I do not make this statement wholly unprovoked. While I have been plotting the review of this book for some time now, the events of this week finally moved the project to the front burner, as the new proposed GOP tax bill promises to strike a final and fatal blow at the estate tax, thereby scoring yet another major victory for Team Dead.
With Republicans now aiming to phase out this already modest tax over the next six years, we seem to be reaching a kind of culmination of Madoff's narrative thread. At the time of writing, she tells us, George W. Bush's temporary diminution of the estate tax had just ended. The publication date of the book therefore places it squarely in the brief window of time -- 2010 A.D. -- when there was no tax at all on inherited wealth. (My brother-in-law, somewhat folklorically perhaps, tells me that there was a marked uptick that year in the number of expiring multimillionaires). "Although no one expects [Bush's] 'here today gone tomorrow' law to remain in effect," writes Madoff, "no one knows whether the estate tax will ultimately be retained or scrapped altogether" (p. 68).
By the end of 2017, it appears, we will have an answer to her implied question. The rising power of the American dead that Madoff charts -- the growth of perpetual charitable entities that are shielded from all taxation and pay up to six figure salaries to their trustees, the creation of "dynasty trusts" that reach across generations and are immune to liability, the gradual erosion of taxation on inherited wealth, etc. -- is approaching a zenith. In the field of ideological battle, the mega-wealthy are fighting with a veritable army of the dead. Reagan, the Bushes, and now the McConnell Senate have placed us all increasingly under the fleshless thumb of what the law itself -- as if inviting satirists with a sense of the macabre -- refers to as "the dead hand." It lends a whole new meaning to the title of a semi-recent book, Zombie Economics. And hey, did not even George H.W. Bush deem the official "trickle-down" theories of his future running mate "Voodoo Economics"?
This army of darkness has never been so well-positioned -- and well-heeled -- as it is now. Plainly we are due for a second edition of Madoff's book, to complete the tale. Madoff redivivus.
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The notion that this contest between life and death is at least as old as the modern left-right political axis gains plausibility from Madoff's book. While she does not cite the famous passage on the social contract from Tom Paine, in which he takes aim at Burke for allegedly shackling the political destiny of the present and future to the whims of deceased generations, she gives us another no less thrilling passage from those early, swashbuckling days of liberalism -- this one penned by Paine's contemporary, Tom Jefferson. "[O]ur Creator made the earth for the use of the living and not of [the] dead;" says Jefferson. "[... T]hose who exist not can have no use nor right in it, no authority or power over it [...] one generation of men cannot foreclose or burthen its use to another." (p. 5).
Paine and Jefferson, we feel confident, would have been on the side of the estate tax. The sorties Jefferson famously waged against primogeniture would no doubt be pilloried today in the right-wing media as a sort of "death tax." Tom and Tom, thou shouldst be living at this hour. One wishes that you, at least, among the dead, could wield more influence over present generations.
And it is here we find the first example of a theme we'll be tracing throughout this post -- and which emerges even more prominently from Madoff's book. It is that whenever the U.S. has faced a choice between a more rational approach to the rights of the deceased and the practice of will-making, founded in a French Enlightenment tradition and carried to our shores by Paine and Jefferson, and one based on a narrowly individualist understanding of property rights derived from English Common Law and reflected in the Federalist tradition, it is always the latter that has won out.
In his own position on these matters, for instance, Jefferson was partially perhaps displaying the Francophilia and Anglophobia that would later influence his foreign policy. The demand to break up large estates and limit the absolute control of the deceased to dispose of their property through will-making was, it would seem, a rallying cry of many 18th and early 19th-century revolutionaries, but it gained the most traction on the continent. Madoff describes how even today French law follows an eminently logical system of "forced heirship" that the U.S. has never adopted.
Forced heirship means in essence that individuals are required to distribute a given share of their property at death to each member of their family. It has never caught on in this country, where the tyranny of the personal will reigns supreme. In line with its French heritage and legal tradition, Louisiana remains today the only U.S. state with a system of forced heirship -- though even here, Madoff tells us, the practice has been eroded in recent years, eliminating protections for adult heirs and restricting them only to minors (pp. 61-62).
The advantages of a forced heirship system are legion. Madoff's account stresses its value in shielding offspring from the threat of disinheritance. In its more progressive forms, this legal principle also protects the interests of children who were born of a different marriage or outside of wedlock, and who may never have lived with a deceased parent or otherwise been recognized in their will.
