How much money is "too much money?" At what point does amassed wealth no longer go towards buying things, but instead exerting power and shaping society? Just what the heck is a "precariat?" These questions are addressed by Chuck Collins, Director of the Program on Inequality and the Common Good at the Institute of Policy Studies, who joins Democracy Nerd to discuss his new book "Wealth Hoarders: How Billionaires Spend Millions to Hide Trillions."
JEFFERSON: Well welcome folks, thank you for being with us. Welcome to Democracy Nerd, I am Jeff Smith. Each time a policy is proposed or introduced--let's say Medicare for everybody or single payer health care. Let's say an enormous investment, two trillion dollars in infrastructure. The response from opposition is “How will it be paid for?” It is *sometimes* heard when there's significant proposed investment or expenditure in the military. It is *sometimes* proposed when there is significant proposal for cutting taxes. It is *always* hear if there is a major investment proposal for something that might help poor people, or might help do something about wealth disparities or impact the environment, etc.
Recently, the Secretary of the Treasury Janet Yellen announced seven trillion dollars in uncollected taxes over the past decade. Seven trillion dollars a lot of money. Might even be an answer to “How are we gonna pay for that?”
Easier said than done. There is a big ecosystem of tax lawyers, accountants, financial advisors our guest today refers to as the “wealth defense industry”--we'll get into that to decide, to leave that decision to whether that's a fair descriptor--whose primary purpose is to shield major earners’ significant wealth from tax liability. If your job is to help your client pay less taxes, there are people who do that do that very well and make good money doing it.
To talk about that, to talk about the collection and preservation of wealth and its impact on democracy is Chuck Collins, the Director of the Program on Inequality the Common Good at the Institute of Policy Studies, the author the new book “The Wealth Hoarders: How Billionaires Spend Millions to Hide Trillions.” Welcome Chuck, to Democracy Nerd!
CHUCK COLLINS: Hey thanks for having me.
JEFFERSON: Let's start out, first of all how are you coping? We should at least be human beings for half a moment. Are you vaccinated? Are you an anti-vaxxer? Are you are you feeling good? What are your reflections coming out of the oddest 14 months in the last, I don't know, many decades?
CHUCK: Well thanks, thanks for asking. I, I'm enjoying the coming of spring, the the the re-socializing with friends and neighbors. I did get vaccinated, I got the one jab Johnson & Johnson just before it came off the market for a little while. But, uh…
JEFFERSON: You got the early one, one and done.
CHUCK: Yeah one and done. And and, uh, yeah last weekend we probably had some of the first ordinary kind of like sitting with friends at dinner kind of. So that and…
JEFFERSON: What was the energy there? Your fir... we just had our family over for the first time--what was the energy there, the people gathered for the first time?
CHUCK: It's just a little bit of disbelief, and just… and also just, “Wow.” We've, we haven't had that high touch connection in such a long time so it's, it's delightful. It's a joyful thing.
JEFFERSON: It was just my, it was just my dad's birthday and so we had the family over. And it felt both entirely familiar…
JEFFERSON: Yeah, it was. It was great. It felt both entirely familiar and oddly unfamiliar. And everybody was in a little better mood than normal, right? Like everybody was like...it was always would have been a festive thing, but it was an extra-festive thing. So I suspect people are feeling those feelings.
All right, let's get into it.
Director of the Program on Inequality at the Institute of Policy Studies--what the heck is that? What do you do there?
CHUCK: Well, we're a research and advocacy group. We've been around since the early 60s. Uh, kind of a left progressive think tank and action tank, but the program on inequality we specifically look at how this great concentration of wealth that has emerged over the last couple decades, how that's affecting democracy and society and our health. And uh, we we co-edit a website called inequality.org which is like a portal on data analysis and also campaigns and actions that people can do.
JEFFERSON: So, uh, you know and obviously this is a time coming out of this pandemic where people are mad and see how inequality, uh, made us more vulnerable during the last 14 months and and cost some people their lives. Say more about that, give us the kind of story of the overlay between wealth and equality. And and you did say wealth inequality. A lot of people say income inequality. Do you have a pr, I have a preference--do you have a preference in phraseology? #watchyourlanguage
CHUCK: Yeah. I, I like to talk about both income and wealth inequality. They're slightly different dynamics and I would say that the extreme inequalities were kind of the pre-existing condition in our society as we came into the pandemic, meaning you got half, half the population has almost no financial reserves, just trying to, you know, survive, uh, underpaid underprotected if you will, and then you have this top ten percent, top one percent and even this top one-tenth of one percent who have reaped most of the income and wealth gains of the last couple decades. And it seems to me the pandemic almost sort of supercharged those trends, uh, that the most vulnerable people in the society who became our essential frontline workers became more vulnerable.
JEFFERSON: You want to spell that out? You want to sort of tease that the dynamics that led to that. Because wenow sort of know, right. It's, we, people have seen probably, uh, Twitter headlines come across the transom of their phone saying, you know, billionaires increased wealth by blank percentage. That didn't happen for poor people. Want to help us just kind of spell out how that went down?
CHUCK: Yeah, I mean if you think about you know, uh, who who didn't have the opportunity to, uh, telecommute, who didn't have the opportunity to work or sequester at home. You know, in the number of people who went to work every day, uh, without health care, without sort of paid sick leave, juxtaposed with the fact that the the U.S. billionaire class… and and this is our research that you've been seeing, uh, over the last 14 months. Uh, the 700 billionaires in the United States saw their wealth go up 1.6 trillion dollars over 14 months. Since 1990 billionaires have obviously seen, U.S. billionaires have seen their wealth go up. But a third of their wealth gains happened during this pandemic. So…
JEFFERSON: What happened to everybody else? So so...
