INEQUALITY, INDIVIDUALIZED RISK AND INSECURITY
April 27th, 2012
Presenters Michael J Zimmer & Margaret Raymond
Fairchild Lecture Series Transcript Dean Raymond: All right. Good afternoon. It is my great pleasure to welcome all of you to, what I believe is, the 24th Annual Fairchild Lecture. My name is Margaret Raymond, and I'm the Dean of the Law School. Thank you very much for joining us here this afternoon. The Fairchild Lecture honors Judge Thomas E. Fairchild, a 1937 graduate of this law school. Judge Fairchild's diverse and remarkable professional life included service as Attorney General of the state of Wisconsin, as US Attorney for the western district, as a justice of the Wisconsin Supreme Court, and then, as a judge on the United States Court of Appeals for the 7th Circuit, where he served for over 40 years. This lecture is an opportunity to recognize Judge Fairchild's decades of service to the law and to our state and nation.
Dean Raymond: It is a special pleasure to welcome the members of the Fairchild family who are with us this afternoon, Judge Fairchild's son, Tim, and his wife, Maya, are here. Let's give them our Wisconsin greeting. Thanks so much for being here. I also want to welcome Shirley Newsome. Is Shirley here?
Speaker 2: She didn't make it.
Dean Raymond: She didn't make it. Sorry about that. I also want to welcome those of the judge's clerks who are joining us and have come to hear one of their own deliver the lecture. We're delighted all of you could be with us here today. The Fairchild Lecture was initiated by Judge Fairchild's law clerks, and each year, the lectureship brings to the University of Wisconsin-Madison a distinguished member of the legal profession from the bench, bar, or academy to speak on a topic of importance to the profession.
Dean Raymond: I should also say that next year is the 25th anniversary of the lecture series, and in preparation for that, the lecture committee and the University of Wisconsin Foundation have initiated a campaign to ensure the continuation of the lecture series for another 25 years. Matt Flynn, who I think can't be here today, and John Skilton, who is here, are co-chairing this campaign, and they will be sending out letters asking for your support in continuing the Fairchild Lecture series. The goal is to raise $150,000 to finance the costs of bringing speakers like our speaker today to campus for this annual event. The series brings to the University of Wisconsin extraordinary and distinctive talents in legal education and legal practice, and we value the Fairchild Lecture highly as a part of our annual calendar as an opportunity to welcome back the judge's community of clerks to campus. So, I am going to encourage all of you to look out for your solicitation to take the calls, which you are undoubtedly going to get and to help us continue the Fairchild Lecture series for another quarter of a century.
Dean Raymond: And with that, I'm going to turn to welcoming our speaker for today. We are honored to have here with us, Professor Michael J. Zimmer, Professor of Law at Loyola University Chicago School of Law and a former Fairchild clerk. Professor Zimmer began his law school teaching career at the University of South Carolina and has taught at a number of law schools, including Wayne State and Seton Transcript by Rev.com Hall, where he taught for 30 years, including four years as an Associate Dean. In 2008, he rejoined us here in the Midwest, joining the faculty at Loyola. He has a long and prolific record of scholarship and is a widely recognized scholar in the areas of employment discrimination law, labor and employment law, and constitutional law. His talk today is entitled, Inequality, Individualized Risk, and Insecurity. Please join me in welcoming Professor Zimmer as our 2012 Fairchild Lecturer.
Michael Zimmer: Thanks, Margaret. Well, maybe I'll end this long string of distinguished speakers, but I'll do the best I can. I want to thank Margaret for the kind introduction and thanks to all the Fairchild clerks, especially John Skilton, Bill Conley who keep this thing rolling and to Lynn Thompson here at the law school who organizes all of this. Clerking for Judge Fairchild was the best year of my legal career, and I look forward to this lecture every year. I hope you'll look forward to next year's lecture after this year's lecture. It seems to me that three things are kind of clear. The first one, I think most people now recognize. The second one, if you put things together, you probably mostly know, and the third one is a hypothesis I'm trying to connect the first two.
Michael Zimmer: Economic inequality is extreme and still growing in this country. It's growing more rapidly here than our comparator countries, even though it's growing in most countries in the world, and I think people now realize that the great recession brought a lot of things to the front, and that's one of them. I'm going to talk a lot about the kind of risks that our legal and cultural system put on individuals in the system, and I think not too often do we put these all together, but I wanted to put a bunch of them together. I come from labor and employment, so that's going to be where I'm coming from, but I'm sure each one of you, with your backgrounds, will think of more ways in which individuals face risks, and the third point, which I'm going to hopefully persuade you to come extent, those risks have become much more difficult to cope with in the present era of economic volatility, and the result is greater insecurity among many, many people in our society.
