In this month’s Atlantic, a lot to write and think about. A great article on “Supremacy by Stealth” by Robert Kaplan that I put on Biggest Guy’s night table for him to read, and that I’ll follow up on in another post.
And an infuriating article “In Praise of Nepotism” by Adam Bellow, son of Saul – taken from a forthcoming book of the same name.
The article isn’t available online, so let me set out some quotes:
Since we are clearly not going to get rid of the new nepotism any time soon, Americans must come to terms with it. That means learning to practice it in accordance with the unwritten rules that have made it, on balance, a wholesome and positive force. If history shows us anything, it is that nepotism in itself is neither good nor bad. It’s the way you practice it that matters. Those who observe the hidden rules of nepotism are rewarded and praised; those who do not are punished, often savagely. These rules – derived from my own study of dynastic families, from the biblical House of David to the Kennedys and the Bushes – can be reduced to the following simple injunctions:
1. Don’t embarrass me. The first rule of patronage has always been that the protege’s actions and manner reflect on the patron. By holding a patron responsible for his protege’s performance, the Mandarins of the Chinese imperial bureaucracy introduced a powerful corrective to the potential for nepotistic abuses. This is also the corrective built into the modern nepotistic equation.
2. Don’t embarrass yourself, or You have to work harder than anyone else. If the protege is obligated to respect the patron, he is equally obligated to respect himself and his colleagues. A democratic society is founded on a moral commitment to equal opportunity, and those who enjoy advantages of birth must make an effort to counteract the natural resentment of those who do not. That is why “good” business heirs display outstanding dedication – arriving early, leaving late, and in other respects going out of their way to win the approval of their colleagues. This is what distinguishes the new nepotism from the old: other people must prove their merit before the fact, but nepotees must prove it after.
3. Pass it on. Although nepotism is considered selfish, it proceeds from the generous impulse to pass something on to one’s children, and this we think of as entirely praiseworthy. But if nepotism is in some respects a two-way street, it is also a one-way transaction. We therefore express our gratitude to our parents in the form of generosity to our children. This wholesome consciousness implies a certain humility and an acceptance of morality.
Above all, it is high time for us to get over our ambivalence about the “return” of dynastic families. This country is now old enough to have accumulated a large number of great families, and we can no longer deny their many obvious and constructive contributions. Americans admire the Adamses, the Roosevelts, and the Kennedys not just for their unity – a value that is becoming increasingly difficult to preserve in our mobile society – but for their sense of common purpose and the spirit of public service that they foster. There is much to be said for these “aristocratic” features of dynastic families, and as long as these families observe the meritocratic rules of the new nepotism, we really have no basis for complaint. Indeed we should not only respect great families, but try to be more like them. rather than simply seeking to punish or stamp out the bad kind of nepotism, we should reward and encourage the good.
My first reaction on reading this was that the satire hadn’t quite worked; I was looking for the ironic stretch, and never found it. A closer reading, and a bit of Google searching, led me to the conclusion that Bellow is actually serious, and that he believes that the kind of dynastic despotism he represents (along with, sadly, Lizzie Grubman and the Hilton daughters) represents the hope of the republic.
My second reaction was to be annoyed that the Atlantic, a magazine I devour and consider a touchstone, would publish such an offensive piece of tripe. But I reconsidered. They have done a valuable service, as has Bellow himself, to whom I give full marks for courage, given the shellacking I am sure he will take once his book hits the stands this month. They have brought this issue out onto the table and made it clear that the ‘Class War’ isn’t only an issue on the left. By writing this article, and publishing it, Bellow and the Atlantic have in essence thrown down the gauntlet.
The decline in income and class mobility for the average American is one of the three or four most dangerous issues that we face as a nation today. The increasing concentration of wealth, income, and power – not a threat from the outside – are what place our nation at the most serious risk. We will eventually defeat the anti-Western, anti-modern forces combating us today, but we may do so only to wither from within, as the legitimacy that ties us together collapses, sucked dry by privilege.
Bellow proposes that we take a bug and declare it to be a feature; that the increasingly frozen nature of our society holds promise – because it will give us more enlightened rulers.
The America that I love has it’s share of spoiled children (I’ll confess that I’m one and grew up with many of them in Beverly Hills), and has never promised to be fair. But they have always been seen as the inevitable imperfections of the system, and the unfairness as something we were mildly ashamed of. Never before has someone had the colossal nerve to hold that unfairness up and call it hope.
The America that I love – of country music stations and diners, as well as symphony halls and dining rooms set with Christofle – is one in which Bellow’s pronouncements in one would lead to an ass-kicking, and in the other social suicide.
