How to Build a New Labor Movement, One Step at a Time

By Abby Rapoport, The American Prospect, posted on Alternet.org,  May 22, 2013

Earlier this month, labor-rights group Working America launched FixMyJob.com. [4]  The text of the site reads a bit like an infomercial: “Tough day at work? Are you feeling overworked, underpaid, unsafe or disrespected by your boss?” But instead of selling a new set of knives, the writers are hawking organizing skills. “Our tool can help you identify problems in your workplace and give you info about what others have done in similar situations.” The famous raised fist of labor is sideways, holding a wrench. The website is yet another attempt by the country’s once-powerful union movement to connect to workers in an increasingly hostile national workplace.

“We also are trying to find new ways for workers to have representation on the job,” writes Working America spokesperson Aruna Jain in an email. “We want to train and educate people on how to self-organize, and to learn collective action—the single most effective way of improving their working conditions. This is one way we can start that process.”

The site, which is being rolled out slowly and in stages, is meant to give workers the resources they need to organize themselves and demand changes—regardless of whether or not an actual union comes together. It tells visitors how to contact the Occupational Safety and Health Administration (OSHA) for safety issues in the work place. It gives tips and strategies for how best to present a case to the boss or how to convince coworkers to get involved.

“We’re trying something new here—an experiment,” writes Jain. “It’s never been done before. We don’t know what will work and what won’t, but we are trying to provide information, resources to create a fertile environment where organizing can happen.” The website doesn’t charge dues and while the term “organizing” is used extensively, “collective bargaining”—a staple of the labor movement—is nowhere to be found.

Dues-paying members sustained the labor movement for decades, and in return, the unions helped negotiate better pay and better hours. But that relationship has been deteriorating rapidly.  For the last several decades, unions and the tools they offered seem far removed from the vast majority of workplace experiences. Around one-fourth of American workers are “contingent workers”—freelancers, independent contractors, part-timers, and temp workers—people with more tenuous relationships to their employers. Meanwhile conservatives have found ways to exploit weaknesses in the National Labor Relations Act, meaning the main legislative defense for unions is increasingly toothless. Labor conditions have gotten dramatically worse as unions have lost power—real wages have stagnated, wealth is increasingly concentrated—but no one seems to know how to connect the old-style of collective bargaining with the new economy. Some held out hope that the Obama administration—coupled with the worst economic crisis in decades—would help resuscitate things.

So when the Employee Free Choice Act failed in 2010, it seemed like a death knell for the American labor movement. The bill, which would have made it easier for workers to collectively bargain and increased the penalties on employers that fired people for trying to organize, was the number one piece in the labor agenda. Unions had poured resources into the 2008 elections, putting in hundreds of millions of dollars and mobilizing thousands of volunteers, and their efforts helped elect a Democratic president, and Democratic majorities in the Senate and House. But despite the concerted effort from labor leaders to push through this key piece of legislation, they simply didn’t have the power. It never got through the Senate.

Faced with the very real threat of extinction, unions have largely put collective bargaining on the back burner, and instead must try to remind American workers of the basic concept of worker solidarity. “We start from the point of view that, because so few people are in unions these days, very few people have personal experience with collective power,” explains Karen Nussbaum, the executive director of Working America. The group is the AFL-CIO’s answer to the “labor problem.” Rather than organizing workers into unions, Working America, an AFL-CIO affiliate, focuses on engaging non-union workers on a number of policy issues, from unemployment insurance and banking reform to education funding and campaign finance. The group uses the same door-to-door, grassroots strategies that have long been the hallmarks of labor organizers. But rather than emphasize relations between workers and their employers, the group focuses largely on policy changes. Members don’t have to pay dues, instead, at meetings and on sites like FixMyJob, they just have to sign up.

The group’s been able to create significant policy changes; with millions of members nationwide, Working America has been able to help mobilize activists for some successful local campaigns. In Portland, Oregon, workers won a battle for paid sick days. In both Albuquerque and Bernallilo County, New Mexico, the group helped organize and win a campaign for increase to the minimum wage.  Those are major changes for the people living in those areas. However, emphasis is necessarily on policy changes, rather than helping employees negotiate with their employers.

On more national policy issues, unions have taken lead roles in coalitions to effect change—just not on issues of collective bargaining. Nearly all the major unions have worked together to push for immigration reform, and perhaps more interestingly, the Communications Workers of America have helped spearhead a “democratic reform” movement focused on public financing for campaigns and changing the filibuster rules in the U.S. Senate so that 60 votes would not be needed for anything to pass. The group is working with GreenPeace, the Sierra Club, the NAACP, and the National Education Association in a coalition that calls itself the Democracy Initiative. The group makes almost no mention of collective bargaining at all. But that’s okay, explains CWA president Larry Cohen.  “If we don’t’ work on democracy issues, “ he says, “the stuff we started out working on is never going to go anywhere.”

In other words, in order to create a future for collective bargaining and increasing the number of dues-paying union members, labor must start by reforming elections and Senate rules. Similarly, Working America’s Nussbaum explains that unions must start engaging the majority of American workers and then find a structure that suits them. It’s unclear if Working America members will ever become union members—or at least the dues-paying kind. “There’s nothing sacrosanct about the form of the union in the United States,” says Nussbaum. But there’s one requirement she does make: “Any new organizational form has to still be based on workers supporting their organization.” And so far, there’s no clear model has emerged.

In implementing these new strategies, the unions are also taking some major risks. The American labor movement was defined by its unique role mediating between workers and their employers. Together, members’ dues created an enormous well of money organizers could draw on for political and organizing purposes. “Going back to 1855, the idea of a union was people at work get together in some fashion and say we want ‘X,’” explains Nelson Lichtenstein, a labor historian at the University of California-Santa Barbara. “If unions [became] just voluntary associations that are politically active, why are they unions?” He points to groups like Our Wal-Mart, a collection of people who work for the retail giant but who do not collectively bargain; instead they speak about conditions and work with activists to push policy changes for the company, like more regular hours.

Such work could lead to a much bigger project: a workers’ solidarity movement, less concerned with the typical lines drawn between different local chapters and instead invested in creating change through a level of class-consciousness. As Harold Meyerson has reported, [5] we’re already seeing new kinds of organizing, as maids and fast-food workers across a number of industries took part in day-long strikes first in New York and then in Chicago. Last week, there was a similar event [6] in St. Louis.

While it was a long time coming, unions are more flexible than ever before, and willing to change to survive. The Service Employees International Union has aided the day-long strike efforts, while sites like Working America’s FixMyJob may help connect other dissatisfied workers to one another. We may begin to see more powerful policy changes to protect workers rights.

These new efforts carry potential seeds for the destruction of unions as we know them, and collective bargaining may never be the tool it once was. But in its place may be something more powerful that we just haven’t seen yet.


Source URL: http://www.alternet.org/economy/how-build-new-labor-movement-one-step-time

Links:
[1] http://www.prospect.org/
[2] http://www.alternet.org/authors/abby-rapoport
[3] http://prospect.org/article/labors-plan-b
[4] http://www.fixmyjob.com/
[5] http://prospect.org/article/how-unions-are-getting-their-groove-back
[6] http://prospect.org/article/fast-food-slow-change
[7] http://www.alternet.org/tags/unions
[8] http://www.alternet.org/tags/collective-bargaining-0
[9] http://www.alternet.org/%2Bnew_src%2B

Billionaires Unchained: The New Pay-As-You-Go Landscape of American “Democracy”

by Andy Kroll, May 16, 2013 by TomDispatch

Billionaires with an axe to grind, now is your time. Not since the days before a bumbling crew of would-be break-in artists set into motion the fabled Watergate scandal, leading to the first far-reaching restrictions on money in American politics, have you been so free to meddle. There is no limit to the amount of money you can give to elect your friends and allies to political office, to defeat those with whom you disagree, to shape or stunt or kill policy, and above all to influence the tone and content of political discussion in this country.

Today, politics is a rich man’s game. Look no further than the 2012 elections and that season’s biggest donor, 79-year-old casino mogul Sheldon Adelson. He and his wife, Miriam, shocked the political class by first giving $16.5 million in an effort to make Newt Gingrich the Republican presidential nominee. Once Gingrich exited the race, the Adelsons invested more than $30 million in electing Mitt Romney. They donated millions more to support GOP candidates running for the House and Senate, to block a pro-union measure in Michigan, and to bankroll the U.S. Chamber of Commerce and other conservative stalwarts (which waged their own campaigns mostly to help Republican candidates for Congress). All told, the Adelsons donated $94 million during the 2012 cycle — nearly four times the previous record set by liberal financier George Soros. And that’s only the money we know about. When you add in so-called dark money, one estimate puts their total giving at closer to $150 million.

It was not one of Adelson’s better bets. Romney went down in flames; the Republicans failed to retake the Senate and conceded seats in the House; and the majority of candidates backed by Adelson-funded groups lost, too. But Adelson, who oozes chutzpah as only a gambling tycoon worth $26.5 billion could, is undeterred. Politics, he told the Wall Street Journal in his first post-election interview, is like poker: “I don’t cry when I lose. There’s always a new hand coming up.” He said he could double his 2012 giving in future elections. “I’ll spend that much and more,” he said. “Let’s cut any ambiguity.”

But simply tallying Adelson’s wins and losses — or the Koch brothers’, or George Soros’s, or any other mega-donors’ — misses the bigger point. What matters is that these wealthy funders were able to give so much money in the first place.

With the advent of super PACs and a growing reliance on secretly funded nonprofits, the very wealthy can pour their money into the political system with an ease that didn’t exist as recently as this moment in Barack Obama’s first term in office. For now at least, Sheldon Adelson is an extreme example, but he portends a future in which 1-percenters can flood the system with money in ways beyond the dreams of ordinary Americans. In the meantime, the traditional political parties, barred from taking all that limitless cash, seem to be sliding toward irrelevance. They are losing their grip on the political process, political observers say, leaving motivated millionaires and billionaires to handpick the candidates and the issues. “It’ll be wealthy people getting together and picking horses and riding those horses through a primary process and maybe upending the consensus of the party,” a Democratic strategist recently told me. “We’re in a whole new world.”

The Rise of the Super PAC

But simply tallying Adelson’s wins and losses — or the Koch brothers’, or George Soros’s, or any other mega-donors’ — misses the bigger point. What matters is that these wealthy funders were able to give so much money in the first place.