It also thankfully guards against the danger of what is apparently known even in legal settings as "posthumous meddling." This is the famous scenario that flourishes in many a bourbon-soaked, Tennessee Williams-inspired nightmare, and of which Madoff gives us plenty of real-world examples, in which a deceased relative will pass on an eye-poppingly vast fortune to a trustee, but only on condition that she or he divorce a spouse who is of the "wrong" religion, renounce atheism or some variety of sexual nonconformity, finish college, etc. etc. When the law dictates that a parent leave a portion of their estate to each child without strings attached, this situation can no longer arise. In short, forced heirship would save us -- were we sensible enough as a society to have it -- from that most wicked, English, and 19th-century-novel-inspiring practice of "will-shaking." I owe the term to Samuel Butler, who gives us a memorable passage on the subject that I would humbly submit for inclusion in any future edition of Madoff's book:
Of course if young people allow their conduct to be in any way influenced by regard to the wills of living persons they are doing very wrong and must expect to be sufferers in the end, nevertheless the powers of will-dangling and will-shaking are so liable to abuse and are continually made so great an engine of torture that I would pass a law, if I could, to incapacitate any man from making a will for three months from the date of each offence in either of the above respects and let the bench of magistrates or judge, before whom he has been convicted, dispose of his property as they shall think right and reasonable if he dies during the time that his will-making power is suspended. (From, of course, The Way of All Flesh -- that book I can't stop quoting it seems until I've transferred every page of it, piece-meal, into this blog.)Of course, Butler might have looked no further than across the channel, where his young protagonist does eventually travel, to have found a country that had managed to abolish this social evil, and by a much simpler method than the one Butler proposes.
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As valid as this social goal of protecting potentially disinheritable and illegitimate children may be, however, forced heirship in the 18th and 19th century had an even more revolutionary meaning that is lost to us today. In the present political moment, the rights of heirs -- even of illegitimate children -- does not quite seem the most pressing front for social justice, in the way that it did formerly. The goal of ensuring that Donald Trump give an equal share of his exaggerated fortune to each of his repellant offspring is not likely to inspire many a petition. We can thus be surprised in reading One Hundred Years of Solitude, say, to hear of the wars that were apparently fought by generations of Latin American "liberals" and "conservatives" over the rights of second sons and of children born out of wedlock.
Yet we have to remember that in 19th century societies where capital was held primarily in the form of land -- rather than in the multiplying many-headed hydra of mutual funds and stock options of today, where each division of the spoils merely creates new mega-fortunes -- splitting an estate two- or three-ways each generation actually made a considerable difference in the overall distribution of wealth in society. It ended the ability of wealthy families to pass on enormous inherited fortunes through innumerable generations. In effect, it abolished the aristocracy.
Tocqueville highlights this fact in one of his great extended footnotes in Democracy in America, and he is puzzled briefly by the fact that this revolutionary system of forced heirship should have proceeded so far France, of all places -- that slumbering ancien régime only just awakening to feverish revolution (at the time of Tocqueville's writing they were already on their second or third try) -- rather than in the democratic United States, which had been republican and without an aristocracy from the start (at least in Tocqueville's telling).
He eventually concludes that this is, however, no real paradox at all. It is precisely because the French system of laws is a revolutionary overlay on an aristocratic regime that it must resort to such abrupt measures; whereas the United States, with its thoroughgoing democracy, has no need of them. There are (or were then) no aristocratic landholdings here to break into pieces. Writes Tocqueville (Reeve trans.):
It cannot fail to strike the French reader who studies the law of inheritance, that on these questions the French legislation is infinitely more democratic even than the American. The American law makes an equal division of the father’s property, but only in the case of his will not being known; “for every man,” says the law, “in the State of New York (Revised Statutes, vol. iii. Appendix, p. 51), has entire liberty, power, and authority, to dispose of his property by will[...]" The French law obliges the testator to divide his property equally, or nearly so, among his heirs. [...] If the social condition of the Americans is more democratic than that of the French, the laws of the latter are the most democratic of the two. This may be explained more easily than at first appears to be the case. In France, democracy is still occupied in the work of destruction; in America, it reigns quietly over the ruins it has made.This is plausible enough -- and conveyed with characteristic vividness -- but Tocqueville might have looked earlier in his own account for a quite different explanation -- one I actually find to be more plausible in this case, and in light of Madoff's book.