Personally, I look forward to using this book as part of my arguments to reimpose the estate tax.
The book is supposed to be published this July; I can only hope it comes out on Bastille Day. I’ll close with Mark Twain’s comment on the Terror and the inevitable end result of the kind of republic of the elites that Bellow envisions:
“There were two ‘Reigns of Terror’, if we could but remember and consider it; the one wrought murder in hot passions, the other in heartless cold blood; the one lasted mere months, the other had lasted a thousand years; the one inflicted death upon a thousand persons, the other upon a hundred million; but our shudders are all for the ‘horrors of the… momentary Terror’, so to speak; whereas, what is the horror of swift death by the axe compared with lifelong death from hunger, cold, insult, cruelty and heartbreak? A city cemetery could contain the coffins filled by that brief terror that we have all been so diligently taught to shiver at and mourn over; but all France could hardly contain the coffins filled by that older and real Terror – that unspeakable bitter and awful Terror which none of us has been taught to see in its vastness or pity as it deserves.”
– Connecticut Yankee in King Arthur’s Court
UPDATE: See the follow-up article “Bellow Redux“, which includes a priceless quote from Tom Paine… and a comparison that may surprise you.
UPDATE 2 My talk with Bellow, and my own apology.
–
Ayn Rand agreed completely with Adam Bellow. Francisco d’Anconia, who was the hero’s second in command of her culminating work Atlas Shrugged is the last in a line of good nepotists. I am not a disciple of Ms. Rand, but I am afraid I agree that if I make a lot of money I want my girls to inherit it, and I also want them to deserve it. We have always had old money in this country, and we have always had new money too. I don’t think we need an estate tax to level the playing field.
Wince And Nod says:
> I don’t think we need an estate tax to level the playing field.
Refer to the line above where Hanson refers to, ‘The increasing concentration of wealth, income, and power’. The statistics (and good, rock solid statistics they are, if you care to look them up) do not support your assertion.
Why should the state rob my children; that is wrong.
Nice for Adam Bellow to come clean on this issue; I’ve always thought that our elites had their thumbs on the scales. This is really going to heat up the populist-elitist debate in American politics, and about time, too.
I don’t think an estate tax is the fix–these guys will come up with fancy tax dodges to keep their dough. Even if one of them ends up broke, he’s so rich in connections that he’ll get a good stock tip, a consulting job, or lots of free NPR coverage for his latest book to put him back in the chips.
How about something non-economic to level the playing field? I suggest this: No one can hold a federal office, elected or appointed, unless they have an honorable discharge from the armed forces, the Coast Guard, or the equivalent from the US Public Health Service or the Peace Corps. This won’t cure nepotism in business or the media, but it would certainly put the brakes on connected guys buying their way into Congress, State, and Justice.
Wouldn’t work. See our current president for an example – he got into the TANG quite quickly when he needed to, was commissioned right out of basic training, and didn’t show up for a year or two when that was convenient for him. He stopped taking flight physicals when they started drug testing, was taken off of flight status with no repercussions. Connections all the way. And this was in Texas, not exactly a Librul PC place. With a father who was a WWII vet.
That Heinlein Starship Troopers stuff was totally disproved by the post-WWII history of the US. Right after a large, popular and necessary war, with a high level of military service, the US set up an exemption-riddle draft system. It was even necessary for a few generations to pass, to grow that corruption; it was already there.
Congrats to Barry for dragging out the ‘draft dodger’ meme, thus putting on display his complete ignorance of the facts of the matter, including, but not limited to:
How the Guard/Reserve structure works
Service commitments requirements of Guard/Reserve duty
That Bush actually EXCEEDED those requirements
And, that at the time of sign up, the unit Bush was joining was sending PILOTS to the ‘nam.
Go borrow a quarter, buy a clue.
There’s an article on MSNBC that sketches out some of the wider implications and connections related to Bellow’s attitude.
I’ll read the MS NBC link, but these li’l window links always destroy the li’l window, so I’ll post first:
I respect your right to have a vehement reaction to something, but I can’t yet get a grip on what it is that you’re vehemently arguing against. The author, Bellow, makes some acknowledgements about nepotism, and you jump from there to classism and elitism and… more…
As if you believe that middle-class fathers are not allowed to give meaningful bequeathments to their children; as if you believe that only monetary wealth, real estate estates and friend-of-a-friend connexions are valuable or valid tickets to the American experience, or human value…
I’m missing something here, and I’m respectfully asking for clues. I’ll keep my finger on THIS pulse for the next several months. Now, however, I’m off to MS NBC.
Nasty word, that: nepotism.
