BILL MOYERS: This week on Moyers & Company…

ARTHUR C. BROOKS: Republicans could come screaming out of the gate going forward and say, we're the ones who will fight for the poor. We're the ones who will fight for workers. You might not agree with what we're going-- how we're going to do it, but let me tell you, you will not doubt what's on our hearts.

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BILL MOYERS: Welcome. My guest Arthur C. Brooks says the compassionate conservatism once touted by George W. Bush is making a comeback. Now, if you've been listening to the heated rhetoric on the right toward poor people, government, immigrants, and liberals, that may come as a surprise. But Mr. Brooks is being taken seriously by influential conservatives in government, business, and the media. In “Commentary” magazine he called on conservative leaders to articulate "a positive social-justice agenda." And just last week, in “The New York Times,” under the headline, “Love People, Not Pleasure,” Arthur Brooks wrote that while "money relieves suffering in cases of true material need [...] when money becomes an end in itself, it can bring misery, too."

That message has some people scratching their heads, coming as it does from the president of the American Enterprise Institute, that venerable conservative Washington think tank funded by some 1200 donors, including the likes of Exxon Mobil, the American Petroleum Institute, the Walton Family Foundation – that’s Wal-Mart – the pharmaceutical industry, and the chairman of the Carlyle Group – that’s the global private equity firm with the touch of King Midas. It is not love that gives these powers their clout in Washington – it is money.

So what's this former professor of the French horn (yes, the French horn) up to? And how did he reach the top of the conservative pecking order in Washington? For one thing, by teaching business, government, and economics for years at Syracuse University. For another, by writing ten books -- this is the most recent: “The Road to Freedom: How to Win the Fight for Free Enterprise.” And for yet another, by his own pilgrimage to understand how it is that human beings are more than the sum of their material appetites. Last year, he went to India to meet with one of the great spiritual shepherds of our time – prompting the very materialistic Vanity Fair magazine to ask: “Why Was the Dalai Lama Hanging Out with the Right-Wing American Enterprise Institute?”

A good question, given that this year the Dalai Lama paid his own visit to Arthur Brooks at the American Enterprise Institute in Washington. Arthur Brooks, welcome.

ARTHUR C. BROOKS: Thank you, Bill.

BILL MOYERS: Why the Dalai Lama? What were you seeking?

ARTHUR C. BROOKS: The Dalai Lama is a representative of human consciousness. He's somebody who transcends a lot of the materialistic pressures. He's also the most respected religious figure today in the world. Whether anybody likes that or not, it's the truth. He's somebody who thinks about the truth, notwithstanding the political realities that are going on around the world. And we wanted to talk to him about many of the controversies that we're seeing today, about how consciousness, free enterprise politics, how it all interacts.

BILL MOYERS: And he called you the spiritual leader of the capitalist people?

ARTHUR C. BROOKS: Well, one of the guests, I guess, at one of our events said that.

BILL MOYERS: How do you reconcile his socialism with your capitalism?

ARTHUR C. BROOKS: Well, I asked the Dalai Lama that and-- when we were in Dharamsala. And it was a wonderful visit. I went to see him in his monastery where he's been living in exile since being expelled from Tibet by the Chinese communists in 1959.

And I went and visited with him. I meditated with his monks for the morning and then in the afternoon we were talking. And he said basically, you love free enterprise. I said, that's right, Your Holiness. And he said, I am a Marxist. And I thought, uh-oh. But he continued. He said, but I do not believe in forced sharing by government. I believe in voluntary sharing as the basis of human morality. And there's nothing that describes my point of view about this world better than that.

BILL MOYERS: But here's the enigmatic part of Arthur Brooks. You know, love does not make Washington go around.

ARTHUR C. BROOKS: Right.

BILL MOYERS: It does not bring home the bacon. The tax subsidies. The loopholes. The special privileges. It doesn't grease the revolving door that is the source of so much of the wealth there. To get those things people have-- need money.

