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Oh! What Might Have Been

The U.S. focus is on health care, but soon we're going to have to face up to the oncoming entitlement train wreck. The Obama Administration is spending promiscuously even before it's done a lick of work to save Social Security, Medicare and Medicaid. There are positive pro-growth reforms that could preserve these programs for those already on them and those about to enroll, while at the same time instituting a new, stronger system for younger people. The Administration is oblivious to these ideas, but voters ultimately won't stand for being crushed by taxes and slashed benefits.

In the meantime, we can all ponder how different--and richer--our world would be had we enacted the Clark Amendment. In 1935 the Social Security issue dominated Congress, just as health care does today. The Roosevelt Administration was proposing a system in which workers would be taxed at a certain level, with employers matching that.

Even though Democrats overwhelmingly dominated Congress in 1935, there were deep misgivings about such a plan. Senator Bennett Champ Clark (Democrat--Missouri) proposed an amendment to the pending Social Security bill. It would have allowed workers to go with the new government system or, if they wished, to have their money put into a private-insurance plan. Either way, the contributions would be mandatory. The idea of giving people such a choice proved to be extremely attractive. A majority of congressional Democrats were ready to vote for the Clark Amendment, but Franklin Roosevelt went ballistic, furiously denouncing the idea. He intensely disliked and distrusted the private sector, particularly life insurance companies. FDR lobbied hard to kill the Clark Amendment. Even so, the amendment almost passed.

Imagine if the Clark Amendment had become part of the original Social Security Act. We wouldn't be saddled with today's fiscal disaster. Hundreds of billions of dollars that politicians have "borrowed" from the Social Security trust fund for all sorts of pork spending would not have disappeared. Instead, all that capital would have been invested in the economy, leaving us a lot more prosperous. Moreover, the Clark Amendment would have been a model for state pension plans, which are now bankrupting local governments, as well as for other nations.

The Clark Amendment incident is yet another example of how disastrous Franklin Roosevelt was for the U.S. economy, and an inspiration for reforming the system for younger people today.

Acorn Runs Off the Rails

On Monday, the U.S. Senate voted 83-7 to strip Acorn, the premier community organizing group on the left, of more than $1.6 million in federal housing money meant to assist low-income people obtain loans and prepare tax forms. This dramatic step followed last Friday's decision by the U.S. Census Bureau to sever its ties with the organization, one of several community groups it was partnering with to conduct the nation's head count.

Both of these actions came after secretly recorded videos involving employees in Acorn's Brooklyn, N.Y., Washington, D.C., Baltimore, Md. and San Bernardino, Calif. offices were televised on Fox News. The videos were recorded by two independent filmmakers who posed as a prostitute and a pimp and said they were planning to import underage women from El Salvador for the sex trade. They asked for and received advice on getting a housing loan and evading federal taxes.

In response, Acorn has so far fired four of the employees seen on the videos. But it claimed the videos were "doctored" and accused critics of a smear campaign and "racist coverage" of the incidents.

Such rhetoric in the past has deflected scrutiny of Acorn tactics, such as street demonstrations and boycotts against banks to force lower credit standards for home loans, which a congressional report found contributed to the subprime loan mess. But now Acorn may be finally running off the rails.

Last week, 11 of its workers were accused by Florida prosecutors of falsifying information on 888 voter registration forms. Last month, Acorn's former Las Vegas, Nev., field director, Christopher Edwards, agreed to testify against the group in a case in which Las Vegas election officials say 48% of the voter registration forms the group turned in were "clearly fraudulent." Acorn itself is charged with 13 counts of illegally using a quota system to compensate workers in an effort to boost the number of registrations. (Acorn has denied wrongdoing in all of these cases.)

A growing number of people once affiliated with Acorn want nothing more to do with the group. Marcel Reid, for example, was one of eight national Acorn board members who were removed last year after demanding an audit of the group's books. She notes that Acorn received $7.4 million in contributions from the Service Employees International Union (SEIU) between 2005 and 2008 but actively fights unionization efforts by its own employees. Ms. Reid also notes that Acorn was sanctioned by the National Labor Relations Board in 2003 for illegally firing workers trying to organize a union.

