A Democracy — For The Wealthy

The New Republic: Swelling Gap In Wealth Is Worrisome For Equality

(The New Republic)  This column was written by Bradford Plumer.

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Class warfare is back in vogue. Just ask Jim Webb, the freshman senator from Virginia who, in his State of the Union rebuttal last week, thundered: "When I graduated from college, the average corporate CEO made 20 times what the average worker did; today, it's nearly 400 times." And it's not just Webb. The yawning gulf separating the rich from, well, everybody else has emerged as a major theme among a new generation of populist Democrats. Even Massachusetts Representative Barney Frank, no great enemy of capitalism he, has wondered lately whether the United States is suffering from more inequality in wealth and income "than is either socially healthy or economically necessary."

And so, predictably, the backlash from conservative economists has begun. Alan Reynolds, a senior fellow at the libertarian Cato Institute, recently published a book arguing that reported increases in inequality have been overblown. Most professional economists dispute Reynolds's claims (see Jonathan Chait, “Equality Bites,” January 29), but, for right-leaning commentators, this is all beside the point: Rising inequality, real or not, just doesn't matter. In The New York Times on Thursday, Tyler Cowen wondered "why we should worry about inequality — of any kind — much at all." What matters, he argued, "is how well people are doing in absolute terms" — and not whether Smith makes ten times more than Jones. Bruce Bartlett, a conservative columnist, agreed: "If my real income does not fall, how am I hurt when Bill Gates makes another billion dollars?"

On their face, these arguments sound reasonable enough, although one could interject with all sorts of complaints (among other things, median incomes in the United States have largely stagnated in the past few years, so Bartlett's hypothetical doesn't quite apply). But there's another inequality-related concern that rarely gets much attention. Over the last few years, political scientists have been converging on the view that massive disparities in wealth and income really do distort the democratic process — by allowing a tiny segment of the population to wield outsized influence in the political realm. The idea isn't terribly groundbreaking — even casual observers of American politics know that money can buy power — but recent research is slowly nailing down exactly how this process works.

The statistics on inequality are well known and — setting aside Reynolds's dissent — present a clear picture. Between 1979 and 2004, the richest 1 percent of Americans saw their after-tax incomes triple, while those of the middle fifth grew by only 21 percent and those of the poorest fifth barely budged, according to Congressional Budget Office data. By the late '90s, the richest 1 percent of American households held one-third of all wealth in the U.S. economy, and took in 14 percent of the national income — a greater share than at just about any point since the Great Depression.

In politics, this all matters a great deal. Larry Bartels of Princeton has recently studied the voting record of the Senate between 1989 and 1994 — a time, note, when Democrats controlled Congress. He found that senators were very responsive to the preferences of the upper third of the income spectrum, somewhat less attentive to the middle third, and completely dismissive of the policy preferences of the poorest third. In one striking example, Bartels discovered that senators were likely to vote for a minimum wage increase only when their wealthier constituents favored it — the views of those directly affected by the hike had "no discernible impact."

Nor is this pattern limited to domestic policy. Lawrence Jacobs of the University of Minnesota and Benjamin Page of Northwestern have found that the foreign policy views of the executive and legislative branches are primarily influenced by business leaders, policy experts — whose think tanks are often funded by businesses — and, to a lesser extent, organized labor. Jacobs and Page found that the views of the broader public have essentially zero impact on the government when it comes to tariffs, treaties, diplomacy, or military action.

To some extent, these findings stem from the fact that elected officials tend to hail from the upper classes, and so they tend to be the sort of people who worry more about the burden the estate tax imposes than, say, food insecurity or too-high heating bills. At least 35 percent of members of Congress were millionaires in 2005, according to the Center for Responsive Politics — compared with 1 percent for the population at large — and senators had a median net worth of $1.1 million. This should hardly come as a shock. Without publicly financed elections, it often takes a good deal of personal wealth and connections to run for office — the average Senate campaign in 2006 cost about $5.8 million.