Tocqueville speaks throughout Democracy in America about the deep embeddedness of English legal traditions in America life, even when they are seemingly at odds with the new nation's democratic values. In writing of the institution of cash bail, for instance -- which remains a cankerous feature of our social life and legal system even today, despite the admonition of the Constitution against allowing excessive forms of it -- Tocqueville offers the following:
Laws and customs are frequently to be met with in the United States which contrast strongly with all that surrounds them. [...] The civil and criminal procedure of the Americans has only two means of action — committal and bail. [...] It is evident that a legislation of this kind is hostile to the poor man, and favorable only to the rich. The poor man has not always a security to produce, even in a civil cause; and if he is obliged to wait for justice in prison, he is speedily reduced to distress. The wealthy individual, on the contrary, always escapes imprisonment in civil causes; nay, more, he may readily elude the punishment which awaits him for a delinquency by breaking his bail. So that all the penalties of the law are, for him, reducible to fines. Nothing can be more aristocratic than this system of legislation. [...] The explanation of the phenomenon is to be found in England; the laws of which I speak are English, and the Americans have retained them, however repugnant they may be to the tenor of their legislation and the mass of their ideas. Next to its habits, the thing which a nation is least apt to change is its civil legislation. [...] The surface of American society is, if I may use the expression, covered with a layer of democracy, from beneath which the old aristocratic colors sometimes peep.(The bail system is also a fine example of that other great Anglo-American tradition of course -- that of criminalizing poverty. Madoff gives another and rather ghastly example of this tradition in her history of organ donation. When corpses from 19th century pauper's cemeteries were exhumed for the purposes of medical dissection, Madoff tells us, at least one public justification offered for the deeply unpopular practice was that it would provide a disincentive to "becoming wards of the state." (p. 27) Since poverty of course is otherwise such an attractive option.)
If the roots of the legal and political system of the United States lie in a thin layer of French revolutionary ardor (reaching us through not particularly legally-binding channels of the Declaration of Independence and Tom Paine) overlaying a much deeper subsoil of Burke-ish ancient English liberty and the Common Law, then it is clear enough that we owe our laws of inheritance to the latter. We have England to thank for our will-shakers and will-rattlers.
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This is ironic in light of the fact that the English for so long have delighted in the thought that they have a far more rational and understated relation to death than do we Yanks. Madoff cites the words of Arnold Toynbee on this subject, and he was not alone among his countrymen. In the twentieth century, the expensive mega-industries that were springing up in the United States around the rites of mortality and burial proved a fertile source of satire for many a cross-Atlantic evaluation of the domestic manners of the Americans. Jessica Mitford on the subject of the funeral industry comes to mind, or Evelyn Waugh doing the same -- in The Loved One -- for California's pet cemeteries.
By the dawn of our current century, the mortuary industry seemed to become less of an urgent topic in public discourse and satire alike. Perhaps -- with some help from Mitford (and the Unitarians with whom, she tells us, she disproportionately consorted in this endeavor) -- our funerals became more modest. Or, more plausibly, the even gaudier forms of posthumous American self-celebration have swelled to such proportions that morticians vanish into insignificance.
We long for a modern-day Mitford or Waugh to explore some of the excesses of American eternity-seeking, for instance, that Madoff displays in her book. Madoff has fine sections on the practice of cryonics, for instance. Apparently it exists outside the world of Austin Powers, which was news to me. Through this practice some 150 people in the U.S., at most recent count (Madoff, p. 49), have had their deceased forms pickled in a state of suspended animation on the off chance that someone in a later generation invents a cure for human mortality.
"[C]ultural historians have noted that we as a people are peculiarly anti-death," observes Madoff in her Conclusion (p. 155). It would seem that America is, as Edna St. Vincent Millay once said of childhood, the kingdom where nobody dies. Had Madoff's book been published a half-decade later, she might have devoted a section to the recent Faustian endeavors of our would-be tech übermensch Peter Thiel, who -- when he is not busy drawing up plans for dystopian island nations -- is allegedly investing significant resources into schemes to live forever. That way humanity can enjoy the presence of his inspiring mentality forever, one assumes -- and aren't we grateful.
