How the Oligarchs Took Over America
http://www.alternet.org/story/149105/how_the_oligarchs_took_over_america
Creating a country of the rich, by the rich, and for the rich.
December 6, 2010
By Andy Kroll
There is a war underway. I'm not talking about Washington's bloody
misadventures in Afghanistan and Iraq, but a war within our own
borders. It's a war fought on the airwaves, on television and radio
and over the Internet, a war of words and images, of half-truth,
innuendo, and raging lies. I'm talking about a political war, pitting
liberals against conservatives, Democrats against Republicans. I'm
talking about a spending war, fueled by stealthy front groups and
deep-pocketed anonymous donors. It's a war that's poised to topple
what's left of American democracy.
The right wing won the opening battle. In the 2010 midterm elections,
shadowy outside organizations (who didn't have to disclose their
donors until well after Election Day, if at all) backing Republican
candidates doled out $190 million, outspending their adversaries by a
more than two-to-one margin, according to the Center for Responsive
Politics. American Action Network, operated by Republican consultant
Fred Malek and former Republican Senator Norm Coleman, spent $26
million; the U.S. Chamber of Commerce plunked down $33 million; and
Karl Rove's American Crossroads and Crossroads GPS shelled out a
combined $38.6 million. Their investments in conservative candidates
across the country paid off: the 62 House seats and six Senate seats
claimed by Republicans were the most in the postwar era -- literally,
a historic victory.
Knocked out of their complacency, no longer basking in the glow of
Barack Obama's 2008 victory, wealthy Democrats are now plotting their
response. Left-wing media mogul David Brock plans to create an
outside group dubbed American Bridge in response to Rove's Crossroads
outfits that will fight in the trenches of 2012 campaign spending.
Many more outfits like Brock's will surely follow, as liberal and
centrist Democrats brace for a promised $500 million onslaught by the
Chamber of Commerce and others of its ilk.
Even the Obama administration, which shunned outside groups in 2008,
has opened the door to a covert spending war. The Democrats will now
fight fire with fire. "Is small money better? You bet. But we're in
a fucking fight," Democratic strategist and fundraiser Harold Ickes
told me recently. "And if you're in a fistfight, then you're in a
fistfight, and you use all legal means available."
The endgame here, of course, is non-stop war. No longer will outside
groups come and go every two years. Now, such groups will be running
attack ads, sending out mailers, and deploying robo-calls year-round
in what is going to become a perpetual campaign to sway voters and
elect friendly lawmakers. "We're definitely building a foundation,"
was how American Crossroads president Steven Law put it.
This is what nowadays passes for the heart and soul of American
democracy. It used to be that citizens in large numbers, mobilized by
labor unions or political parties or a single uniting cause,
determined the course of American politics. After World War II, a
swelling middle class was the most powerful voting bloc, while, in
those same decades, the working and middle classes enjoyed
comparatively greater economic prosperity than their wealthy
counterparts. Kiss all that goodbye. We're now a country run by rich people.
Not surprisingly, political power has a way of following
wealth. What that means is: you can't understand how the rich seized
control of American politics, and arguably American society, without
understanding how a small group of Americans got so much money in the
first place.
That story begins in the late 1970s and continues through the Obama
years, a period in which American policy has been so skewed toward
the rich that we're now living through the worst period of income
inequality in modern history. Consider the statistics: 50 years ago,
the wealthiest 1% of Americans accounted for one of every 10 dollars
of the nation's income; today, it's nearly one in every four. Between
1979 and 2006, the average post-tax household income (including
benefits) of the wealthiest 1% increased by 256%; the poorest
households saw an increase of 11%; middle class homes, 21%, much of
which was due to the arrival of two-job families.
Tax guru David Cay Johnston recently crunched new Social Security
Administration data and discovered an even starker divide. On the one
hand, the number of Americans earning a steady income declined by 4.5
million between 2008 and 2009, and the average wage in the U.S.
dipped by 1.2%, to $39,055. On the other hand, the average wage among
Americans earning more than $50 million per year was $91 million in
2008 and $84 million in 2009.