That's only the most obvious way economic power begets political power. Consider the fact that wealthy Americans are far more likely to vote: 80 percent of families with incomes over $75,000 voted in 2004, compared with just 48 percent of families with incomes under $20,000, according to the Census Bureau. Whether that's because the well-off are more likely to believe that government will work for them — evidently a sound assumption — or because they have more time and opportunities to inform themselves and do their civic duty is unclear.

But it's not just voting. People in the $75,000 bracket are much more likely than those in the $15,000 bracket to join a political advocacy group like the National Rifle Association or the NAACP (73 percent versus 29 percent) and much more likely to make campaign contributions (56 percent versus 6 percent). Indeed, in the 2000 election, 95 percent of those donors making substantial campaign contributions came from households earning over $100,000. While high-income donors don't usually bribe politicians to do their bidding, they do get more face time with their representatives, during which they can frame issues and concerns in ways amenable to their interests. (Over half of donors in a 2000 poll reported speaking directly with a major elected official, as opposed to 9 percent of regular voters.)

This counts for a lot. For one, as Dean Baker has argued in his book The Conservative Nanny State, the political right has long employed big government to redistribute wealth upwards — from promoting high CEO pay to putting loopholes in bankruptcy law that benefit wealthy homeowners. Second, politicians tend to think more about their better-off constituents in everything they do, which inevitably biases policy. George W. Bush once reportedly told Jim Wallis, "I don't understand how poor people think." One assumes he doesn't hear much on the subject during chats with key donors.

Back in the postwar era, the working classes at least had unions to fight for their concerns some of the time. But, thanks to the decline of manufacturing and the assault on organized labor over the past three decades, union density has shriveled — from 24 percent in 1973 to 12 percent today. Meanwhile, in the late '70s, in response to inflation that was eating away at the wealth of the top 1 percent, "business refined its ability to act as a class, submerging competitive instincts in favor of joint, cooperative action in the legislative arena," as TNR's Thomas B. Edsall wrote in his 1986 book, The New Politics of Inequality. It worked. The leveling forces of the '60s and '70s were overturned by the Reagan revolution, and the upper classes have made out quite nicely ever since.

That dynamic seems likely to accelerate. The political scientist Theda Skocpol has noted that there are more well-educated Americans in rapidly growing professional societies than there are lesser-educated workers in trade unions. Absent a countervailing force, the political influence of the wealthiest Americans will continue to expand. On the other side of the Atlantic, European nations have managed to reduce inequality, partly by redistributing wealth through the welfare state. Unless the United States figures out how to do something analogous — or, failing that, find some way to bolster civic participation — the very idea of "equal citizenship" will continue its long erosion.

[bluestardad]

So in the Libyan Fable it is told That once an Eagle, stricken with a dart, said, when he saw the fashion of the shaft, With our own feathers, not by others hands are we now smitten.
Aeschylus

[luvny-2009]

This is exactly what Bush wants, he wants rich and poor no middle class and the faster the middle clas disappears the better he likes it. He a wack job

[bluestardad]

The Democrats will never hold the majority in congress if they do not take decisive action to extricate America from Iraq. No smoke screen of a gradual draw down or four year plan introduced in the summer of 08 will do. The American People voted for immediate change in Iraq policy and expect to see their wishes materialize. Congressional members that let three American Soldiers die a day during political indecisiveness is criminal, and is not worthy of another term in office. The Republicans will do what ever they have to in order to stop the Democrats from getting America out of Iraq.

[gunnerv1]

Screw all of you! I got mine, you get yours!

[marcodele]

Making the rich richer and the poor poorer has always been a compassionate christian conservative family value. Why is any of this news to anyone? Its the Bush Family mantra.

[rhs648]

Unemployment is down, inflation is in check, the stock market is up, home ownership is up, and incomes are rising. The elderly even have a prescription benefit. The economy is booming. Are people unable to appreciate when they are well-off. What happened to "its the economy stupid"?