Michael Zimmer: So, I have a three step thesis. The first one I always thought was true, but now, there's a lot of support for it, and that is this extreme economic inequality is, in part, the result of government policy, in large part, and that result is the product of the undue influence of money in politics. So, here we go. Before any true reform on any of the issues I'm going to be talking about, about any of the risks that people face, I think the first issue is to bring about reform in the way money enters politics. My goal is kind of minimum. It's not to get rid of money in politics, as I think that can't happen, but to reduce it to a minimum. So, I'm scaring myself, so I'll drink a little water. I want to make nine points, one short of David Letterman. I thought I couldn't compete with him and do it in 16 slides. We're already at number four, so how bad can it be?
Michael Zimmer: Just to reiterate the tremendous and increasing economic inequality, the top tenth of 1% has garnered most of the economic gains of the last 40 years in this country, and people will say, "Fine. That's fine. If it's well-deserved, that's fine," but the gap is growing at the other end as well. The rest of us, at best, stay even
Transcript by Rev.com with many falling behind. So, there are many more poor people. More people are falling into poverty as we go along, and I think that this causes an especial difficulty for members of minority groups, the young because they're facing tremendous challenges, and it's very much an uphill battle. The heart of the problem, though, in addition to the poor, is that the middle class is shrinking in size and definitely shrinking in capacity to live what most of us think is a middle class life, a job with some sense of security, sufficient income to buy a home for the family, support the lifestyle, health insurance, the expectation that the kids will go to college and do better than their parents did, the prospect, if you really watch your pennies, to have a good retirement. All of these things are fading into the distant past for too many of our people.
Michael Zimmer: So, what we think about as a middle class country is ceasing to be true for larger and larger percentages of the faculty. The trend really started in the '70s that we moved in these directions, but the results of it all, I think, became much clearer to most of us as a consequence of the Great Recession, which the government claims is over three years ago, but it still doesn't seem to be over for many or most of us. So, here's where I'm cheating. I said 16 slides. Well, I'm going to have a lot of points here. There are six risks that people face that are exacerbated by business and job volatility. The first, employers can decide if workers are employees. Let me give you an example. Cab drivers for the Yellow Cab Company in Chicago are not employees. They're independent contractors because the Yellow Cab Company leases the cabs to them each day and doesn't control where they pick up fares. So, these cabbies, cab drivers, they are pushed out of any protection that is accorded to people in the formal labor economy. So, they're not protected by our labor and employment laws. They're in the informal economy, a size of our economy that's growing rapidly.
Michael Zimmer: Now, all they can get is what they can bargain for individually with their employers, and that's pretty much an unequal, highly tilted bargaining situation. Relying on the labor market works pretty well if you're George Clooney or Katie Couric or somebody like that, but there aren't too many of us that fit into that category. So, without bargaining power, these workers can't even bargain to be treated as employees to be protected by our labor and employment laws. Risk two, employers have the final say on unionization. The National Labor Relations Act says that workers get to choose whether they want a union or not, but in fact, union density around the world, but in the United States as well, is declining, and our National Labor Relations Act is so weak that, really, for most employers, it's just this question of cost-benefit analysis of whether they have unionized workers or not. If you want to spend the time, spend the money, you can crush the workers' rights to organize.
Michael Zimmer: Now, union density in this country as of January was 6.9% in the private sector. So, employers even don't have to think about crushing workers' rights to organize because the chances that they're going to be organized are increasingly small as the union representation in this country declines. Moreover, even if the union is representing workers, they only get to bargain over wages, hours, and conditions of employment. These days, the large issues that come out of the Transcript by Rev.com economic volatility that we have are the bigger, broader entrepreneurial questions of whether this workplace is going to continue, whether these jobs are going to be moved someplace else, what kind of product the company's going to sell. All those are within the exclusive discretion of the employer, and even as to issues of wages, hours, and conditions of employment, now, the trend of bargaining is that it's concession bargaining. The employers are demanding givebacks from the union in order to discontinue to compete in the global economic market.
Michael Zimmer: So, that doesn't make unions all that attractive, and it doesn't protect ... I guess it does protect workers, but maybe not enough. Okay. So, risk three, the outsourced and offshore work hurts US workers. Employers have off-shored 2.9 million jobs since the year 2000, and they have also outsourced a significantly larger portion of their business. Offshore means that move it to some other country. Outsource means that they establish a supply chain or other independent contractor relationship that kind of breaks apart their enterprise into independent business operations. For example, Apple has some 53,000 employees in the US and around the world. They're almost equally balanced in the US versus elsewhere in the world, but its independent contractors employ hundreds and hundreds of thousands of workers. I don't know if you've been following the news about Apple and its Foxconn contractor in China and the employment relation problems there.
Michael Zimmer: So, I think a conventional attack is, "Oh, we shouldn't let those jobs go," sort of a protectionist kind of thing. That's actually not my position. My position is that our workers shouldn't be subjected to the lower labor cost due to the abuses by these independent contractors in the supply chain leading to major retailers and brand names like Apple, but the law says different. These large retailers and major brands can insulate themselves from both consumer boycotts and by having codes of conduct required in all of the contracts in their supply chains, but they can also escape liability if those employers down the line abuse their workers. The 9th Circuit recently, in Doe I v. Walmart, looked at the Walmart code of conduct in a case brought by workers from other countries who are working for contractors for Walmart, and the court said, "Hey, Walmart drafted this code of conduct so that they don't owe a duty to the workers of the supply chain employers." So Walmart gets the advantage of the code of conduct and can put it on their website, but they're not responsible for the abuses that occur down the supply chain, and that is added competition for our workers here.