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Well, after many a summer dies the swine, and as Madoff ultimately reminds us, these schemes for personal immortality are likely to come to naught. When she speaks of the rising power of the dead, then, she is of course just being colorful. The dead aren't actually troubled one way or the other with such matters. It is not with them that we have our true quarrel.
But there are real consequences for those of us still alive, as well as generations yet to come, of policies -- enacted by other living people who represent particular and powerful interests, and it is they who are our true concern -- that grant so much authority to the decisions of those who are no longer living. This is what Tom Paine was warning against. This is what upset Jefferson. We should not bestow upon the institution of the will the absolute power to dispose of an individual's property, and for all time. To do so is a violation of our democratic aspirations -- it is a sop to aristocracy. This is likewise the real thrust of Madoff's book. "Over time," she writes, "[...] we have forgotten what our founders knew, and today we are recreating the very world from which they sought to distance themselves." (p. 155).
As much as English satirists might mock the curious "American Way of Death," therefore, it is a case of the pot calling the kettle black. As explicated above, we really owe our will-worshipping to the English aristocracy, as well as to its near offshoot, English individualism. This is whence we derive the notion that property is essentially something earned through the unassisted efforts of a single person, and therefore that no part of it is meaningfully owed to anyone else -- whether family members or the public -- apart from that which the individual gratuitously sees fit to bestow.
The institution of the will is the ultimate expression of that individualism that Mill speaks of in his On Liberty, that individualism that is so closely tied to eccentricity. The personal will and testament is the last spasm of self-will from the ornery English crank in his country house -- the one who, let's say -- leaves all his vast inherited wealth to maintain a collection of toadstools, and leaves his descendants penniless. It is the final crotchet before the casket lid can close.
Sometimes, the crotchets that Anglo-American inheritance law makes possible are well-meaning, in a grandiose sort of way. Madoff cites the case of a wealthy Texan who, in 2004, proposed to earmark money in a trust for 350 years, in sufficient quantity that it would accumulate via compound interest in that time to such a vast amount -- à la The Sleeper Awakes -- that it would be able to pay out $1 million to every U.S. citizen at the close of that period. (pp. 89-90). Defying the unfair popular image of eccentric wealthy Texans in 2004, this individual, Mr. Walker, made sure to include as a condition of his bequest that the U.S. government could not discriminate in disbursing this money on the basis of race, religion, marital status, wealth or poverty, or sexual orientation (p. 172). Depressingly, the court ultimately ruled this bequest invalid, Madoff tells us. Mr. Walker's wealth is not currently compounding somewhere for the use of future generations.
Another case of the merely bizarre and apparently good-natured bequest is one with which I am more directly acquainted, since it comes from the annals of Unitarian Universalism. This is the bizarre origin story, beloved in UU lore, of the UU Association's Holdeen Program -- a trust that does excellent work supporting grassroots social justice movements in India. It seems that the original gift that gave rise to the program had similarly been set aside by a wealthy lawyer to accumulate for an immense stretch of time, such that the total would one day be large enough to satisfy the entire tax burden of the state of Pennsylvania, and thereby remove the obligation from its citizens henceforth to fill the state coffers. If, and only if, this bequest was declared inadmissible by the courts was the full amount to revert to the UUA, to be used -- in Holdeen's words -- for the benefit of "the poorest of the poor in India." This led to a protracted court battle, which the UUA eventually won, the court having found that Holdeen's original bequest was not a valid charitable purpose -- all of this good for the program, but probably not earning the UUA many fans in the Keystone State, who are still paying taxes.
Here we see the lovable oddness of the English individualism that Mill defended -- here we are almost glad for the preposterous expressions of unmitigated selfhood that the institution of the unrestricted personal will makes possible.
But there are also, of course, the drably selfish bequests -- the downright cruel crotchets. These too owe their origins to the British system. Caroline Blackwood's fictional Great Granny Webster, who leaves her only servant and dependent a painfully high-backed wooden Victorian chair upon her death, and directs all the rest of her enormous fortune to "the Society for Euthanasia" ("One only had to take one look at that old woman's face to know that someone as trenchantly ungenerous in life would be just as ungenerous in death," as another character says of her), has more than a few real-life analogues.