[tbag_7575]

Equality will never happen as long as there is more money to be made than moral gratification. In other words, "Who cares about people struggling to get by on thier minimum wage jobs with no vacations, as long as i have my bentley to drive and jets to take me to "business meetings" in the bahamas the world seems to be doing just fine."

[cantshutup]

THE DRAFT IS HERE. Universal Nat'l Service Act of 2007.
NOT TO ALARM YOU OR ANYTHING. Just passing this along.

http://thomas.loc.gov/cgi-bin/
query/z?c110:H.R.393:

Universal National Service Act of 2007 (Introduced in House)
HR 393 IH
110th CONGRESS
1st Session
H. R. 393
To require all persons in the United States between the ages of 18 and 42 to perform national service, either as a member of the uniformed services or in civilian service in furtherance of the national defense and homeland security, to authorize the induction of persons in the uniformed services during wartime to meet end-strength requirements of the uniformed services, to amend the Internal Revenue Code of 1986 to make permanent the favorable treatment afforded combat pay under the earned income tax credit, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
January 10, 2007

[ianklimister]

If this continues there might come a point when the growing number of poor people will not tolerate it any more. And with the easy availability of handguns this might be an interesting picture (speaking as someone who is living in Europe and will be watching it on the nightly news but not outside my own door).

[dallison7]

Unemployment is down, inflation is in check, the stock market is up, home ownership is up, and incomes are rising. The elderly even have a prescription benefit. The economy is booming. Are people unable to appreciate when they are well-off. What happened to "its the economy stupid"?
Posted by rhs648 at 09:17 PM : Jan 31, 2007

YEAH, DON'T YOU STUPID SERFS KNOW WHEN YOU HAVE IT GOOD? IF WE HEAR ANYMORE WHINNING WE'LL TAKE AWAY YOUR MINIMUM WAGE JOBS.

[naturaltwo]

Class warfare has been around nearly as long as man has been around. This administration has taken it to a new level.

To me the acts of the rich, in the past twenty years, have been treasonous in nature. This class has crippled the United States to attain their wealth.

The richest 1 per cent of this nation are traitors and need to be tried as traitors and hung by the neck until dead just as Saddam was.

[i-tack]

Why is the widening gap surprising?

Globalization has taken away many middle-class options for citizens in established nations (NA & EU). If you think taxation is the root cause you're missing the point.

With the realization that people from Malaysia and China can "screw in a bolt" - came the destruction of many households. Developed nations will need to develop strong students (are we?), not world-class hip-hoppers or snow-boarders.

When new high-technology jobs become available in your area, who will fill them? Multi-generational Americans, or new immigrants willing to work for a fraction of the cost. It is not always pleasant but the marketplace at work.

Bash Bush or Clinton or .......but a huge chunk of this is a global reality. Go to Germany, UK, France and you will find the same problem.

[eggy1620]

I tack is right. The labor expenses have not really changed after inflation adjustments. The labor expense pie has just moved to parts of the world where each worker eats less of the pie. Manufacturing and manual labor used to be very underpaid many decades ago. Then by the 50s and 60s, labor and manufacturing paid very well, because the U.S. became a manufacturing powerhouse. Now the U.S. is a consumption powerhouse. And if you want to be well off, then you must cater to the consumer market, and make sure your wages are based on how many consumers come to you.

[sy2502]

Good for the top rich people for being smart enough to get where they are now. I am not going to try and take away their wealth just because I am jealous!
Sure the really rich can fund politicians and get some of what they want, but the rest of us can still write to our Congress representative and VOTE, yeah, that's right, which is the best, least expensive, most effective and least utilized way of changing politics. If, according to the article, poor people don't vote, it is ridiculous to blame rich people for it.