She needed something sexy, memorable. In all fairness, anything was an improvement on “independent expenditure-only political action committee.” Eliza Newlin Carney, one of D.C.’s trustiest scribes on the campaign money beat, didn’t want to type out that clunker day after day. She knew this was big news — the name mattered. Then it came to her:

Super PAC.

The Supreme Court’s 2010 Citizens United decision is often blamed — or hailed — for creating super PACs. In fact, it was a lesser-known case, SpeechNow.org vs. Federal Election Commission, decided by the D.C. Circuit Court of Appeals two months later, that did the trick. At the heart of SpeechNow was the central tension in all campaign money fights: the balance between stopping corruption or the appearance of corruption, and protecting the right to free speech. In this instance, the D.C. appeals court, influenced by the Citizens United decision, landed on the side of free speech, ruling that limits to giving and spending when it came to any group — and here’s the kicker — acting independently of candidates and campaigns violated the First Amendment.

Wonky as that may sound, SpeechNow reconfigured the political landscape and unchained big donors after decades of restrictions. The lawyers who argued the case, the academics and legal eagles whose expertise is campaign finance, and the beat reporters like Carney Newlin soon grasped what SpeechNow had wrought: a new, turbocharged political outfit that had no precedent in American politics.

Super PACs can raise unlimited amounts of money from pretty much anyone — individuals, corporations, labor unions — and there is no limit on how much they can spend. Every so often, they must reveal their donors and show how they spent their money. And they can’t directly coordinate with candidates or their campaigns. For instance, Restore Our Future, the super PAC that spent $142 million to elect Mitt Romney, couldn’t tell his campaign when or where it was running TV ads, couldn’t share scripts, couldn’t trade messaging ideas. Nor could Restore Our Future — yes, even its founders wince at the name — sit down with Romney and tape an interview for a TV ad.

It’s far easier, in other words, for a super PAC to attack the other guy, which helps explain all the hostility on the airwaves in 2012. Sixty-four percent of all ads aired during the presidential race were negative, up from 51% in 2008, 44% in 2004, and 29% in 2000. Much of that negativity can be blamed on super PACs and their arsenal of attack ads, according to a recent analysis by Wesleyan University’s Erika Franklin Fowler and Washington State University’s Travis Ridout. They found that a staggering 85% of all ads aired by “outside groups” were negative, while only 5% were positive.

And it will only get worse. “It’s going to be the case that the more super PACs invest in elections, the more negative those elections will be,” Michael Franz, a co-director of the Wesleyan Media Project, told me. “They’re the ones doing the dirty work.” Think of them as the attack dogs of a candidate’s campaign — and the growling packs of super PACs are growing fast.

The savviest political operatives quickly realized how potentially powerful such outfits could be when it came to setting agendas and influencing the political system. In March 2010, Karl Rove, George W. Bush’s erstwhile political guru, launched American Crossroads, a super PAC aimed at influencing the 2010 midterms. As consultants like Rove and the wealthy donors they courted saw the advantages of having their own super PACs — no legal headaches, no giving or spending limits — the groups grew in popularity.

By November 2010, 83 of them had spent $63 million on the midterm elections. Nearly $6 of every $10 they put out supported conservative candidates, and it showed: buoyed by the Tea Party, Republicans ran roughshod over the Democrats, retaking control of the House and winnowing their majority in the Senate. It was a “shellacking,” as President Obama put it, powered by rich donors and the new organizations that went with them.

In 2012, no one, it seemed, could afford to sit on the sidelines. Having decried super PACs as “a threat to democracy,” Obama and his advisers flip-flopped and blessed the creation of one devoted specifically to reelecting the president. Soon, they were everywhere, at the local, state, and federal levels. A mom started one to back her daughter’s congressional campaign in Washington State. Aunts and uncles bankrolled their nephew’s super PAC in North Carolina. Super PACs spent big on abortion, same-sex marriage, and other major issues.

In all, the number of super PACs shot up to 1,310 during the 2012 campaign, a 15-fold increase from two years earlier. Fundraising and spending similarly exploded: these outfits raised $828 million and spent $609 million.

But what’s most striking about these groups is who funds them. An analysis by the liberal think tank Demos found that out of every $10 raised by super PACs in 2012, $9 came from just 3,318 people giving $10,000 or more. That small club of donors is equivalent to 0.0011% of the U.S. population.

Into the Shadows

In late April, roughly 100 donors gathered at a resort in Laguna Beach, California. They were all members of the Democracy Alliance, a private group of wealthy liberals that includes George Soros and Facebook co-founder Chris Hughes. Over five days, they swapped ideas on how best to promote a progressive agenda and took in pitches from leaders of the most powerful liberal and left-leaning groups in America, including Organizing for Action, the rebooted version of Obama’s 2012 presidential campaign. Since the Democracy Alliance’s founding in 2005, its members have given $500 million to various causes and organizations. At the Laguna Beach event alone, its members pledged a reported $50 million.

At the same time, about 100 miles to the east, a similar scene was playing out. A few hundred conservative and libertarian donors descended on the Renaissance Esmeralda Resort and Spa in Palm Springs for the latest donor conference convened by billionaire Charles Koch, one-half of the mighty “Koch brothers.” Over two days, donors mingled with politicians, heard presentations by leading activists, and pledged serious money to bankroll groups promoting the free-market agenda in Washington and around the country.

The philosophies of these two groups couldn’t be more different. But they have this in common: the money raised by the Democracy Alliance and the Kochs’ political network is secret. The public will never know its true source. Call it “dark money.”

So what is dark money? How does it wind up in our elections? Say you’re a billionaire and you want to give $1 million to anonymously influence an election. You’re in luck: you can give that money, as many donors have, to a nonprofit organized under the 501(c)(4) section of the tax code. That nonprofit, in turn, can spend your money on election-related TV ads or mailers or online videos. But there’s a catch: unlike super PACs, the majority of a 501(c)(4) nonprofit’s work can’t be political. Note, though, that where the IRS draws the line on how much politicking is too much, and even what the taxman defines as political, is very murky. And until Congress and the IRS straighten all of that out, donors wanting to influence elections have a mostly scrutiny-free way to unload their money.

This type of nonprofit has a long history in U.S. politics. The Sierra Club, for instance, has a 501(c)(4) affiliate, as does the National Rifle Association. But in recent years, political operatives and wealthy donors have seized on this breed of nonprofit as a new way to shovel secret money into campaigns. Between 2010 and 2012, the number of applications for 501(c)(4) status spiked from 1,500 to 3,400, according to IRS official Lois Lerner.

During the 2010 campaign, politically active nonprofits — “super secret spooky PACs,” as Stephen Colbert calls them — outspent super PACs by a three to two margin, according to a Center for Public Integrity analysis. Take the American Action Network (AAN), run by former Senator Norm Coleman of Minnesota. The group purports to be an “issue-based” nonprofit that only dabbles in politics, but its tax records suggest otherwise. From July 2009 through June 2011, as Citizens for Ethics and Responsibility in Washington noted, 60% of AAN’s money went toward politics. (An AAN spokesman called the complaint “baseless.”)

Because they’re so lacking in transparency, some nonprofits have been emboldened to bend — if not break — the tax law. One of the more egregious examples was benignly named the Commission on Hope, Growth, and Opportunity (CHGO). Created in the summer of 2010, it informed the IRS that it wouldn’t spend a penny on politics. During the 2010 elections, however, it put $2.3 million into ads attacking 11 Democratic congressional candidates. Then, sometime in 2011, CHGO simply closed up shop and disappeared — a classic case of political hit-and-run. And it wouldn’t have happened without a secretive wealthy bankroller: of the $4.8 million raised by CHGO, tax records show that $4 million came from a single donor (though we don’t know his or her name).

Transparency advocates and reformers supporting more limits on spending have pushed back against the new wave of dark money. They have filed numerous complaints with the IRS and the Federal Election Commission alleging that politically active nonprofits are flouting the law and demanding a crackdown. Marcus Owens, the former head of the IRS’s exempt organizations division, which oversees politically active nonprofits, agrees that the agency needs to take action. “The government’s going to have to investigate them and prosecute them,” Owens, who is now in private practice, told me in January. “In order to maintain the integrity of the process, they’re going to be forced to take action.”

Don’t hold your breath for that. This week, a report by a Treasury Department inspector general revealed that IRS staffers singled out tea partiers and other conservative groups which had applied for tax-exempt status for special scrutiny. Now, Republicans and Democrats are howling with outrage and demanding that heads roll. One result of this debacle, ex-IRS director Marcus Owens told me, is that the IRS will certainly shy away from cracking down on those nonprofits that do abuse the tax code.

At least one politician is upset enough by the steady flow of dark money into our politics to do something about it. Senator Carl Levin of Michigan, who is retiring in 2014, has made the issue of dark money one of the priorities of his time left in office. He plans to “look into the failure of the IRS to enforce our tax laws and stem the flood of hundreds of millions of secret dollars flowing into our elections, eroding public confidence in our democracy.”

Do millionaires and billionaires dominate the donor rolls of nonprofits, too? Without disclosure, it’s near impossible to know who funds what. But not surprisingly, the limited data we have suggest that, as with super PACs, rich people keep politically active nonprofits flush with cash. The American Action Network, for instance, raised $27.5 million from July 2010 to June 2011; of that haul, 90% of the money came from eight donors, with one giving $7 million. The story is the same with Karl Rove’s Crossroads GPS. It raised $77 million from June 2010 to December 2011, and nearly 90% of that came from donors giving at least $1 million. And while Priorities USA, the pro-Obama nonprofit, raised a comparatively tiny $2.3 million in 2011, 80% of it came from a single, anonymous donor.

Big Money Civil War

A few days after the 2012 elections, a handful of Republican politicians including Governor John Kasich of Ohio and Governor Bobby Jindal of Louisiana met privately with Sheldon Adelson. They were officially in Las Vegas for a gathering of the Republican Governors Association, but it was never too early to court the man who, with a stroke of his pen, could underwrite a presidential hopeful’s bid for his or her party’s nomination.

Democratic candidates are no different. House and Senate hopefuls are flocking to Hollywood studio boss Jeffrey Katzenberg, one of their party’s biggest donors and fundraisers. And why wouldn’t they? Barack Obama might not be where he is today without Katzenberg. Days after Obama launched his presidential campaign in 2007, the DreamWorks Animation mogul gave the junior senator his imprimatur and prodded Hollywood into raising $1.3 million for him. Years later, Katzenberg provided $2 million in seed money for the pro-Obama super PAC that played a pivotal role in his reelection.