Harvard University economist Lawrence Katz put the situation
Americans now find themselves in this way:
"Think of the American economy as a large apartment block. A century
ago -- even 30 years ago -- it was the object of envy. But in the
last generation its character has changed. The penthouses at the top
keep getting larger and larger. The apartments in the middle are
feeling more and more squeezed and the basement has flooded. To round
it off, the elevator is no longer working. That broken elevator is
what gets people down the most."
Let's call those select few in the penthouse the New Oligarchy, an
awesomely rich sliver of Americans raking in an outsized share of the
nation's wealth. They're oil magnates and media tycoons, corporate
executives and hedge-fund traders, philanthropists and entertainers.
Depending on where you want to draw the line, they're the top 1%, or
the top 0.1%, or even the top 0.01% of the population. And when the
Supreme Court handed down its controversial Citizens United decision
in January, it broke the floodgates so that a torrent of anonymous
donations from this oligarchic class could flood back down from the
heights and inundate the political lands below.
"The Thirty-Year War"
How did we get here? How did a middle-class-heavy nation transform
itself into an oligarchy? You'll find answers to these questions in
Winner-Take-All Politics, a revelatory new book by political
scientists Jacob Hacker and Paul Pierson. The authors treat the
present figures we have on American wealth and poverty as a crime
scene littered with clues and suspects, dead-ends and alibis.
Unlike so many pundits, politicians, and academics, Hacker and
Pierson resist blaming the usual suspects: globalization, the rise of
an information-based economy, and the demise of manufacturing. The
culprit in their crime drama is American politics itself over the
last three decades. The clues to understanding the rise of an
American oligarchy, they believe, won't be found in New York or New
Delhi, but on Capitol Hill, along Pennsylvania Avenue, and around K
Street, that haven in a heartless world for Washington's lobbyists.
"Step by step and debate by debate," they write, "America's public
officials have rewritten the rules of American politics and the
American economy in ways that have benefitted the few at the expense
of the many."
Most accounts of American income inequality begin in the 1980s with
the reign of President Ronald Reagan, the anti-government icon whose
"Reaganomics" are commonly fingered as the catalyst for today's
problems. Wrong, say Hacker and Pierson. The origins of oligarchy lay
in the late 1970s and in the unlikely figure of Jimmy Carter, a
Democratic president presiding over a Congress controlled by
Democrats. It was Carter's successes and failures, they argue, that
kicked off what economist Paul Krugman has labeled "the Great Divergence."
In 1978, the Carter administration and Congress took a red pen to the
tax code, slashing the top rate of the capital gains tax from 48% to
28% -- an enormous boon for wealthy Americans. At the same time, the
most ambitious effort in decades to reform American labor law in
order to make it easer to unionize died in the Senate, despite a
61-vote Democratic supermajority. Likewise, a proposed Office of
Consumer Representation, a $15 million advocacy agency that was to
work on behalf of average Americans, was defeated by an increasingly
powerful business lobby.
Ronald Reagan, you could say, simply took the baton passed to him by
Carter. His 1981 Economic Recovery and Tax Act (ERTA) bundled a
medley of goodies any oligarch would love, including tax cuts for
corporations, ample reductions in the capital gains and estate taxes,
and a 10% income tax exclusion for married couples in two-earner
families. "ERTA was Ronald Reagan's greatest legislative triumph, a
fundamental rewriting of the nation's tax laws in favor of
winner-take-all outcomes," Hacker and Pierson conclude.
The groundwork had by then been laid for the rich to pull
definitively and staggering ahead of everyone else. The momentum of
the tax-cut fervor carried through the presidencies of George H.W.
Bush and Bill Clinton, and in 2000 became the campaign trail rallying
cry of George W. Bush. It was Bush II, after all, who told a room
full of wealthy donors at an $800-a-plate dinner, "Some people call
you the elites; I call you my base," and who pledged that his 2001
tax cuts would be a boon for all Americans. They weren't: according
to Hacker and Pierson, 51% of their benefits go to the top 1% of earners.
Those cuts will be around a lot longer if the GOP has its way. Take
Republican Congressman Dave Camp's word for it. On November 16th,
Camp, a Republican from Michigan, said the only acceptable solution
when it came to the Bush-era tax cuts was not just upholding them for
all earners, rich and poor, but passing more such cuts. Anything in
between, any form of compromise, including President Obama's proposal
to extend the Bush cuts for the working and middle classes but not
the wealthy, was "a terrible idea and a total non-starter."