ARTHUR C. BROOKS: Yes.

BILL MOYERS: And use money. So many of the people listening to us right now are going to be, as I said, scratching their heads and say, how can Arthur Brooks be comfortable in an environment where money is the prime, if not sole, instrument of consolidating the power of the rich and privileged, the corporations, in Washington today? Does that create any tension in him?

ARTHUR C. BROOKS: Money always creates tension in me and it creates tension in our political system and it creates tension in all people of good will. The fact of the matter is it should create tension with-- we should have an uneasy relationship with material prosperity. An uneasy relationship with power. But we can also use it at the government level to alleviate poverty for our poorest citizens. This is one of the reasons that I recommend that conservatives declare peace on the safety net for the truly poor. But not for others.

BILL MOYERS: What does that mean?

ARTHUR C. BROOKS: That means basically we have a concept of the safety net that is either, in comic book form: we're against it because it creates dependency and it's always wrong, on one hand. Or it's a good thing and we should expand it to include everybody. Upper middle class people, crony corporations, people who haven't earned particular benefits or who actually aren't in need. Neither one of those extremes is something that we should embrace.

BILL MOYERS: So help me understand this. Tax laws favor capital over labor, giving capital gains a lower rate than many people who earn ordinary income. Bankruptcy laws allow companies to reorganize but not college students burdened by huge debt. The minimum wage is losing ground, losing value, while CEO pay is, as you know, going through the roof again and again. Is this compassionate conservatism at work?

ARTHUR C. BROOKS: There is a lot of lacking compassion in the American economy, and every institution, or, for that matter, in any economy around the world, but you have to take each one of these things-- these are not comparable situations. So I'll give you an example. Minimum wage. Now, the problem with the minimum wage is not that we're worried about the expenses it's going to create for businesses. The problem with the minimum wage is that it hurts the people it's supposed to help. It's a perfect way to give a raise to my teenage children.

It's the worst way to try to wipe out the unemployment scourge that we have in this country. We don't have a low wage problem. We have an unemployment problem in the bottom 50 percent. America has left the bottom behind. And we have a conspiracy. We have a left wing politically that talks about solutions, but has no implementable answers that actually help poor people. And we have a right wing that technically-- that traditionally doesn't even talk about poverty.

When you have that kind of a conspiracy it's the poor who lose out. And if the only thing that we can come up with is a command and control law that tells businesses they have to pay more, as opposed to all the great ideas - an expansion of the earned income tax credit, wage subsidies that make work pay that don't destroy jobs, then--

BILL MOYERS: I'm with--

ARTHUR C. BROOKS: --shame on us.

BILL MOYERS: I'm with you on the earned income tax credit.

ARTHUR C. BROOKS: For sure.

BILL MOYERS: One of the best means of getting money to people who need it. But is there any better way of creating jobs than putting money into the hands of people who spend it immediately? Middle class, working poor, poor people? And so a raise in the minimum wage has been shown, in some studies, to actually make people better off and stimulate the economy--

ARTHUR C. BROOKS: Very little. Very little. The best way-- if you want to create jobs you need policies of economic growth. And furthermore, you know, economic growth that reaches all the way to the bottom of the income distribution. The crisis in the American economy today, Bill, is that we have economic growth that's concentrated in the top 10 percent.

The stock market run up that's come about because of loose money that makes interest rates effectively zero, that blows up equity markets. The stock market has increased by 125 percent since Barack Obama took over as president. 81 percent of those gains has gone into the pocket of the top 10 percent of the income distribution. In the meantime, food stamp recipiency is up by 50 percent. From 32 million Americans to 48 million Americans. You remember John Edwards was-- I mean--

BILL MOYERS: I think I do remember John Edwards.

ARTHUR C. BROOKS: I know. I know. We go back and--

BILL MOYERS: A meteor in the sky.