As 2016 nears, don’t be surprised to see the next set of Democrats clambering over each other to win Katzenberg’s endorsement and money. Paul Begala, the Democratic consultant and TV pundit, is already predicting what he calls the “Katzenberg primary.”

More than ever, a serious Senate or White House bid is dependent not on climbing the party ranks, but on winning the support of a few wealthy bankrollers. In fact, it’s no longer an exaggeration to say that while the political parties still officially pick the candidates for office, the power increasingly lies with the elites of the political donor class.

Super PACs, just three years old, are now a fixture, not a novelty. They’ve become de rigueur for candidates running at the federal, state, and even local level. Want to scare off potential primary challengers? A super PAC with millions in the bank will help. Need to blast away at your opponent with negative ads without tarnishing your own reputation? Let a super PAC do the dirty work. Any candidate running for office begins with a to-do list, and with each month, getting a super PAC and making friends in the dark money universe rises higher on those lists.

Super PACs and their wealthy donors are also stoking civil wars within the parties. At the moment, they have been springing up to offer cover to politicians who vote a certain way, or stake out traditionally unpopular positions. For instance, Republicans for Immigration Reform, a relatively new super PAC, says it will spend millions to defend GOP politicos who take a moderate stance on immigration reform. And another super PAC, bankrolled by hedge fund investor Paul Singer, intends to spend big money to push more Republicans toward the middle on same-sex marriage. But there are also vigorous tea-party-style super PACs pushing their politicians toward the fringes. Each faction of the GOP is getting its own set of super PACs, and that means an already contentious fight for the future of the party could get far bloodier.

Democrats could find themselves in a money-fueled internal struggle, too. Tom Steyer, a former hedge fund investor worth $1.3 billion, says he’s sick of seeing climate change neglected in campaigns. He now plans to use his vast wealth to elevate it into a banner issue. In a recent primary in Massachusetts, he spent hundreds of thousands of dollars attacking Democratic Congressman Stephen Lynch for supporting the controversial Keystone XL pipeline. Lynch’s opponent, Congressman Ed Markey, a leading House environmentalist, went on to win the primary, but Steyer’s intervention raised plenty of eyebrows about possible Democrat-on-Democrat combat in 2014.

Meanwhile, as the recent Democracy Alliance and Koch retreats show, millionaires and billionaires are revving up to take ever-greater control of the political process via secretive nonprofits. In April, Facebook co-founder Mark Zuckerberg unveiled FWD.us, a quasi-dark-money outfit created to give Silicon Valley a greater political presence in Washington. It has already raised $25 million.

Right now, the best avenues for fired-up billionaires exist outside the traditional political parties. The Supreme Court could change that. In a case called McCutcheon vs. Federal Election Commission, the court is considering whether to demolish the overall aggregate limit on how much a donor can give to candidates and parties. If the court rules in favor of Republican donor Shaun McCutcheon, and perhaps goes on to eliminate contribution limits to candidates and parties altogether, super PACs could go out of style faster than Crocs. Donors won’t need them. They’ll give their millions straight to the Democrats or the Republicans and that will be that.

There is an important backdrop to all of these changes, and that’s the increase in income inequality in this country. Just as the incredibly wealthy are given the freedom to flood the political system with money, they’ve got more and more money to spend. Our lopsided economic recovery affords a glimpse of that growing inequality gap: from 2009 to 2011, the average wealth of the richest 7% of American households climbed by almost 30%, while the wealth of the remaining 93% of households actually declined by 4%. (So much for that “recovery.”)

Can there be any question that this democracy of ours is nearing dangerous territory, if we’re not already there? Picture the 2016 or 2020 election campaigns and, barring a new wave of campaign reforms, it’s not hard to see a tiny minority of people exerting a massive influence on our politics simply by virtue of bank accounts. There is nothing small-d democratic about that. It flies in the face of one of the central premises of this country of ours, equality, including political equality — the concept that all citizens stand on an equal footing with one another when it comes to having their say on who represents them and how government should work.

Increasingly, it looks like before the rest of us even have our say, before you enter the voting booth, issues, politics, and the politicians will have been winnowed, vetted, and predetermined by the wealthiest Americans. Think of it as a new definition of politics: the democracy of the wealthy, who can fight it out with each other inside and outside the political parties with little reference to you.

In the meantime, the more those of modest means feel drowned out by the money of a tiny minority, the less connected they will feel to the work of government, and the less they will trust elected officials and government as an institution. It’s a formula for tuning out, staying home, and starving whatever’s left of our democracy.

I caught a glimpse of this last November, when I spoke to a class of students at Radford University in Virginia, a state blanketed with super PAC attack ads and dark money in 2012. Over and over, students told me how disgusted they were by all the vitriol they heard when they turned on the TV or the radio. Most said that they ended up ignoring the campaigns; a few were so put off they didn’t bother to vote. “They’re all bought and sold anyway,” one student told me in front of the entire class. “Why would my vote make any difference?”

Copyright 2013 Andy Kroll

Andy Kroll is a reporter in the D.C. bureau of Mother Jones magazine and an associate editor at TomDispatch.com.

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Article printed from www.CommonDreams.org

Source URL: http://www.commondreams.org/view/2013/05/16-6

 

The Biggest “Takers” and Societal Parasites Are the Rich, Not the Working Class and Poor

by Paul Buchheit, Buzzflash at Truthout, May 13, 2013

Ayn Rand’s novel “Atlas Shrugged” fantasizes a world in which anti-government citizens reject taxes and regulations, and “stop the motor” by withdrawing themselves from the system of production. In a perverse twist on the writer’s theme the prediction is coming true. But instead of productive people rejecting taxes, rejected taxes are shutting down productive people.

Perhaps Ayn Rand never anticipated the impact of unregulated greed on a productive middle class. Perhaps she never understood the fairness of tax money for public research and infrastructure and security, all of which have contributed to the success of big business. She must have known about the inequality of the pre-Depression years. But she couldn’t have foreseen the concurrent rise in technology and globalization that allowed inequality to surge again, more quickly, in a manner that threatens to put the greediest offenders out of our reach.

Ayn Rand’s philosophy suggests that average working people are ‘takers.’ In reality, those in the best position to make money take all they can get, with no scruples about their working class victims, because taking, in the minds of the rich, serves as a model for success. The strategy involves tax avoidance, in numerous forms.

Corporations Stopped Paying

In the past twenty years, corporate profits have quadrupled while the corporate tax percent has dropped by half. The payroll tax, paid by workers, has doubled.

In effect, corporations have decided to let middle-class workers pay for national investments that have largely benefited businesses over the years. The greater part of basic research, especially for technology and health care, has been conducted with government money. Even today 60% of university research is government-supported. Corporations use highways and shipping lanes and airports to ship their products, the FAA and TSA and Coast Guard and Department of Transportation to safeguard them, a nationwide energy grid to power their factories, and communications towers and satellites to conduct online business.

Yet as corporate profits surge and taxes plummet, our infrastructure is deteriorating. The American Society of Civil Engineers estimates that $3.63 trillion is needed over the next seven years to make the necessary repairs.

Turning Taxes Into Thin Air

Corporations have used numerous and creative means to avoid their tax responsibilities. They have about a year’s worth of profits stashed untaxed overseas. According to the Wall Street Journal, about 60% of their cash is offshore. Yet these corporate ‘persons’ enjoy a foreign earned income exclusion that real U.S. persons don’t get.

Corporate tax haven ploys are legendary, with almost 19,000 companies claiming home office space in one building in the low-tax Cayman Islands. But they don’t want to give up their U.S. benefits. Tech companies in 19 tax haven jurisdictions received $18.7 billion in 2011 federal contracts. A lot of smaller companies are legally exempt from taxes. As of 2008, according to IRS data, fully 69% of U.S. corporations were organized as nontaxablebusinesses.

There’s much more. Companies call their CEO bonuses “performance pay” to get a lower rate. Private equity firms call fees “capital gains” to get a lower rate. Fast food companies call their lunch menus “intellectual property” to get a lower rate.

Prisons and casinos have stooped to the level of calling themselves “real estate investment trusts” (REITs) to gain tax exemptions. Stooping lower yet, Disney and others have added cows and sheep to their greenspace to get a farmland exemption.
The Richest Individuals Stopped Paying

The IRS estimated that 17 percent of taxes owed were not paid in 2006, leaving an underpayment of $450 billion. The revenue loss from tax havens approaches $450 billion. Subsidies from special deductions, exemptions, exclusions, credits, capital gains, and loopholes are estimated at over $1 trillion. Expenditures overwhelmingly benefit the richesttaxpayers.

In keeping with Ayn Rand’s assurance that “Money is the barometer of a society’s virtue,” the super-rich are relentless in their quest to make more money by eliminating taxes. Instead of calling their income ‘income,’ they call it “carried interest” or “performance-based earnings” or“deferred pay.” And when they cash in their stock options, they might look up last year’s lowest price, write that in as a purchase date, cash in the concocted profits, and take advantage of the lower capital gains tax rate.
So Who Has To Pay?

Middle-class families. The $2 trillion in tax losses from underpayments, expenditures, and tax havens costs every middle-class family about $20,000 in community benefits, including health care and education and food and housing.

Schoolkids, too. A study of 265 large companies by Citizens for Tax Justice (CTJ) determined that about $14 billion per year in state income taxes was unpaid over three years. That’s approximately equal to the loss of 2012-13 education funding due to budget cuts.

And the lowest-income taxpayers make up the difference, based on new data that shows that the Earned Income Tax Credit is the single biggest compliance problem cited by the IRS. The average sentence for cheating with secret offshore financial accounts, according to theWall Street Journal, is about half as long as in some other types of tax cases.
Atlas Can’t Be Found Among the Rich

Only 3 percent of the CEOs, upper management, and financial professionals were entrepreneurs in 2005, even though they made up about 60 percent of the richest .1% of Americans. A recent study found that less than 1 percent of all entrepreneurs came from very rich or very poor backgrounds. Job creators come from the middle class.

So if the super-rich are not holding the world on their shoulders, what do they do with their money? According to both Marketwatch and economist Edward Wolff, over 90 percent of the assets owned by millionaires are held in a combination of low-risk investments (bonds and cash), personal business accounts, the stock market, and real estate.