Why should you care what Dave Camp says? Here's the answer: in
January, he's set to inherit the chairman's gavel on the powerful
House Ways and Means Committee, the body tasked with writing the
nation's tax laws. And though most Americans wouldn't even recognize
his name, Camp's message surely left America's wealthy elites
breathing a long sigh of relief. You could sum it up like this: Fear
not, wealthy Americans, your money is safe. The policies that made
you rich aren't going anywhere.
Tear Down This Law
Where rewriting the tax code proved too politically difficult,
demolishing regulations worked almost as well. This has been
especially true in the world of finance. There, a legacy of
deregulation transformed banking from a relatively staid industry
into a casino culture, ushering in an era of eye-popping profits,
lavish bonuses, and the "financialization" of the American economy.
April 6, 1998: it's a useful starting point in the story of financial
deregulation. On that day, two well-known Wall Street denizens,
Citicorp and Travelers Group, agreed to a historic $140 billion
merger. The deal required much lobbying, but eventually the chiefs of
these banks won an exemption from the Glass-Steagall Act, the New
Deal-era law walling off commercial banks from riskier investment
houses. The resulting institution, dubbed Citigroup, would be the
largest supermarket bank in history, a marriage of teller windows and
trading desks, customer banking and high-stakes investing -- all
suddenly under one deregulated roof. It would prove an explosive, if
not disastrous, mix.
The merger stirred visions of a future in which the U.S. would
dominate the planet financially. All that stood in the way was undue
regulatory red tape. At least that's the way free marketeers like
then-Republican Senator Phil Gramm of Texas saw it. Gramm, who as an
aide to presidential candidate John McCain infamously called America
a "nation of whiners," was, in fact, the driving force behind two of
the most influential pieces of deregulation in recent history.
In 1999, President Clinton signed the Gramm-Leach-Bliley Act, a bevy
of deregulatory measures that obliterated Glass-Steagall. In December
of the following year, Gramm quietly snuck the 262-page Commodity
Futures Modernization Act into a massive $384-billion spending bill.
Gramm's bill blocked regulators like the Securities and Exchange
Commission (SEC) from cracking down on the shadowy "over-the-counter
derivatives" market, home to billions of dollars of opaque financial
instruments that would, years later, nearly demolish the American economy.
As presidents, both Bill Clinton and George W. Bush wrapped their
arms around financial deregulation. As a result, in a binge of
financial gluttony, Wall Street grew fat in ways never previously
seen. Between 1929, the year the Great Depression began, and 1988,
Wall Street's profits averaged 1.2% of the nation's gross domestic
product; in 2005, that figure peaked at 3.3% as industry bonuses
soared ever-higher. In 2009, bad times for most Americans, bonuses
hit $20 billion. So much wealth in so few hands. Nothing explains
the rise of the new American oligarchy more starkly.
Of course, it's not just what politicians did that helped create
today's oligarchy, but what they failed to do. A classic example: in
the 1990s, the Financial Accounting Standards Board (FASB), a private
American accounting regulator, set its sights on a loophole big
enough to drive a financial Mack truck through. Until then, stock
options included in executives' skyrocketing pay packages --
potentially worth tens of millions of dollars when exercised -- were
valued at zero when issued. That's right: zero, zilch, nada. When
FASB and the SEC tried to close the loophole, however, big business
leapt to its defense. An avalanche of money went into the pockets of
an army of K Street lobbyists and leviathan business trade
associations. In the end, nothing happened. Or rather, everything
continued happening. The loophole remained.
Citizen United's Brave New World
Hacker and Pierson ably guide us through 30 years of
"winner-take-all" policymaking, politicking, and -- from the point of
view of the wealthy -- judicious inaction. They offer an eye-opening
journey across the landscape that helped foster the New Oligarchs,
but one crucial vista appeared too late for the authors to include.
No understanding of the rise of our New Oligarchs could be complete
without exploring the effects of the Supreme Court's January Citizens
United decision, which set their power in cement more effectively
than any tax cut ever could. Before Citizens United, the rich used
their wealth to subtly shape policy, woo politicians, and influence
elections. Now, with so much money flowing into their hands and the
contribution faucets wide open, they can simply buy American politics
so long as the price is right.