ARTHUR C. BROOKS: He's usually kind of, you know, the punch line to a right wing joke. But John Edwards had one idea, which was that we were becoming two Americas. He was right. He was just early. He just didn't see the plutocratic tour de force. That's the crisis.

BILL MOYERS: He was also late. Michael Harrington and many others--

ARTHUR C. BROOKS: Yeah, I know.

BILL MOYERS: --had said, look what's happening.

ARTHUR C. BROOKS: It's true. It's true. He’s-- now we see it. And now we see what we need to do. Economic growth that reaches all the way to the bottom. The minimum wage doesn't do it. Free money doesn't do it. Only the free enterprise system that has a bias for the poor is going to get that done.

BILL MOYERS: But our economy is growing faster than Canada's and northern Europe's. And yet more-- less of that is going to everyday workers than it is in Canada and Europe. How do you explain that?

ARTHUR C. BROOKS: The reason is because our economic growth is concentrated in the top fifth of the income distribution in this country. So what happens is you have effectively 5 or 6 percent economic growth for guys like you and me. It's party time. But the rest of the economy is somewhere 1 to 2 percent growth and the whole bottom half is zero. That's what's going on in America today. It's concentrated only on favoring those at the very top. And that's because of very bad public policy.

BILL MOYERS: I would suggest that one of the problems is that it is that over 70 percent of the wealth in this country is owned by the top. And they are doing everything they can, both to preserve, perpetuate and increase that wealth without following Arthur Brooks's advice and sharing it downstream.

ARTHUR C. BROOKS: Man, I wish it were true that that were the real problem. I wish it were, because if it were, we could decide together that we could go to Washington and we could try to increase taxes and have more redistribution and solve the problem. But Bill, it's not.

Look, tax revenues this year are the highest in inflation-adjusted terms in American history. But do you believe that we could do something big like the interstate highway system today in America? You know we couldn't. We couldn't do it. With any amount of time. We can't do it because we have this rabbit warren of expanding government that makes it impossible with any amount of money to actually help citizens. That's the problem. It's not that rich people are getting richer. It's that we can't do things with the money.

BILL MOYERS: With due respect, many businesses today are thriving on desperate workers. It's not just that government is corrupted or is too big. For example, workers at Target, McDonald's, Wal-Mart, need food stamps to survive. Let's just take Wal-Mart.

ARTHUR C. BROOKS: Okay.

BILL MOYERS: Made over $17 billion in profits last year, about $12,000 per employee. Yet Wal-Mart pays their employees so little that the average Wal-Mart worker depends on about $4,000 per year in taxpayer assistance. Food stamps, and other programs. You and I and every taxpayer in the country, including the Wal-Mart workers are subsidizing the company for paying its workers so little, to the tune of about $6.2 billion. That's not morally right, is it? And it's not government's fault.

ARTHUR C. BROOKS: You know, the idea that these are dead-end jobs is not correct. The truth of the matter is that I started out in a dead-end job, I bet you started out in a dead-end job, and what we have an obligation to do as a society is to not to force an organization like Wal-Mart to change their wage structure, because you know what they'll do.

I mean, in America today, we have a 36 percent African American teenage unemployment rate. We could make it 44 percent by forcing through these market signals. Or we could band together and say, what are we going to do? And that's why you and I agree on the earned income tax credit expansion and other wage subsidies to make work pay.

BILL MOYERS: But I'm speaking here about issues of justice. The four Walton heirs together made nearly $30 billion from their personal investments last year. Not envious, that's just a fact. That doesn't strike me as compassionate conservatism.

ARTHUR C. BROOKS: Well, what-- wait, wait--

BILL MOYERS: And instead of providing--

ARTHUR C. BROOKS: Why conservatism?

BILL MOYERS: Well, they're conservatives. But instead of providing a living wage for its workers, the company spent $7.6 billion on stock buyouts in order to further boost the value of the owner's stockholdings. I mean, Wal-Mart even profits from food stamps. They process them. They have 18 percent of the SNAP market, which means they're making money from the food stamps that their workers need and get from you and me in order to--

ARTHUR C. BROOKS: But no, we--

BILL MOYERS: --support them.

