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8/13/2018 "The Black Economy 50 Years After The March On Washington"


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Part 2 Of Our Exclusive Interview With Rep. William Jefferson (D-La.)


Part 2

CM: As far as inner cities go, for a long time, I have thought of the capital gains tax in these terms: Sure, capital gains tax reduction doesn't directly benefit someone who doesn't invest in the stock market or in businesses, but it may benefit them indirectly; however who it would benefit, in my opinion, are private businesses of small to mid-size, that operate in the Black community and inner city and bring in hundreds of thousands and millions of dollars in profit, particularly businesses that operate in the technological fields and in the fashion and entertainment industries. These businesses could go public, have initial public offerings (IPOs), and with the added attraction of no capital gains tax tied to the investment in those businesses, they could be hot investment prospects on the stock market and attract millions of dollars of financial capital. The concern that I have with the bipartisan community development initiative that you helped to shape and craft is that it mandates a 5-year holding period in order for the investment to qualify for the capital gains tax exemption. Do you have any concerns about that length of time on how long you would have to hold a stock to qualify for the zero capital gains tax?

Rep. Jefferson: Well that of course applies to investments in the zone...and I know the regular holding period is much shorter...And here you are trying to get some hard places to turn around, you want to keep the money invested for a while. If a guy can put the money in for a hot second and take it out, it wouldn't do any good for the development that you would want to see take place and for the business that you want to see develop or for the real estate project to get going. And so, because the benefit is deep and rich, the idea is to make sure that the taxpayers of the country get something back for this investment in the way of a broad public benefit and it is debatable whether it (holding period) could be three years or four years or five years or six years or whatever but I can't argue with the fact that you need to have an investment that is going to stay for a while. But we can quibble over whether the holding period should be a year or so less.

CM: I know that you were a big supporter of the African Trade Bill, maybe you could give me your macro view or maybe your long-term view of what you think the relationship should be between the United States and Africa.

Rep. Jefferson: I think that two important things have happened in the last six years - one is symbolic. That is, the President and Congress and people from other high places that have high visibility, are saying to US business people and to the rest of the world that Africa is an important trading and investment destination for our business people and we regard Africa highly enough to think of it as a partner for our business community and other communities and a destination for capital for those who currently invest and develop in other countries. And so it starts with people thinking of Africa in a different paradigm and not just as a place where you have a bunch of kids who don't have enough to eat and sure that happens; and also where you have people who are involved with conflict and sure, that happens. But it also has to be thought of as a place where you have bright able leaders with resources and (where investors) have an opportunity to get a big return on an investment and a place where there is a growing respect for the rule of law and a place where you find a regime where, when something goes wrong you can find a remedy for it whatever that might be. That is one thing.

The second thing is that this trade and investment act starts to establish a framework that's substantive for helping to move our people into these relationships and partnership with Africa; helping Africa with regional development; getting some equity funds directed to Africa; having a conference to talk about long-term planning of African development on an investment and economic basis; making sure that we have people in place at the key agencies like the Export Import Bank and OPIC and the USTR to focus on Africa. Africa didn't have anybody in any of those places although they were there for Asia and every other place in the world, no one was there to take care of Africa. So my hope is that we continue to do the things that we need to do to help from a developmental point of view. We have a lot of issues over there like a lot of health issues like AIDS, issues with education, help with agriculture, training people to do various things and all of that. And at the same time, the returns on investment in Africa are now higher than any other place in the developing world and people need to know that. And I hope that down the road we will begin to realize that Africa needs America but America also needs Africa. We are sitting here with less than 5% of the world's population yet holding 20% of the world's wealth. The only way that America is going to hold on to its wealth position, and you are never going to hold on to it all, forever, is to get involved in markets that are going to bring back big returns and no market has a better chance to do that for the U.S. investor than Africa. China doesn't, it's big, but it is very difficult to get any money out of it and Latin America...none of them have the resources that Africa has and none of them really has the openness to U.S. business that Africa has, so I think it is a real opportunity and I hope that down the road more US businesspeople will recognize that.

CM: If you look at some of the organizations and regional development groups that have formed in Southern Africa and the Western African States...

Rep. Jefferson: SADC and ECOWAS...