We have had occasion above already to meet Butler's tribe of "will-shakers" and "will-danglers." William Hazlitt, another great observer of English "types" -- also held them up to scrutiny in one of his essays. I would submit this passage too for quotation in that second edition of Madoff's book that the world needs. Writes Hazlitt:
Few things show the human character in a more ridiculous light than the circumstance of will-making. It is the latest opportunity we have of exercising the natural perversity of the disposition, and we take care to make a good use of it. We husband it with jealousy, put it off as long as we can, and then use every precaution that the world shall be no gainer by our deaths. This last act of our lives seldom belies the former tenor of them for stupidity, caprice, and unmeaning spite. (See "On Will-Making")
He goes on to catalogue the various devices of the will-danglers. The wealthy woman who invites a poor relation to stay with her and taunts her with vague promises of a future bequest, only to crush her hopes from beyond the grave, is one of the garden varieties.
There is also, however, the more refined and abstract sort of cruelty -- the cheating of the public -- that underlies the various tactics for dodging taxes and liability that Madoff describes. These too are devices for guaranteeing "that the world shall be no gainer by our deaths."
The recent enactment into law of "dynasty trusts," for instance, is perhaps the premiere example of the whole selfish spectacle of the rising power of the rich and dead that Madoff wishes to chart. This relatively new phenomenon in American life apparently enables its creator to set aside unlimited sums of money in perpetuity (at least in some states) for the use of their future descendants. Since the money in these trusts has been earmarked by someone else for one's benefit, and since the revenue it generates is paid out as a gift, the beneficiary does not pay any taxes on its income. Moreover, the assets in these trusts are permanently shielded from the debts and liabilities of the beneficiary. As Madoff puts it, "Thus, these beneficiaries are free to act as recklessly as they like, knowing that their money is forever protected for themselves and their heirs." (p. 84).
The recent enactment into law of "dynasty trusts," for instance, is perhaps the premiere example of the whole selfish spectacle of the rising power of the rich and dead that Madoff wishes to chart. This relatively new phenomenon in American life apparently enables its creator to set aside unlimited sums of money in perpetuity (at least in some states) for the use of their future descendants. Since the money in these trusts has been earmarked by someone else for one's benefit, and since the revenue it generates is paid out as a gift, the beneficiary does not pay any taxes on its income. Moreover, the assets in these trusts are permanently shielded from the debts and liabilities of the beneficiary. As Madoff puts it, "Thus, these beneficiaries are free to act as recklessly as they like, knowing that their money is forever protected for themselves and their heirs." (p. 84).
Madoff rightly worries about the broader social effects of creating this mighty overclass of the permanently and untouchably wealthy. Nabokov was writing in fairy-tale vein -- summoning a super-aristocrat who could not actually exist -- when he says that "economic disasters" were "beyond the financial or philosophical ken" of his "invulnerable" creation Van Veen. But the dynasty trust creates an actual race of "invulnerable" Van Veens, who can accumulate untold personal debt, fines, and civil liabilities without ever facing consequences to their chief assets and primary income-stream. "The result of these trusts," says Madoff, "will be the creation of new societal divisions between those who are beneficiaries of these tax-free, judgment-proof, long-term trusts and the rest of society." (p. 8)
If the absolute power U.S. society grants to the personal will is an instance of Tocqueville's "old aristocratic colors" sometimes "peeping" from behind the curtain of U.S. democracy, here we have aristocracy tearing that veil away and thrusting itself into the open. What could be more aristocratic than a set of people who have done nothing for themselves apart from win the lottery of birth, and who are shielded from any possible financial consequences of their own profligacy or of the civil harms that they may inflict on other people?
Madoff rightfully considers that "this magnitude of wealth may not be good for the maturation of beneficiaries." (p. 84). Another way of putting it is that this is precisely the same recipe that -- across the Atlantic -- yielded so many generations of fox-hunting, pheasant-shooting, socially indifferent, idle and parasitical aristocratic English nincompoops. Soon we shall have in America what Rochester called "the booby breed":
Who with strong beer and beef the country rules,
And ever since the Conquest have been fools[.]
One might hope that this uninspiring future, in which vast sums will be locked up in impenetrable trusts paying out to a handful of the undeserving and socially unconscious, will be leavened somewhat by the equally vast sums being locked up in charitable trusts, which presumably will go to meet some of the the social needs that our new aristocratic "booby breed" will likely fail to satisfy -- or to notice.