Ayn Rand’s hero John Galt said, “We are on strike against those who believe that one man must exist for the sake of another.” In his world, Atlas has it easy, with only himself to think about.

 http://truth-out.org/buzzflash/commentary/item/17960-the-biggest-takers-and-societal-parasites-are-the-rich-not-the-working-class-and-poor

Paul Buchheit is a college teacher, a writer for progressive publications, and the founder and developer of social justice and educational websites (UsAgainstGreed.org, PayUpNow.org, RappingHistory.org).

Millennials to business: Social responsibility isn’t optional

By Michelle Nunn, Washington Post, December 20, 2011

Michelle Nunn is CEO of Points of Light Institute, a nonprofit nonpartisan volunteer organization with more than 20 years of history. She is also the co-founder of the HandsOn Network, the volunteer-focused arm of the Points of Light Institute.

Excerpt

….As consumers, employees and entrepreneurs, Millennials are shifting the norms of corporate America’s conduct, ethical imperatives and purpose. In his book, “The Way We’ll Be,” pollster John Zogby documents how these “First Globals” are more conscientious consumers than their predecessors, demanding greater honesty and accountability from businesses.

Millennials are bringing their values into the career equation by placing a premium on employers’ reputation for social responsibility and the opportunities those companies and organizations provide their employees to make a positive impact on society. ..

Millennials, as consumers, are pushing companies to change the ways of doing business to align with the values of civic and global responsibility largely held by Millennials…

While Millennials are transforming established businesses, they are also starting a new breed of businesses with built-in social missions that are resonating with the marketplace and revolutionizing their sectors…The values behind Occupy Wall Street are manifesting themselves in the marketplace and companies that are failing to take notice should start…

A new generation of employees, consumers and entrepreneurs is stepping forward with a better way of doing business — putting its bets on the goodness of people rather than loading the dice in its own favor.

Full text

The Occupy Wall Street movement is largely fueled by a relatively small set of young people who view the protests as a fight for their future. The vast majority, however, are getting up and going to work every day — or wishing they could. These individuals are part of a less dramatic but, perhaps, equally powerful movement of Millennials shaping the future of business. As consumers, employees and entrepreneurs, Millennials are shifting the norms of corporate America’s conduct, ethical imperatives and purpose. In his book, “The Way We’ll Be,” pollster John Zogby documents how these “First Globals” are more conscientious consumers than their predecessors, demanding greater honesty and accountability from businesses.

Millennials are bringing their values into the career equation by placing a premium on employers’ reputation for social responsibility and the opportunities those companies and organizations provide their employees to make a positive impact on society. Sixty-one percent of 18- to 26-year-olds polled in a 2011 Deloitte Volunteer IMPACT survey said they would prefer to work for a company that offers volunteer opportunities. Over the past decade, this generational shift has pushed these programs to be more sophisticated, generating billions of dollars of pro bono support for nonprofits and activating millions of skilled volunteers.

Even as the economy has slowed, companies are expanding volunteer programs because these programs attract, develop, motivate and retain the most dynamic and passionate employees. The most innovative of these companies also understand these programs as critical to their bottom line. IBM’s Corporate Service Corps, launched in 2008, has deployed 1,200 IBMers to more than 20 countries, in both a highly competitive leadership development program and a rigorous endeavor to bring the corporation’s skills to bear on complex problems in developing communities. IBM Chairman and CEO Sam Palmisano said at the program’s founding that “we fully expect [this] will make IBM a more competitive and successful business.”

Millennials, as consumers, are pushing companies to change the ways of doing business to align with the values of civic and global responsibility largely held by Millennials. Monitoring supply chains, safeguarding labor and environmental conditions for the creation of products and embracing environmental sustainability have become basic requirements to preserve relationships with customers and retain young employees. A recent market study by the public relations firm Edelman shows that consumers now expect brands to support causes. Many companies are responding to this market shift in ways that integrate causes fully into their business strategy and brand identities. Earlier this year, the Millennial founders of GOOD Magazine launched a subsidiary consulting business called GOOD/Corps, which is helping some of the world’s most recognizable brands navigate and profit from what they call the “Values Revolution” driven by this generation. Companies like Pepsi, Toyota and Starbucks are seeking their guidance on building the meaningful connections that these consumers demand.

While Millennials are transforming established businesses, they are also starting a new breed of businesses with built-in social missions that are resonating with the marketplace and revolutionizing their sectors. TOMS Shoes was founded in 2006 by 30-year-old Blake Mycoskie and has quickly become one of the fastest-growing apparel companies in the world. Well known for its groundbreaking “One-for-One” model that donates a pair of shoes in the developing world for every pair sold, it is also growing a fiercely loyal and active following through its anti-poverty advocacy efforts. It is hard to imagine a traditional shoe brand being able to mobilize a network of 1,200 campus chapters and 250,000 young people in a single day to promote its brand, but that is exactly what TOMS has accomplished with its “One Day Without Shoes” campaign.

Despite the economic downturn and the headlines, the nation’s private sector is still lively. The values behind Occupy Wall Street are manifesting themselves in the marketplace and companies that are failing to take notice should start. These people-powered movements may not have stopped the markets in their tracks, but they are creating the demand for new forms of corporate behavior and ethical imperatives. The winning brands of the future will be ones that authentically respond.

This may result in an aligning of private-sector muscle to address the very inequities, lack of transparency and poverty that Occupy Wall Street has spotlighted. A new generation of employees, consumers and entrepreneurs is stepping forward with a better way of doing business — putting its bets on the goodness of people rather than loading the dice in its own favor.

http://www.washingtonpost.com/national/on-innovations/millennials-to-business-social-responsibility-isnt-optional/2011/12/16/gIQA178D7O_story.html?wpisrc=nl_headlines

It’s not the left that’s changed, it’s the economy

By Harold Meyerson, Washington Post, March 21,2013

Excerpt

Have American liberals moved too far to the left? That’s long been the contention of conservatives contemplating liberal positions on a host of social issues, such as gay marriage and the legalization of undocumented immigrants. But opinion polls on these issues show that yesterday’s far-out liberal positions are quickly becoming today’s conventional wisdom…Gallup released a poll showing that 72 percent of Americans, including a majority of Republicans, would support a major federally financed infrastructure repair program and a federal program creating 1 million jobs… But there’s a bigger problem with the conservative contention that government stands athwart the private sector’s capacity to create jobs and prosperity: It fails to acknowledge that the private sector no longer creates jobs and prosperity like it used to, completely apart from whatever effects governmental policy may have on job creation. Entirely on their own and well before Obamacare was a gleam in anyone’s eye, employers began cutting back or altogether dropping health coverage and retirement benefits for employees. Nor have government regulations compelled employers to increase the share of company revenue going to profits (which is at its highest level in decades) and reduce the share going to wages (which is at its lowest level in decades)…In short, the economy is working for our economic elites…the economy has reached a dismal stability far short of its full employment potential or renewing the promise of widespread prosperity, and government investment is required to make up the difference…

Full text

Have American liberals moved too far to the left? That’s long been the contention of conservatives contemplating liberal positions on a host of social issues, such as gay marriage and the legalization of undocumented immigrants. But opinion polls on these issues show that yesterday’s far-out liberal positions are quickly becoming today’s conventional wisdom.

A more nuanced conservative critique focuses on liberals’ support for a greater government role in the economy. To be sure, New York Times columnist David Brooks argued in a recent column, liberals have traditionally urged government to take up the slack in economic activity during recessions, but now, as the budget proposal of the Congressional Progressive Caucus shows, liberals believe that “government is the source of growth, job creation and prosperity” even when the economy has righted itself. The progressives’ budget, Brooks complains, proposes spending $450 billion on public works and sending $179 billion to the states so they, too, can provide more services and pave more roads. All this and more would be financed by increases in progressive taxation — draining the private sector of the capital it needs to grow, hire and produce prosperity.

Not surprisingly, liberal economists have jumped on Brooks’s arguments. Lawrence Mishel of the Economic Policy Institute argues that the economy is still performing so under par — $985 billion below its potential output if all our factories were going full tilt — that it needs a major boost from government-financed economic activity to increase production, employment and consumption. Coincidentally, the day after Brooks’s column was published, Gallup released a poll showing that 72 percent of Americans, including a majority of Republicans, would support a major federally financed infrastructure repair program and a federal program creating 1 million jobs. Nearly 80 years after Franklin Roosevelt created the Works Progress Administration, it seems the American people would like the government to re-create it.

But there’s a bigger problem with the conservative contention that government stands athwart the private sector’s capacity to create jobs and prosperity: It fails to acknowledge that the private sector no longer creates jobs and prosperity like it used to, completely apart from whatever effects governmental policy may have on job creation. Entirely on their own and well before Obamacare was a gleam in anyone’s eye, employers began cutting back or altogether dropping health coverage and retirement benefits for employees. Nor have government regulations compelled employers to increase the share of company revenue going to profits (which is at its highest level in decades) and reduce the share going to wages (which is at its lowest level in decades).

The U.S. corporations that make up the Standard & Poor’s index of the 500 largest publicly traded companies get almost half their revenue from sales abroad, according to a 2011 S&P analysis, and, despite all the hoopla about bringing manufacturing back to the States, much of their production is going to remain abroad. The rise of machines has, we all know, taken its toll on employment too. U.S. corporations are sitting on $1.7 trillion in cash, with share values and profits that render most of these businesses’ leaders happy campers. Even if the U.S. economy continues to fall far short of full employment, and even if the rate of workforce participation continues to decline, these businesses can still sell their products all over the world. Unlike in the 1930s, the shortfall in domestic consumption does not present them with a crisis but with perhaps nothing worse than a missed opportunity.

In short, the economy is working for our economic elites. The massive changes they would have to make to investment strategies and the division of corporate revenue so that the economy worked for the majority of the American people are nowhere on the horizon. The great growth machine that once was the U.S. private sector ain’t what it used to be — which is one reason each recession since 1990 has been longer, deeper and more in­trac­table than the last. That’s the new economic reality in this country, and that’s what the budget of the Congressional Progressive Caucus responds to. It’s not that liberals have been prompted to move leftward through the readings of ancient socialist gospels or by smoking some stash left over from the ’60s. It’s that the economy has reached a dismal stability far short of its full employment potential or renewing the promise of widespread prosperity, and government investment is required to make up the difference. If anyone is smoking something, it is conservatives who foresee a rebirth of prosperity if only the private sector is left alone.