There's no mistaking how, in less than a year, Citizens United has
radically tilted the political playing field. Along with several
other major court rulings, it ushered in American Crossroads,
American Action Network, and many similar groups that now can reel in
unlimited donations with pathetically few requirements to disclose
their funders.
What the present Supreme Court, itself the fruit of successive
tax-cutting and deregulating administrations, has ensured is this:
that in an American "democracy," only the public will remain in the
dark. Even for dedicated reporters, tracking down these groups is
like chasing shadows: official addresses lead to P.O. boxes; phone
calls go unreturned; doors are shut in your face.
The limited glimpse we have of the people bankrolling these shadowy
outfits is a who's-who of the New Oligarchy: the billionaire Koch
Brothers ($21.5 billion); financier George Soros ($11 billion);
hedge-fund CEO Paul Singer (his fund, Elliott Management, is worth
$17 billion); investor Harold Simmons (net worth: $4.5 billion); New
York venture capitalist Kenneth Langone ($1.1 billion); and real
estate tycoon Bob Perry ($600 million).
Then there's the roster of corporations who have used their largesse
to influence American politics. Health insurance companies, including
UnitedHealth Group and Cigna, gave a whopping $86.2 million to the
U.S. Chamber to kill the public option, funneling the money through
the industry trade group America's Health Insurance Plans. And
corporate titans like Goldman Sachs, Prudential Financial, and Dow
Chemical have given millions more to the Chamber to lobby against new
financial and chemical regulations.
As a result, the central story of the 2010 midterm elections isn't
Republican victory or Democratic defeat or Tea Party anger; it's this
blitzkrieg of outside spending, most of which came from right-leaning
groups like Rove's American Crossroads and the U.S. Chamber of
Commerce. It's a grim illustration of what happens when so much money
ends up in the hands of so few. And with campaign finance reforms
soundly defeated for years to come, the spending wars will only get worse.
Indeed, pundits predict that spending in the 2012 elections will
smash all records. Think of it this way: in 2008, total election
spending reached $5.3 billion, while the $1.8 billion spent on the
presidential race alone more than doubled 2004's total. How high
could we go in 2012? $7 billion? $10 billion? It looks like the
sky's the limit.
We don't need to wait for 2012 to arrive, however, to know that the
sheer amount of money being pumped into American politics makes a
mockery out of our democracy (or what's left of it). Worse yet, few
solutions exist to staunch the cash flow: the DISCLOSE Act, intended
to counter the effects of Citizens United, twice failed in the Senate
this year; and the best option, public financing of elections, can't
even get a hearing in Washington.
Until lawmakers cap the amount of money in politics, while forcing
donors to reveal their identities and not hide in the shadows, the
New Oligarchy will only grow in stature and influence. Left
unchecked, this ultimate elite will continue to root out the few
members of Congress not beholden to them and their "contributions"
(see: Wisconsin's Russ Feingold) and will replace them with lawmakers
eager to do their bidding, a Congress full of obedient placeholders
ready to give their donors what they want.
Never before has the United States looked so much like a country of
the rich, by the rich, and for the rich.
--------
The Largest Welfare Check Ever Written
The Rise of the Wall Street Ruling Class
http://www.counterpunch.org/volscho12102010.html
By THOMAS VOLSCHO
December 10 - 12, 2010
Who rules America? Sociologists and political scientists have
debated this question since C. Wright Mills published his 1956 book
The Power Elite. Writing in the 1950s, Mills argued that the United
States was ruled by a triangle of power between the federal
government, large corporations, and the military industrial complex
(with many people moving between these sectors). Robert McNamara
went from CEO of Ford Motor Company to Secretary of Defense under the
Kennedy-Johnson administrations (modern examples include Dick Cheney,
Henry Paulson, Robert Rubin, Larry Summers, etc). Since the late
1960s, sociologist G. William Domhoff has revised, updated, and
increased the sophistication of power elite theory. If we look at
the composition of cabinet-level and other White House appoints since
the Reagan administration, it is clear that there is a significant
movement between Wall Street and the Federal Reserve Bank and
Treasury Department. But why? The answers are found in the social
and economic crises of the 1960s and 1970s.