Michael Zimmer: Now, at common law ... I almost pushed the wrong button here. Most employees are at will. You can be terminated for good reason, no reason, or bad reason at all, and that at-will status is bolstered by an extremely strong presumption. I'm going to cite a couple of Wisconsin Supreme Court cases. I don't know how that's going to go over. Forrer vs. Sears, Roebuck involves Sears trying to hire a manager from a competitor to move, I think, here to Madison to take over managing a department in a Sears store, and this guy was, "I've got my family here, and I don't know. Is Sears really a good place to work? Do I have job security?" And the person recruiting him said, "You have permanent
Transcript by Rev.com employment." The Wisconsin Supreme Court said, as a matter of law, "Oh, that's at will." It didn't even go to a jury as to whether it was actually a contractual agreement of permanent meaning something other than, "It could be terminated tomorrow."
Michael Zimmer: Now, the common law does provide some public policy exceptions, but these have been construed increasingly narrowly. One of my favorite Wisconsin cases is Bammert v. Don's Super Valu. A grocery clerk got fired because her husband, a local police officer, assisted in giving a DUI to the wife of the owner of the store. She's not protected. That's beyond any public policy. What's the social value there? I don't know. So, we can see that at-will, by its statement, sounds, "Oh, yeah. I can quit. They can fire me. Fine," but it's very difficult in position of risk on employees. Now, as business volatility increases, the at-will principle puts more risk on employees. They don't know day-to-day whether they're going to have a job. You hear these stories of, "Get your things. There's security. They're going to escort you to the gate." Well, as business volatility increases, those kind of decisions increase.
Michael Zimmer: Now, here's the funny thing ... maybe it's not funny. At-will doesn't cost less than other systems. There's a study in Canada. Canada has a complicated statutory notice system with a common law notice system built on top of that. So, a Canadian law professor compared the costs of terminating in Canada with the cost of terminating in the United States. The costs were equal. In Canada, the money went to the workers. Here, it went to the lawyers. Well, maybe a lot in this room would say, "Oh, that's pretty good. Better me than not anybody." So, when I teach students, I try to make things as concrete as I can, so I tell them, "When you're out there interviewing for your first job, you should bargain for a just cause provision in your employment letter," and they look at me like I am on the moon because they know. What would the message be that you're sending if you demand a for cause protection in your job? You think you're going to get fired, and you want to have a way to challenge. Not a very strategically good way to show your best lights, I would say.
Michael Zimmer: Okay. Risk five, the federal statutory protections are becoming increasingly illusory. Employees are losing their right to a day in court. Employers now have the discretion to impose what some call mandatory arbitration, it's an oxymoron if I ever heard one, on individual workers, making them submit all of their statutory claims through arbitration. Even their unions can bargain away their individual statutory rights to go to court. Now, besides losing their day in court, bonus, bonus, arbitration cuts off the right to jury trial. It'll be funny to think about an arbitration having a jury, but also, after a recent Supreme Court decision, the ability to bring class actions, and for many kinds on employment issues, the actual economic value to each individual is not worth bringing a suit. Class actions aggregate these and so, make the challenge worth it. Those can be cut off with a simple arbitration clause.
Michael Zimmer: Now, some employers kind of fail the IQ test of pouring all their employees into arbitration. They face increasingly high procedural barriers and legal barriers
Transcript by Rev.com when they bring lawsuits in court. The Supreme Court decided a case called Iqbal. It's a really intriguing civil procedure case, where they changed the pleading rules. You used to be able to get your complaint accepted if you made a short and plain statement of the claim. This is what it's all about. Now, plaintiffs have to state a claim to relief that is plausible on its face. With present company excluded, I would say, the general lack of empathy for the federal judiciary to discrimination claims, claims that might be plausible to some or to many of us, maybe aren't so plausible to them. So, it's harder to get past that first stage of having your action continue.
Michael Zimmer: Now, the possibility of broad-based actions is disappearing. The broader substantive theories of discrimination law are being undermined. Some of you probably know of Ricci, the New Haven firefighters case, where New Haven decided not to use the results of a promotion test because of disparate impact it would have on African Americans and Hispanic test-takers. The Supreme Court found, as a matter of law, that that was intentional discrimination, knowing the racial consequences of your act is intentional discrimination. Justice Scalia, just to add a little fun to it, concurred, and in his concurrence, he says, "Oh, the disparate impact provisions of Title VII, oh, they're unconstitutional because employers have to know the race consequences of what they're doing in order to avoid liability." So, class actions, if you get into court, have also been narrowed very much recently in Walmart vs. Dukes case, which also applies, I think, to all consumer class actions, other class actions, and this coming term, the Supreme Court may finally put an end to affirmative action when it decides Fisher vs. University of Texas.