But no. Madoff has some stern warnings for us on this subject as well. Not that Madoff, of course, is opposed in any way to charitable giving. The thing that she is far from completely sanguine about is the significant tax deductions that are given away to encourage these donations.
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Madoff reminds us that charitable tax deductions are a relatively new feature of the American landscape -- a twentieth century invention. She argues that they are also deeply problematic, because they effectively transfer control and influence over social policy out of the hands of a democratically-elected government and into those of private wealth. Her reasoning is that every tax deduction on the basis of a charitable gift is, of course, lost revenue in government coffers. Thus, the end result is entirely the same as if the donor were giving a slightly small share and the government paying the deducted portion directly to the non-profit. Private philanthropists are, in a sense, directly telling the government where to channel its money, without the latter -- the elected representative of the people -- having a say in the matter. This is why Madoff refers to the charitable giving deduction as, in reality, a federal "matching grant program." (p. 110)
I confess that as someone who has spent his whole career thus far, such as it is, in the service of tax-deductible organizations of one kind or another, this section of the book came as rather stiff medicine. I do wonder how my sector of the economy would fair if these policies were to change. Most likely, however, I suspect we would be just fine, and that the significance of the deduction to the life of non-profits has been exaggerated. Tax write-offs are a relatively small part of the reason why people give to organizations whose work they support -- as indicated by the large numbers of people who give small amounts to various causes without ever keeping close enough track to itemize them on an annual tax return.
When I presented Madoff's argument on this score to my dad, he salvoed back that there are numerous causes that no government would support, but which desperately need funds. Indeed, one is slightly concerned by Madoff's observation that foreign aid polls poorly among the general public, yet by subsidizing donations to the Bill and Melinda Gates Foundation, say, the government is effectively -- if indirectly -- contributing a larger share of its budget annually to this purpose than would appear from official appropriations. (p. 112). One is tempted to think that, well, democracy is wrong on this one. Foreign aid, while in need of various kinds of reform, is important.
But perhaps we are faced simply with an instance of having to take the good with the bad. Besides, it is not wholly unreasonable to suggest that if philanthropists value a cause sufficiently, they will and should contribute without requiring that the government subsidize them to do so.
Here, as in the other cases we have been considering, it is plain once again that U.S. policy aligns with an English individualist definition of property, and will scout the wildest alternatives to avoid having to compromise it. Even though we somehow managed to hammer through an income tax in this country in the early twentieth century, we are quite adept at avoiding its full impact.
Charitable giving, even though it is ostensibly directed toward other people and toward collective endeavors, aligns very well with this individualist notion of property. It conceives of wealth as something that can be disposed off through the wishes of only one person -- the one who currently possesses it -- and suggests that if social purposes really have to be pursued one way or the other, it is better to do so through the free choice of the individual donor, rather than the compulsion of public policy. Charity is thus a useful device for dodging the necessity of politics. There is a reason that Claude McKay's imagined Daughter of the American Revolution advises her son: "Shun sentimental liberals, but rather/[...] give to charities."
Moreover, as Madoff points out, the purposes served by private giving often do not benefit the larger public, even when they are made to IRS-recognized "charitable purposes," but serve to further entrench the privilege of the donor. She cites prestigious educational institutions as one example. These are among the largest recipients of tax-deductible charitable donations each year from the mega-wealthy, according to Madoff (p. 111) -- and so let us pause to choke on our bile for a moment at the thought that Harvard, with its endowment considerably larger than the GDP of many small nations, is effectively receiving a government grant every time a wealthy donor leaves money to erect a new wing bearing their name.
To cite another example from Chuck Collins, whose book Born on Third Base first directed my attention to Madoff's work, it is also possible to receive tax deductions for establishing a "land trust." This is a portion of conserved land that might be, let us say, next to one's beachfront property. The result (and quite possibly the purpose) of thus closing off an area around one's own real estate to further development might be to preserve or elevate one's property values, but for tax purposes this would be just the same as if they had given the money to Doctors Without Borders.
By far the most problematic form of modern charitable enterprise, however -- in Madoff's telling -- is the private foundation. Madoff takes us through the complex web of tax law and other intricacies that allow for this seeming paradox to exist: an institution, that is, which serves an ostensibly "charitable" purpose, and is able to receive tax-deductible donations, but which never pays out more than 5% annually of its principal (a figure chosen so as to be small enough that it would never require a cutting into the original assets, since the income from the principal would be sufficient each year to cover this 5%). Any portion of this 5% expenditure, Madoff adds, can go to pay the salaries of trustees and administrative costs, rather than charitable purposes.