Read more from Harold Meyerson’s archive or follow him on Twitter.

http://www.washingtonpost.com/opinions/harold-meyerson-its-not-the-left-thats-changed-its-the-economy/2013/03/21/1aa67af8-925a-11e2-9cfd-36d6c9b5d7ad_story.html?hpid=z2

Engineered Inequality

Jacob Hacker & Paul Pierson on Engineered Inequality, Moyers & Company,  March 1, 2012

Moyers & Company dives into one of the most important and controversial issues of our time: How Washington and Big Business colluded to make the super-rich richer and turn their backs on the rest of us. Bill’s guests – Jacob Hacker and Paul Pierson, authors of Winner-Take-All Politics: How Washington Made the Rich Richer — And Turned Its Back on the Middle Class, argue that America’s vast inequality is no accident, but in fact has been politically engineered. March 1, 2012

How, in a nation as wealthy as America, can the economy simply stop working for people at large, while super-serving those at the very top? Through exhaustive research and analysis, the political scientists Hacker and Pierson — whom Bill regards as the “Sherlock Holmes and Dr. Watson” of economics — detail important truths behind a 30-year economic assault against the middle class.

Who’s the culprit? “American politics did it– far more than we would have believed when we started this research,” Hacker explains. “What government has done and not done, and the politics that produced it, is really at the heart of the rise of an economy that has showered huge riches on the very, very, very well off.” 

Bill considers their book the best he’s seen detailing “how politicians rewrote the rules to create a winner-take-all economy that favors the 1% over everyone else, putting our once and future middle class in peril.”

Excerpt

LINNEA PALMER PATON: This is supposed to be a government run by the people and if our voices don’t matter because we’re not wealthy, that’s really unacceptable and it’s dangerous.

BILL MOYERS: Why, in a nation as rich as America, has the economy stopped working for people at large even as those at the top enjoy massive rewards?

The struggle of ordinary people for a decent living, for security, is as old as the republic, but it’s taken on a new and urgent edge. Instead of shared prosperity our political system has now produced a winner-take-all economy…

BILL MOYERS: This gross inequality didn’t just happen. It was made to happen. It was politically engineered by powerful players in Washington and on Wall Street. You can read how they did it in this book, Winner-Take-All Politics, by two of the country’s top political scientists, Jacob Hacker and Paul Pierson.

PAUL PIERSON: It’s really astonishing how concentrated the gains of economic growth have been.

JACOB HACKER: But we were actually looking at the last 30 years, and seeing that the middle class had only gotten ahead to the extent that it had because of families working more hours…

 

JACOB HACKER:  …And what we found is it’s not the haves versus the have-nots. It’s the have-it-alls versus the rest of Americans. And those have-it-alls, which are households in say the top one-tenth of one percent of the income distribution, the richest one-in-a-thousand households are truly living in an unparalleled age.

BILL MOYERS: You set out to try to solve three mysteries: who done it, who created the circumstances and conditions for the creation of a winner-take-all economy. And your answer to that in one sentence is?

JACOB HACKER: American politics did it far more than we would have believed when we started this research. What government has done and not done and the politics that produced it is really at the heart of the rise of an economy that has showered huge riches on the very, very, very well off…

BILL MOYERS: How did they do it?

PAUL PIERSON: Through organized combat is the short answer.

BILL MOYERS: And why did they do it?

JACOB HACKER: Because they could. Because the transformation of political organization, the creation of a powerful, organized business community, the degree to which that was self-reinforcing within both parties has meant that politicians have found that they can on issue after issue cater to the interests of the very well off while either ignoring or only symbolically addressing many of the concerns that are felt by most Americans and get reelected and survive politically…

BILL MOYERS: You write, we have a government that’s been promoting inequality, and at the same time, as you just said, failing to counteract it. This has been going on, you write, 30 years or more. And here’s the key sentence: Step by step, and debate by debate, our public officials have rewritten the rules of the economy in ways that favor the few at the expense of the many…

BILL MOYERS: How can this happen? How could Washington turn its back on the broad middle class to favor a relatively few at the top in a democracy?

JACOB HACKER: What has really changed is the organization of American politics, particularly the organizations that represent the deepest pocketed members of American society. What we’ve seen as an organizational revolution over the last 30 years that has meant that business, and Wall Street, and ideological conservative organizations that are pushing for free market policies have all become much more influential.

And at the same time, a lot of the organizations that once represented the middle class, labor unions, broad-based civic organizations and, sort of, organizations at the local and grassroots level, including social movements, have all lost enormous ground… the wealthy are much more powerful than in the past…

JACOB HACKER: Yeah, I mean, if you look at the history of American democracy it is about a broadening of our understanding of political equality to incorporate African Americans and women and ultimately to also incorporate the idea that large inequalities of property were a threat to democratic equality. So FDR during the Great Depression famously said that political equality was meaningless in the face of economic inequality… Americans have very complex views about equality, but they all agree in this basic idea that as Thomas Jefferson famously said, “All men are created equal.”…

BILL MOYERS: Point blank, Paul, do we still have a middle class country?

PAUL PIERSON: I would say no…. in terms of its weight in the society, its ability to produce a society and reproduce a society that is oriented around the needs and concerns and opportunities of the middle class, I don’t think that we live in that country anymore…

JACOB HACKER: The fact is that for most middle class and working class Americans the politics seems increasingly removed from their everyday experience and their life. And there is a current of distrust and anger towards Washington is that is so deep right now…

JACOB HACKER: That is one of the big changes that occurs over this period. Money becomes more important for campaigns and it also becomes much more important in terms of lobbying, which in some ways is the more important way that money changed American politics. It’s really the development of lobbying over this this last 25, 30 years that stands out as the most dramatic role of money in American politics…

the optimistic message is that politics got us into this mess and therefore potentially politics can get us out of it. ..

JACOB HACKER: When citizens are organized and when they press their claims forcefully, when there are reformist leaders within government and outside it who work on their behalf, then we do see reform. This is the story of the American democratic experiment of wave after wave of reform leading to a much broader franchise, to a much broader understanding of the American idea…what was valuable in the past could be a part of our future.

Full posting

(Because of Hurricane Sandy’s impact on our offices and studio, we’re airing this encore edition of Moyers & Company, first broadcast in January. This Election Day, issues of money, influence and “winner-take-all politics” are more important than ever.)

How, in a nation as wealthy as America, can the economy simply stop working for people at large, while super-serving those at the very top? Through exhaustive research and analysis, the political scientists Hacker and Pierson — whom Bill regards as the “Sherlock Holmes and Dr. Watson” of economics — detail important truths behind a 30-year economic assault against the middle class.

Who’s the culprit? “American politics did it– far more than we would have believed when we started this research,” Hacker explains. “What government has done and not done, and the politics that produced it, is really at the heart of the rise of an economy that has showered huge riches on the very, very, very well off.”

Bill considers their book the best he’s seen detailing “how politicians rewrote the rules to create a winner-take-all economy that favors the 1% over everyone else, putting our once and future middle class in peril.”

Jacob Hacker & Paul Pierson on Engineered Inequality, Moyers & Company,  March 1, 2012

PAUL PIERSON: I think a lot of people know that inequality has grown in the United States. But saying that inequality has grown doesn’t begin to describe what’s happened.

JACOB HACKER: It’s not the haves versus the have-nots. It’s the have-it-alls versus the rest of Americans.

LINNEA PALMER PATON: This is supposed to be a government run by the people and if our voices don’t matter because we’re not wealthy, that’s really unacceptable and it’s dangerous.

BILL MOYERS: Why, in a nation as rich as America, has the economy stopped working for people at large even as those at the top enjoy massive rewards?

The struggle of ordinary people for a decent living, for security, is as old as the republic, but it’s taken on a new and urgent edge. Instead of shared prosperity our political system has now produced a winner-take-all economy.

GORDON GEKKO: The richest one percent of this country owns half our country’s wealth: five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows’ idiot sons and what I do — stock and real estate speculation. It’s bullshit. You got 90 percent of the American people have little or no net worth. I create nothing; I own.

We make the rules, pal. The news, war, peace, famine, upheaval; the price of a paper clip. We pull the rabbit out of the hat while everybody else sits out there wondering how the hell we did it. Now, you’re not naive enough to think we’re living in a democracy are you, Buddy?

BILL MOYERS: That, of course, was Michael Douglas as the wheeler-dealer Gordon Gekko, responding to his protégé, played by Charlie Sheen in the movie Wall Street, 25 years ago!

Back in the late 80s, the director Oliver Stone, himself the son of a stockbroker, saw something happening before it reached the mainstream. Before the rest of us knew what hit us. That little speech about the richest one percent and the demise of democracy proved to be prophetic. Flesh-and-blood Americans are living now every day with the consequences.

BILL MOYERS: This gross inequality didn’t just happen. It was made to happen. It was politically engineered by powerful players in Washington and on Wall Street. You can read how they did it in this book, Winner-Take-All Politics, by two of the country’s top political scientists, Jacob Hacker and Paul Pierson.

PAUL PIERSON:

It’s really astonishing how concentrated the gains of economic growth have been.

JACOB HACKER:

But we were actually looking at the last 30 years, and seeing that the middle class had only gotten ahead to the extent that it had because of families working more hours.

So this is a story that isn’t just about those at the top doing much, much better. But is, also, we found, a story about those in the middle not getting ahead, often falling behind in important ways, failing to have the same kinds of opportunity and economic security that they once had.

JACOB HACKER:  …And what we found is it’s not the haves versus the have-nots. It’s the have-it-alls versus the rest of Americans. And those have-it-alls, which are households in say the top one-tenth of one percent of the income distribution, the richest one-in-a-thousand households are truly living in an unparalleled age.

BILL MOYERS: You set out to try to solve three mysteries: who done it, who created the circumstances and conditions for the creation of a winner-take-all economy. And your answer to that in one sentence is?

JACOB HACKER: American politics did it far more than we would have believed when we started this research. What government has done and not done and the politics that produced it is really at the heart of the rise of an economy that has showered huge riches on the very, very, very well off.

BILL MOYERS: It’s the politics, stupid?

JACOB HACKER: Exactly.

BILL MOYERS: How did they do it?

PAUL PIERSON: Through organized combat is the short answer.

BILL MOYERS: And why did they do it?

JACOB HACKER: Because they could. Because the transformation of political organization, the creation of a powerful, organized business community, the degree to which that was self-reinforcing within both parties has meant that politicians have found that they can on issue after issue cater to the interests of the very well off while either ignoring or only symbolically addressing many of the concerns that are felt by most Americans and get reelected and survive politically.