CHUCK: And and...
JEFFERSON: I think in the, in the parlance, right? We have the discussions, “Okay, well rich people are getting richer.” Well, if the stock market's getting better, if the economy's getting better, those are different things. Uh, then is that bad? Is it just being grumpy or jealous to say, to point that out? How's everybody else doing?
CHUCK: No, I mean it's the juxtaposition. It's the fact that other people have lost savings, lost ground, uh, you know whatever. If people had any financial reserves--and you know we're on the verge of an eviction and foreclosure crisis now in many communities. So, uh, you know almost 600 000 people lost their lives, many people lost their livelihoods and savings and, and maybe their health permanently coming out of the pandemic. And and the, you know, people who reap the benefits of owning stock or in owning companies that actually profiteered at different points during the pandemic have done extremely well. Uh, it's and by the way, you know Jefferson during the coming out of the economic meltdown in 2008-2009, that's not what happened. You know, the billionaires lost their wealth didn't recover for four years the levels they had in 2007. So this is just shows that it's really a, it's a heads they win, tails we lose kind of economy.
JEFFERSON: So I want to quote Denzel Washington from the movie “Philadelphia.” Talk to me like I'm a five-year-old. How come? Right. So I understand and, you know, we've talked to Andrei Cherney, who wrote, I mean if there, if an op-ed can be seminal, to me it's a seminal op-ed and how I sort of see the world, understand... He wrote about ALICE Americans: asset, asset limited, incomes constrained, employed. Essentially, the second quintile of the American economy. His quick story being that if that for much of American history, much of the 20s, most of the 20th century at least, the middle three quintiles, right, the, the upper middle class, the middle class, and lower middle class all sort of traveled together. Good times, everybody did better. Bad times, everybody did worse. What happened during the “Great Recession” was essentially a separation between the middle class, the upper middle class, and between the middle class and lower middle class, reducing what we would call a middle class. The example he used was Disneyland. Used to be four-fifths of the American people could basically afford a day at Disneyland. Now it's hard for three-fifths of Americans, easier for two-fifths of Americans to go to take their family to Disneyland. So we've seen that sort of, that sort of separation--what's happened now in this pivotal time of history? Why is it even been better for the biggest repositories of wealth and worse for the destitute or the people who have a hard time making it by?
CHUCK: Well, I mean I think what, what I would say is that the the rules of the economy have been tipped in favor of people who own a lot of assets at the expense of people who work for wages and the rules being tax policy and trade policy and what government spending priorities are. And if you do that for 40 years, you pull apart you see this fragmentation. And you know, as you point out the bottom sixty percent of households now… Uh, the Brits have a cool word they call it the “precariat,” the precarious class the bottom sixty percent literally are living paycheck to paycheck living, uh, in a much more precarious state. They're not going to Disneyland. They're not going in. They're not going anywhere. They're precarious.
JEFFERSON: And these are the folks you're talking about. This is what we hear if, uh, if they have a health problem, if they lose their job, they don't have… they don't have daddy they can call to get the dough or they don't have, you know, sort of a bank account or, you know, rental income or, or stock dividends that will pay the float as they look for their next, as they look for the next gig.
CHUCK: Exactly. And, and then at the very high end you, you now have the economy is kind of wired to funnel wealth to the top. You have, uh, kind of you know the classic concept of rent, rent people who extract rents and extract value from the rest of the economy. It's like a parasitical relationship. And oh, you know, take it, take a an Amazon or take any of the larger global companies… they are nickel and diming us and squeezing consumers and workers at every step of the way and funneling wealth to the top.
JEFFERSON: I still want to get, I still want to push on you a little bit, right, and get a little more granular and, and attempt to live up to the name of the show. That it's... you said 40 years. What happened? So it's 40 years of tax policy, 40 years of trade policy right? If I, if I go back 40 years ago that's about 1980. That's basically the election of Ronald Reagan. And, uh, and and challenge me if I’ve done my time, my temporal arithmetic incorrectly. The, uh but you also said that the last, the “Great Recession” was called 2008 it took four years for billionaires to recover their lost wealth. Why is it different this time, if it's 40 years what was 30 years then? So was it, was it because the particular difference--the stock market didn't go down, stocks stayed high? Was it pretty much that simple? Was it bitcoin? Was it real estate values didn't decline so, so the wealth the repositories remained? Is it, I want to get into this because I'm trying to figure it out for myself. Is it in part there is now so much collected wealth that it has to buy things and so there's limited number of real stuff to own? So that's why the, uh that's why like any asset maintains its value because there's so much wealth in accounts somewhere, it'll still need to buy stuff. At, meanwhile the stuff that's, that's cheaper, the stuff that isn't wealth, the stuff that we have to live on, right, that stuff becomes harder to come by. Help me explain again if I’m, if I'm the Denzel lawyer, Denzel Washington's lawyer character in “Philadelphia.” Explain it I'm like a five-year-old or explain it like I'm, uh, like we're trying to live up to the title of the show and get as nerdy as you want.
CHUCK: Well, I mean another way to understand is we've had a lot of pr… productivity gains over these last fewdecades and people, dated to the late 70s. But that the rewards to capital to owners of wealth and investment have just gone up and the returns to labor to workers have gone down. So that's one nerdy concept which is...
JEFFERSON: That's helpful.
CHUCK: You know, the productivity gains have gone to capital have fun... and, and…
JEFFERSON: We work harder, we work smarter. There's more automation. There's more things happening. Communication technology has enabled things to move more quickly, but because we've been sort of in the current policy landscape of the last 40 years, uh, that hasn't been divvied up the way it might have been during, let's say, the Eisenhower years.