The idea of a "charity" that exists for all time and that does no charitable work itself, but merely makes grants to other entities, does seem the ultimate perverse extension of Weber's Protestant "worldly asceticism." If a Scrooge or a Warren Buffett accumulates wealth year after year, decade after decade, without ever spending it on anything (Buffett for one is so notoriously cheap that -- according to his biographer -- he used to wash his car in the rain, to save money on the water necessary for rinsing), one thinks at first that they must be doing so with the idea that the money they are saving will eventually serve some purpose. It must eventually be spent.
It was the genius of Weber to see that this is not the case. The obsessive hoarding of wealth is, in its own fashion, an ascetic practice, with a strong element of mysticism. It is yet another form of the worship of the infinite that underlies all religions -- and indeed, all efforts at happiness.
And since the worldly ascetic is not truly motivated by the desire to satisfy actual bodily needs or pleasures in this life, there is all the less reason that he or she will do so from beyond the grave. To return to Hazlitt's essay "On Will-Making," the master writes:
Men like to collect money into large heaps in their lifetime; they like to leave it in large heaps after they are dead. They grasp it into their own hands, not to use it for their own good, but to hoard, to lock it up, to make an object, an idol, and a wonder of it. Do you expect them to distribute it so as to do others good [...]? No, they will thrust their heaps of gold and silver into the hands of others (as their proxies) to keep for them untouched, still increasing, still of no use to any one, but to pamper pride and avarice, [...] this is with them to put it to its intelligible and proper use; this is fulfilling a sacred, indispensable duty; [...] But to think of frittering it down, of sinking it in charity, of throwing it away on the idle claims of humanity, [...] oh! it would be madness, waste, extravagance, impiety!—Thus worldlings feel and argue without knowing it; and while they fancy they are studying their own interest or that of some booby successor, their alter idem, are but the dupes and puppets of a favourite idea, a phantom [....] I have insisted on this point the more, to show how much of the imaginary and speculative there is interfused even in those passions and purposes which have not the good of others for their object[....] Man is not the creature of sense and selfishness, even in those pursuits which grow out of that origin, so much as of imagination, custom, passion, whim, and humour.Indeed. And I confess myself to an obscure anxiety at the thought of foundations cutting into their principal, even though I don't have one to my name, and to a vague sense of warmth and security at the thought of a sum of money existing somewhere in perpetuity. It makes me wring my hands to think of it all just being spent on actual people, and so to be dissipated and lost, never to be piled all in one place again. Faced with the thought, I feel rather like the protagonists of the Treasure of the Sierra Madre in the closing scene, watching their long-sought prize of gold reduced to a valueless powder and then blown to the four winds. I'm afraid I too suffer from what Hazlitt further down in the same essay diagnosed as the "tendency to the heap."
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This is of course utterly irrational -- all of it. Money serves no purpose unless it is meeting some actual human need. And while I was momentarily inclined to think that perhaps a private foundation paying out only 5% the amount of its principal annually will eventually amount to more giving in total than if it had just immediately spent the original endowment, Madoff informs us that this is not the case, and includes the math to show it (the seeming paradox is chiefly due to the diminishing value of the U.S. dollar over time).
But the reason for the irrationality with respect to money is plain enough. We long for the infinite. We long for immortality. We ourselves wish to exist in perpetuity, so we do the next best thing -- we create hoards of money that will live on in our name.
It is this that leads to the abject loathing of the estate tax -- and taxation in general -- that one meets with among the GOP mega-donor base and the politicians they support. It is not quite greed, per se, or a hankering for luxury in any vulgar sense (except in Trump -- but he, again, is not nearly as wealthy as he claims). Mitt Romney, say, is to all appearances a person of relatively modest habits, and he is a more typical example of this hoarding class.
The fear of the estate tax touches rather on that nerve of the "imaginative and speculative" that Hazlitt identifies. It relates to the longing for mystical eternal existence, in which one's property -- which in the English individualist conception, as we have seen, is so much an extension of oneself -- will go on existing forever, world without end, compounding eternally in one's stead.