[rhs648]

r_bayless is irrational, shortsighted, and clueless. 1) Personal savings is down. Instead, consumers have stocks, bonds, mutual funds, money markets, treasury notes, 401k plans, and equity in their homes. 2) Unemployment statistics are the best indicator we have to judge employment. 3) 2.2% inflation is negligible. It reached 21% and higher under the Carter Administration. 3) Real Estate sales have slowed. However, more Americans own homes than ever before. 4) The national debt is again declining. Ups and downs in national debt are as old as our nation. It is time r_bayless begins reading newspapers, watching the news, and paying attention to the financial news. Who is the %u201Cself-centered short-sighted shmuck%u201D now?. r_bayless could also use some lessons in civility.

[cdegolier]

Liberals apparently aren't very bright, now Bush created CEO's and Big Business, wow I guess he has been very busy, since everything from 9/11 to poor people was all his doing. Guess he's not as stupid as you people claim.

Big Business and CEO's employ millions of people, provide medical to millions, 401k's, vacation time, sick leave, sometimes even daycare. So I guess without them the poor and middle class can find all of that on their own.

Then you have the other wealthy people, athletes, entertainers, etc. who do they actually help, employ, etc. without getting paid for that public service announcement, other than the Democrats.

Hollywood is worse than anything thing else I can think of and they actually do nothing but hand themselves awards for subpar "acting" and collect free gifts.

Point being if you librals want to whine about the rich, whine about the very ones that put you in office and contribute nothing to society.

[gray_owl_55]

Continued from above

Another reason mentioned in the article is Dean Baker%u2019s argument in his book The Conservative Nanny State, that %u201Cthe political right has long employed big government to redistribute wealth upwards %u2014 from promoting high CEO pay to putting loopholes in bankruptcy law that benefit wealthy homeowners%u201D. Isn%u2019t govt. subsidy called welfare? Aren%u2019t these the same people who tell the rest of us we shouldn%u2019t look to govt. to solve our problems? It%u2019s ironic that people who benefit the most from democracy feel entitled to earn the most and as a percentage of income pay the least in taxes. Consequently they pay a smaller percentage than the rest of us to maintain our democracy. With a flat income tax everyone would pay the same percentage to maintain our democracy, no wonder the wealthy fight the idea so much misinformation. So the next time a politician says %u201C I will cut your taxes%u201D or %u201Cyou must make these tax cuts permanent%u201D. If you%u2019re not a multi-millionaire, bend over and grab your ankles, you%u2019re about to get screwed.

[gray_owl_55]

Here is why Democracy for the wealthy is not a good plan for the majority of America. To paraphrase Gordon Geiko from the movie Wallstreet %u201CGreed is NOT good%u201D. Paying executives $80M/yr and the common worker $40K/yr is bad policy for several reasons. Unless the CEO is the founder, there is no reason other than greed why he should be paid 2000 times more. And even then it would be wise to reinvested those funds on new plants, equipment and labor locally rather than exporting operations. Having a strong manufacturing base is vital to our national security. A key reason the US won WWII and the Cold War was because we could produce more steel, aluminum, tires, electronics, weapons and supplies than any other country. We were a net exporter not a net importer. We no longer have that capacity due to policies of rewarding corporate incompetence with %u201Cgolden parachutes%u201D, bad trade policies and out sourcing jobs.

[rhs648]

Thank you r_bayless.

[adian1-2009]

It is strange that you find reasonable on their face the arguments from Mssrs. Cowan, Reynolds and Barlett. Their arguments are clear examples of business alien to ethics. Worse than that, their arguments show that in their respective views, there is no social duty involved in doing business. There is nothing wrong, I am willing to concede, in that Mr. Gates makes a billion a year, as long as he is aware of the fact that he did not invent the road that took him to school, nor the educational system he went to, nor the shoes he used, etc., etc. Judging from what he has been doing, it seems that he is aware of his social duties as well as of ethics in our business society. Most entrepreneurs in our country do not. Or in the capitalistic world, for that matter. It is just that it does not look right that while a few make so many billion dollars a year, there are 47 million without health insurance, and who knows how many out of those, without medical treatment. Or without enough food for two meals a day. Or elderly people that do not have enough means to survive in dignity.