Consider its rigorous and complete absence: what would substitute for long association, connections, experience, judgment, tradition? Will we completely forgo our experience and our long term associations? Shall everyone we draw to our side in service be subject to an exam as if we know nothing of this person that we admire and trust, but thrust out for a stranger and some numbers?
We, alas, remain biological creatures. Until and unless we ran reach the dispassionate judgment of thinking machines, we shall have to live far away from digital certainty in this analog world of senses, emotions and experience.
Sir: I am clearly more qualified than your son, (as far as you or anyone can tell from the available data) and therefor, you must take me?
When I show this to Dad, he’s going to have your ass!
Bellow has a point on a micro level, but this should never be taken into policy. I’m going into the same profession as my father, law, and I may well wind up practicing in the same market, but not for the same firm, partly for personal reasons and partly because of what type of law he does (zoning). I know that not embarassing him will be important to both of us, and that if he opens a door, it’s my job to walk through it, as it were.
To say from this that legacy admissions in colleges, or tax cuts for the wealthy, or the abolition of inheritance taxes, naturally follow, is silly. A parent can give comparably more to his own child, but should not do so at the exclusion of opportunities for others. Maybe I get a minor career boost, only possible because my own talents make it not embarassing for him to help me out, but neither of us would say that now is the time to defund public schools.
It also seems to me that, while I still hold out hope of being as good a lawyer as my dad, Adam ain’t writing “Augie March.”
“Refer to the line above where Hanson refers to, ‘The increasing concentration of wealth, income, and power’. The statistics (and good, rock solid statistics they are, if you care to look them up) do not support your assertion.”
Where might I find these “rock solid statistics” providing a comprehensive empirical measurement of this thing you call “power” and demonstrating its increasing concentration?
“The decline in income and class mobility for the average American is one of the three or four most dangerous issues that we face as a nation today.”
Except that there is NO decline in income for the average American. There also appears to be no decline in class mobility. Your statement is EXTREMELY flawed.
There is a trend towards some wealth concentration, but only in many middle class people moving to lower upper class, but it’s nearly impossible to separate that from other factors, including: the increase in women’s participation in the workforce, especially in high income families (leading to double income wealthy families), the increase in the divorce rate (leading to single parent families, who have low income compared to the double income families), and the increase in the college student and graduate student population. (College students and grad and professional students make less money while in college than they would if working, but more money than otherwise once they get out. This increase their personal income inequality over their lifetimes. Since different people in the population are at different stages in their life, in the aggregate this increases income inequality.) Also, the increase in divorce means that the average size of households has decreased, which means that the same income per person leads to a smaller income per household in some case. (That’s why the income per household measure is extremely flawed.)
Take a full look at the latest Census report, which has many interesting pieces of data. Page 21 especially has interesting data, showing that median income has had steady growth, and that all income groups have benefited. Fewer people are in the very poor (inflation adjusted) incomes of below $10,000. The inequality has still increased, but that is entirely explained by the massive increase in the number of people in households making $75,000 or more in 2001 constant dollars. (These are undoubtedly largely double income families.)
My question for AL is this:
Would you prefer an economy where the wealth of the rich grew 30 times what it is today and all the rest of us had 2.5 times what we have today; or would you prefer today’s situation?
As Bill Whittle has said so well: do you love the poor more than you hate the rich?
Milton Friedman says we could have had the economy I describe (a growth rate of 10% a year) had we not gotten those thugs with guns (the government) to steal from the rich in the name of Robin Hood economics.
A growing disparity of wealth is created by a growing economy.
“Concentration of wealth is a natural result of concentration of ability, and recurs in history. The rate of concentration varies (other factors being equal) with the economic freedom permitted by morals and the law … democracy, allowing the most liberty, accelerates it.
Will and Ariel Durant
Do we really want to hobble the best wealth producers in the name of fairness? Not me. There are still a lot of hungry people on the planet. In fact it is why I am no longer on the left. The politics of envy no longer appeals to me. It hurts the poor too much. In fact given the outcome every where it has been tried Robin Hood economics is the most illiberal system you can devise. Worse than Kings even.
John Thacker writes:
“Except there is NO decline in income for the average American.”
I believe the sentence you’re criticizing John is not claiming a drop in income, but a drop in income mobility.
As for the claim of that class mobility has not decreased, I point you to
this article in the Regional Review (via CalPundit) at http://www.bos.frb.org/economic/nerr/rr2002/q4/issues.pdf
To bring that article home, just take a look at these graphs.