PAUL PIERSON: …That it couldn’t explain why the economic gains were so concentrated within a very small subset of the educated people in American society. I mean, 29 percent of Americans now have college degrees. But a much, much smaller percentage of Americans were benefiting from this economic transformation.

JACOB HACKER: We think the story that’s told about how the global economy has shifted clearly matters. But that it doesn’t get to the sort of really powerful role that government played in adapting to this new environment and in changing the well-being of people in the middle and at the top.

PAUL PIERSON: … Which to us, really, was a very strong clue that we need to understand why the American response to globalization, to technological change has been different than the response of most other wealthy democracies.

JACOB HACKER: …But how do you explain the fact that we’ve seen over this period where the rich have gotten richer the tax rates on the richest of the rich come dramatically down. ..

PAUL PIERSON: The Bush tax cuts in a lot of ways were written like a subprime mortgage. You know, they were designed to make people see certain things, and not see a lot of the fine print.

JACOB HACKER: Fully 30 to 40 percent of the benefits were going to the very top, of the income distribution. The top one percent. And when you broke it down, it was really the top one-tenth of one percent that did so well because of the estate tax changes, and because of the changes in the top tax rates, the changes in the capital gains taxes. And if you go to 2003, changes in the dividend tax….

PAUL PIERSON: …it was really designed to front-load the relatively modest benefits for the middle class, and to back-load the benefits for the wealthy….

JACOB HACKER: So why? Why do the winners get policies that make their winnings even larger? You know, this is not a trivial change. If you say from the mid-90s to 2007, those top 400 tax payers, they’ve seen their tax rates decline so much that it’s worth about $46 million for every one–

JACOB HACKER: Well, I think this is something that really needs to be understood. You know, these large shifts in our economy had been propelled in part by what government has done, say deregulating the market, the financial markets, to allow wealthy people to gamble with their own and other peoples’ money, and ways to put all of us at risk, but allow them to make huge fortunes….

BILL MOYERS: You write, we have a government that’s been promoting inequality, and at the same time, as you just said, failing to counteract it. This has been going on, you write, 30 years or more. And here’s the key sentence: Step by step, and debate by debate, our public officials have rewritten the rules of the economy in ways that favor the few at the expense of the many.

PAUL PIERSON: In some ways, the fundamental myth that we’re trying to break out of is the idea that there’s something natural out there called “the American economy” that is prior to government, prior to politics. And that government, if it’s involved at all, is only involved sort of at the end of the day, maybe tidying things up around the edges, or redistributing money from some people to another…

BILL MOYERS: How can this happen? How could Washington turn its back on the broad middle class to favor a relatively few at the top in a democracy?

JACOB HACKER: What has really changed is the organization of American politics, particularly the organizations that represent the deepest pocketed members of American society. What we’ve seen as an organizational revolution over the last 30 years that has meant that business, and Wall Street, and ideological conservative organizations that are pushing for free market policies have all become much more influential.

And at the same time, a lot of the organizations that once represented the middle class, labor unions, broad-based civic organizations and, sort of, organizations at the local and grassroots level, including social movements, have all lost enormous ground.

And so it’s that imbalance, that shift, I think, that is the sort of underlying pressure that plays out in our politics today. The way we describe it in the book is as if the ecosystem of American politics has changed. And everyone in American politics, Democrats, Republicans, liberals, conservatives has had to adapt to this new world where money matters much more in our politics, and where groups representing business and the wealthy are much more powerful than in the past.

BILL MOYERS: And you don’t beat around the bush. You say, quote, “Most voters of moderate means…have been organized out of politics, left adrift as the foundations of middle class democracy have washed away.”

JACOB HACKER: Yeah, I mean, if you look at the history of American democracy it is about a broadening of our understanding of political equality to incorporate African Americans and women and ultimately to also incorporate the idea that large inequalities of property were a threat to democratic equality. So FDR during the Great Depression famously said that political equality was meaningless in the face of economic inequality… Americans have very complex views about equality, but they all agree in this basic idea that as Thomas Jefferson famously said, “All men are created equal.”…

PAUL PIERSON: Yes, they do. And we describe that period after World War II, which lasted for about 30 years

JACOB HACKER: Right now I think we’re seeing the kind of bitter fruit of winner-take-all politics because this financial crisis was not an act of God or work of nature. It was brought on by poor decisions that were made in Washington and on Wall Street.

BILL MOYERS: So the winner-take-all politics has produced a winner-take-all economy?

BILL MOYERS: Point blank, Paul, do we still have a middle class country?

PAUL PIERSON: I would say no. I mean, obviously there is still something there is still something that we would recognize as a middle class, it’s still probably the biggest segment of the population. But in terms of its weight in the society, its ability to produce a society and reproduce a society that is oriented around the needs and concerns and opportunities of the middle class, I don’t think that we live in that country anymore.

JACOB HACKER: … I think, what is wrong with the priorities of our society that we cannot figure out how to translate our great wealth, our ingenuity, the hard work of our citizens, into a better standard of living that is shared broadly across the population? That’s a fundamental thing that a well-functioning democracy should do.

JACOB HACKER: …

At the individual level Americans are extremely optimistic. And if you ask them, “Will you achieve the American dream?” Most Americans say yes. But at a collective level when you ask people, “Does the American dream still hold true?” We’re seeing in surveys for the first time that only about, you know, half of Americans are agreeing that the American dream still holds true. And that’s remarkable.

BILL MOYERS: What’s the practical consequences of that? Of giving up faith and hope in that dream?

JACOB HACKER: The fact is that for most middle class and working class Americans the politics seems increasingly removed from their everyday experience and their life. And there is a current of distrust and anger towards Washington is that is so deep right now…

JACOB HACKER: That is one of the big changes that occurs over this period. Money becomes more important for campaigns and it also becomes much more important in terms of lobbying, which in some ways is the more important way that money changed American politics. It’s really the development of lobbying over this this last 25, 30 years that stands out as the most dramatic role of money in American politics.

Well, a few years later lobbyists had written a lot of these loopholes back into the tax code..

PAUL PIERSON: Right. It is the story that we try to tell in this book that there has been a 30 year war in which the sound of the voice of ordinary Americans has been quieter and quieter in American politics and the voice of business and the wealthy has been louder and louder

And I think the main punch line of our story and the optimistic message is that politics got us into this mess and therefore potentially politics can get us out of it. ..

JACOB HACKER: When citizens are organized and when they press their claims forcefully, when there are reformist leaders within government and outside it who work on their behalf, then we do see reform. This is the story of the American democratic experiment of wave after wave of reform leading to a much broader franchise, to a much broader understanding of the American idea.

In the mid-20th century we saw a period in which income gains were broadly distributed, in which middle class Americans had voice through labor unions, through civic organizations and through, ultimately, their government. We’ve seen an erosion of that world, but just because it’s lost ground doesn’t mean it can’t be saved. And so in writing this book we were hoping to sort of tell Americans that what was valuable in the past could be a part of our future.

BILL MOYERS: Jacob Hacker and Paul Pierson, thank you.

PAUL PIERSON: Thank you so much.

JACOB HACKER: Thank you.

Full transcript

March 1, 2012

Jacob Hacker & Paul Pierson on Engineered Inequality

BILL MOYERS: This week on Moyers & Company.

PAUL PIERSON: I think a lot of people know that inequality has grown in the United States. But saying that inequality has grown doesn’t begin to describe what’s happened.

JACOB HACKER: It’s not the haves versus the have-nots. It’s the have-it-alls versus the rest of Americans.

BILL MOYERS: And…

LINNEA PALMER PATON: This is supposed to be a government run by the people and if our voices don’t matter because we’re not wealthy, that’s really unacceptable and it’s dangerous.

BILL MOYERS: Welcome. I’m glad we could get together again. I look forward to your company from week to week – here and online at BillMoyers.com. It’s good to be back.

We begin with the question that haunts our time: Why, in a nation as rich as America, has the economy stopped working for people at large even as those at the top enjoy massive rewards?

The struggle of ordinary people for a decent living, for security, is as old as the republic, but it’s taken on a new and urgent edge. Instead of shared prosperity our political system has now produced a winner-take-all economy.

BUD FOX: How much is enough Gordon?

BILL MOYERS: Hollywood saw it coming.

GORDON GEKKO: The richest one percent of this country owns half our country’s wealth: five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows’ idiot sons and what I do — stock and real estate speculation. It’s bullshit. You got 90 percent of the American people have little or no net worth. I create nothing; I own.

We make the rules, pal. The news, war, peace, famine, upheaval; the price of a paper clip. We pull the rabbit out of the hat while everybody else sits out there wondering how the hell we did it. Now, you’re not naive enough to think we’re living in a democracy are you, Buddy?

BILL MOYERS: That, of course, was Michael Douglas as the wheeler-dealer Gordon Gekko, responding to his protégé, played by Charlie Sheen in the movie Wall Street, 25 years ago!

Back in the late 80s, the director Oliver Stone, himself the son of a stockbroker, saw something happening before it reached the mainstream. Before the rest of us knew what hit us. That little speech about the richest one percent and the demise of democracy proved to be prophetic. Flesh-and-blood Americans are living now every day with the consequences.

AMANDA GREUBEL: My name is Amanda Greubel. I am 32 years old, born and raised in Iowa. I’ve been married for ten years today to my high school sweetheart, Josh. He’s the High School Band Director in the same district where I am the Family Resource Center Director. We have a five-year old son Benen, and our second child on the way in December. Like a lot American families, we have a lot of debt – mortgage, two vehicles, and because we both have masters degrees, a lot of student loan debt.

BILL MOYERS: Amanda Greubel was invited to testify last summer at a Senate hearing on how Americans are coping in hard times. When the state cut funding for local school districts, Amanda Greubel and her husband feared they might lose their jobs. At the last minute, they were spared, although her salary was reduced by $10,000.

AMANDA GREUBEL: $10,000 might not seem like a lot to some people, but that loss of income required a complete financial, emotional and spiritual overhaul in our family. […] It means that even though I would rather shop at local grocers, I shop at Wal-Mart for groceries because that’s where the lowest prices are. Sometimes the grocery money runs out before the end of the month, and then we have to be creative with what’s in the cupboard – and that was a fun challenge at first, but the novelty wears off after a while. […] It means that most of our clothing comes from Goodwill, garage sales, and the clearance racks because we try not to spend full-price on anything anymore. It means that when my son brought me the snack calendar for his classroom and I saw that that month was his week to provide snacks for 15 classmates, I was scared because I knew that it would stretch the grocery budget even further. And we didn’t have roast beef or pork chops in our house that month. […] This past spring our son was hospitalized for three days, resulting in $1000 in out-of-pocket medical expenses beyond what our insurance covered. Then a problem with our roof required $1500 in repairs. Even though we’d been setting aside money every month for emergencies like that, we still didn’t have enough. And so we’ve spent the last few months catching up.