Michael Zimmer: Okay. I didn't think I was going to be that thirsty. Now, we have a system where workers are dependent on their employers for a lot of their middle class lifestyles, vacations, health insurance, retirement benefits. Health insurance and retirement benefits came into the employment relationship in World War II during the wage and price limitations. People said, "Well, you can't get a raise, but we can provide health insurance. We can provide a retirement plan." So, it's dependent, for workers, on them having a job. Now, just having the job doesn't do it because the employer has the discretion to offer health insurance, to offer retirement plans. Now, when employers do offer retirement plans, they've shifted from pensions, defined benefit plans, where the investment risk is on the employer to define contribution plans, the 401k plans where the investment risk is on the worker, on the account holder, and these defined contribution plans are set up in ways that employees have to contribute a certain amount of money before they can get a responding contribution from the employers, and a lot of workers simply can't afford to make that contribution. So, the employer has a plan, but the employee can't afford to take part in it.
Michael Zimmer: Now, notice that all of these risks give tremendous discretion to employers, but of course, they are bound, in some sense, by the labor market demands, but that tilts highly in favor of those higher up the skill and educational ladder and against those lower down where workers don't have the skills to compete for other jobs in the labor market, and there's an increasing divide between the Transcript by Rev.com educated and super-skilled workers and everybody else. The old-style factory jobs, like my job at Allen Bradley in Milwaukee during my misspent youth, are history, at least in the United States. Coming out of high school, getting a good job at the factory where your mom and dad work, that's a fantasy, increasingly a fantasy. So, I think that the consequences today of the system are greater than they ever have been in the past because of the volatility of business, enterprise, et cetera.
Michael Zimmer: Now, you say, "Ah, same old, same old. We've had this system for a long time. What's so bad about it?" And it's true that US has been considered exceptional. We consider ourselves exceptional in many ways, and some of those are good ways, I think, but we're exceptional in our labor and employment relations because we provide much less social service and protection than other developed countries. Just an anecdote, I was speaking at a international labor conference in Italy about a month ago, and as I was walking up to speak, the moderator introduced me. He's a friend of mine, Manfred Weiss. He's a labor professor at the University of Frankfurt, and he said, "Remember, everything about American labor and employment law is bad." Now, he was only partly kidding, but from a European point of view, most of them think it's unusual, if not bad. But it's the increased volatility that's really driving this. The risks are increased as economic change grows. So, back in the day, in the industrial age, at-will workers were kind of protected, if not by law, by an internal labor market. So, the workplace was expected to be there for a long time. Workers learned a lot. Employers taught them a lot. It was expected that would say there a long time. Workers were promoted from within up a hierarchy of an organization. That's a form of job security.
Michael Zimmer: In the information age we live in now, organizational change is so rapid and organizational structures have become so flattened that, that's gone. The informal labor market is gone. So, another question I always ask my students, so what's the first thing you do when you get a new job? Any takers here? Update your resume because you don't know if you're going to have the job tomorrow, and on the other side of it, you don't know if another job's going to come along that's better than the one you got today. So, always be ready. Update your resume. That's such a shift in the way most people used to think and how many people still think about jobs. They think that can't possible be the way, that if I do a good job, it'll be rewarded. I'll have some job security, and that's true for the people at the high end of the education and skill level because, okay, they have a good chance of finding another job that's comparable. As you go down into that lower half, those alternatives are grim. They're nonexistent, and so, it's becoming worse and worse as volatility increases.
Michael Zimmer: So, how did we ever get here? Now, I think the conventional explanation is that increased economic globalization weakens the power of each nation state to regulate their national economies. If the economy of the world is increasingly integrated [inaudible 00:34:04] problems, nation states have lost a lot of purchase to be able to regulate national economies effectively to deal with these problems. For much of our history in this country, we saw this race to the Transcript by Rev.com bottom, the competition between states and the United States for the textile industry, from New England to the South. Well, those jobs are now not in the South anymore. They're outside of this country. A friend of mine, [Jacques Rousseau 00:34:39], who's at the University of Paris, has this terrifying vision that haunts me. He calls it the virtual enterprise. He says this is what's coming, and I think there are examples already that it's here.
Michael Zimmer: Multinational companies can increasingly disaggregate the parts of the enterprise and place each part anywhere in the world where it serves their best advantage, including escaping the grasp of any particular nation's set of laws. An example from Chicago, a very large employer, large insurance company in Chicago, Aon, is moving its corporate headquarters to London. Well, what they're doing is moving a handful of the top corporate executives, and why are they doing this? Well, they've got tax advantages to being in the UK rather than in the United States. If they were in the United States, they'd have to pay taxes on $300 million or pay $300 million in taxes or something like that. Well, this is just a sample. People, in the interest of their own corporations, were thinking, "Well, if we move this to Hong Kong and that to the UK, well, national law just kind of loses its grasp on problems." But I think it's a serious mistake to blame everything on globalization. The extreme inequality is the result of American government and politics. Recent scholarship has looked at this.