Not that the estate tax, mind you, actually prevents vast sums of money from accumulating in a single spot. The belief that it does among large parts of the general public is part of a larger trove of taxation folklore that has been inculcated by GOP strategists -- and that seems to be prevalent even among those who regularly file an annual return. In reality, the estate tax is graduated, just like the income tax. Those with married parents who are inheriting a large fortune can thus expect to receive the first ten million of it entirely tax-free -- more than enough to keep any young scion of the "booby breed" in style. And -- here is where the tax folklore comes in -- if they receive more than this amount, it does not mean the whole is suddenly going to be taxed at the standard 40% rate. They will only have to pay 40% on whatever amount exceeds the 10 million. So if they inherited 10 million and one dollars, say, they would pay the government a grand total of 40 cents in estate tax. So my Republican friend in high school who informed me that the "death tax" was going to take his money was -- quite possibly -- mistaken. It is just the same with the income tax. Those who enter a higher tax bracket always pay the same lower rates on the portion that falls below the higher bracket figure than they did before. Thus, contrary to folklore, there is never a disincentive to enter a higher bracket.
Bearing all of this in mind, one could well be justified in saying to our GOP mega-donors and their army of the dead --okay, sure, you have the love of the heap -- but does the heap really need to be bigger than this? Don't you still have the security you need, the money to ensure that you'll never want, even with the estate tax?
To be sure, it's unrealistic to expect that people will ever entirely stop caring about money. Or, if some will, I cannot claim -- must as I would like to -- to count myself among them. "[M]oney losses are the hardest to bear of any by those who are old enough to comprehend them," writes Samuel Butler, with his typical perspicacity. "Let a man have been brought up to a moderate competence[...]; then let his money be suddenly taken from him, and how long is his health likely to survive the change in all his little ways which loss of money will entail?"
But suppose one has so much money that no one "little way" could possibly be altered an inch by the modest losses of taxation. Suppose you were to say to the GOP mega-donors, isn't 10 million dollars, plus 60% -- more than half! -- of everything that's left, enough? And if that's not enough, what possibly could be?
But again, this is missing the point. The loss of that 40% of everything above 10 million dollars is not dreaded and resented because it is crippling to some other purpose that the money might serve. It is dreaded and resented because it is a step backward in the infinite mission of accumulating the heap. It is losing ground, when the essence of human happiness is the perpetual striving onward -- the scaling of the impossible mountain -- the "progress toward happiness" that is more desirable than happiness itself, to quote Gide's Alyssa again.
So what right have we to expect that they will surrender even this measly 40% share to the public coffers, to be spent on those "idle claims of humanity" -- to borrow Hazlitt's phrase? No matter how pressing and superior the social need, can we ask that a person give up their infinite quest, their hobby horse, when it gives them so much pleasure?
--
Yes, we can. We have a right to ask it because it is ultimately a sacrifice that we all must make. As much as our happiness on a daily basis may derive from a sense of fulfilling a purpose that will simply go on forever, we do not in fact last forever, as our individual selves. We are mortal. We may endow a "dynasty trust" on the theory that our personal self will continue by proxy through countless generations of descendants; yet eventually we have to face the fact that -- as my biologist sister always reminds me -- by the time seven or eight generations have passed, these descendants will share so little genetic material with you as the original testator that they might as well be strangers, at least at the level of DNA. Likewise, we might like the idea of piling up "charitable" money to exist under our name for all eternity, but we have to remember that we will not be the ones who will be around to gaze upon it admiringly. We won't even know if the pile is there.
In short, we have all got to figure out how to find meaning in living for the good of strangers, because at some point, strangers are all that's left. What exists far beyond our mortal span is not ourselves; it is the life of other people. We are one part of a larger planetary project, and our part will not last forever.
This is the final justification for giving up one's wealth in taxes -- and in genuinely philanthropic endeavors in which money is actually spent -- the justification for seeing those vast fortunes gradually dissipate, across generations, like so many motes of gold dust upon the Sierra Madre winds.
This is the reason why it ultimately does make sense to spend down one's principal on the "idle claims of humanity." Because humanity is all that there is. Humanity is all that lasts. I will eventually go "the way of all flesh." But the species -- if we can do a better job than we have hitherto of figuring out how to live together for collective purposes, and to find meaning in aiding one another -- might just have a shot at perpetuity.
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