CHUCK: Yeah. And actually the, the Rand company did a very fascinating analysis. I haven't really looked at the underlying, but they, they said over this 45-50 year period, you know, uh, some estimated 50 trillion dollars that should have been paid to kind of workers, worker productivity gauge. If workers had shared in productivity gains, their median wealth would be higher. Their savings rates would be much higher. I mean, you know, a huge... that's, that's the shift right there. Um, what I think the difference between, say, 10-12 years ago the economic meltdown is that was a kind of systemic collapse. It did affect capital and investment markets, um, and the wealthy rebounded way faster than everybody else.
CHUCK: In fact, many households coming into the pandemic still, you know, were still wobbly. Still had not recovered, uh, in terms of savings and and economic, uh, you know, wages since 2009-2010. So, uh, but there's something about the, the market. The market, the stock market just took off after an initial caving.
CHUCK: I think partly because the market's all about betting on the future, and quickly the market pivoted to betting on certain companies that were going to do really well in the pandemic and in the post-pandemic economy. The, the online, cloud-based research, telemedicine, Big Pharma, you know, gaming. All the things that we've kind of, online retail... all the things that we've sort of used more of in the last 14 months. Wall Street was betting big wins because they're also going to consolidate those gains in the post-pandemic era.
JEFFERSON: This is helpful. I'm a verbal processor. This, you know, one of the reasons we do the show is one reason I so appreciate having a chance to do is help me figure things out. Maybe it's sort of simple. Not easy, but simple. Which is the crisis in 2008 was an asset crisis, and the crisis in 2020 was a productivity crisis. It was, it was an activity crisis. And so one impacted wealth in a different way. And one impacted sort of working people in a different way and working people got screwed both times. And anyway that helps me understand the story.
Let's get to the book. The book is “The Wealth Hoarders: How Billionaires Spend Millions to Hide Trillions.” So a friend of, a friend of mine just bought a freehold, no a freeport which is a, which is in some cities around the world. I, I, if anybody has watched the movie “Tenant” or has watched the tv show “Billions,” uh, you will have seen a freeport, right, a freeport where you can house art. I don't know if any of them are quite as glamorous as the one in “Tenant” but, and maybe they're not as pedestrian as the one in “Billions” but the, but it's a place where you can house art without paying tariffs for shipping that art and so it's a way to sort of hold wealth and maybe that's a at least a mildly accessible pathway. In your book is saying that this kind of thing is a big deal. This is, this is now a major piece of service that is provided to the sort of largest wealthiest organizations and families in the world.
CHUCK: Well I think the, the, the context is, and you have to kind of get into your inner billionaire here Jefferson…
JEFFERSON: All right, sure.
CHUCK: You have so...
JEFFERSON: It's not, it's, it's more honed I will say than my “outer billionaire,” but go ahead.
CHUCK: Yeah, yeah there's… So, you have so much wealth that you need to spread it around broadly…
CHUCK: ..and you want to have it not all, you don't want to have all your eggs in one basket so you want to have your wealth in lots of asset classes. That's how the rich think about it. So I've got my investments in market com, new companies, emerging markets and I've got my wealth over here and in blue chip stocks and certain kinds of stable investments. But I still have so much wealth I want to be in real estate, and land, art, jewelry, crypto. I'm going to just spread it...
JEFFERSON: Ultimately, ultimate diversification.
CHUCK: Ultimate diversification. I'm going to have some in Portland. I'm going to have some in San Francisco real estate. So art is just one category of where the super rich park their money. And the value of a freeport is you can buy and sell art and it, it never enters into a national jurisdiction. So the… and I visited one of these in Harlem. You know, the whole idea is you, you go to the Sotheby's auction. I buy your, uh, you know Rembrandt from you, Jefferson, which is sitting in the art port…
JEFFERSON: Which one? Which one of my Rembrandts?
CHUCK: Which, you know, one of them. I don't know, whichever one.
JEFFERSON: One of my lesser...
CHUCK: Or maybe one of your Monets in the blue period or whatever…
JEFFERSON: Yeah, all right.
CHUCK: And you're, you're, you know so I buy it from you at something like…
JEFFERSON: Klimt. I'm a big Klimt fan. You can, so I don't know if I'll part with those. But yeah, you can have one of my lesser Monets or lesser Rembrandts.
CHUCK: Yeah, all right. Hold on to your Klimt. Your Klimt is going to be a stable investment for decades to come, yeah. But, you know, that so, so it's a way that we, you and I do a transaction and I'm not going to pay any taxes, because it's in a stateless, ownership zone. It's in a “free trade zone" and so I don't have to pay any taxes on that and then I can sell it in three years to you know some other billionaire. And it'll go up in value or maybe at least it'll hold its value. So it's, yeah. It's just a way to park money. It's like a wealth storage unit. Some people get one of those garage bays down at American Storage and put their extra stuff there. You and I keep our stuff in art, freeports.
JEFFERSON: So your title is the “Wealth Hoarders.” Why isn't just the “Wealth Protectors.” Why isn't just “The People Who Are Smart About Not Being Wasters,” right. It's maybe in the Bible, right. Don't just, don't just waste your resources. Also, if we're talking about family money, they are, they have a fealty to the family that includes the many, you know, much of the base of that wealth, you know. Some of that's new money, right. New tech money. There's certainly a lot of that. But there's also generational wealth and generational wealth is something that if you just spend it you might feel like a jerk. Right. Like, that you received something and it could be, feel like your duty to pass it to the next generations and to try to grow it. In fact, you'll be evaluated by your friends and evaluated by your family in large degree to, in large measure by the degree to which you're able to do as good or even better a job as previous generations in helping build the family esteem, build the family wealth, and and make things better for the future generations of the family.
