Privacy

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HOLLOW VICTORY ON BANK SECRECY

Although hailed as a victory by both the American Bankers Association (ABA) and the American Civil Liberties Union (ACLU), the U.S. District Court decision on the Bank Secrecy Act of 1970 was something less than a libertarian triumph. The Act, public law 91-508, was to have gone into effect on 1 July, but was held up by a temporary restraining order while the ABA/ACLU suit was in process. In brief, the law would have required:

(1) that banks microfilm all customers' checks, deposit slips, and other account records, and keep them on file for two years.

(2) that they notify the Treasury Department of all overseas transactions by individuals that exceed $5000, and

(3) that they keep federal authorities informed of all "unusual" cash deposits or withdrawals—defined (for the present) as those over $10,000.

What the court ruled, in a 2-1 decision on 11 September, was that the third of these provisions is unconstitutional since it would "unreasonably invade the right of privacy protected by the Bill of Rights." However, it let stand both the microfilming requirement and the foreign transactions reporting. The dissenting judge, Oliver D. Hamlin, rightly pointed out that he could see no difference between provisions covering domestic and foreign accounts. (Hamlin favored the entire act, however!)

The implication of all this is clear; despite the hollow ACLU and ABA victory statements, the fact is that in the U.S. "there is simply no right of privacy for bank customers," as the government attorney on the case put it. The microfilming provisions are particularly chilling, in view of FBI and IRS access to bank records. According to columnist Jack Anderson, the FBI obtains "informal" access—without benefit of subpoena—to bank accounts of political dissidents. Anderson last summer gave the Senate Banking Committee FBI memos on the bank accounts of Jane Fonda, Benjamin Spock, and Floyd McKissick, to prove his point. The IRS follows more "official" procedures; IRS agents carry "pocket "subpoenas" which they fill out on the spot when they want access to a taxpayer's bank records.

Fortunately, despite the premature victory notices, both sides in the case planned to file further motions, and the ABA/ACLU will ask the judges to reconsider the record-keeping provisions. As California Bankers Association lawyer Phil Diamond put it, "We don't want to accumulate that kind of information for the government."

SOURCES:
• "Bank Accounts: Confidential or an Open Book?" Robert E. Wood, LOS ANGELES TIMES, 22 June 1971.
• "Court Delays Enforcement of Secrecy Act," UPI (San Francisco), 2 July 1972.
• "Anderson Discloses Alleged FBI Memos on Private Bank Accounts," UPI (Washington), 15 August 1972.
• "Court Overturns Law Allowing U.S. to Check Bank Accounts," John Getze, LOS ANGELES TIMES, 12 September 1972.

URBAN DYNAMICS UNDERWAY IN LOWELL

Faced with the glum certainty that programs to "help" the cities were doing little but wallpaper bureaucrats' halls with charts and diagrams, the Department of Housing and Urban Development (HUD) this spring approved a grant to test a bright, new approach to limit urban decay.

The approach, a drastic reversal of previous urban strategies, calls for an end to publicly-subsidized housing, limitation of welfare expenditures, and sharp tax relief for urban-based industry. Known as "Urban Dynamics" after the book written by MIT professor Jay Forrester, it argues that all governmental attempts to improve the lot of the under- and unemployed are doomed, as they serve only to attract more individuals to be subsidized, drive up the tax rate, and drive out productive enterprises.

As an answer to such counter-productive policies, Forrester wrote that urban planners should stop creating plentiful low-income housing and simultaneously grant tax incentives to industry locating in low-income areas, to improve the upward mobility of the "underemployed."

Chip Schroeder, a staff member of Forrester's Urban Dynamics team, told REASON in August that HUD's grant of $500,000 will provide backing for a 3-year effort to acquaint officials of Lowell, Massachusetts, with the Urban Dynamics approach. He said that effort, underway since the beginning of summer, has overcome initially hostile or skeptical responses from both HUD planners and Lowell officials, to the point where public housing projects now underway are being strongly questioned.

The city manager, James Sullivan, is a particularly strong backer of the Urban Dynamics strategy, Schroeder said.

The first two years of the project will be spent largely on research to refine Forrester's computer model of the urban system. The third year will emphasize a continuing orientation among Lowell officials towards the Urban Dynamics approach.

Lowell was chosen as a near-ideal test-site because of its moderate size (100,000), shrinking industrial base, and extremely high unemployment rate (over 10%).

SOURCE:
• Interview with Chip Schroeder, MIT Sloan School of Management, conducted by
REASON contributing editor Mark Frazier.

FREEDOM FOR BROADCASTING

Prominent members of the communications industry finally seem to be joining Walter Cronkite in speaking out against government control of broadcasting as a violation of freedom of the press. In June 1972 Wes Gallagher, president and general manager of the Associated Press, called on members of both the broadcast and the print media to work toward eliminating government interference with broadcasting. Speaking to the opening session of the Associated Press Broadcasters Convention in Chicago, Gallagher noted that "We need to organize to tell the people they'll lose if we lose freedom of the press." This issue, he said, is "the most important thing we have to contend with." Gallagher's speech was paralleled by a major article in the WASHINGTON POST by broadcast critic Steve Knoll, calling for full-fledged First Amendment protection for the "electronic press."