The rate of profit in the non-financial sector fell after peaking in
1966 and continued its fall into the mid 1970s. At the same time,
the Civil Rights, anti-war, feminist, brown power, black power,
American Indian Movement, student revolts, prison riots, and other
rebellions against the establishment were taking place. Regulatory
victories by Ralph Nader and other challenges to the power of the
capitalist establishment were increasingly seen as a threat in the
1970s. Lewis F. Powell (a corporate lawyer, board member, and future
Supreme Court Justice) wrote a memo to the Chamber of Commerce in
1971 and opened the document by stating, "No thoughtful person can
question that the American economic system is under broad
attack." But what was most alarming was that " Although New Leftist
spokesmen are succeeding in radicalizing thousands of the young, the
greater cause for concern is the hostility of respectable liberals
and social reformers." The great fear was that mainstream liberals
were becoming more radical. A further fear was that Yale's
graduating classes (composed of old and new money and elites-to-be)
in the late 1960s and 1970s included those who were versed in the
"politics of despair."
In response capitalists mobilized politically and ideologically. By
1976, the U.S. Chamber of Commerce's membership started increasing
rapidly and doubled by 1980. In 1975, there were just under 200
Corporate Political Action Committees (PACs) but about 1400 by
1981. The ideological factions of the right in the late 1970s
included Supply-Siders, Monetarists, and Neoconservatives. Each of
these factions were in power at the Treasury Department, White House,
and Federal Reserve Bank beginning in 1979. While they didn't
necessarily always get along, they put policies into place that led
to the rise of the Wall Street Ruling Class.
Supply-siders argued that radical tax cuts would increase economic
growth so much that it would actually increase government tax
revenues. This theory (known as the "Laffer Curve") was drawn on a
napkin at a bar and then presented in editorials in the Wall Street
Journal. One of Reagan's wunderkind, Office of Management and Budget
David Stockman, confided to a Washington Post reporter (William
Greider) that Reagan's tax cut was really a "trojan horse" for
cutting taxes on the rich.
At the same time, monetarists believed that the only cause of
inflation was the money supply. Beginning in October 1979, one of
the first applications of the "shock doctrine" came in the form of
very high interest rates. The vague proclamations of the Federal
Reserve Banker, Paul Volcker, that the Fed was only focusing on M1 (a
measure of money supply) and that the Fed's hands were tied such that
it was "the market" that determined interest rates was sold to the
public. What this really was, was "bitter medicine" and Volcker was
quoted in the New York Times as saying that Americans must get used
to declining living standards. In essence, the Federal Reserve Bank
was implementing the "shock and awe" phase of the first-strike of a
thirty year class war.
In 1981 Reagan signed the "Kemp-Roth" tax bill about a week after he
had taken the radical step of firing 11,000 striking federal air
traffic controllers. This was accomplished within the context of the
highest interest rates and subsequent unemployment rates of the
postwar era (in 1981-1982). This strategy, as explained by Naomi
Klein in her book The Shock Doctrine, requires that radical policy
shifts must occur when the public is disoriented and confused. High
interest rates, business failures, foreclosures, plant closures,
downsizing, and rising unemployment can have this effect. The
interest-rate shocks enabled elites to pursue radical anti-union
policies and radically reduce taxes on the rich. At the same time,
neoconservatives argued that "missile gaps" and "acoustic submarines"
(the inability to detect them being given as evidence for their
existence) developed by the Soviet Union were posing a major threat
to the United States. This justified unprecedented defense spending
increases. One of the failed moments of the Reagan revolution, of
course, was the decision not to pursue "Social Security reform" while
only having limited success at cutting other social programs. This
left a problem. Tax cuts for the rich reduced the tax revenue of the
Federal government while a defense-spending spree threatened to
create the largest federal deficit in history.