ARTHUR C. BROOKS: Well, we're glad they can take food stamps, aren't we?

BILL MOYERS: What?

ARTHUR C. BROOKS: Aren't we glad that people can cash their food stamps--

BILL MOYERS: Absolutely. But, I mean, Wal-Mart--

ARTHUR C. BROOKS: You're pointing out the irony, you're not protesting the policy, right--

BILL MOYERS: Yeah, right.

ARTHUR C. BROOKS: No, I understand. Now I think we should agree not to be envious of the Waltons. I think Sam Walton did created a great company.

BILL MOYERS: Absolutely.

ARTHUR C. BROOKS: And I love it when people go, he came from nothing. He was the American success story. And I don't begrudge his right to actually pass on money to his heirs.

BILL MOYERS: Nor do I.

ARTHUR C. BROOKS: As a matter of fact, you know, you could look at the tremendous wealth of the whole 1 percent, and you distribute that among the population, it would be $7,000 per American. It--

BILL MOYERS: It just--

ARTHUR C. BROOKS: It wouldn't--

BILL MOYERS: Do it among your workers.

ARTHUR C. BROOKS: Yeah.

BILL MOYERS: I mean, just distribute more of the profits among the workers who have to depend on you and me for the food stamps they get to survive while working at Wal-Mart.

ARTHUR C. BROOKS: Well, but do we know the philanthropy of the Walton family? I mean, do we--

BILL MOYERS: Well, there's--

ARTHUR C. BROOKS: I mean, that's a wonderful thing. And--

BILL MOYERS: As a--

ARTHUR C. BROOKS: That's what we're trying to do.

BILL MOYERS: Are you suggesting, I don't think you're suggesting that we should admire their philanthropy when they're not paying their workers a living wage.

ARTHUR C. BROOKS: No. I'm suggesting that the markets in the United States, given the fact that we have not prepared workers for the modern economy, that we have an insufficient education infrastructure that’s leaving the poor behind, at least there are jobs, and I want public policies that make those jobs pay more.

The idea somehow that Wal-Mart can suddenly take the whole-- take the profit margin in a publicly traded corporation and spread the money around in this way, or even worse, if we decide to go to Washington and do it by fiat, can you imagine? Can you imagine the crony capitalists--

BILL MOYERS: Well, no, no, no, no. Just pay your workers. I mean, it would seem to me that compassionate conservatism would take some of those exorbitant profits that come in no small part because they're subsidized by you and me, the taxpayer, because the Waltons won't pay them sufficiently and spend that on paying their workers a better wage.

ARTHUR C. BROOKS: So this is not a public policy argument--

BILL MOYERS: No, no, it's not.

ARTHUR C. BROOKS: --at all.

BILL MOYERS: It's capitalism.

ARTHUR C. BROOKS: It--

BILL MOYERS: It's business. You represent a lot of business representatives in there. I mean, if you took the leadership on this, there's no telling what kind of revolution you could spark.

ARTHUR C. BROOKS: Well, we're talking about-- and not just paying people more, what we actually can do all together--

BILL MOYERS: I am.

ARTHUR C. BROOKS: --to be fighting for--

BILL MOYERS: Let-- pay them and let them live as they want to live. Don't try to put--

ARTHUR C. BROOKS: So you're a big fan of Hobby Lobby, for example, because they pay-- the minimum that they pay per worker is $15 per hour--

BILL MOYERS: I admire their employment policies.

ARTHUR C. BROOKS: Right--

BILL MOYERS: I disagree with the fact that the owner's religious beliefs should trump the rights of women to what they need in contraception or want in contraception. But that's a different-- I'm talking about capitalism, Arthur. I'm not talking about government. And the fact of the matter is, capitalism has captured government so we can't do the things that you're talking about--

ARTHUR C. BROOKS: Well, capitalism is capital-- it's the antithesis of capitalism that's captured government.