Michael Zimmer: Jacob Hacker of Yale and Paul Pierson of Berkeley had this interesting book called Winner Take All Politics, which attributes the enormous increase in economic inequality to American government and politics and that it happened over the last 40 years. So, with the aim and focus of the government on actions and in-actions aimed at the very top of the economic ladder, the interests of the rest kind of get on the back burner at best if at all. Now, why did governments do this? Well, money in politics is a pretty good explanation. I'm just going to use the financial sector as an example. From 1998 to 2008, the financial sector gave $1.7 billion in campaign contributions and spent $3.4 billion for lobbying. In 2009, there were 25 times the number of lobbyists for financial institutions than all the people involved in protecting consumers or other supporters for financial reform. Here's some evidence of the payoff.
Michael Zimmer: In 1980, 90% of all financial instruments were regulated. By 2008, 90% were not. There's too many examples of government inaction. If I started listing them, we'd still be here next year for the lecture. So, I better just give you one. Think about the SEC, the Securities and Exchange Commission. Years ago, when I was in law school and first out of law school, it was one of the most respected and probably feared government agencies that we had. It's been defanged. Now, federal judges reject settlements that the SEC is proposing because the judge considers them to be powder puffs on the wrist. The SEC has lost its ability to really even convince judges that they're doing the public interest. Now, another example, a study shows that senators vote with the opinions of their constituents at the top third of the economic ladder and vote against the opinions and interests of those on the bottom third. Now, why might that be?
Transcript by Rev.com Michael Zimmer: Now, we have moved, in that 40 year period from the '70s, from a collectivized view of us as a nation to a very individualized identity. Princeton history professor, Dan Rodgers, has this very interesting book called The Age of Fracture, and he starts off by trying to describe this difference through changes in rhetoric of presidents. So, he starts with the inaugural address of JFK, "Ask not what this country can do for you, ask what you can do for this country." We all have to stand together. We are one, and of course, that's in the context of the Cold War and fighting communism, and it's always sad to say, if we have an enemy out there, we're more likely to organize to protect ourselves in a larger group, but there was this sense of unity that came out of the Great Depression through the World War II and thereafter. Economic inequality steadily decreased from the Great Depression up 'til 1970s, then it shifted.
Michael Zimmer: Now, what Rodgers shows is that ... Oh, and let me get the second one. President Reagan, his inaugural, "Government is not the solution to our problems. Government is the problem." We should stand on our bottoms. Nothing else is going to work for us. We have to just do what's in our own best interest. So, what caused the change in thinking. Rodgers, again, of course, end of the Cold War. Frank Fukuyama wrote The End of History where democracy will rule, and everything is solved. Well, and of course, that's an important influence, but Rodgers shows, through a variety of different intellectual disciplines, how even theorists, who contested each other in so many very important ways, nevertheless, all tended to vector toward individualism and individualism without a collective aspect to it. One important shift is in economics, from Keynesian macroeconomics to Chicago School microeconomics, and big money pushed the big investment in microeconomics.
Michael Zimmer: Some of you probably remember Milton Friedman. He had PBS specials and coffee table books, and he spoke virtually everywhere. Well, he had a lot of big money support, and the message was, "Adopt the Chicago School of microeconomics." Now, that theory doesn't deny that other values exist. It just argues that for social and economic policy, the only thing that we should look at is this individualized, not individuals like you and me with all of our conflicts and different interest and all the rest, but individuals as profit maximizers. That should set policy. What's good for profit maximization by individuals is good for all. Years ago, I had a chilling dinner conversation with one of President George W. Bush's economic guys, and he said, "We don't care about anything except the size of the pie. We don't care at all about the distribution, about the size of the pieces of the pie." Now, I'm a very voluble person, as you can tell, and I was speechless, but that is the essence of the message.
Michael Zimmer: Now, Robert Lucas, another Chicago professor, another Nobel winner, trumpeted that they were going to drive macroeconomics off the map. Macroeconomics will disappear. Now, the Chicago economic theory is highly romantic, really. It's very unreal, but I think, today, behavioral economists are saying that people don't actually act the way that Ayn Rand thinks they ought to act, but we act out of all kinds of different motivations and conflicts, and yes, people act altruistically. What a surprise. Now, that theory was put to use in Transcript by Rev.com politics. You probably recognize the name Lewis Powell. He was a Supreme Court justice, ultimately, but in an earlier role, he was the chairman of a Chamber of Commerce committee that urged business to get involved in politics, "Political power is necessary and available only through united action." So, that's the link, I guess. Now, I think I just lost my place. No.
Michael Zimmer: How does this money influence government? Well, I've been thinking about this for a long time, and of course, when you're thinking about something like this, at least for me, I'm lucky enough that things start happening that I see and notice and put into this. Really, This American Life had a show at the end of March called Take the Money and Run for Office, and it demonstrated how money dominates Congress. Now, these are people who I probably like. House minority leader, Nancy Pelosi, attends some 400 fundraisers every year. That would be a pretty grim job, I think, but somebody's got to do it. Former Democratic Congressman, Walt Minnick, and he's former because it didn't work, said, "I needed to raise 10,000 to 15,000 dollars every day. I had to spend two or three hours on the phone every day trying to raise money." My own senator, Dick Durbin, is quoted as saying that while generally the people he called to contribute, or even better, host the fundraiser, don't ask for special favors, but there are exceptions, "Some won't waste any time to tell you what is the most important issue in Washington as they talk about making a contribution."