CM: Do you see what the trade bill brings to the table as a compliment to SADC and ECOWAS? Or do you see it as a substitute or is it more the case of two parallel roads being taken?

Rep. Jefferson: I think it is more like two parallel roads. Because what it does, it encourages regionalism. It encourages, as the Africans call it "harmonizing" of trading groupings in their own countries and not just where people have vehicles to talk about common problems but where they put together blocs where they can move currency across and where they use infrastructure in common, they build bridges that go from Nigeria to Benin. They build pipelines that go from Gabon to Cote d'Ivoire and they think of themselves as a place that is like a magnet that has power to attract investment to the region. I'll give you a little example. I was in China about three or four years ago and you had all of these U.S. businesspeople who were sitting around thinking about how they could do business in China - you had John Deere, Caterpillar, everybody. And they were all complaining about how difficult it was to do business there. And one of the things that they said was that when you go there and you say you want to do X,Y and Z then the government says well - here is your partner. And the American company says well, "Who is this guy?" and they say well, "We don't know but he is your partner". Or the military gets involved in the enterprises. And one of the companies told me that they have been in China for four years and have not made a deal yet and I said, " Well by God, if it is so difficult for you, why don't you leave, why would you stay here and go through all of this? And they say, " Because China is too big to ignore". With Africa having all of these little countries, many of them land-locked, they are not going to have a chance to be part of a real trading regime like the United States or any other country unless they are regionalized and then these blocs would be "too big to ignore". If you have a bloc in West Africa that has 300 million people in it and one in Southern Africa that has 200 million people in it, you can't ignore it because it will be too big of an economic factor. So, while the trade bill doesn't require regionalism, they certainly encourage it. And I think you will see these regional groupings coming together to think more about how they can work together across international lines so that they can be looked at as one trading bloc and not just a group that comes together for conflict resolution purposes or for commercial purposes between each other, but for commercial purposes with the entire world and that is how I think they will come to look at themselves down the road.

CM: The emphasis on textiles and apparel in the trade bill, how did that come about? Was that a strategic vision that grew out of something that started in Washington D.C. or was it a consensus among African business and political leaders that was presented to you all here?

Rep. Jefferson: This has been a heavily debated issue and we haven't treated Africa right on this. And it is one area of major disappointment for me in the whole bill. We have opened up our markets to developing countries all around the world and we permitted them to bring in textiles and basic cloths - that is how South Korea fifty years ago started its comeback. It had per capita income like Ghana did back then - less then $100 a year, now it is $11,500 a year. You know...very modern, with a competitive per capita income, with the rest of the world and it did it by starting out with the United States saying, "make your cloth product bring it in here", "make your yarn and whatever and bring it in here", " no questions asked, just bring it in here, take back the money you make with that and invest it in your country, in other things." And now Korea makes computer boards, they won't fool around with textiles anymore because it is an entry level kind of job. And because we did this for the rest of the world we (some members of Congress) said let's finally do this for Africa, let's give them (a chance), the people, the folks that don't have to have any skills to speak of can make their own cloth and their own yarn and then from that make their own apparel or send it to us as a raw material. Well, that ended up not being apart of the bill, that was dropped from the bill. Textiles are not in the bill. Jesse Helms and the rest of the world wouldn't let it happen. Now, last year we imported more than $60 billion of textile and apparel from other countries, less than 1% of that came from Africa. A great part of it came from China, a great part of it came from Latin America - largely from Mexico because of NAFTA, because they have the trade barriers down (between Mexico and the U.S.).

So from Africa now we are going to import cotton trousers, cotton blouses and shirts...that is going to be 85% of what comes in from Africa and now we put caps on that so that it can only be so much this year, so much next year until it finally gets to be 3 and 4%. I do think that what we ought to say to Africa now is, make your goods and sell them in the marketplace wherever you can, just like China can. We don't have these sorts of restrictions and limitations on these other countries, they have huge opportunities here. So here we have China, a communist country that doesn't even speak about democracy - it doesn't even cross the lips of the Chinese leadership and here we have Africa struggling under great pressures to change and democratize - which we all applaud and hoped for. And they have endured structural adjustment programs which are very painful to deny people right now, benefits, for budget solvency, for the long-term and then we make it tough for them to trade with us - these are some of the poorest countries in the world - why would we do that? It is really terrible what the Senators from North Carolina and South Carolina did on this African bill, where they really didn't care and they kind of stuck us up on that and wouldn't let it (the trade bill) out without these caps (on textiles) on it.