In a widely ignored 2000 book, Wall Street Capitalism: A Theory of
the Bondholding Class, economist E. Ray Canterbery explains what
happened. The tax cuts drastically increased the incomes of the rich
and they used their newfound money from the tax cuts to buy the
Treasury bonds, notes, and bills that the Treasury Department had to
issue in order to finance Reagan's deficits. The combination of
monetarism (high interest rates), supply-side tax cuts, and the
phantom Soviet threat created the bondholding class. In essence, a
Wall Street Welfare institution known as the bond market came to
dominate politics in the United States. Instead of using taxes to
fund the federal government (and increasingly state and municipal
governments), taxes on the rich were cut and they were handed an
"investment opportunity" so that working and middle-class taxpayers
now pay a "bondholder's tax" to firms like Goldman Sachs and JP
Morgan Chase (as well as Japan and China). The domination had become
quite apparent in early 1993 when President-elect Bill Clinton
remarked "You mean to tell me that the success of the economic
program and my re-election hinges on the Federal Reserve and a bunch
of fucking bond traders?" Clinton ditched his 1992 campaign promises
to the whims of the Wall Street Ruling Class and the Federal Reserve Bank.
Treasury securities come in maturities of 1 month, 3 months, 3 years,
7 years, 10 years, and 30 years. But rarely does the bondholding
class hold their securities to maturity. Instead, they are
circulated through high-volume secondary markets. In October of
2010, for instance, the average daily trading volume of Treasury
bonds was $558 billion. Treasury, State, and Municipal bonds are
highly concentrated among the rich. In the 2007 Survey of Consumer
Finances, the Top 5 percent (ranked by net worth) held about 93.6 per
cent of all bonds (this does not include the savings bonds that the
working and middle classes are familiar with). Likewise, the Top 5
percent owned 82.4 per cent of all stocks. The bondholding class
oscillates between bonds and stocks as market conditions
dictate. The Wall Street Ruling Class manipulates the supply of
bonds, bills, and notes of differing maturities through its "Treasury
Borrowing Advisory Committee" to maximize the economic gains of the
bondholding class. The current Chairman and Vice Chairman are from
JP Morgan Chase and Goldman Sachs, respectively.
By implementing what Canterbery calls a "bondholding class
strategy," the Federal Reserve Bank managed interest rates so as to
optimize returns for the bond and stock market. Studies indicate
that bond prices and the stock market generally react negatively to
what is good news for most Americans: strong employment growth, a
decline in jobless claims, an increase in wages, or an uptick of
inflation sends bond and stock prices falling. When news reports of
slower housing starts, slower than expected employment growth, an
increase in unemployment or jobless claims are released, the bond and
stock markets rally. This is a major difference in the class
interests between the vast majority of Americans whose primary income
is from wages and salaries and the minority of rich asset
holders. When the economy grows too fast, the ideology of the
bondholding class dictates that the Federal Reserve Bank should raise
interest rates (which increases the unemployment rate and reduces
wages). Keep wage and commodity inflation in check by all means
necessary while allowing for stock market and home mortgage inflation.
The last thirty years of the class war waged by the Wall Street
Ruling Class and the Federal Reserve Bank has been about reducing
wages and goods inflation while sustaining financial asset inflation
to increase the enrichment of the bond and stock holders. Net
interest payments on Treasury securities are welfare payments to the
Wall Street Ruling Class. One of the propaganda functions of the
highly concentrated (by ownership) mass media is to keep the masses
confused about this great source of power. From the perspective of
the elite, it is better to inflame and encourage hatred for Mexican
immigrants, welfare recipients, and Muslims. But Mexican immigrants
and Muslims, generally speaking do not run the country. Instead, the
simple answer is: follow the money. By following the money you will
be led to a street with a river at one end and a graveyard at the
other. In fact, it is for whom the firms located on this street
received the largest welfare check ever written. As the chorus of
Ron Paul supporters, Tea Party activists and white supremacists
continues rising and violence escalates, the question arises: Is
there socialism in the United States? The answer is a resounding Yes!
Socialism for the rich.
--
Thomas Volscho is Assistant Professor of Sociology, CUNY / College of
Staten Island. He can be reached at Thomas.Volscho@csi.cuny.edu
--------
Class Conflict, American Style
http://online.wsj.com/article/SB10001424052748704594804575649310009009640.html
DECEMBER 11, 2010
By FRED SIEGEL
Pathology of the Elites:
How the Arrogant Classes Plan to Run Your Life
By Michael Knox Beran
Ivan R. Dee, 293 pages, $26.95
--
Fortunes of Change:
The Rise of the Liberal Rich and the Remaking of America
By David Callahan
Wiley, 314 pages, $25.95
--
The Ruling Class:
How They Corrupted America and What We Can Do About It
By Angelo M. Codevilla
Beaufort, 147 pages, $12.95
In the 2010 electoral campaigns, some tea-party candidates referred
to the objects of their middle-class enmity as "the ruling class."