In 1995, Acorn unsuccessfully sued California to be exempt from the minimum wage, claiming that "the more that Acorn must pay each individual outreach worker . . . the fewer outreach workers it will be able to hire." The decision to file that lawsuit was made by Wade Rathke, who founded Acorn in 1970 and was its long-time leader. He was forced by the group's board to resign last year after it found that he'd engaged in a cover-up of a nearly $1 million embezzlement of Acorn funds by his brother Dale, then the group's chief financial officer.

Mr. Rathke now the chief organizer of a New Orleans-based local of the SEIU, a key Acorn ally is out with a new book, "Citizen Wealth," in which he touts a vision of "maximum eligible participation" by Americans in welfare programs as a way to force radical social change.

Regardless of the wisdom of that vision, it's time to follow the lead of the Census Bureau and cut the government's ties to the highly dubious characters surrounding Acorn. (The group has taken in more than $53 million in direct funding from the federal government since 1994, and substantially more indirectly through states and cities that receive federal block grants.)

Acorn's allies in Congress have long stopped every move to rein it in. Rep. Steve King (R., Iowa), for example, has tried six times to get House floor votes restricting Acorn's access to federal funds but has been blocked by Speaker Nancy Pelosi's hand-picked Rules Committee members. Some Democrats have grumbled. Michigan's John Conyers, chair of the Judiciary Committee, urged a hearing be held on Acorn abuses in March, but later told the Washington Times "the powers that be decided against it."

There is a chance the latest scandals will convince Democrats that Acorn is too toxic a political partner. And President Barack Obama, who once ran a voter-registration program for an Acorn partner (Project Vote) and then worked for Acorn as a lawyer on key cases, has every incentive to distance himself further from the organization.

Former Acorn board members tell me the group has always been confident it will be protected. After the Nevada voter-registration fraud indictment last May, Bonnie Greathouse, Acorn's chief organizer in the state, told the Las Vegas Review-Journal that "we've had bad publicity before" and survived. "People always come forward to our defense. We're just community organizers, just like the president used to be."

By JOHN FUND (Columnist for WSJ.com)

The New Rentier Class

"You low-down rent seeker!" That's an insult used by economists.

The term "rent-seeking behavior" dates only to 1974, but the concept goes back a ways. RSB can be defined as the extraction of undeserved economic rewards. How? Via threats of violence, for example. Or help from elected officials. In a free market, your reward is a function of how much you contribute to the economy; in a regulated market, of how much you contribute to politicians.

The effort succeeds often enough to support a thriving class of facilitators. A few centuries ago we had fawning courtiers at the court of Queen Elizabeth. Now we have Tom Daschle running around town in a limousine. Lobbying (the disclosed portion of it, that is) is a $3.3-billion-a-year industry, according to the Center for Responsive Politics.

Even--no, especially--in a recession, RSB is big business. There's all that stimulus money. In the doldrums of New Haven, Conn. a commercial printer is putting up a windmill. It makes no economic sense, not even in a world trying to curb its appetite for carbon. But it makes sense to him, because he's paying only a sliver of the cost. See the story by Jonathan Fahey.

Vendors of renewable energy would go near the top of any list of rent seekers. Here are the next nine in my catalog of favorite RSBs.

The tax code. Why do we have a depletion allowance for spodumene, whatever that is--or 70,000 pages of other peculiarities? To help members of the Joint Tax Committee get campaign donations.

UAW pay and benefits. These are being supported with $50 billion of federal money. We are taxing $30-an-hour schoolteachers to help out $59-an-hour autoworkers.

Public employee pay and benefits. When the privately owned BMT competed with the IRT, the New York City subways did not offer such nice pensions, or employ so many featherbedders.

Cap and trade. The clean way to limit carbon is with a tax. The dirty way is with a system of permits dished out in an arbitrary fashion. Guess which we'll get?

Farm subsidies.

Transportation permits. Why is a NYC taxi medallion worth $600,000? That sum is monopoly rent (rigged fares, that is), capitalized.

Baseball stadium financing. George Steinbrenner gets welfare. Classic RSB.

Opera. Consumption by aristocrats gets help from the tax deduction for "charity."

Academia. What explains the comfortable lifestyle of those economists and other professors? Not the economic value of liberal arts education, which is nowhere close to the $330 billion a year this sector consumes. The explanation is federal handouts.

William Baldwin