CM: One of the factors with developing the U.S. relationship with Africa is trade and then there is the other factor that impacts that which is the IMF, and I write about this quite frequently, most recently as it relates to Nigeria and Zimbabwe. Do you take a double-approach as far as speaking against some of the deleterious things that the multilateral institutions, like the IMF direct toward Africa at the same time that you push for trade and investment in Africa?

Rep. Jefferson: We try and get these folks to recognize that you can't have a cookie cutter approach to Africa, not even within the countries on the continent - they are all different and when you get off of the continent and start to compare Africa to other places in the world, you have got to be aware of what the very deep differences are. And so you can't treat Rwanda like you treat South Africa, it just doesn't make any sense but that is what they go in there and do. They will go in there and tell a country like Equatorial Guinea that just discovered a lot of oil and down the road they are going to have a lot of resources, but before they discovered the oil, they were the poorest country in the world, virtually, so the people had nothing. And now they (Equatorial Guinea) say, "My God, we just discovered oil, what about the schools, what about the roads?" and the IMF says, "Nope, hold up...you have $ 200 million in debt, we want you to take care of that somewhere before you start talking about roads and schools". The people think the leaders are stealing money now because nothing is happening on the schools and roads because they (the government of Equatorial Guinea) are trying hard to get the respect of the international community by agreeing to a structural program that is going to have them paying down all of this debt before they take care of some basic health and road and whatever needs at home. And now, the IMF, after getting a lot of pressure, is talking differently. They are trying to mature to the idea, at least some of their Directors are, that they have got to change otherwise they are going to risk getting money from the countries that fund them because they are not doing a proper job.

CM: You have made some powerful arguments regarding your belief that the estate tax needs to be repealed or reformed. What exactly is your position, in total, on the estate tax?

Rep. Jefferson: I think that it is a peculiar tax that we need to reexamine if not eliminate or come close to eliminating for most Americans. Back in the days when hardly anybody had any money, no one worried about it except the Rockefellers and Henry Ford, well... just no one cared because it wasn't a tax that affected people very broadly, Now, you have more and more people who are becoming millionaires in the country and more and more folks that aspire to that level of income. So it is a tax that puts pressure on people, particularly first-generation wealth generators. People that make money for the first time and who then have to worry about how in the world they can give their family a leg up for the next generation without starting all over again. The way it works now, and I'll tell you a bit about my pause for eliminating it, even though I voted to eliminate it.

I want to be part of a debate about how, in the end, we structure it. And it isn't necessarily the endgame to eliminate all of it because there is one downside to elimination which I will tell you about. But, look at it this way: half of the entire amount of estate taxes are paid by 90% of the people. This 90% represents estates that are between $5.5 and $6 million. The other half of the tax is paid by the other 10% of the people. And they represent estates that are larger than $6 million. We could largely correct the inequities and problem with the tax if we eliminated the tax on anyone up to $6 million. And I hope we can get that much of it done. Now, when I tell you that half is paid by the top 10% this is after they have done elaborate planning. These people know how to plan their estates and their trusts. It is the people who are down at the other level (under $6 million) who don't have access to sophisticated advice, who are going to end up paying a lot of the taxes. So for the fact that they are ill-prepared to deal with the death tax and the fact that there is not a lot of money involved because they have smaller estates compared to those who have huge ones, I think that with them it is a major burden that we ought not visit upon them at the time of death.