And finally, this change in our finances meant giving very serious consideration to whether it was even a good idea for our family to have another child. Thankfully, life has a way of reminding us through our son’s brief illness and hospitalization that some things are more important than money and that we’ll figure it out.

BILL MOYERS: She told the senators how the sour economy has affected her students and their parents.

AMANDA GREUBEL: If my family with two Master’s degrees is struggling, you can imagine how bad it is for other people.

The past few years our school district has seen our percentage of students on free and reduced lunch increase steadily. In a community that has a reputation of being very well off, over 30 percent of our elementary level students qualified for that program this year. I’ve sat with parents as they’ve completed that eligibility application, and they cry tears of shame, and they say things like “I never thought I’d have to do this,” and “I’ve never needed this help before.” They worry that their neighbors will find out and that their kids will be embarrassed. And it’s my job to reassure them that reaching out for help when you need it is no problem – it’s not a shame, it’s not anything to be embarrassed about. […] Kids don’t necessarily tell their parents when they’re afraid, because they see that their parents are stressed out enough already and they don’t want to make it worse. Sometimes their clothing becomes more tattered and we see parents cut the toes off of tennis shoes to accommodate a few more months’ worth of growth, and let those shoes last just a little bit longer. When kids don’t have enough to eat or they worry about losing their homes they cannot concentrate on learning their math facts, or their reading strategies. And in some cases financial concerns lead to or exacerbate issues such as domestic violence, child abuse, substance abuse, and physical or mental health conditions. All of the things that are ailing our families right now are so interconnected.

[…] I may have been called on to be the voice of struggling families today, but there are millions more out there who want and need to be heard by you. And I would ask that you not only listen, but that you then come back here and do something. Because it was your commitment and your passion for public service that brought you here in the first place.

BILL MOYERS: Our once and future middle class is in trouble. Their share of the nation’s income is shrinking, while the share going to the top is growing. Wages are at an all-time low as a percentage of the economy, and chronic unemployment is at the highest level since the Great Depression, but the richest Americans now hold more wealth than at any time in modern history.

This gross inequality didn’t just happen. It was made to happen. It was politically engineered by powerful players in Washington and on Wall Street. You can read how they did it in this book, Winner-Take-All Politics, by two of the country’s top political scientists, Jacob Hacker and Paul Pierson.

They were drawn to a mystery every bit as puzzling as a crime drama: How Washington Made the Rich Richer—and Turned Its Back on the Middle Class.

Quote: “We wanted to know how our economy stopped working to provide prosperity and security for the broad middle class.” And that’s what you saw.

PAUL PIERSON: I think a lot of people know that inequality has grown in the United States. But saying that inequality has grown doesn’t begin to describe what’s happened. The metaphor that we had been using lately is if you imagine a ladder, with the rungs in the ladder, and you think, “Okay, well inequality’s growing. So the rungs are getting further apart from each other.”

That’s not what’s happened in the United States. What’s happened in the United States is that the top one or two rungs have shot up, you know, into the stratosphere while all the other ones have stayed more or less in place. It’s really astonishing how concentrated the gains of economic growth have been.

JACOB HACKER: You know, the startling statistic that we have in the book is that if you take all of the income gains from 1979 to 2007, so all the increased household income over that period, around 40 percent of those gains went to the top one percent. And if you look at the bottom 90 percent they had less than that combined.

And it is not just a one or two year story. I mean, we’ve seen a terrible economy over the last few years. And the last decade is now being called “The Lost Decade” because there was no growth in middle incomes, there was no, there was an increase in the share of Americans without health insurance, more people are poor. So there was a terrible ten years.

But we were actually looking at the last 30 years, and seeing that the middle class had only gotten ahead to the extent that it had because of families working more hours.

So this is a story that isn’t just about those at the top doing much, much better. But is, also, we found, a story about those in the middle not getting ahead, often falling behind in important ways, failing to have the same kinds of opportunity and economic security that they once had.

BILL MOYERS: Let’s take a look at just how dramatic the inequality is. You have a chart here. I’m not an astute reader of charts, but this one did hit me. What are you saying with that chart?

JACOB HACKER: It says how much did people at different points on the income ladder earn in 1979 and how much did they earn in 2006 after adjusting for inflation?

It exploded at the top. The line for the top one percent, it’s hard to fit on the graph because it’s so much out of proportion to the increases that occurred among other income groups including people who are just below the top one percent. So, that top one percent saw its real incomes increase by over 250 percent between 1979 and 2006. Yeah. Over 250 percent.

PAUL PIERSON: And actually, even this graph– we couldn’t find a graph that fully describes it because even this graph actually really understates the story. Because it—

BILL MOYERS: Understates it?

PAUL PIERSON: Understates it.

BILL MOYERS: I mean, this is pretty powerful. When I looked I thought it was a showstopper.

PAUL PIERSON: Okay, so well, if you really if you really want the showstopper you have to go one step further because that big increase is for the top one percent. But the real action is inside the top one percent. If you go to the top tenth of one percent or the top hundredth of one percent, you know, you would need a much bigger graph to show what’s happening to incomes for that for that more select group. Because they’ve gone up much faster than have incomes for just your average top one percent kind of person.

BILL MOYERS: But we’ve all known for a long time that the rich were getting richer, and the middle class was barely holding its own. I mean, that was no mystery, right?

JACOB HACKER: Oh, it is. It’s a mystery when you start to look beneath the familiar, common statement that inequality has grown. Because when you think about rising inequality, we think, “Oh, it’s the haves versus the have-nots.” That the top third of the income distribution, say, is pulling away from the bottom third.

And what we found is it’s not the haves versus the have-nots. It’s the have-it-alls versus the rest of Americans. And those have-it-alls, which are households in say the top one-tenth of one percent of the income distribution, the richest one-in-a-thousand households are truly living in an unparalleled age.

Since we’ve been keeping records on the incomes of the richest from tax statistics in the early 20th century, we never saw as large a share of national income going to the richest one-in-a-thousand households as we did just before the great recession.

Their share of national income quadrupled over this period, to the point where they were pulling down about one in eight dollars in our economy. One-in-a-thousand households pulling down about one in eight dollars in our economy before the great recession began.

BILL MOYERS: You set out to try to solve three mysteries: who done it, who created the circumstances and conditions for the creation of a winner-take-all economy. And your answer to that in one sentence is?

JACOB HACKER: American politics did it far more than we would have believed when we started this research. What government has done and not done and the politics that produced it is really at the heart of the rise of an economy that has showered huge riches on the very, very, very well off.

BILL MOYERS: It’s the politics, stupid?

JACOB HACKER: Exactly.

BILL MOYERS: How did they do it?

PAUL PIERSON: Through organized combat is the short answer.

BILL MOYERS: And why did they do it?

JACOB HACKER: Because they could. Because the transformation of political organization, the creation of a powerful, organized business community, the degree to which that was self-reinforcing within both parties has meant that politicians have found that they can on issue after issue cater to the interests of the very well off while either ignoring or only symbolically addressing many of the concerns that are felt by most Americans and get reelected and survive politically.

PAUL PIERSON: If you listen to many public officials over the over the last 20 or 30 years as they’ve started to recognize that inequality has grown, typically what they’ll say is, this is a result just of economic change. It’s a result of globalization changes in technology that have advantaged the educated at those with high skills at the expense of the uneducated.

And there, clearly, there is some truth to this story that education matters more in determining economic rewards. But the more we looked at this, the less satisfied we were with that explanation.

That it couldn’t explain why the economic gains were so concentrated within a very small subset of the educated people in American society. I mean, 29 percent of Americans now have college degrees. But a much, much smaller percentage of Americans were benefiting from this economic transformation.

BILL MOYERS: Well, as you speak, I can hear all of those free-marketers out they say, “Come on, Piers– come on Hacker it is the global economy. It’s that cheap labor overseas. It’s those high technology skills that you say are required, these deep forces that actually are beyond our control, and are making inevitable this division between the top and everyone else.” Right? That’s what they’re saying as they listen to you right now.

JACOB HACKER: We think the story that’s told about how the global economy has shifted clearly matters. But that it doesn’t get to the sort of really powerful role that government played in adapting to this new environment and in changing the well-being of people in the middle and at the top.

PAUL PIERSON: And again, we wouldn’t want to say that the kinds of changes that they’re talking about don’t matter at all. But they still leave open for a country to decide how they’re going to respond to those kinds of economic challenges.

And when you look at other affluent democracies that have also been exposed to these same kinds of pressures, who are actually more open — smaller economies are often more open to the global economy than the United States is — you don’t see anything like the run-up in inequality, especially this very concentrated high-end inequality, in most of these other countries that you see in the United States. Which to us, really, was a very strong clue that we need to understand why the American response to globalization, to technological change has been different than the response of most other wealthy democracies.

JACOB HACKER: So it’s one thing to say, “Oh, the rich are getting richer because we have this new global economy.”

But how do you explain the fact that we’ve seen over this period where the rich have gotten richer the tax rates on the richest of the rich come dramatically down. You know, Warren Buffet now says that he thinks he’s paying a lower tax rate than the people who work for him do.

PAUL PIERSON: The thing that got us going at the very beginning was the Bush tax cuts.

GEORGE W. BUSH: This tax relief plan is principled. We cut taxes for every income taxpayer. We target nobody in, we target nobody out. And tax relief is now on the way. Today is a great day for America.

PAUL PIERSON: The Bush tax cuts in a lot of ways were written like a subprime mortgage. You know, they were designed to make people see certain things, and not see a lot of the fine print.

JACOB HACKER: Fully 30 to 40 percent of the benefits were going to the very top, of the income distribution. The top one percent. And when you broke it down, it was really the top one-tenth of one percent that did so well because of the estate tax changes, and because of the changes in the top tax rates, the changes in the capital gains taxes. And if you go to 2003, changes in the dividend tax.

I mean, these were all tax breaks that were worth a vast amount to the richest of Americans and worth very little to middle class Americans.