CHUCK: Well in, in, in the book I'm really zeroing in on, uh, the 30 million and up group all the way up to the billionaires. And I'm, I'm focusing on them because at that point you, you sort of have enough wealth that you, all your needs and desires are taken care of. Your children are going to be fine. Your grandchildren and great-great, unborn legacy… At that point you do have to ask a reasonable question: Why so much wealth? Why, how much is enough? And why are you continuing to accumulate? And I would use the word horde. And some of that is, uh, dynastic succession. You're trying to have a legacy. You're trying to, uh, you know, press on wealth to your kids. Not just trying to help them out to avoid suffering, but so literally they don't have to work. But I would say at that point you're accumulating power. And in a democratic, self-governing society, that accumulation of power becomes democracy-distorting and undermines creating a good society for everybody else. And that's where you and I should step in and say, uh, this is a, this hoarding behavior needs an intervention. Uh, it's destructive to families actually. I--that's, that's a whole other side. But it's really destructive to societies.
JEFFERSON: This is, this is helpful I think. This is helpful to understand. So at some level, right, we can argue about what that level is, money is no longer about survival, right, survival is taken care of. And survival, even in a, uh, comfort at some level, after survival at some level, you know, sort of the hierarchy of needs come, might come in. But, at some level, uh, comfort is taken care of right at some level. Also, it is taking care of the having things or enjoying things. You'll be able to have lots of stuff, you know. Multiple places to go without paying rent, right, multiple places to own. Where you can just go and sleep there that's really nice. You can have friends over and impress them. Multiple things to be able to travel around in without paying a fee to be in that vehicle because you own the vehicle. You're able to hire people to do things you don't want to do, right, to save your time because time is precious. At some point above that, right, for you it's that might be that 30 million level. Other people might be a different level. It is no longer just about having or enjoying things. It is about being able to make things happen, to be able to impact the world because you can change the composition of companies. Because you can change the comp, the composition of--heck, maybe a legislative body or a city council. Or you can put on a ballot measure, if you so choose. At some point it is about impacting the world, not only being able to experience it or live within it. Is that a fair, is that a fair or helpful way to delineate?
CHUCK: I think it is. I think, you know, we know that passing on too much inherited wealth to children at a certain point become, becomes counterproductive. We know that happiness, that there's sort of a, a plateau, you know, above a certain level more wealth doesn't make you more happy. It is at that point which you've, you've met your basic needs. You've met your desires. You have the luxuries you want, etc. And then I think backing up from a society point of view, that's where we should also say when people are using that wealth to exercise power when they're using it to hire this “wealth defense industry” to rig the rules so they don't have to pay taxes. Well, that's a problem. If they're using their wealth to buy media and legislators and warp the political system, that's a problem. And yeah, I would say that cut off is, it is at that one-tenth of one percent, where…
JEFFERSON: It's, is that one percent, is that 30 million, is that about 30 million dollars in wealth?
CHUCK: Yep. It's about four or five million in income and 30 million and up in wealth.
JEFFERSON: And top one...
CHUCK: Planners call...
JEFFERSON: Oh go ahead.
CHUCK: Well, people call it the ultra high net-worth, right, households.
JEFFERSON: Right, right. So, so top one percent in wealth, not income, is what about--is about five ten million dollars?
CHUCK: Yeah. It's about closer to five, about five million dollars.
JEFFERSON: So, so essentially, which is a qualify, so to our, to, to any viewer who's sort of a well-heeled or investor class. Uh, an investor class person, that'd be sort of a, qualified purchasers five million dollars, not but accredited Investor is one million dollars and up. And what's that, is that, what top five percent is a million dollars in wealth? Or is that like in top eight percent…
CHUCK: Kind of in the top. No, you're really the top like, the top two and a half percent, really.
JEFFERSON: Million dollars in wealth including, including I guess that doesn't include family home, uh, credit investors. Don't include family home... But that's helpful because that gives us a little bit of a sense of, of, of what we're talking about. And what's the wealth level, there's a reminder of what--what's the wealth level of the median American? And what's the wealth level, maybe even give us a couple of quintiles, right, you know, bottom 20 percent, second 20 percent, middle 20 percent, to the extent.. You are sort of the national expert on this stuff, so I don't feel bad asking you the question. I don't feel like I'm quizzing you unduly.
CHUCK: No, no fair question. Uh, the median--and this is, you know, not the average but the median--wealth is about 140, uh, thousand dollars.
JEFFERSON: A hundred and forty thousand, and that's mostly their homes.
CHUCK: Mostly in-home.
JEFFERSON: And maybe an IRA or something.
CHUCK: If you were to kind of look at it through a racial lens…
CHUCK: Uh, the, the median black household income is closer to eight thousand. Latino six thousand…
JEFFERSON: Income or wealth?
CHUCK: I'm sorry, at…
CHUCK: Median wealth. Yeah, I think, um, and what's fascinating…
JEFFERSON: So you just said is median, median black family, median latino or latinx family has, has, has wealth approaching zero. As well, well, you know, eight thousand dollars--it doesn't feel zero if you have eight thousand dollars. But it's, but it's not... But if you add it all up it is not, it's not moving a lot of financial units.
CHUCK: And again, that's in part because lack of home equity, lack of home ownership. Uh, lower retirement, security retirement funds. Those, that tends to be, you know, wealth for people in the middle...