Link to Image: http://www.calpundit.com/blogphotos/Blog_Inequality_Mobility.gif
Kilroy
M. Simon quotes the Will and Ariel Durant in arguing that the primary measure of ability in a society is wealth.
I believe Mr. Simon is under-valuing the role of chance. It is not guarenteed in our society that those with wealth have ability. For example, in California, we have over 20 new millionaires a year whose sole source of wealth is winning the California Lottery. Certainly, Mr. Simon wouldn’t argue that those new millionaires are guaranteed to have more ability than doctors, journalists, teachers, etc with less wealth.
Second, when one has a greater basis of wealth to begin with, one can accumulate more wealth with less ability. For example, a person who amasses a great deal of wealth (say $10 million) from a baseline of $0 may be likely to have a good deal of ability. A person who amassess $10 million dollars from a basis of $100 million dollars has invested in Treasury bonds, which requires no ability whatsoever.
Using wealth as a measurement of ability in our society takes a very simplistic view of the role of contingency. Most of the mega-wealthy in our society either inherited that wealth (a form of birth lottery) or found themselves in the right place at the right time (for example, the bull market of the late 90s in Silicon Valley). For a more detailed view of this as it relates to the stock markets, I suggest the book Fooled By Randomness by Taleb.
In fact, if you have to find a single measurement of ability based upon money, you would be more accurate to measure a person’s income mobility with greather positive change indicating greater ability, rather than absolute wealth.
Kilroy Was Here
A.L., one one forum I frequent the estate tax has come to be called the
“latifundia creation, consolidation, and encouragement” tax. I know a couple
academics have turned around and said it’s never happened, but you only have
to look around at the decline of the family farm relative to the large
corporate farms to see that it is.
It’s not that I don’t worry about social stratification, it’s just that
I’m convinced that an estate tax, which will just be another bit of overhead
to hurt small businesses a lot more than large ones (or truly rich people).
I _really_ don’t think the sort of nepotism that Bellows talks about can be
fixed by abolishing the small family business. What can be done?
I think that a good start would be to fix the schools. And NOT by
following the European example of making the schools social stratification
devices; I think there’s too much of that already. Hold on, I’m running out
of space here…
Interesting that he would use the Kennedy family as an example. They seem to become more dysfunctional with each generation.
OK, I think one of the major problems we are having is that greater than
half of a good general education is put off until college, and the college
selection process, by a combination of testing and income filtering, has
become a class stratification device. Another problem we have is that there
are two different college “experiences:” the ones for those who study
physical sciences, and those who study the humanities or business or
whatnot.
An American in the former group is likely to find himself taking
undergraduate courses with foreign grad students who had better math
education in high school, not to mention their college experience back home;
I’m convinced that this is one of the big reasons over half of US college
students studying the sciences flunk out.
Anyway, by fixing the elementary and high schools, we could move a lot
of the stuff that gets taught _after_ the stratification process back to
high school, before the stratification, where it was taught in the old
days.
Oh, one final note: Ayn Rand did make complaints
about nepotism in her books. I don’t remember the
exact quote verbatim, but she was worried that
those who would get rid of the “aristocracy of
money” would merely replace it with the aristocracy
of pull instead.
While I’m at it, why isn’t formatting working?
I’m wrapping my paragraphs in “paragraph” tags,
but the line length, in lynx, still seems to be
skewed.
Could the estate tax have aggravated nepotism? It gives the rich an incentive to put more effort into arranging cushy jobs than into creating inheritable wealth.
The quote from Twain shows how myth takes the place of reasoning in the politics of envy. Few of the victims of the terror were aristocrats. Most were either revolutionaries who had fallen afoul of rivals (the Girondins who went to the guillotine when Louis XVI did for example) or ordinary people accused of some, often nebulous, counter-revolutionary acts. In this respect the Bolsheviks and their later imitators just followed the lead given by the Sea-green Incorruptible and his comrades in viciousness. This sort of violence is what the politics of envy always leads to. You want that here? No thanks.
It hurts me not a bit that Bill Gates, or even that twit Patrick Kennedy, is rich, or that he’ll pass it on to his heir. The steps that would be taken to prevent such things, or to prevent influential or wealthy people from making things easier for their relatives, would hurt me and all others in the country far more. There was good reason to count Envy as one of the seven mortal sins.
In closing I would like to point out that in polities where “equality” is the ideal to achieve and in which any necessary violence is condoned for achieving that goal, as in Communist states, nepotism and corruption are rife, exceeding the worst aspects of these things here. Do not say you do not wish to advocate violence for increasing equality. That will be the only way to get it, as the history of the 20th Century ought to demonstrate.
Joseph –
Yeah, of course, that’s it, there never would have been nepotism without the Estate tax. And there never would have been crime without the Welfare State. And there never would have been racism without Affirmative Action. Why didn’t I think of that?