The ruling class, as its critics understand it, consists of the
overlapping circles of Washington, Wall Street, Hollywood, Silicon
Valley and Big Labor who have the sense that their
resourcesfinancial and intellectualentitle them to an outsize say
in how America is governed.
The idea that there is a British-style ruling establishment in
America is touched by more than a little hyperbole. But in the past
three decades the political and class structure of the U.S. has
indeed been rearranged. We have seen more and more "assortative
mating"wealthy, highly educated professionals marrying other
wealthy, highly educated professionalsand the rise of
information-age fortunes. In 1982, 20% of the Forbes 400 list of the
wealthiest Americans was composed of people whose fortunes were based
on old money. By 2008 that portion had dropped to 2%. The vast new
accumulations of wealthenabled, for the most part, by the creation
of a world economybelong to a small group of bicoastal beneficiaries.
In "Fortunes of Change: The Rise of the Liberal Rich and the Remaking
of America," David Callahan regards the political power of the newly
enriched as a largely benign phenomenon. The left's "traditional
prism of class politics," Mr. Callahan argues, is hopelessly outdated
at a time when wealthy liberals are more than willing to make common
cause with the barons of labor and the working class: "Far from
corrupting the Democratic Party, some wealthy liberal donors are
actually doing the exact opposite; they are helping the party find
its moral backbone."
Mr. Callahana senior fellow at Demos, a left-leaning think tank that
he co-foundedbegins by describing how moneyed liberals jammed the
airspace around Washington when they arrived in private jets for
Barack Obama's inaugural. He notes that one "progressive" donor
group, the Democratic Alliance, has been dubbed "billionaires for big
government."
The author admits to some qualms about the way Jon Corzine used the
fortune he acquired at Goldman Sachs to win first a seat in the U.S.
Senate and then the governorship of New Jersey. Mr. Corzine, in
effect, bought the support of the state's famously corrupt Democratic
Party. "Yet Corzine was also extremely liberal," Mr. Callahan notes
approvingly, "so liberal that Americans for Democratic Action gave
him a perfect 100 percent liberal rating for three of the five years
he served in the Senate." Mr. Corzine was not an outlier. Mr.
Callahan acknowledges that his book "will confirm the right's worst
fears about the ties between coastal elites and left-wing activists."
If the liberal rich are indeed a kind of class of their own, what
holds them together? Mr. Callahan doesn't say, but we can always
speculate. First there is the assumption that the technical know-how
that built their wealth qualifies them for a privileged position in
the political world. And then there is their contempt for George W.
Bush and the voters who made him president. The left-wing and
wealthy, accustomed to giving orders, don't understand why the
political systemwhich operates on a truly egalitarian principle (one
man, one vote)doesn't automatically validate their worldview.
Mr. Callahan traces the rise of the liberal rich to the 1960s and the
vital role played by Stewart Mott, a General Motors heir, in
financing the 1968 anti-war campaign of Eugene McCarthy. But Michael
Knox Beran, in "Pathology of the Elites," looks well beyond the
1960s, finding the liberal-rich quest for power rooted in an older
set of beliefs. In a collection of elegantly written essays on Lionel
Trilling, Isaiah Berlin, Ralph Waldo Emerson, Hannah Arendt and
Abraham Lincoln, Mr. Beran argues that this "arrogant" class is in
thrall to the sort of utopian impulses long associated with radical leftism.
The liberal rich, Mr. Beran believes, imagine that government would
be able to eliminate pollution, racial discrimination and other
social scourges if only their own wise counsel were accepted. Mr.
Callahan takes as a given the virtue of "supercitizens" like Google
chief executive Eric Schmidt and financier George Soros. But when Mr.
Beran discusses Google's substantial economic investments in
environmental projects, he sees not only self-interest but also
vanity and a will to power that masks itself as virtue.