JEFFERSON: And a big piece of that we can't, I appreciate you bringing it up because we can't get to as two white dudes, we can't get sort of any further in this conversation without putting, like, sort of seeing it through a racial lens. Through seeing it through an equity lens. Seeing it through an oppression and or an anti-oppression lens, and recognize that when you talk about, when you talk about home ownership, right, in my neighborhood, in fact in the house in which I am sitting, right, a black person wasn't eligible to get a loan to buy this house, and this house's value is extremely increased over the last 40 years. Uh, and they weren't eligible to do that. Like I think when I was born, I think that, I think the red-lining didn't stop until, uh, shortly before or right around when I was born.
CHUCK: It, it's, uh, you're absolutely right and, and, and this is where there's a, there's a gap of even... You know, we don't have to necessarily go have, back 400 years to look at the the legacy of racism and slavery and white supremacy and wealth-building. We don't have, we, if we just go back to the 50s and 60s, uh, where there was systemic mortgage discrimination we had, you know, coming out of World War II and GI Bill...
JEFFERSON: Some of that stuff, and give me a timeline there. Forgive my interruption.
CHUCK: Yeah. My understanding...
JEFFERSON: Because you'll know better than I. Uh, my understanding is a lot of the redlining practice didn't stop really until the 70s. Do I have my timeline wrong?
CHUCK: It hasn't, it actually hasn't stopped. I mean if you look at the leading up to the great, the economic meltdown 2000, you know, 7, 2008, 2009. And the ways in which households of black and latinx households are pushed into the predatory mortgage sector because they couldn't get access to conventional traditional lending. But just an important piece of the history, you know, coming out of world war II, 1945 to 1977, the, the U.S. government, government subsidized home ownership for white households. We put millions of white households on the express train to wealth ownership. So…
JEFFERSON: My neighbor. My neighbor owns a four plex, okay. They live in the four plex. They're retired now. That retirement was enabled because they got a GI bill first to buy that four plex and then got another government subsidized loan, I think another GI bill loan to get another house, okay, and they're, you know, they would have been considered as a classic middle-class white family, right. Not a wealthy income, the middle-class white family. Now they're, I mean that four plex is worth a couple of million dollars, right. There, they've sold their other house and now they have a comfortable retirement. And it wasn't merely that they worked hard and, you know, good people and I'm not knocking them. But just the classic example of the, of the, you know, older boomer, uh, experience. Maybe a little north of there that, uh, that didn't, you know they worked hard, but that's not the whole story.
CHUCK: Yeah, yeah that's, it's a longer discussion, really, of how do we have conversations with our neighbors about the fact that, you know, some of us as white people got huge public subsidies that, that put us on the wealth building, the multi-generational wealth building train. I have a, I have an uncle. Uh, was able to buy his farm in 1958 outside Lima, Ohio with a farmer's home. One percent fixed-rate, 35, 35-year loan.
CHUCK: I think he told me once his monthly payment was 90. And it was, you know, that was heavily government subsidized. And those programs were racially discriminatory, so black and brown latinx buyers didn't get on the wealth building train. So that's why the homeownership rate is 70 for, uh, whites and about 41 percent for, for blacks in the United States percentage of households and…
JEFFERSON: I appreciate you bringing up because it is easy as soon as one says “billionaires,” right, it's easy to sort of say there's a conversation about the other right and and which, which can attempt to free us from our own, uh, either culpability or, at least, participation in the context in which we live. And if we are criticizing the context in which we live, even if we have only minimal agency, we have some. And we have some benefit. So recognizing our own, I mean, I guess what the kids say today now is “privilege” is, uh, is maybe a useful exercise. But we're not just talking about the other, right. We're talking about us.
CHUCK: Yeah. I think it's important to look at how advantage works throughout the economy. Um, we can't really talk about the racial wealth divide without talking about multi-generational disadvantage and multi-generational advantage and I, I like to think of the... We've had these 40 years of economic extreme economic inequality, income and wealth inequality is one strand of the story. But there's a much longer story of white supremacy and, you know, economic inequality that, and these two strands sort of weave together and we, you can't just sort of, just focus on one. We have to sort of see how they interact. And, you know, I, I think it is important to talk about the billionaires in the, to the extent that they are a driving force in these economic policies that have worsened the racial wealth divide, have worsened the economic divide. But that doesn't mean that we have no agency…
JEFFERSON: Yeah, but It doesn't absolve it, doesn't absolve everybody. But it's still a worthwhile topic and, and also because the, you know, the, the title of this show is not Class War Now. The title of the show is Democracy Nerd, right. It's trying to understand how we're stronger together than we are apart. How we, uh, make decisions in community. How we figure out stuff to make democracy work, and if that experiment is worth doing. And I tend to think, “I sure as heck hope so.” And, and at some level, right, and “billionaire” is at least a handy, a handy shorthand, at some level we aren't just talking about, uh, what you can have or what you can enjoy or even what you can impact. But the power that you might be able to wield. And we are talking about something a little more like a king, right. We're talking about something more like a duke. Something more like somebody who is landed gentry. Particularly if we're talking about something to be transferred over generations. And that’s something different than democracy. Can impact democracy. In a previous conversation, we talked to Robert Lieberman, who wrote the book “Four Threats: The Recurring Crisis in American Democracy.” He argues that income and wealth inequality is one of those four threats, one of the recurring crises that threatens democracy and has throughout American history. The, I want to, I want to tease that. I want to connect that out a little more by why this conversation is so connected to democracy. One way to do that is just asking: In addition to tax policy and trade policy which people can probably, uh, understand, right, that's limiting the, uh, that's lowering taxes at the upper-end, lowering capital gains taxes. Uh, making sure payroll, payroll taxes stay higher. Taxes on the middle class stay, stay you know moderate or high or, you know, whatever, however one characterizes them now and how they have been. Uh, trade policy, I think people might understand a little bit of that and how that impacts offshoring of jobs. What are either amplify those or what are other key policy choices that you think have been made. This isn't just something that happened. It's something that got done. What are some of the other critical policy choices that anybody wanting to consider themselves a democracy nerd should be able to rattle off quickly?