Lots of comments, and I’m still supposed to be working around the house, so let me hit a few high points.
The mere fact that Ayn Rand might have agreed with Bellow isn’t by itself conclusive proof that he’s wrong, but is certainly a strong argument. Rand’s “objectivism” is a classic manifestation of the Romantic impulse I criticize *here*.
I’m not an immense fan of the estate tax as it existed. But I think that the strength of the Republic rests on a moderately broad distribution of power, wealth, and incomes, and we ought to be designing policy to support that – not policy to ‘force equality’ in some Leninist fantasy, but policy to keep 21st Century America from seeming too close to Dickens’ England.
Nepotism has always been with us, but in the face of the egalitarian ethos of America, has always been bounded somewhat by shame, and by government policies that explicitly attempted to slow the concentration of economic power.
Bellow’s breakthrough is that he stands, unashamed, as the beneficiary of nepotism, and suggests that in fact it’s a good thing.
It isn’t.
Does that mean it should be regulated out of existence? Not possible, and the consequences of the regulation would be far worse. But it ought to be possible to limit it, both through social opinion and as a matter of law.
A.L.
RE: FORMATTING
Phil, looked at your entries from the admin. end. Problem is that the comments settings interpret line breaks, so just wrapping it in P/P tags only ups the spacing between paragraphs if your posts have hard line breaks in them (and yours do). Lynx may be doing this, but then again your past comments have all worked. I’m puzzled – could you be hitting RETURN for some reason?
Aristocracy and meritocracy cannot coexist comfortably; one side will envy or disparage the other, respectively. America has always walked that fine balance from the time of the Revolution, and I certainly don’t think we should give up the ghost now.
Toqueville noted that no democracy has lasted for more than 200 years, but if we move toward an acknowledged aristocracy, we will be proving him right where we all thought we were on the verge of proving him wrong.
I’ve absolutely nothing toward the rich, and only slight annoyance with “old money,” but when people begin to bring concepts of noblesse oblige into the picture, and suggest that old money somehow accounts for a greater savvy or ability to lead, then we are racing toward exactly what people fought and died in this country to prevent.
It’s always amazed me that the well off don’t realize its in their own best interest to help the needy as well as their own. Is having a work force of sick and poorly educated people some kind of advantage? Didn’t Henry Ford show that paying his workers more actually increased his competitiveness? Didn’t the union movement create the middle class and what used to be our consumer economy to the benefit of all? Is it a coincidence that there’s no longer enough people able to buy things now that our blue-collar jobs have been moved off-shore? And we fix all this with bigger and bigger tax breaks for the wealthy who are supposed to spend that money to build more production facilities for non-existant buyers? Instead of spending that money to buy another Ferrari or, just perhaps, contributing to the party giving the tax breaks?
Spreading the wealth around returns value to the donor. It increases net wealth. Your children deserve a better world to live in, not just more cash to wallow in. Do it for your children.
Some personal, and almost immediate, reactions: Bellow (fils) has certainly not embaressed himself or Bellow (pere). He has been a fine editor and has brought along many good books that might otherwise not have seen daylight.
Further, his essay seems to be an elaboration of something anyone who has been in the world for a while knows: the way we live now features considerable nepotism just as the way they lived then did. Further, there are many “failed” sons and daughters of the prominent or otherwise powerful. The burden of a celebrated parent, honored and heavily rewarded by others, is often more than the offspring can carry with grace. As commonly as not, the next in line breaks ranks and willfully manages a downward mobility as distressing to the parent as ultimately it is self-puishing for the child.
If Bellow brings the literary world down upon hiim for this (and I don’t really think he will) it will be rather like the storm that raged around Norman Podhoretz for three or four days after he publised “Making It.”
I don’t have a cite for supporting data, but on CSPAN Al Franken said that someone (presumably a Democrat?) in Congress suggested a compromise on the estate tax.
Instead of eliminating it completely, it would be kept, but the first 100 million dollars would be exempt and inherited tax-free.
According to Franken, the Republicans weren’t interested.
I’d be curious to see how many family farms are worth $100 million or more.
(Maybe in Colombia…)
milton –
My point is certainly not to attack Adam Bellow’s professional accomplishments – of which I’m assuredly ignorant. Nor is it to suggest that nepotism is some new thing, or that it is desirable, or even possible to legislate it out of existence.
I have been and am extremely concerned about the political and economic consequences of concentrations of wealth, income, and power.
I believe that Bellow’s article breaks new ground, in that while his sentiments may have been voiced by teenagers at Choate or their parents in the dining halls of certain private clubs, those who held those views felt that the egalitarian nature of the Republic meant that those who voiced them in public would be ostracized.
