This is the second part of an interview that The Eisenthal Report conducted with Sen. Mike Gravel in Sturbridge, Massachusetts on Saturday, December 2. Sen. Gravel is seeking the Democratic nomination for President in 2008. He represented Alaska in the United States Senate for two terms from 1969 to 1981. He is 76 years old and lives with his wife in Arlington, Virginia. He is originally from Springfield, Massachusetts; he attended Assumption College in Worcester, Massachusetts and American International College in Springfield, Massachusetts before graduating from Columbia University. Before serving in the Senate, Gravel served two terms in the Alaska House of Representatives, serving in his second term as Speaker of the House.
The first part of the interview covered mainly Gravel’s views on the international scene – particularly the War in Iraq. This second part focuses more on the Senator’s domestic agenda.
I asked the Senator about his advocacy of the “Fair Tax” – a national sales tax – to replace the entire current revenue structure of the federal government. I asked him about the fairness of the tax – and the revenue-neutrality.
Gravel began by saying that he had first advocated something like the 'Fair Tax" more than thirty years ago, when he was a Senator. He went on to say that he believed the “Fair Tax” was at least revenue-neutral – producing the same revenue as the current system – but that it would produce “very unusual economic consequences.” He went on to say that
Now, let’s stop and think. That little recorder of yours – that has probably 20 to 30 percent income taxes embedded in that little instrument. If you’re manufacturing that in Massachusetts and then exporting it to Europe – of course, they have a VAT (Value-Added Tax), which is a sales tax – that means that your product is overpriced by 20 to 30 percent just coming out of the gate. It’s little wonder why we have rust-belts across this country – why we’ve lost all this manufacturing. The liberals like to tell us that we’ve been exporting jobs – that’s not the problem – the problem is that our system of taxation is so bad that it has crushed our economic system for middle-income and low-income Americans. In the last two decades, income for ordinary Americans increased by 0.1% in one decade and was flat in the other decade. All this wealth that we see – all this prosperity that we see – that’s up at the top.
Gravel believes that wealthy people “can always game the system.” He believes that it is important to “concentrate on having the revenue to the federal government be fair, be collected as fairly and as equitably as possible. And the best way to do this is with a sales tax.”
He believes that the tax should be levied only on new goods and services. He also believes that the way to address the potential income inequities of this form of taxation is to pay a “prebate,” which would be an amount based on the cost of necessities – food, clothing, and housing – for the poverty level. The prebate would be paid annually to everyone who registers. He doesn’t believe that goods and services should be excluded; his feeling is that once certain goods and services are excluded, the door would be open to endless exemptions.
A major benefit of the “Fair Tax” in Gravel’s view is that if it were implemented,
the United States would become the largest economic entity without income taxes in the World – you’ve created the largest tax haven in the world. Why do you think that corporations go to Aruba – or these other tax havens? Implementing the Fair-Tax would mean that these corporations would come back. Those corporations – and others with money to invest – would come back. This would create a flood of capital that we would use to rebuild our infrastructure. And solve our environmental problems. And make education number one. And provide health care for everybody. That’s where the money will come from – the Fair-Tax.
Gravel dismisses concerns about the effects of eliminating income taxes on major sectors including the municipal bond market and charitable giving.
Why should we give this city or that city (a break on their interest payments). I don’t think that’s equitable. Why should we keep the tax system we have – a terrible tax system – to advantage a sewer project in your community. What about religion? What about churches? What about foundations? Do you think that people aren’t going to give now because they can’t deduct from their taxes? I don’t know, but I think that if you believe in the church, you’ll support it. If you believe in the cause of a foundation, you’ll support it. You don’t need a tax advantage to do this.
Gravel believes that the 'Fair Tax" is
the only way to get the deficit under control. I have no magic to get the deficit under control. I have no magic to pay for single-payer health care. I have no magic to make education the number one priority of this nation. But the "Fair Tax" can do that.
In Gravel’s view, the key to changes like the "Fair Tax" is enactment of the National Initiative. This would provide for the consideration and enactment of laws at the federal level by initiative petition. It would allow the people direct control over lawmaking.
We’ve all been weaned on the idea that we control the government by voting. That’s not so. We don’t. We found that with gerrymandering. The power of government is not voting. The power of government is lawmaking. Them’s that make the laws determine who, how, and when you vote. All we do on election day is give our power away – to the people who then control our lives – and all we can do is beg them to do the right thing. So if there’s ever going to be a chance to turn the direction of this country around, you can’t rely on the Congress – you can’t rely on the existing leadership – because they’re all stuck in the monopoly of representative government. So we need to find a device to bring the people into the operation of government as lawmakers. This device is The National Initiative, which is both a constitutional amendment and a set of statutes.
Senator Gravel said that he is running for office in large part to focus attention on this proposal, which he has been working on for 15 years. "The only way I can get over the shoulders of the American media, which does not want to focus on this, which is in cahoots with economic elites of this country, who don’t want to empower the American people."
TER asked the Senator to respond to critics who point to state initiative processes that produce bad laws, like Proposition 13 and Proposition 2 ½.
First of all, you’re making a pejorative statement saying that Proposition 13 is a bad law. I think you would find some people living in California who don’t think this is a bad law, particularly if you’re elderly and couldn’t afford to sell your house and you would be taxed blind. We’ve had a thousand initiatives passed in this country in the last hundred years. In every state, the law that permits the initiative petition is a bad law. The legislative process is a deliberative process – and no state has a deliberative process. However, if you look at the initiatives that have been passed in the last hundred years, the laws are no different than what have come out of legislatures – and on fiscal matters, the laws have been one hundred times better than those produced by any legislative body.
By this, Senator Gravel meant that the people voting in initiatives “have never been irresponsible with respect to taxation and fiscal matters. The people are more conservative than their leaders, regardless of what party their leaders belong to.” Gravel believes that “if the people make a mistake, they’ll correct it. But when representative government makes a mistake, they don’t feel the pain.”
Senator Gravel concluded the interview by saying that he was running for President
to empower the people so they can take control of their society. I want to take the celebrityhood associated with a run for the Presidency and shine a spotlight on my proposal, The National Initiative. If this resonates with the people, they will want somebody to lead – and so I may become President. If this happens, I’ll do some interesting things.