CHUCK: You know, one, one is to say, well, public investments in things that create social opportunity and mobility for everybody else. So whether it's having a higher minimum wage, having access to education, being able to go to college without going into debt for decades. Access to universal health insurance. I kind of back up and say why is it that other advanced capitalist countries have way less inequality and, and greater social mobility than the U.S. It's because they have a higher floor. They have a sort of safety net, or I call it a “decency floor” through which people cannot fall. You know…
JEFFERSON: “Decency floor.” That's interesting.
JEFFERSON: That's a helpful...
CHUCK: You don't lose your job and you have to live in a car. You know, you don't, you don't go, become destitute.
JEFFERSON: Yeah. If you're, if you're lazy or unlucky you can have a worse life. But it's not so bad that you know you, you have to turn to meth and crime.
CHUCK: That's, that's right. so you have a floor. But you also then have public investments in things that make it possible for everybody to have a really good life: access to education, health care, and then you put a limit on how much wealth can be concentrated in a democracy-distorting way. And this, you know, if you live in the north, live in the Nordic countries, uh, these are capitalist societies. Vibrant, capitalist societies with private markets and vibrant main streets and the like. But there's a limit to how much income and wealth you're going to accumulate. And there's a limit on how you can use that wealth to warp the system.
CHUCK: Um, and this is where, you know, from a democracy point of view, the key question to me is, you know, what's the difference between wealth and an oligarch. You know, an oligarch, an oligarchic society is where you have so much wealth that you can rig the rules of the economy. You can put your finger on the scale and tip things in your favor and, you know, the, the reason I wrote this book is because this wealth defense industry is helping coddle dynastic oligarchs. That's helping the rich get richer at the expense of everyone else in the society. And acqu, and build up democracy-distorting piles of wealth. But that's, that's where I think it's, it's, it's a democracy discussion. It's central to what, what you're focused on.
JEFFERSON: The, so let's get in to that a little bit. You said the dividing line between wealth and oligarchy and that's I think hugely useful because the American dream is to get wealthy, right, like, like that. And one can question the parlance. One can say, well that maybe we should, we should slightly differently define the American dream, right. Like maybe the American dream’s be able to feed your family and, and have enough adventure and safety in your life to feel that it is a life well lived. So I don't merely mean to pile on to, to whatever tropes are currently dominating our conversation. But nonetheless, like one of the things we, that defines the nation is that he, is if I work hard, if I have a good idea, if I, uh, or heck, if I get lucky then, then I can do way better than my parents. I can do better than my grandparents. I can be rich too, right, a little bit. You know, Mark Twain, I don't want to be a member of a club that have me in as a member, right. I want to be able to, I, I want to be able to be the president of something or other, right. I want to be a big deal and my ambition is going to fuel some portion of my life. I'm not only sort of a socialist, communist chair. I'm also an acquirer of things, a doer of things and I'm a reward for my action. And, and that's a big part of the story. And quelling that, that's, that's a, that's a different thing than saying, okay wait, wait a revolution was not fought in the, to make the United States a country to stop wealth. In fact, a bunch of wealthy people were involved in it. They wanted to protect their own wealth. But a revolution was fought in this country so that we didn't have a system other than democracy. So we didn't, we did not have an oligarchy or a plutocracy or a monarchy. We did fight a revolution on that. That is an idea we are supposed to share. We ought to be able to build not a 90 consensus, but we ought to be able to build a two-thirds consensus in this country, 75 consensus this country we don't want an oligarchical plutocracy. Uh, do I have it about right? What would you change?
CHUCK: I think, I think you said it right. Which is and, and, and, uh, the whole idea of dynastic wealth, I mean, we fought a revolution to separate ourselves from hereditary monarchs. And unfortunately, if you if you sort of play out the inequalities we're living through now, if you if you sort of, if we stay on the same trajectory for the next 20 years, we're going to have a society that's dominated by this oligarchic class. They're going to control the economy, the democracy, the philanthropy. They're going to use their philanthropy as an extension of their wealth and power. They're going to control the media and the conversation. The sons and daughters of today's billionaires will be in our faces like Kardashians. Every day. Dominating everything we, we care about.
JEFFERSON: But instead of getting...
CHUCK: That's what's at stake.
JEFFERSON: But instead of getting there because of an O.J. trial and a sex tape, they get there because their parents, you know, either got their parents’ money or because their parents made a bunch of money.
CHUCK: Yeah they are hereditary aristocrats. They have hereditary dynasties. They, they won the lottery at birth. They're, today's billionaires’ children throwing their weight around.
JEFFERSON: And we end up being Peru or Bolivia or one of the countries where there is some pastiche, there is some conversation about elections and making decisions together. But basically all the big stuff is happening because a relatively small number of people are making those decisions based on what is best for them, and maybe some mild beneficence for, for others. Uh, and, and that is what’s at stake. How do you--and that's why your argument is it's connected so deeply to democracy. How do you compare this era now, the year 2021 with let's say you know, 1912. With pick your year. In the, in the prior to the Progressive Era, maybe 1899, right, or the Gilded Age. And you'd have a better year than I would.