Many have noted the hypocrisy of Sen. John Kerry, he of the five
mansions, haranguing others to reduce their carbon footprint. But
even more important, as Mr. Beran sees it, is the way the
imperiousness of John Kerry and his fellow moralists can quash "the
common culture of the market square." It is the interaction between
citizens of varied sorts in the public common, Mr. Beran argues, that
offers the opportunity for a degree of civic equality. Yet the
liberal rich who would lecture us about equality tend to live in
their own isolated social worlds and self-segregated neighborhoods.
Mr. Beran cites his hero, Abraham Lincoln: Those who, in one way or
another, deny equality, Lincoln said, are "the miners and sappers of
returning despotism. We must repulse them, or they will subjugate us."
In one of his closing essays, Mr. Beran, a man of wide reading,
strains to connect his argument with today's headlines. He suggests
that, in criticizing liberal pretension, Sarah Palin and the literary
critic Lionel Trilling share a commitment to what Trilling described
as the "moral" as opposed to the "social" imagination. Placing Ms.
Palin and Trilling in the same sentence is misleading in more than
the obvious way. Ms. Palin has her own kind of social imagination,
one in which a self-organized society would largely govern itselfif
only the elites could be forced to retreat. Mr. Beran wouldn't go
that far. He acknowledges, as Jefferson did, that "a complete
overthrow of the aristocratic element in society would be a catastrophe."
Just such an overthrow, by political means, is what Angelo Codevilla
has in mind in "The Ruling Class: How They Corrupted America and What
We Can Do About It." Mr. Codevilla, a professor emeritus at Boston
University, says that our elitesleft, right and centerhave
discredited themselves. The financial crash was caused by the
can't-miss mathematical models of Wall Street whizzes. The outcry
over climate change has been driven by scientific hucksterism. The
private-sector middle class feels itself ground down by the costs and
regulations imposed by the statist coalition of the liberal gentry
and their allies in the pampered public-sector unions. Meanwhile the
liberal gentry's favorite politician, Barack Obama, displays
priest-king pretensions.
Mr. Codevilla divides the U.S. into the categories of the 18th
century: the Country Class of ordinary workaday Americans and the
Ruling Class of the coastal elites, many of whom made their fortunes
directly or indirectly from government. American society, he
believes, has been deeply corrupted by the malign influences of an
increasingly parasitic polity. "Regardless of what business or
profession they are in," he writes, referring to the Ruling Class,
"their road up included government channels and government money
because, as government has grown, its boundary with the rest of
American life has become indistinct."
Discussing the rise of the tea party, Mr. Codevilla note that, "while
most of the voters who call themselves Democrats say that Democratic
officials represent them well, only a fourth of the voters who
identify themselves as Republicans tell pollsters that Republican
officeholders represent them well." His argument is grounded in the
spirit of Federalist No. 62, which warned: "It will be of little
avail to the people, that the laws are made by men of their own
choice, if the laws be so voluminous that they cannot be read, or so
incoherent that they cannot be understood" except by government
experts and their allies, who can "harvest" the value of new regulations.
Carrying that admonition into the present, Mr. Codevilla says that
"laws and regulations nowadays are longer than ever because length is
needed to specify how people will be treated unequally. . . .
Congresses empower countless boards and commissions arbitrarily to
protect some persons and companies, while ruining others." That's why
companies hired 2,500 lobbyists last year just to guide the shape of
climate-change legislation.
The book's core argument, though too broad, has some purchase: The
overreach and incompetence of the Obama administration has markedly
weakened the public's willingness to defer to Washington's authority.
But Mr. Codevilla's anger leaves no room for the exceptional talent
and expertise that can only grow more important in a complex world
linked by trade and high technology. What good will it do us as a
country if the Barbara Boxers of the world are replaced by the Sharron Angles?
With the occupant of the Oval Office bitterly disparaging "the
wealthy" and tea-party stalwarts attacking "the elites," a peculiar
sort of class conflict is roiling American politics. It's a
well-funded conflict: On both sides of the aisle, as Mr. Callahan
notes, "the most active donors hold the most ideologically extreme
views." That is why, regardless of the outcome of any one election,
the mutual contempt evinced by liberal grandees and tea-party
activists is likely to be with us for years to come.
--
Mr. Siegel is a scholar in residence at St. Francis College in
Brooklyn and a contributing editor of the Manhattan Institute's City Journal.
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