For a figure such as Bellow to write, and a magazine such as the Atlantic to publish what is not an apologia for nepotism and class stratification, but a strong defense of it as inevitible and desirable is newsworthy.
And if I can play some part in making sure what he says is heard by the people in the public high schools and diners, I intend to do so…
A.L.
Though I think it unwise of Adam Bellow to refer to the phenomenon he has written about as ‘nepotism,’ I fully agree with the concept of general appreciation of the immense and irreplaceable social value built up in our great families. We have currently turned Jefferson’s notion of “raking…annually from the rubbish” into a mindless bulldozing of our country’s undoubted eminences. Envy is an extremely ugly sin, and must not be bowed down to.
Isn’t it possible to have a society that elevates someone from a miserable environment without hypocritically denigrating someone from a good or even great one?
The bulldozer must be re-directed towards many shoddy conceptual structures in which Bellow Jr.’s present and future critics are now camping out.
Many writers seem to assume that envy is the natural response to superiority in anything. I don’t believe it. I don’t even believe it is the modal response. A more widespread, and certainly a more natural response is admiration, joy, and emulation.
Bellow Jr.’s toying with the heavily-laden notions of ‘aristocracy’ and ‘meritocracy,’ etc., merely play into the pet ideas of the mentally incestous. His clear intention is being ignored by some of the writers above. The aristoi (=Greek:best) do have merit. But that is not the meaning of aristocracy referred to by most of the writers here- they think it means money, and thus- power, passed on from undeserving generation to undeserving generation. The use of the word ‘dynasty’ further obscures the plain truth well set out by gberke above: what is passed on is something that cannot be measured by examination alone, and certainly cannot be equally transferred by what we call “education.”
Chris –
Perhaps you can expand on “the immense and irreplaceable social value built up in our great families“??
A.L.
…and if you could also exlain the difference here “The aristoi (=Greek:best) do have merit. But that is not the meaning of aristocracy referred to by most of the writers here- they think it means money, and thus- power, passed on from undeserving generation to undeserving generation” as well??
A.L.
As an aside, the estate tax is not just a tax on the concept of inherited income– and its purpose is not about redistribution of wealth. The tax also serves as a means of simplifying the taxation of capital gains after the death of the bequeather. The heirs who inherit wealth never have to worry about what the original price of their inherited assets were before they sell them. Stocks bought at $1 by the original estate holder and bequeathed to an heir at $100 may be sold by the heir without having to pay any capital gains tax.
Elimating the estate tax shoots a huge loophole in the tax code allowing some capital gains to go untaxed, and attempting to tax them as capital gains rather than estate taxation would cause a larger paperwork problem than a simple, one-time estate tax at the point of inheritance.
Err… Somehow, even if the estate tax were abolished, I just don’t see it as being a terribly abused tax loophole, I think death is a fair disincentive somehow…
Seriously, I think the oft overlooked point when people go on chicken little crusades over the width of the income bell curve is the fact that we have little data suggesting how big the gap can get before the system breaks down. Remember up until this point in history the curve has been squashed into the lower-left corner. No democracy has yet broken the system, so we don’t know where the system will break. Historical comparisons are worthless because it’s only natural that as the curve encompasses more and more money and people it will widen out somewhat, standard random spread.
The warning signs are I think the creation of a class of the IDLE rich. The currently wealthy in the US don’t break the system because, they split on most issues, and in any case are mostly too busy, well, living, to spend their money on mercenary armies.
The real problem here, and I think everyone knows it and is dodging it, is that it’s mobility which is the real problem, and the ultimate determiner of mobility in the information age is education. Capping the right side of the chart is just going to cause massive problems. The key is making sure that people on the left with talent and ambition can always migrate to the right. To ensure that we need to fix the education system which below the college level is completely broken, and even the universities could do better, and that’s a complete can of worms.
As for the nepotism thing, when are we going to get to bury the whole eugenics thing? You’d think with all the advances in genetic sciences that show it’s just not practical even with rigid controls (it’s difficult with straight physical abilites, damn near impossible to breed mental traits true), and here’s another idiot who thinks it happens naturally? Haven’t they figured out that rich people promptly marry beautiful (handsome) bimbos and dilute the genetics?
This issue of the atlantic looked pretty disappointing on the cover, so I figured I would start from the back, which is usually better anyway. I was leafing through and read three words: “Ricky Ray Rector” and thought — there is a 100% chance that I can name the author of this article. And I was right. The whole magazine is around the bend and over the edge.