CHUCK: This is exact very similar. I mean, I think that the concentration of wealth and power was a little bit greater in 1910. You know, the 400 families that got, gathered together in this one, you know, dance hall… You know that we, we don't know because we didn't have the way to measure wealth at that point. But the first Gilded Age, uh, you know the democratic system was completely captured. Uh, you know, obviously senators were not elected directly at that point. And the oligarchs, uh, pretty much owned, you know, half the U.S. Senate. And that the way that they, that affected democracy is it meant that they could block a generation of transition of important legislation, whether it was child labor laws or tax policies or just things that made the quality of life better for everyone else. But we're definitely living in the second Gilded Age and if we don't do anything to reverse these inequalities, we're heading right back into that. We're becoming a Brazil, you know, with this very concentrated wealth at the top, precarious shrinking middle class, and vast precarious... That sixty percent becomes eighty percent of, of desperate precarious households.
JEFFERSON: And I like the historical reference, because then it also helps pull it away from, I don't know, Hillary Clinton versus Donald Trump, right. It helps pull it away from Fox News versus whatever the heck. To say that it's, that Teddy Roosevelt was the Republican president did as much or more than any other American to try to disrupt the trajectory at the time. Which was taking us away from having democracy. Say might say whatever you will about trying to have, you know, labor unions, a protected democracy, having an education, compulsory education system. A bunch of things that happened during the progressive era. But just in making sure that there was a Sherman Anti-Trust Act. That there was a, that there were the kind of tax policy that would justify or make palpa, make possible. I should say a middle class that, that, that was not the enterprise of a single political party. And that was something that, that did build sort of rough, if not consensus at least super majority support in the country.
CHUCK: Yeah. I mean, I think it's important to yeah, point out, that those were vic, you know, there were, there were social movements of rural people and urban reformers. Uh, TR progressives. Uh, and they, and they won the two, 1916 the first income tax…
CHUCK: And the first estate tax. Uh, and those for existed for the last over 100 years slowed the concentration of wealth and power. Slowed dynastic wealth. And the tran, you know, you didn't, you know, after the estate tax which was very robust for several decades. It really broke up concentrations of wealth and power that were undermining democracy. It opened up that period after the Depression in World War II, where we did grow together. Where there was, you know, with our caveat about the racial discrimination and housing, you know, but, but the rising tide did lift all boats, even in terms of income. Um, so that's the problem and we're right back to the site, this peril that the estate tax has become optional for the super rich. We even had Trump administration people saying only morons pay the estate tax.
JEFFERSON: Because they hide their money.
CHUCK: Because they're able to hide their money. Because they're able to hire workers, their wealth defense industry workers to create trusts and other systems to avoid taxes.
JEFFERSON: So we might even have to get do a part two because I know you've got a, uh, I know you've got a two o'clock hard stop. Uh, but the, but let's get into the what you call the “wealth defense industry.” The folks who say you're a, if you pay an estate tax because instead you ought to hire the firm of Dewey Cheatem Howe and make sure that you don't have to do that. What are the most notable or surprising exercises or practices within that wealth defense industry as you describe it?
CHUCK: Yeah, well... If you, that the tools in the toolbox are offshore tax havens, dynasty trusts--where people can park money outside the reach of of taxation--the creation of family offices that are huge piles of unregulated private wealth sort of bursting into the news recently with the collapse of this Archegos, uh, Capital management which was a family office, a privately controlled pile of wealth.
JEFFERSON: Explain that.
CHUCK: Uh, well, uh, rich people create these family offices. They're like private trust companies. But they've carved out and fended off any kind of oversight and regulation. But then they go out and get involved ininvestments in various things and then when they go bad, you know, the rest of the economy is put at risk.
JEFFERSPN: Yeah, but explain, explain Archegos, people don't know it.
CHUCK: All right. This guy, Bill Juan, who was a private equity hedge fund manager who, you know, took other people's money and invested in a certain way, you know, fell out of gracie. He had insider, he had to pay all these fines and fees. He reformed his investment company as a what's called a family office. He went out and, you know, made high fancy bets on, you know, the tech stocks and and media stocks. And during the pandemic lost about 20 billion dollars. Lost about six billion dollars of Credit Suisse's money, uh, by these highly leveraged, very reminiscent of the, you know, 2008-2009 meltdown. Um, the, the key thing to realize here is family offices are like the last vestige of the shadow financial system that we heard so much about 15 years ago, 12 years ago, you know, in the aftermath of the economic meltdown. All i'm saying is this is, there's a sector, there's a large sector of people who just are now working for the super rich to help them mask, hide, sequester their wealth and avoid taxes to the point where at the opening of the show you talked about, you know, how come the rich or how come their seven trillion dollars of tax revenue didn't get collected. Where's that seven trillion dollars? Well, I can help you find it.
JEFFERSON: I think people have a basic understanding that this kind of stuff exists, right. I don't think that's news to folks that, okay, well, if I get a smart tax law... In fact, it's one of the things that is then used to even argue against, uh, tax proposals. Because folks would say, well why would we raise taxes? My taxes will go down but there's somebody out there who has a fancy lawyer who won't pay these taxes. So I don't want any of this stuff. Call me a libertarian, or call me an anarchist. I don't want any of this Stuff. What is something that people might not know, what are other mechanisms including the, as you said, sort of the, um, as we brought up, brought up the movie ‘Tenant,’ right. Are there any, any tools that, uh, that anybody, they're sort of newer, that are novel that people should be aware of?
CHUCK: You know, in a way what's new is the pace of the activity has accelerated even during the pandemic. I mentioned dynasty trusts, but what your listeners might not know is that, you know, there are several statesincluding South Dakota and Wyoming that have changed their rules at the state level to make it possible for people to anonymously have a trust that will exist for centuries. That wasn't possible ten years ago. Uh, they may know that you can create the...
JEFFERSON: Rule against perpetuities. I remember from law school, right.