In September Eugene Pulliam, publisher of the ARIZONA REPUBLIC, PHOENIX GAZETTE, and the INDIANAPOLIS STAR and NEWS, published a front-page Sunday editorial calling for freedom for radio and television. Although Pulliam has no broadcasting interests, he called on newspapers to fight government controls because television's hands are tied by government restrictions. Unless Congress acts decisively to remove existing controls, Pulliam predicted, the government will take over radio and television in a few years. The result would be a single broadcast system, "operated, programmed—in short, completely dominated—by an elite group of Washington bureaucrats." As evidence of the worsening trend of controls, Pulliam cited recent court decisions forcing broadcasters to air "counter-commercials" by anti-pollution groups, an FCC proposal to require two hours of free daily children's TV programming, demands that station licenses not be renewed because of program content, and the rulings prohibiting cigarette advertising.

Most recently NBC president Julian Goodman joined the critics of the FCC's "Fairness Doctrine." Speaking to the Great Issues Forum at the University of Southern California, Goodman called for the elimination of the Fairness Doctrine to protect broadcasting from being "contaminated at the source by government intrusion." Already, he noted, the wall that should exist between government and journalism has been breached, giving us "regulated broadcast news…government-controlled broadcast information." Goodman rightly pointed out that a voluntary fairness policy of presenting contrasting views on controversial issues was just normal, responsible journalism. "But when it becomes a government standard," he pointed out, "it moves government officials into newsrooms and seats them as judges of how broadcast news and information should be presented."

Hopefully it won't be long before such journalists realize that the only way to remove government control of broadcasting is to return ownership of the frequency spectrum to private enterprise, ending the fiction that the "airwaves" are a "public good."

SOURCES:
• (Untitled), Associated Press (Chicago), 2 June 1972.
• "First Amendment: Why Should TV Be Excluded?" Steve Knoll, LOS ANGELES TIMES, 4 June 1972 (reprinted from the WASHINGTON POST).
"Arizona Publisher Fears Government Control of TV," Associated Press (Phoenix), 10 September 1972.
• "Fairness Doctrine on Broadcast News Hit," LOS ANGELES TIMES, 12 October 1972.

GUARANTEED ANNUAL STAGNATION

Columnist Kevin Phillips recently described an interesting and important case study in the use and misuse of history by those in power. The object of the case was the history of 19th-century English attempts to guarantee poor people a minimum income.

In 1795 the town of Speenhamland in southern England became the site of the first English experiment with large-scale, systematic welfare, as a matter of right. The basic plan was to give poor people subsidies in addition to their wages, to assure them a minimum income regardless of earnings. This "Speenhamland System" spread rapidly to other parts of rural England and remained in effect for 40 years-until 1834, when it collapsed entirely.

French philosopher Alexis de Tocquevilie analyzed the experiment, after observing that England in 1835, despite being the world's richest nation, also had the greatest percentage of poor people. In his "Essay on Pauperism," de Toqueville suggested that England's affluence had engendered guilt, which had led to the welfare subsidies. The subsidies then so thoroughly destroyed the work ethic that the number of poor people rose enormously. In our own century, the Speenhamland disaster was chronicled in Karl Polanyi's book THE GREAT TRANSFORMATION, which described how the system nearly wrecked the English economy, leading to "the pauperization of the masses, who almost lost their human shape in the process."

Kevin Phillips relates how the Speenhamland story was brought to the attention of Nixon by Dr. Martin Anderson, who was then on the staff of domestic counsellor Arthur Burns. Anderson, author of the well-known revisionist work THE FEDERAL BULLDOZER, prepared a memo for Nixon based on Polanyi's book, as an argument against the president's not-yet-announced Family Assistance Plan (FAP). Daniel Moynihan then prepared a countermemo, claiming that "Polanyi's thesis of the effects of the Speenhamland System has been rejected by economic historians," and citing a 1964 economic history journal. Whereupon Martin Anderson asked a professor of British history at Columbia for his opinion of Moynihan's assertion. In reply, the historian prepared a list which showed that "17 leading historians unanimously (save for the single article cited by Moynihan) agreed with Polanyi's thesis that Speenhamland subsidies brought indigence, illegitimacy, and family disintegration in their wake."

Despite the above, Nixon proceeded to announce his guaranteed-income FAP that spring (1969). This year, after three attempts to get Congress to act (and with Moynihan back at Harvard), columnist Phillips reports that Nixon has abandoned FAP, based on the Speenhamland evidence. We'll see.

SOURCE:
"Family-Aid Lesson from Speenhamland," Kevin Phillips syndicated column, 14 August 1972.