I just want to second Eric M’s comment. The Atlantic Monthly gives me the creeps. In the Kaplan article he looks back fondly on Reagan Administration policy in El Salvador. A couple of years ago I think they published an article defending torture (the ticking time bomb example was used, of course). There’s probably an underlying political philosophy to all this, and I don’t think it’s a very pretty one.
Dean,
Which capital gains go untaxed if the estate tax actually goes away? *Everything* gets sold, eventually. (In fact, there’s an argument to be made that getting rid of the basis step-up on inherited property will actually increase tax revenues in the long run. Precisely why the Demo “compromise” of keeping the estate tax – and the step-up – at a very high exemption is actually the worst possible alternative.)
Yes, record-keeping and basis-calculation is going to get Byzantine, but when was the last time tax reform actually *simplified* anything?
The Standard and Poor’s Executive College Survey used to tabulate which undergraduate school the country’s leading business executives graduated from and add up the results. As of the last survey I know about from the mid 90’s, Yale had the third most executives, Harvard the 2nd most (I may have these backwards). Guess which school had the most?
And yes, this is relevant to the post and the comments.
Why should the state rob my children; that is wrong.
Why should I have to pay taxes on money earned through sweating my ass off but not have taxes be paid by some kids who just had it handed to them? Sure, you could try and make the argument that it was the parents money and they should be able to do with it what they want but then why can’t I decide that my employees are “good kids” too and instead of paying a wage that has to be taxed (and I have to kick in matching FICA) just “gifting” them the money. After all, it’s my money and if I wanted to just give it away shouldn’t I be able to? Isn’t that what the inheritance tax repeal is all about? The right to give money away without the recipient having to pay any taxes on it?
Excuse me. By “country” I meant the U.S.
“Which capital gains go untaxed if the estate tax actually goes away?”
The entire acrument of wealth in holdings the deceased has earned between the time s/he bought it and the time he transferred it to the heir. Capital gains taxes aren’t applied to such a transfer of capital, and to do so is extremely costly compared to simple estate and gift taxes, as it would require tracking down all the paperwork to audit the original values to figure out what the total income was, yadda. Estate and gift taxes primarily affect unrealized capital gains. According to this paper unrealized capital gains make up 56% of estate tax revenue on estates larger than $10 million.
“*Everything* gets sold, eventually.”
Capital gains is applied to gains made after you inherited it, the base value of the property is reset for the heir. So no, the gains made by the deceased are never taxed.
“I’m convinced that an estate tax, which will just be another bit of overhead to hurt small businesses a lot more than large ones”
Will be? The estate tax is being abolished, it’ll be gone by 2009. As it existed in 2001, previous to the cuts, it barely affected small businesses and increasing the exempted income for small businesses could make the effect null, if that’s what you want. As it was estates valued up to $675,000 were exempted from taxation (if you’re married you can exempt double that, along with further exemptions for family owned businesses and farms). It, quite simply, had a neglible impact on small business, and what impact it did have would have been very simple to nullify it without throwing out the baby with the bathwater.
This has nothing to do with “politics of envy”, and doesn’t have much to do with neopotism since we already have plenty of families that approach the level of an American aristocracy, and a few that approach the level of dynasty (how much neopotism makes it neopotism?): it’s just a simple, cheap, non-beaurecratic way of collecting on gains made by the wealthiest individuals, and for the extremely successful some extra to give a little back to the country that made them what they were, which can then be invested by the charities, or federal and state governments, into stuff said country cares about – roads, defense, hunger, neo-con flak machines, David Horowitz’s paycheck, whatever.
I mean, I’m crying my heart out for the kid that will inherit only $950,000 instead of $1,000,000, but it’s for the good of the country. Honestly.
There’s a clear example of how stopping inheritance of property can aggravate nepotism. Some of the worst instances of nepotism occurred in the medieval Catholic Church, where the children of big shots could not inherit their father’s wealth.
I’m really glad this finally came up. I think it’s a growing feature of society that’s been much ignored. And I think acknowledgement of the problem is most pertinent regarding enterprises in whose benefits we all share: government organizations and other public agencies, non-profits, and publicly-owned corporations.
No-one should be surprised or, I think, disturbed by nepotism at a family-owned business. But more and more, I’m seeing commercial associations, local offices of big financial services firms, even government agencies who hire as if they were the family business of the hiring executives. So I think the problem – and it is a problem – isn’t just one of a few high-profile families engineering political appointments for the kiddies. If nepotism filters down through every category of commercial activity, my concern is that it will ultimately stunt innovation, as the resulting system of rewards and punishments will induce people to stay in their corners rather than follow their natural talents. In other words, sure, I could take a job doing what I love at Nuts and Bolts, Inc., but I’ll never make it to VP; and why bother, when I can stay (and ultimately run) daddy’s firm/office/department? Who cares if I hate this business – at least I’m guaranteed success.