CHUCK: Oh my god, you're…
CHUCK: You, you, you've, you've spoken the words.
CHUCK: If you really want to go, go nerd. Deep nerd.
JEFFERSON: No that's, that's the good stuff, right? We don't, let's not dodge that.
CHUCK: And actually that was what, you know, if you think of the rule against perpetuities, which is basically a way of saying you can't create a contract or a trust that exists forever. Because it was really a response to monarchy in the UK. It was a way of the, it was sort of like the, uh, the, the commoners saying you can't tie up the wealth of the society forever. You can't rule from the, from the grave.
CHUCK: Uh, and, uh, and South Dakota suspended their rule against perpetuities to attract dynastic wealth.
JEFFERSON: I had no idea they did that. I did not know South Dakota, that's very interesting. I need to tell Frank Michaelman at Harvard Law School that question because that definitely didn't, didn't come when we studied property. It, we did learn about the fertile octogenarian, right, the, the mythical case of how you could how you might be able to preserve the fiction of multiple generations by the idea that an 80 year old might have children. Uh, the 80 year old of, of either both sexes and genders might still be able to have children and grandchildren. But yeah, there's been, this is not this is not some, uh, modern or some socialist, uh, crazy idea, the idea that, you know, things should spread out that there should be real opportunity. That you shouldn't govern from the grave, rule from the grave. Hey, that's common-law British stuff. That's, that's the stuff the United States wanted to preserve in the, uh, in the revolution. Or even amplify, uh, rather than do away with.
CHUCK: Amen. Yeah, I mean that's in, if to sum it up that we're kind of re-feudalizing, or we're bringing feudalism to America. We didn't have a feudal system. We fought for, we are creating sort of feudal vestiges of feudalism in the United States by creating perpetual trusts where wealth dynasties will exist for centuries. And where the sons and daughter, great, you know, the descendants of today's billionaires will have trillions in wealth and power sequestered from taxation and democratic oversight.
JEFFERSON: Does Bitcoin make it worse? Is, does this cryptocurrency, untracked and unregulated, uh, money, make secret money, money laundering, uh, and wealth preservations make it worse? Or is it or or do you not have that in your crosshairs because it's kind of new and sexy.
CHUCK: I think it does make it worse. I think blockchain as a technology has the possibility of fixing it by, by sourcing money in a way that we currently don't source money. So we have, you know, all this I would call it “kleptocratic money laundering” money gushing into the United States now. If you had a blockchain system where you could sort, you could essentially say that there see the derivation of training…
JEFFERSON: You track it on the ledger.
CHUCK: Yeah, right. If you track it on a ledger might be one of the ways we fix it.
JEFFERSON: What's a “ghost town neighborhood?”
CHUCK: Well, it's a neighborhood that, uh, where wealthy people have bought up the real estate and where they're not living there. They're just parking their money there, like we talked about with the art ports and the freeports. Uh, Vancouver experienced this. Uh, so much money was flowing in from out of the country buying up luxury real estate, buying up any real estate in Vancouver that whole neighborhoods lost their social fabric. Uh, they lost their, you know, street life because no one was living in the housing. It was all vacant high rises.
JEFFERSON: But they were still seeing, those assets were still retaining their value because the only transactions that would happen would still be at a high asset, that would still be at a high price. So the paper value of that property was still high even though it was producing no income, or even though it was, you know, producing no like day-to-day use value.
CHUCK: Yeah. It's essentially one of the ways wealthy people were, uh, get, getting their money out of theircountries and just parking it places where it could hold its value. And we saw that all over Canada. And a lot of, and in a lot of Eastern coastal cities and Western coastal cities. This is a phenomena, this parking of wealth, parking of global capital.
JEFFERSON: You offer a range of policy solutions and I'm going to tease the question. I'm going to go through them very quickly. I talk far too fast. I want to apologize to everybody for that. Or you're welcome, maybe. And the question I'm going to ask is, any of these or is there a characterization of some or all of them that you might want to put on a bumper sticker, right, that might be the “Chuck Collins New Deal Great Society.” Call it what you might, but a range of policy solutions: transparency against money laundering, corporate taxation and governance, disclosure of real estate ownership, disclosure of beneficial ownership. Uh, getting the United States in order--I don't understand what that is. Closing the individual wealth hiding practices, the trust loopholes, etc. Enforcing global standards. Any of those in our closing minutes here that either you want to go in on, or what--how would you put this in a bumper sticker?
CHUCK: Well I think...
JEFFERSON: Of course, bumper stickers, driving around cars. That's gonna be the most important way we deliverpolitical messages. Probably not, but go ahead.
CHUCK: Well, it is important to just distill things down. First I, I sh--you should invite me back because I do have to jump off and join this live program. I would love to kind of go into detail, but if I was going to come back to what we talked about at the beginning: enforce existing tax rules, for starters. Shut down some of these warped trusts that are just for the purpose of avoiding taxes. Transparency, corporate transparency--who owns the corporation. Who owns the neighborhood, who owns that real estate in our neighborhood. People should have a right to know. The U.S. cleans up our own act, and then we rejoin the European Union and other countries that are further ahead of us right now in cleaning up their hidden wealth systems. And we create some global treaties and we shut down this hidden wealth system. That's that's the way forward.
JEFFERSON: We've been talking to Chuck Collins, Director of the Program for Equality and Common Good in the Institute of Policy Studies. That is a mouthful. The author of the new book, “The Wealth Hoarders: How Billionaires Spend Millions to Hide Trillions.” Chuck, thanks for your work. Thanks for the talk today. Hope to do it again. And thanks for being a democracy nerd.
CHUCK: Thanks, Jeff, for having me.
JEFFERSON: Cheers, everybody.