Michael Zimmer: All this is from Take the Money and Run. You can find it, and it's very daunting, I would say. One of the takeaways is that this vision that I have of sleazy lobbyists kind of creeping up to politicians at cocktail parties and imposing on them, it works just the opposite. It's the politicians who are creeping up to the lobbyists, and one lobbyist is quoted as saying, "I don't really want to take the call, but I've got to take the call." There's more examples of how it gets worse from the Take the Money program. Jimmy Williams, who used to be a lobbyist for the National Realtors Association, describes a typical situation that he confronted many times. He brings in two clients to see a congressman. They're constituents of the congressman. The congressman has them go into his office first and in private says, "I've put in two calls to your PAC director, and I haven't received any return phone calls. Now, why am I taking this meeting?" Well, the message of that one is, "Bring on the money, and maybe you'll get something." But you surely won't unless money comes into the campaign.
Michael Zimmer: Here's something that's so awesome, it's almost unbelievable. University of Kansas tax professor, Raquel Alexander, traced the money spent by multinationals lobbying to get the 2004 American Jobs Creation Act enacted, and then, used that amount to compare it with the tax breaks that came to those multinationals as a result. She's quoted as saying, "I ran these numbers so many times because I just couldn't believe it was true," but the payoff was 22,000%. So, if you're a rational profit maximizer, invest in lobbying. That seems pretty obvious. Now, that might be a very exceptional payoff, but I think there's lots of payoffs. Now, that's kind of pre-Citizens United. In 2010, the Supreme Court decided the Citizens United case, and there, the court reaffirmed that Transcript by Rev.com spending on elections is speech, that the government can't regulate unless it can prove a compelling government interest, and the only one that is available is to prohibit quid pro quo bribery, this for that explicit exchange, and gaining access is not quid pro quo bribery or even its appearance, as a matter of law.
Michael Zimmer: Now, the whole system of lobbying doesn't exactly work on, "I'll give you $10,000, and you give me this." There certainly is some examples of this. We have Jack Abramoff and Duke Cunningham and William Jefferson as good examples of the classic quid pro quo, but really, Congress is a gift culture. You develop relationships, friendships, and what do friends do for each other? They help each other out. So, it isn't a "this for that". It's a relational kind of thing, and now, spending money to do that can't be regulated, and trying to balance out the resources available to the candidates, so one candidate doesn't have way too much more resources. It's anti-distortion principle. That's not a compelling interest either in regulation. Now, the court did recognize a difference between direct campaign contributions, which still can be regulated, and so-called independent electioneering. So, as long as the independent electioneering isn't coordinated with the campaign, with the candidate, then it's protected speech.
Michael Zimmer: Now, I don't know if you folks watch Stephen Colbert and Jon Stewart, but we do from time to time, and they demonstrated that this line will not hold in a very funny parody, but it's a frightening parody as well. So, there's a tremendous ... Part of the payoff, just to go back is the revolving door between Congress and K Street. In 1970s, only 3% of the retiring congresspeople moved to K Street. Between 1998 and 2004, 50% of the senators and 42% of the House members retired to make the move to K Street. Now, there already is some evidence of the effect of Citizens United on campaign money and election money. The 2010 election involved one example of a congressional candidate, a Democrat, Dr. Ami Bera, who was closing fast on an incumbent, but right before the election, he got hit with $682,000 media blast. Everybody in his district was exposed to an ad 16 times a day. He lost. Now, maybe he would've lost anyway. He was closing, but he wasn't ahead. Now, who was the donor?
Michael Zimmer: Well, the donor was American Crossroads. That's a Super PAC organized by Karl Rove, and it's organized under 501(c)(4) of the Internal Revenue Code. I bet not too many of you thought I was going to mention the Internal Revenue Code, but under that system, social welfare organizations don't have to disclose their donors. So, we don't know who gave the money to Karl Rove to spend in this way in this campaign, and it's going to get worse. Norman Ornstein, who is a big name in the American Enterprise Institute conservative organization, he says he's heard of this happening all the time now. Two weeks before the election, somebody, you may not even know who it is, spends $10 million on a blanket television campaign defining he was a scoundrel and alien, a felon, and a louse. You can't raise any money to respond at that late date. There's no time to do that or to do anything with, really, too much with the money you have. So, what's happening now?
Transcript by Rev.com Michael Zimmer: Congressmen are anticipating that this will happen. So, they're building up even bigger campaign war chests to protect themselves for that last minute attack that might come from who knows where. So, the more money you need in politics, the more influence money has in politics. Now, that's pretty daunting. So, what might happen? What could happen? Well, there is another case that's maybe on the court's docket for this coming term, Western Traditions Partnership. The Supreme Court has already issued a stay in the Montana Supreme Court's decision, where the Montana Supreme Court upheld its electioneering regulations and distinguished Citizens United. Now, it's kind of ironic because Montana has about the most corrupt history in politics of any of our states.