As for the estate tax: it’s been enacted, repealed, and enacted again more than once. I’m not sure how it’s relevant to nepotism anyway – no-one expects anyone but family to inherit a family business, do they? And having sold whole life insurance for awhile, I’ll add that the wealthy have had the means to diminish the impact of estate taxes. I do agree that it hurts farmers the most, which not only explains the prevalence of Farming, Inc., but has a lot to do with the ubiquitous subdivision of prime farmland for commercial and residential development.
Want to see serious nepotism in action? Ponder this report, from The Gweilo Diaries. Tom Paine was right about this practice, and Bellow is simply wrong.
The Estate Tax I’ll leave as an exercise for Americans.
The Atlantic has turned into a piece of sh**. Saul Bellow is still a genius – but all the nepotism in the world isn’t going to make Adam anything more than a third rate hack. Zzzzz.
“I do agree that it hurts farmers the most”
This is pure mythology, inheritance taxes rarely if ever affect family farms. Farms can be passed to heirs with millions in farm assets left untouched, assuming the heirs continue farming for 10 years, and whatever taxes are levied after that can be paid over the course of 14 years. Ie. “Even one of the leading advocates for repeal of estate taxes, the American Farm Bureau Federation, said it could not cite a single example of a farm lost because of estate taxes.”
What’s hurting the family farm: lack of interest among heirs, economy of scale in large farming operations, cheap slave-ag from the third world, and government subsidization – also justified by this “save the family farm” garbage – that primarily benefits big agribusiness and benefits working farmers not a lick:
http://www.ewg.org/farm/help/faq.php
It’s hard to be profitable farming alone to begin with, the massive subsidies to the big competitors doesn’t help any.
The estate tax is related to neopotism by the wealth-to-power conversion equations that govern Washington.
“Didn’t Henry Ford show that paying his workers more actually increased his competitiveness?”
Well, yeah. Paying higher rates got him the best workers available. You get what you pay for, after all.
“Didn’t the union movement create the middle class and what used to be our consumer economy to the benefit of all?”
Nope. Technological advancement created the middle class. All the union organizing in the world isn’t going to take a bunch of 19th century factories and crank out enough goods and services with them for today’s middle class lifestyle.
“Is it a coincidence that there’s no longer enough people able to buy things now that our blue-collar jobs have been moved off-shore?”
What are people going to buy? As existing products get cheaper and easier to make, we’re going to have to come up with brand-new products, or new variations on existing products, to keep people gainfully employed. If it only takes half the people to make all the stuff we’ve been consuming, the other half will either sit idle, pretend to be useful with busywork, or put to work making something else that we haven’t been consuming all along.
But the process of coming up with new versions of existing products is slowed down if vendors have to get all their offerings blessed by the authorities before customers are allowed to buy them. So one good way to help people find jobs is to start deregulating things, to allow product improvement and new product introduction to happen as fast as humanly possible.
“the immense and irreplaceable social value built up in our great families”
Well, at the level of a non-great family, my own, I don’t think it co-incidental that one of my grandfathers went to Pratt and was a commercial artist, that both my parents went there.
That my father worked as a commercial artist almost all his life. That my sister went to Pratt and works at MOMA. and that my two brothers do things related to that art-world. Talking about and doing things in that world was normal for us.
In another part of my family, my mother’s mother’s side, are five generations of Malones who went to West Point. Nepotism–Or tradition and a level of comfort with things military?
We seem to have decided disconnect here: try the mental experiment of trying to feel “outrage” or “concern” that the son or daughter of a sports or entertainment personality might be doing well in the same or a related profession….No, it is only the sons or daughters of businesspeople or political figures that we find so “troubling.”
The table-talk of the Prescott and Geo. H.W. Bushes is always going to give a leg up to a scion of that family, over the table talk of Virginia Kelley to a scion of that familiy. Take it easy.
…and if you could also exlain the difference here “The aristoi (=Greek:best) do have merit. But that is not the meaning of aristocracy referred to by most of the writers here- they think it means money, and thus- power, passed on from undeserving generation to undeserving generation” as well??
The passing on of musicianship in the Van Eps family is what I mean by “hoi aristoi”- the best. The immersion of musical children in a musical family exemplifies what I mean by “irreplacable social capital.” I am not praising wastrels with trust funds. I had the misfortunate to work in a restaurant partially owned by a son of the late William Paley, a son who allegedly sucked up much of the restaurant’s profit up his nose.
Did I understand your question?