Highly recommended: The transcript of a panel discussion on poverty featuring Harvard professor Robert Putnam, President Obama, and the president of the American Enterprise Institute, Arthur Brooks. The whole thing is worth a look, but the highlight for me is this passage:
THE PRESIDENT: I'll ask Arthur for some advice on this -- because, look, the devil is in the details. I think if you talk to any of my Republican friends, they will say, number one, they care about the poor -- and I believe them. Number two, they'll say that there are some public goods that have to be made -- and I'll believe them. But when it comes to actually establishing budgets, making choices, prioritizing, that's when it starts breaking down.
And I actually think that there will come a time when political pressure leads to a shift, because more and more families -- not just inner-city African-American families, or Hispanic families in the barrio, but more and more middle-class or working-class folks are feeling pinched and squeezed -- that there will be a greater demand for some core public goods and we'll have to find a way to pay for them. But ultimately, there are going to have to be some choices made.
When I, for example, make an argument about closing the carried interest loophole that exists whereby hedge fund managers are paying 15 percent on the fees and income that they collect, I've been called Hitler for doing this, or at least this is like Hitler going into Poland. That's an actual quote from a hedge fund manager when I made that recommendation. The top 25 hedge fund managers made more than all the kindergarten teachers in the country.
So when I say that, I'm not saying that because I dislike hedge fund managers or I think they're evil. I'm saying that you're paying a lower rate than a lot of folks who are making $300,000 a year. You pretty much have more than you'll ever be able to use and your family will ever be able to use. There's a fairness issue involved here. And, by the way, if we were able to close that loophole, I can now invest in early childhood education that will make a difference. That's where the rubber hits the road.
That's, Arthur, where the question of compassion and "I'm my brother's keeper" comes into play. And if we can't ask from society's lottery winners to just make that modest investment, then, really, this conversation is for show. (Applause.)
And by the way, I'm not asking to go back to 70 percent marginal rates, which existed back in the golden days that Bob is talking about when he was a kid. I'm just saying maybe we can go up to like -- tax them like ordinary income, which means that they might have to pay a true rate of around 23, 25 percent which, by historical standards in postwar era, would still be really low.
So that's the kind of issue where if we can't bridge that gap, then I suspect we're not going to make as much progress as we need to -- although we can find some areas of agreement like the earned income credit, which I give Arthur a lot of credit for extolling because it encourages work and it could help actually strengthen families.
MR. DIONNE: Arthur raised capital gains taxes for us here.
MR. BROOKS: Yes, sure. Fine. These are show issues. Corporate jets are show issues. Carried interest is a show issue. The real issue? Middle-class entitlements -- 70 percent of the federal budget. That's where the real money is. And the truth of the matter is until we can take that on -- if we want to make progress, if the left and right want to make progress politically as they put together budgets, they're going to have to make progress on that.
Now, if we want to create -- if we want to increase taxes on carried interest, I mean, that's fine for me -- not that I can speak for everybody, certainly not everybody on the Republican side.
And by the way, Mitch McConnell and John Boehner are watching, at least indirectly, and they're paying attention to this -- 100 percent sure, because they care a lot about this. And they care a lot about both culture and economics, and they care a lot about poverty. And, again, we have to be really careful not to impugn their motives, and impugning motives on the other side is the number-one barrier against making progress. Ad hominem is something we should declare war on and defeat because then we can take on issues on their face, I think. It's really important morally for us to be able to do that.
Who, by the way, were you having dinner with who was discussing Ayn Rand and why wasn't I invited? (Laughter.)
So if we want to make progress, I think let's decide that we have a preference -- I mean, let's have a rumble over how much money we're spending on public goods for poor people, for sure. And Republicans should say, I want to spend money on programs for the poor, but I think these ones are counterproductive and I think these ones are ineffective, and Democrats should say, no they're not, we've never done them right and they've always been underfunded. I want to have that competition of ideas. That's really productive.
But we can't even get to that when politicians on the left and the right are conspiring to not touch middle-class entitlements, because we're looking at it in terms of the right saying all the money is gone on this, and the left saying all we need is a lot more money on top of these things -- when most people who are looking at it realize that this is an unsustainable path. It's an unsustainable path for lots of things, not just programs for the poor. We can't adequately fund our military.
I think you and I would have a tremendous amount of agreement about the misguided notion of the sequester, for lots of reasons, because we can't spend money on purpose. And that's what we need to do. And when we're on an automatic path to spend tons of money in entitlements that are leading us to fiscal unsustainability, we can't get to these progressive conversations where conservatives and liberals really disagree and can work together, potentially, to help poor people and defend our nation.
Among the remarkable aspects (worth a fuller discussion elsewhere), you have the president of AEI supporting increased taxes on carried interest, you have President Obama calling hedge fund managers "society's lottery winners," and you have Mr. Obama hauling out a Steve Schwarzman quote from five years ago that he apparently still hasn't gotten over. And you have the effort to pit the 1% against the .001% — "you're paying a lower rate than a lot of folks who are making $300,000 a year."
The president's comments about private schools — "what's happened in our economy is that those who are doing better and better -- more skilled, more educated, luckier, having greater advantages -- are withdrawing from sort of the commons -- kids start going to private schools; kids start working out at private clubs instead of the public parks. An anti-government ideology then disinvests from those common goods and those things that draw us together" — are also interesting considering that he attended one himself and sends his own children to one.