Speaker 4: That's saying a lot.
Michael Zimmer: That's saying a lot. Yes, I know, and I'm living in Chicago. We might not have direct elections of senators without all of the corruption about the copper barons buying senatorial seats for themselves in Montana back many years ago, and of course, that case could be distinguished in a lot of ways. We could maybe talk about it, but that could give the court a chance to revisit Citizens United because by the time they hear it and decide it, I think the 2012 elections will have run their course, and we'll see what even more impact the Citizens United might have. It's already been demonstrated in the Republican primaries. A couple of the candidates who probably would've folded a long time earlier hung in there because they had a couple of big money supporters who kept their campaigns somewhat alive. Now, will the Supreme Court revisit that issue? That's a good question, or will they remain resolute in Citizens United?
Michael Zimmer: What's left? Well, Congress could enact disclosure legislation. They could close that loophole in 501(c)(4), and maybe that could happen. They could, at a broader level, provide for public financing of elections. Lots of countries do it. It's not like it's never been done. Now, that would take campaign contributions out of it, but it still would leave that electioneering money independent of the candidate that would presumably be unregulated if Citizens United stood as good law. Now, of course, so, there's a couple more. This was a longer range plan considering political organization. You need a new court that might, over time, distinguish away or overrule Citizens United. I'm not sure we can hold our breaths long enough for that one. A constitutional amendment is maybe even less likely. It's possible. There are some drafts trying to take money out of the First Amendment. Now, here's the one that I'll throw out there for laughs if nothing else.
Michael Zimmer: I kind of view our present Constitution as Constitution 2.7 or 2.8. Constitution 1 was Articles of Confederation, 2 was the original Constitution. Add all the amendments, we're getting close to 3. Maybe we need a 3. Maybe we need to revisit this. Now, this is a terrifying thought. Just think of all of the potential craziness that could enter into our Constitution making it even worse, but it could also make it better. So ... I shouldn't be in charge of paperwork. I can tell you that. Now, Hope Springs Eternal, I couldn't stop there. I think reform takes a Transcript by Rev.com long time and much effort, and gridlock involves big money. Both political parties are beholden to big money. I think one of the revelations coming out of the Great Recession is that all politicians need big money, regardless of party, and that influences both parties, which makes it more difficult to just go and vote for something and have an affect.
Michael Zimmer: It may take a new social movement to shift politics. If you look back in our history, we've had some great social movements, some of which we probably all accept, some of which we might reject, but we've had a variety of them, and maybe we're starting. The Occupy movement and American Spring. For those of us in the legal academy, we would say that the Occupy movement is seriously under-theorized, and I think that's true. We sort of know what they're all about, but what are they all about? That sort of thing. But we're starting to have a turn in scholarship, and I think scholarship, I'm an academic, so I've got to put a pitch for scholarship, can be important to build up the kind of theoretical basis to shift the paradigm in the same way that the thrust of big money shifted the paradigm to what we have now.
Michael Zimmer: So, I like quoting big names. Amartya Sen, in The Idea of Justice, has this human capabilities goal, and under that, his approach is to take as many possible intellectual disciplines and shape them towards this idea that what the goal should be is that each individual in the world, not just here, but in the world, should be able to reach their highest capability. Maybe we can start moving that direction. I've mentioned a bunch of scholarship already that's starting to address these problems and is starting to move in that direction. There's a lot more that's starting to come out from a number of different angles. There's a whole bunch of people talking about challenges to our not so democratic system at all. Even beyond the King Bhutan's gross domestic happiness standard, replacing gross domestic product, you have Derek Bok, the former president of Harvard, writing The Politics of Happiness, and Eric Posner, the son of Judge Posner, and Cass Sunstein producing a book called Law and Happiness that explore the use of happiness as a measure for social policy.
Michael Zimmer: So, we're starting to move in that direction. Now, it may take a long time, but I think the first goal is to try to organize around getting money as much as possible out of politics, and then, kind of let democracy return to work. Now, the conclusion is this. All that sounds so daunting and unlikely, even to me. Probably, you're thinking, "Who is this crazy guy?" But just remember Tommy Fairchild. Just look at his history. At age 12, he was putting signs for Calvin Coolidge on the front lawn. In college, he supported Herbert Hoover. After the Wisconsin Progressive Party disintegrated when Senator Bob La Follette lost, Tom Fairchild with his merry group of very smart, talented, and energetic, and funny people ... I mean, some of you know some of those people. What a great crew they were. They created the modern Democratic Party in Wisconsin. [inaudible 01:05:21] could happen. Then, he goes on to become one of the most distinguished jurists of his time. So, there's always hope. Thanks.
Transcript by Rev.com Dean Raymond: I think Professor Zimmer will take a few questions if there are any, and our [inaudible 01:05:49] assistant will make sure you get the mic.
