How Big Money Corrupts the Economy
If war is politics by other means, political spending is economic war by other means. Runaway campaign spending and lobbying don’t just stand in the way of a fair political system. They also stand in the way of an economy that works for the middle class.
After all, why do corporations and the super-rich pour money into campaigns and lobbying? Sometimes political convictions are at play. But far more so than small-scale donors, the biggest spenders are investing in favorable policy outcomes. Money doesn’t just give big spenders the chance to express a view or support a candidate; it gives them leverage to reshape the American economy in their favor. And as the richest have pulled away from the rest of America, the policies they want—extremely low tax rates on the wealthy at a time of record deficits, rampant underinvestment in our future, special treatment for corporations that are imposing major environmental costs and financial risks on our society—are increasingly at odds with the policies the country desperately needs.
Of course, money has always been part of American politics. William McKinley’s political fixer, Mark Hanna, famously said, “There are two things that are important in politics. The first is money, and I can’t remember what the second one is.” But Hanna spoke at the end of an era, the Gilded Age of staggering inequality and government corruption. In the decades that followed, reformers acted on the calls of Theodore Roosevelt (“the supreme political task of our day… is to drive the special interests out of our public life”) and Franklin Roosevelt (“we now know that government by organized money is as dangerous as government by organized mob”) to reinvigorate a realm of civic life distinct from the disparities and imbalances of the market.
The goal was not just greater political equality. It was also to prevent the capture of government by powerful economic interests and to create space for economic policies that would further the interests of broad majorities of citizens. New rules for Wall Street prevented the destabilizing financial crises that were endemic under the hands-off regime demanded by the financial industry. Providing for workplace safety and economic security meant workers were better protected and more productive. Raising taxes on the wealthy funded investments in education and infrastructure, providing long-term benefits to society and the economy alike.
Today, however, the floodwalls between the market and democracy are washing away, and both sides of the barrier are being reshaped by the new currents of influence. It’s not just the sheer volume of dollars that’s driving the change. At least as important is the growing gulf between those at the commanding heights of our economy and the rest of Americans. The share of pretax national income going to the richest 0.1 percent has roughly quadrupled since the 1970s. At the same time, as our economy has grown more globalized and finance has increased in importance, many of the richest companies have increasingly separated themselves from the fate of ordinary U.S. workers. The interests of today’s corporate titans are not as well aligned with the interests of the American middle class as they were a generation ago.
The consequences of these growing divides are visible all around us: a tepid response to the housing and jobs crisis even as Wall Street received a generous rescue; a recovery that’s been much better for the richest 1 percent (who received 93 percent of pre-tax income gains in 2010) than for the rest of Americans; and rates of joblessness and underemployment that remain tragically high. Over the last generation, the middle class has faced rising health and education costs, weakened job and retirement security, and stagnating opportunities for advancement. Yet government too often has failed to respond, or has responded in ways that actually made the problems worse. A major reason is the weakening political clout of the middle class in a more money-centered political world.
Winners Write The Rules
Two players in the market for political power have gained the most ground: the super-rich, and corporate and financial lobbies. To be sure, these are overlapping groups. Six in ten of the richest 0.1 percent of Americans are corporate or financial executives. The Koch brothers, for example, are both huge individual donors and leaders of an industry juggernaut. Nonetheless, it’s useful to consider the groups separately. According to a recent survey of the super-wealthy by a team of enterprising political scientists, the rich are primarily concerned with taxes and deficits. Corporations care about these things too, but their primary focus is industry-specific regulations and subsidies. And while the super-rich focus heavily on contributions to campaigns (while also funding advocacy), corporations put most of their money into lobbying (while also funding campaigns).
The most important thing to bear in mind about the super-rich is that they are more conservative than average. In fact, much more so: While most voters rank creating jobs a much higher priority than reducing the deficit, the rich express exactly the opposite preference—which may explain why jobs don’t seem to be such a high priority in Washington. And in contrast with voters of more modest means, the rich appear to support cutting even highly popular economic-security programs rather than raising taxes to close the budget gap. As the authors of the survey conclude, “If wealthy Americans have an extra measure of influence over policy making and public discourse, then their focus on deficit reduction and budget cutting may help explain why elite pundits and Washington politicians are currently contemplating deep cuts in the very social welfare programs that are most popular among ordinary Americans.”
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