BILL MOYERS: How so?

ARTHUR C. BROOKS: You see, this is the problem. When markets work, you actually don't have a free path for the well-connected to get their favors through the government. Government circumvents competition. Basically, you're one of two kinds of people. Either you believe in winning competition, or you believe in shutting it down. In Washington, in the confluence of corporate interests, and power in the state, we’ve become a country that's dedicated in the seat of power of shutting down competition. And that's the actual problem. So capitalism--

BILL MOYERS: But monopolies are a huge problem.

ARTHUR C. BROOKS: I mean it’s-- bring in more capitalism.

BILL MOYERS: Listen, Wal-Mart's not alone. There was a study last year. The National Employment Law Project and the University of California Berkeley reporting that fast food companies cost taxpayers another $7 billion a year in public assistance for underpaid workers with McDonald's accounting for $1.2 billion of that. And over 50 percent of fast food workers rely on one or more public programs. How about that?

ARTHUR C. BROOKS: Well, the one thing that we could do to deal with that is increase the minimum wage, which would of course throw people out of work who are the most marginalized members of the workforce. And they would be entirely on the public dole at that point. That would be-- I guess you'd probably--

BILL MOYERS: Throw them out because the owners would not want to pay them the higher minimum wage.

ARTHUR C. BROOKS: Again, if we ask owners either through the government by fiat or through moral suasion to increase the amount that they're paying to workers, artificially, not according to market forces, artificially, what will happen? They will lower the size of their work forces as sure as we're sitting here. Again, the problem in America, I understand that some people don't make enough. I completely understand that. Which is why I want policies--

BILL MOYERS: A lot of people don't make it.

ARTHUR C. BROOKS: That's why I want policies that make work pay. But the bigger problem is the employment crisis. We have an employment-- a workforce participation rate that's the same as it was in the bad old days of the Carter Administration. We've gone backwards, Bill. And that's completely concentrated among the poor. You have 17 percent of working-age men who are not institutionalized not working. Not studying. Totally idle. This is a crisis. It's the zero, one, working, not working part that's a problem. That's what we have to deal with first. And if you don't create more jobs with more economic growth, with less regulation, you're not going to solve that. You can basically put more people into government dependence and hurt them or you can find ways to actually use public policies to make work pay.

BILL MOYERS: But name one public policy that you would think-- that you think would help make work profitable.

ARTHUR C. BROOKS: Make work profitable for-- make work pay?

BILL MOYERS: Make work pay for the worker.

ARTHUR C. BROOKS: Okay, okay. Right--

BILL MOYERS: One idea.

ARTHUR C. BROOKS: Okay, one policy. Right now, we've talked about it tangentially a little bit which is the earned income tax credit. It's an expensive policy, it's hard to administer, it costs taxpayer money, it's a great policy.

BILL MOYERS: It is, absolutely--

ARTHUR C. BROOKS: It's a great policy. Now, the problem is, it excludes single men. Especially those who have non-custodial parenting relationships with their children. It excludes them. These are the people who are most marginalized in the workforce today. These are the people who are most vulnerable. We need to expand it to include those people. We need to expand it such that people who are working, working honestly. As they say, as politicians like to say, they're working hard and playing by the rules, which they are, they actually can make a living. We can solve this problem, Bill. We don't have to have by fiat telling Wal-Mart to pay $3, and $4, and $5 an hour more. And throw more people into welfare, no, no, no, no. And more people into homelessness when they lose their jobs. We can solve this with the expansion of the EITC or any of the other wage subsidy ideas.

BILL MOYERS: But don't you think the big capitalist, the big owners have a moral and an economic obligation to their workers to help them make a living that is sufficient for their families?