Michael Zimmer: And don't start talking 'til the mic is there. I've been warned that that would be bad.
Speaker 5: [inaudible 01:06:01] if you see any parallels in what came out of the Great Depression and created this astounding period of greater equalization of wealth within our country as a trigger now coming out of what has been the worst recession, arguably, for many, the closest thing to a Great Depression since that time, and whether that's a reason to vote for some of the similar parallels? Although, you can make a good argument that the driver of that one had nothing to do with government as much as it did an expansion of the pie, which you criticized because, admittedly, as the pie has grown more recently, it has grown very specifically.
Michael Zimmer: Well, when the Great Recession started rolling over us, there actually was some discussion about, well, Keynesian macroeconomics will be back. That was gone within a month or two, and some of it is the product of really heavy duty lobbying in Washington. So, put that aside. Don't go that way. Here's something that's really grim. The Great Recession maybe wasn't bad enough. The Great Depression was horrific. The Great Recession was awful but not quite horrific. Over a quarter of all workers were unemployed for a long time in the Great Depression. It's been bad but not that bad. So, if you believe in ...
Speaker 6: So, your answer's no? [inaudible 01:07:59]
Michael Zimmer: Well, no. I wouldn't say that. I think the Great Recession is triggering this response, at least in academia and in politics and in the Occupy Wall Street movement of turning a corner, trying to get away from the old paradigm, establishing a new paradigm. I think it's too early to tell. We had the Great Depression sitting on us for a long time before anything much positive happened. I'm hopeful but not hopeful for next week or immediately. I'm one of the least skilled predictors of Supreme Court decisions and politics and stuff, but I think the 2012 elections are going to be very significant as to which way our future goes. I think it's really up for grabs, as I can tell.
Speaker 7: My question is maybe we could look at it a little differently. Instead of Transcript by Rev.com government changing, maybe we can change the corporations, and I'm thinking in the last few days, this American Legislative Exchange Council, where it came out that they were doing things like having guns be available and all this, and so, when it came out, some companies quit the American Legislative Exchange Council because of the bad publicity of being associated with something like this. So, what do you think, let's say, people who are stockholders in various companies, when you get your proxies, voting against, let's say, the directors of companies who are members of these councils or others kinds of proxy things that could take place? In other words, don't look at Congress and the Supreme Court for your relief. Look at a new way of paying attention to the companies who are providing this money and what sorts of things could you propose as a shareholder to put up to a vote to the other shareholders or voting on the proxies.
Michael Zimmer: Well, yeah. I think shareholder activism has some potential. It's got a huge collective action problem in it. That is the way the system is really set up. It's set up that if you don't like the management, sell your stock. It's so hard to change the system with a corporation. Our corporations, we talk about shareholder value. It's really about top management continuing control, and they're very successful at maintaining control. So, I think that's quite difficult, but if we start doing some of that and more of that, that would be good. My brother was a general counsel of this small insurance company where the guy running it was very much interested in controlling CEO compensation. So, my brother got to go to a lot of meetings and try to get proxies accepted to control that. He wasn't too successful. It was the high point of his legal career, I think. I think he really enjoyed it, but he was not that successful, but maybe there will be an increasing shift.
Michael Zimmer: Now, on the other side, a lot of these big corporations are responding to the risk of consumer boycotts. That's the whole Apple thing, and it goes back to little kids chained to benches, sewing soccer balls in Pakistan many years ago on the European attack on consumer things. Well, if you can organize consumers against practices of the big brands because the value of Nike is in the brand ... So, if start attacking the brand, that's going to the heart of that company. Or the major retailers, Apple is a good example of one that plays both roles. That can be effective, but there's a tremendous part of the economy that you can't find where they do, as a consumer, and do anything. A lot of people are in businesses making parts for something else, and they can be supporting things you don't agree with, and it's very hard to know who they are and what they do, but I really think we have to change our mindset about how we think about what we should be doing in our society, and I think we should put ... I listed all those risks. I'm not sure what my position is as to any one of those, how I would change them, if I would change them, but I think we got to start thinking about how we can get to this stage where we can start actually talking about those things.
Dean Raymond: Mike, thank you for a very thought provoking talk. I have for you a classic Wisconsin gift. I know that to folks who are not intimately involved at the University of Wisconsin Law School this looks a little funny, but it actually means a lot to us. This is a gargoyle. It's a replica of one of the gargoyles that came off of the old law building, and believe it or not, here, it's an honor. So, please accept from us your very own gargoyle, your own memento of the University of Wisconsin Law School.
Michael Zimmer: Thank you very much.
Dean Raymond.: We can send it home for you if you would like.
Transcript by Rev.com Michael Zimmer: No, I'm going to take it with me.
Dean Raymond: He wants to carry it.
Michael Zimmer: I want to thank you and thank the law school and thank the audience. I've actually been looking forward to getting one of these since they asked me to do this. Thank you.
Dean Raymond: Well, it's my pleasure. Please join us all in the atrium for a reception following the lecture. Thanks for being here.
Transcript by Rev.com