system has not increased in progressivity as much over the past quarter century as one would think if one focused solely on the federal income tax.

Low income individuals without children have seen little change in their overall tax burden.

Marginal income tax rates may have declined in low income ranges, but have increased or stayed the same in moderate income ranges.

So, while concerns about redistribution have led to dramatic reductions in the federal income tax for low-income families with children, changes elsewhere in the code have not kept pace, and the overall tax system has not increased in progressivity as much as one would think if one focused solely on the income tax.

Direct measures of taxes paid may be poorly correlated with the actual incidence of the tax. If wages and prices shift because of taxes, the cost (or 'incidence') of the tax may shift to others than those who appear to directly pay the tax. Also, there is an effect of the corporate income tax on low-income individuals as adjustments to this tax over time may have lead to this tax increasingly being borne by workers.


(I 'borrowed' most of these, but they are pretty basic assumptions)

[DangerDave921]

20. good points

I was only discussing income tax, you're right. And for federal income tax, the stats from the IRS are pretty straightforward. The top 1% of earners pay about 39% of the total amount collected in income taxes. And the top 50% of earners pay about 97% of the total amount collected.

But how this changes when one factors in property taxes and sales taxes is something I just don't have the economic background to discuss intelligently. Sorry! :)

[DangerDave921]

19. where did the money come from?

It came from those who earned it and paid it. I don't subscribe to the notion that the government "pays" for tax cuts. It's not the government's money to start with. It belongs to the people who earned it. If the government then allows each person to keep more of their own money, then the government is not paying anything.

As for the tax cuts going more to the rich, that is just a simple matter of math. If I pay $5000 a year in taxes and get a 10% reduction, I see a $500 savings. If, however, I pay $50,000 in taxes and get that same 10% reduction, I get a $5,000 savings. Same rate, but a difference in hard dollars.

[B Calm]

15. Why would it make you cringe? Throw it right back at them!

[B Calm]

14. Tax cut for the middle class is now called socialism. I look at it as

a recovery mechanism to get back some of the money the rich and Wall Street stole from us!