Now it is doubly bad when you get down to an African-American owned business. There the trouble is not just the usual ones of having people hold on to a family business. It is how do you get to keep the business African-American owned? At a time when you are pushing for African-American businesses now some guy dies who owns a construction company and his family is sitting there because the planning isn't done right or something doesn't go right and now they have to pay 55% in taxes. So now they have a few options: Does the guy have cash to pay the taxes? Probably not. Can they borrow the money? Maybe they can, but if they do they are in debt for a heck of a long time and trying to figure that out may put the whole thing in jeopardy anyway. And if they can't borrow, can they sell? They probably can but if they sell who is going to buy? How many African-Americans are there who are in a position to buy a construction business? Or who are even in the construction business? This guy is probably the only one of a kind in his entire region. So a white guy buys the business so it is no longer an African-American-owned business. That is the double problem that you find with minority-owned businesses. That is why you find that the African-American Chamber of Commerce and the Hispanic Chamber of Commerce are saying let's wait a minute and look at this thing.

The one reservation that I have for eliminating the estate tax for the top 10% that pay the tax is the issue of charitable giving. I just worry about whether if people didn't have to worry about the estate tax whether they would give to charitable causes. Now the folks I was talking about in the $5-$6 million category are not who I am talking about - they are not doing much charitable giving. It is the ones with the $100 million who I am talking about who are giving to schools and health and that all makes a difference in how things turn out in this country. And a lot of people give in order to escape paying the estate tax.

CM: From what I understand, Rep. Jackson Jr. has a bill before Congress that would place a moratorium on the death penalty. I would like to know if you support that bill and second, in general, what is your philosophy on the death penalty.

Rep. Jefferson: Well, I am troubled by the death penalty now more than I have ever been in the last 10-12 years because of the empirical evidence that is being developed that the death penalty is being terribly, unfairly administered and that the amount of money that you have determines whether you live or die, in terms of the type of representation that you get. Basic biases still remain. And in the African-American community there is an insensitivity that had arisen about this whole question because there is so much carnage and people felt that if a guy does this (crime) he should be executed. I remember in the Black Caucus there were members saying that we couldn't be for the death penalty. I was saying that I could vote for the death penalty in a variety of cases. In this Congress I have vote for the death penalty for drug kingpins and cop-killers - a whole lot of stuff, when it comes to the death penalty over the years. And that - my view- represented the minority view inside of the Black Caucus. Others were saying they could not be for the death penalty, period. But the Caucus' position really was not the position held buy the Black community at that time, because people were just overrun and being killed in their own communities. And people in the community were saying that these criminals were our people and that they should be punished severely. These weren't some Black people who were running around and were framed in a white neighborhood for X,Y and Z; this is some guy who is ruthlessly running around with some type of assault weapon who just fired a weapon killing somebody who is 10 years old or walking up to some old guy and blowing his head off.

But now it turns out that in this push in the country to get rid of criminal activity - this whole thing in New York that is happening with Giuliani and the cops being empowered to just sweep the streets, and the things going on in L.A....this whole thing has to be revisited because the police have been given too many liberties and they have taken too many. And so while we all have to remain concerned about law enforcement, and be concerned that our communities don't get overrun by criminals; and while I haven't looked at Jesse Jackson Jr.'s bill to see what it does, there is certainly a need now to revisit how we apply the death penalty and to make sure that we have the best representation for folks charged with cases, to try to ferret out discrimination in these police units across this country, to have strong enforcement, in place, against police who violate the rules. We have got to have some standards, in crime fighting, that are more than just "clean up the place". And in cases, where there is doubt, and where we have the empirical capability to ferret it out, we shouldn't be in such a hurry to execute somebody so that we can say that we are tough so that you make mistakes that you cannot correct or turn around. DNA evidence is out there now, and getting people off of these raps - that other wise you wouldn't have known these people were innocent. Now, we have states that are not willing to provide this ultimate test of DNA just because they don't want to be bothered with it. Or there are witnesses now - and I don't know how people can live with themselves - when people show up and say, "Well the guy who you arrested was not the man who did it", and you still say "Well we had a fair trial."...you didn't have a fair trial if these witnesses were not permitted to be involved! So we have to have a greater sensitivity about how high are standards ought to be to put someone to death, which is the ultimate punishment that we can impose upon a person and I think that it is time to examine the standard by which the death penalty is applied; the racism in the system; giving people a final and ultimate chance by letting science get involved in the end; we must do all of those things and look at those standards and figure them out.

CM: Thank you so much.

Rep. Jefferson: It was a pleasure.


Thursday, June 29, 2000

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