ARTHUR C. BROOKS: I think that people should examine exactly what their motives are. And I will and personally I do and so do you, we talk to people in every sphere of life how they should treat their fellow men and women. Now, I also understand economics enough to understand that it either through law or moral suasion, when people start to pay more than the market dictates, the demand for labor will decrease and the people who will be hurt the worst, who are most likely to be thrown out of jobs are the people who are most marginalized to begin with. That's the reason we need other ways of doing this.

BILL MOYERS: Would you concede, or would you agree that democracy in our system is meant to be a brake, B-R-A-K-E, on rampant greed and power?

ARTHUR C. BROOKS: No. Our system morally is supposed to use capitalism in a way that's healthy, where people don't cheat each other, where people treat each other with principles of brotherhood. See, this is important for conservatives to remember as well as liberals. But especially conservatives, that the architect of our modern understanding of capitalism is Adam Smith.

Adam Smith understood that it doesn't matter what your political system is. It doesn't matter what your economic system is if people cheat each other. If people are not honest, if people do not believe in global brotherhood, if there's not transparency, if you don't believe in these moral ideals, you could be a socialist, you could be a capitalist, you could live in a fiefdom of some kind, it doesn't matter. People who are impoverished and people who lack power are going to lose out. This is something that we need to remember. We need a moral reformation in this country.

BILL MOYERS: That's one side of the equation. But people also need referees. They need government to prevent those who don't play by the moral--

ARTHUR C. BROOKS: Absolutely.

BILL MOYERS: --rule--

ARTHUR C. BROOKS: Absolutely. You need--

BILL MOYERS: --to live up to their obligation.

ARTHUR C. BROOKS: You know, somebody-- muggers are bad. And--

BILL MOYERS: Well, you--

ARTHUR C. BROOKS: --inside traders are bad.

BILL MOYERS: And you need an SEC--

ARTHUR C. BROOKS: Exactly right.

BILL MOYERS: --and an FTC.

ARTHUR C. BROOKS: Again, Adam Smith said that markets fail. Markets fail because of monopoly, because of externalities like pollution, they fail because of public goods like the need for an army and a police force. They also fail because of what economists call asymmetric information. Which is another one of-- way of saying that I know more than you do and I can exploit you. And I can exploit you because I coerce you with a tip of a gun or I exploit you because I use insider information and I use it to my own gain. Those are market failures. That's why we need the government as well as a well-functioning, reliable safety net for the poor. Absolutely.

BILL MOYERS: But how do we get good public policy when Congress is under the thumb of the big donors who contribute to their election or their re-election?

ARTHUR C. BROOKS: Well, for one thing, I don't want to make it so stark. It's not true that every member of Congress is under the thumb of businessmen or capitalists or public sector unions or good guys on the right or the left or any place in between. I know a lot of people in Congress who are very serious about their independence, number one.

Number two, it's in the hands of citizens to demand a representative government. Look, we can get this. The problem that we have is that we have a little bit of a conspiracy between right and left now to have people who are really tending to be more part of the machine. What happens when citizens rebel and they say, we're only going to hire politicians who refuse to stay more than three terms in Congress, for example?

What happens when we have people who truly are moral populists? That would be an interesting thing. Now that's the big opportunity for the Republican Party today. That's the big opportunity. Why? Because you had somebody who said he was going to fight for the people, and things didn't, in my estimation, work out so great over the past few years. Republicans could come screaming out of the gate going forward and say, we're the ones who will fight for the poor. We're the ones who will fight for workers. You might not agree with what we're going-- how we're going to do it, but let me tell you, you will not doubt what's on our hearts. That means we need a more-- a new kind of moral climate for the future leaders.

BILL MOYERS: We'll continue this conversation online. Arthur Brooks, thank you very much for being with me.

ARTHUR C. BROOKS: Thank you, Bill. It's been an honor.

BILL MOYERS: At our website, BillMoyers.com, we want to hear your thoughts about my conversation with Arthur Brooks. So please share them with us.

That’s at BillMoyers.com. I’ll see you there and I’ll see you here, next time.