PAUL PIERSON: Within a few weeks after the legislation was passed, we all get a letter that says Congress and the President have given you this tax cut. And then that’s pretty much it for the middle class. But for higher income groups, the further forward you go in time, the bigger and bigger the benefits get. So it was really designed to front-load the relatively modest benefits for the middle class, and to back-load the benefits for the wealthy.

JACOB HACKER: So why? Why do the winners get policies that make their winnings even larger? You know, this is not a trivial change. If you say from the mid-90s to 2007, those top 400 tax payers, they’ve seen their tax rates decline so much that it’s worth about $46 million for every one–

BILL MOYERS: For every–

JACOB HACKER: Of those 400 tax payers. So it’s– the numbers are staggering. When you start to look within the top one percent, and look at what government has done to help those people out, through taxes, through changes in the market, financial deregulation and the like, and through protecting them from efforts to try to push back.

BILL MOYERS: Protecting them?

JACOB HACKER: Well, I think this is something that really needs to be understood. You know, these large shifts in our economy had been propelled in part by what government has done, say deregulating the market, the financial markets, to allow wealthy people to gamble with their own and other peoples’ money, and ways to put all of us at risk, but allow them to make huge fortunes.

And at the same time, when those risks have become apparent, there has been a studious effort on the part of political leaders to try to protect against government stepping in and regulating or changing the rules.

BILL MOYERS: You write, we have a government that’s been promoting inequality, and at the same time, as you just said, failing to counteract it. This has been going on, you write, 30 years or more. And here’s the key sentence: Step by step, and debate by debate, our public officials have rewritten the rules of the economy in ways that favor the few at the expense of the many.

PAUL PIERSON: In some ways, the fundamental myth that we’re trying to break out of is the idea that there’s something natural out there called “the American economy” that is prior to government, prior to politics. And that government, if it’s involved at all, is only involved sort of at the end of the day, maybe tidying things up around the edges, or redistributing money from some people to another.

And I think the financial crisis has been a rude awakening for people who viewed the economic world that way. It’s now, I think, very clear in retrospect that the decisions that leading public officials made over a period of decades helped to get us to a point where a financial crisis could be so devastating to all Americans.

BILL MOYERS: How can this happen? How could Washington turn its back on the broad middle class to favor a relatively few at the top in a democracy?

JACOB HACKER: What has really changed is the organization of American politics, particularly the organizations that represent the deepest pocketed members of American society. What we’ve seen as an organizational revolution over the last 30 years that has meant that business, and Wall Street, and ideological conservative organizations that are pushing for free market policies have all become much more influential.

And at the same time, a lot of the organizations that once represented the middle class, labor unions, broad-based civic organizations and, sort of, organizations at the local and grassroots level, including social movements, have all lost enormous ground.

And so it’s that imbalance, that shift, I think, that is the sort of underlying pressure that plays out in our politics today. The way we describe it in the book is as if the ecosystem of American politics has changed. And everyone in American politics, Democrats, Republicans, liberals, conservatives has had to adapt to this new world where money matters much more in our politics, and where groups representing business and the wealthy are much more powerful than in the past.

BILL MOYERS: And you don’t beat around the bush. You say, quote, “Most voters of moderate means…have been organized out of politics, left adrift as the foundations of middle class democracy have washed away.”

JACOB HACKER: Yeah, I mean, if you look at the history of American democracy it is about a broadening of our understanding of political equality to incorporate African Americans and women and ultimately to also incorporate the idea that large inequalities of property were a threat to democratic equality. So FDR during the Great Depression famously said that political equality was meaningless in the face of economic inequality.

So we now, I think, understand that inequality of income and wealth is part of a capitalist society, but it can’t overwhelm our democracy. And what we’ve seen in the last 30 years is a gradual erosion of the firewalls that protect our democracy from the inequalities that are occurring in the market. Money has come into politics much more.

And the power that people have in the market is being used more and more in politics as well. And that’s a concern because Americans have very complex views about equality, but they all agree in this basic idea that as Thomas Jefferson famously said, “All men are created equal.”

And he meant men probably, but you know, the modern understand of that phrase, we believe that people whether they’re rich or they’re poor, whether they have lots of property or not, whether they’re in, on Wall Street or off, they should have equal potential to influence what government does. Anybody who looks around at our government today cannot believe that’s the case or that we’re even close to that.

PAUL PIERSON: Well certainly you just have to look at recent headlines to see a Washington that seems preoccupied with the economic concerns of those at the top and is resistant in many cases to steps that are clearly favored by a majority of the electorate such as wanting to increase taxes on the very well-to-do, letting the Bush tax cuts for the wealthy expire as if you want to do something about the deficit. That’s the single most popular proposal for doing something about the deficit would be to let the Bush tax cuts for the wealthy expire. And yet that gets nowhere in Washington.

JACOB HACKER: You know, there is an organized, powerful constituency for deregulation, for high end tax cuts, for policies that are neglecting some of the serious middle class strains. And there just isn’t anything of comparable size or power on the other side.

And that has pulled Washington way toward the concerns of the most affluent, most privileged members of our society and led them to often neglect the real struggles that Americans are facing during this economic crisis, struggles that are magnified versions of what Americans have been going through for 25 years or so.

BILL MOYERS: There was a time when we were sure that a strong middle class was the backbone of a democracy. And there was a time, after the second World War when I was a young man when incomes actually grew slightly faster at the bottom and the middle than at the top, is that right? Do your figures support that?

PAUL PIERSON: Yes, they do. And we describe that period after World War II, which lasted for about 30 years as being a country which we labeled Broadland. And—

BILL MOYERS: Broadland?

PAUL PIERSON: Broadland. And I think it’s most clearly captured by that old idea that a rising tide lifts all boats.

Everybody’s income is going up at the roughly the same rate, slightly faster actually towards the bottom of the income distribution than towards the top, but everybody’s incomes were going up. And it’s important to understand, so this wasn’t some egalitarian fantasy world. It wasn’t Sweden.

It was the United States, recognizably the United States with significant inequalities of wealth, but everybody was participating in prosperity and seeing their incomes rise. And then after the mid 1970′s we start moving towards a distribution of income that looks more like that of a third world oligarchy. It looks more like Mexico or Brazil or Russia. Income inequality that statistics on income inequality now suggest that inequality is higher in the U.S. than it is in Egypt. And that’s quite a journey from where we were when I was growing up.

JACOB HACKER: Right now I think we’re seeing the kind of bitter fruit of winner-take-all politics because this financial crisis was not an act of God or work of nature. It was brought on by poor decisions that were made in Washington and on Wall Street. Yes, there’s a global dimension to this, but a big part of it was failures of domestic policy. You know, if you look to our northern neighbor, Canada, it had nothing like the same degree of banking crisis the United States did. And that’s partly because it had much more effective regulations of the financial sector. You know, over this period that we saw leverage and speculation increasing on Wall Street, Washington, both Democrats and Republicans, were trying as hard as they could to allow Wall Street to do even more.

BILL MOYERS: So the winner-take-all politics has produced a winner-take-all economy? Right?

JACOB HACKER: Yes.

PAUL PIERSON: Yes.

BILL MOYERS: And the winners are?

JACOB HACKER: The winners are those who’ve made out so well in this new economy, the very well off and financial– and people in the highest reaches of finance and corporate executives suites.

BILL MOYERS: And the losers?

PAUL PIERSON: Well, the losers are, I think, almost all of us.

I think almost all Americans lose from the shift toward a society in which rewards are so narrowly concentrated on a small segment of the population.

I was talking yesterday evening with a friend of mine who spends much of his time in Mexico who was describing a society in which a small group of wealthy people are protected by guns mostly from the rest of the population and dart from one protected location to another protected location completely separate from the rest of society.

We’re not there yet but we’ve moved a long way down a road in which there’s just a sharp social, economic, cultural separation from the vast bulk of Americans and a small astonishingly successful financial elite. And I don’t think that — I think most Americans would consider that not to be an improvement. They would consider themselves to be losers from that.

JACOB HACKER: And there’s no sign that the sort of massive concentration of the gains of the economy at the very top is slowing down. In fact, this downturn has been remarkable in the degree to which those at the very top seem to have weathered it pretty well. Profits are still very high.Those who are on Wall Street have recovered thanks to a massive government bailout.

BILL MOYERS: Taxpayers put it up. I mean, they’re spending taxpayer money.

JACOB HACKER: Yes, yes. And so we’ve seen the economy over 30 years very consistently shift in this direction. And what I think has not happened and what concerns us greatly is a kind of real undermining, deep undermining, of the operation of our democratic institutions.

I mean, we’re describing a massive erosion, but the question is could we see those democratic political institutions really cease to function effectively in the future if we have a society that continues to tilt so heavily towards winner-take-all. And that’s why we wrote the book because, you know, Walter Lippmann back in the early 20th century said the challenge for democratic reform is that democracy has to lift itself up by its own bootstraps.

And we’re, we are deep believers in the ability of American democracy to reform itself, of the strength of our democratic institutions. But they’re in very serious disrepair right now. And we’ve seen in recent political fights a sort of paralysis and a broad loss of faith in government. And that sort of secession of the wealthy from our economic life that we’ve already started to see could be matched by a secession of them from our political life and a sort of loss of that broad democracy that was characteristic of mid-20th century. That’s the greatest fear that we have.

BILL MOYERS: Would you say we still have a middle class country?

PAUL PIERSON: That’s–

BILL MOYERS: Wow.

PAUL PIERSON: No, no, I wouldn’t, I wouldn’t.

BILL MOYERS: You’re hesitant.

PAUL PIERSON: If you asked me if you asked me that point blank, I mean–

BILL MOYERS: Point blank, Paul, do we still have a middle class country?

PAUL PIERSON: I would say no. I mean, obviously there is still something there is still something that we would recognize as a middle class, it’s still probably the biggest segment of the population. But in terms of its weight in the society, its ability to produce a society and reproduce a society that is oriented around the needs and concerns and opportunities of the middle class, I don’t think that we live in that country anymore.

JACOB HACKER: There was a poll done in 2010 that asked Americans whether the federal government had helped a great deal the following groups: large financial institutions and banks, 53 percent of Americans said they’d been helped a great deal.

What about large corporations? 44 percent of Americans said they’d been helped a great deal. Then they asked, well, has the federal government helped the middle class a great deal? And do you want to guess what percent of Americans said that they’d been helped a great deal– the middle class had been helped a great deal? Two percent.

BILL MOYERS: Two percent?

JACOB HACKER: Two percent.

BILL MOYERS: Well, this is—

JACOB HACKER: And so it’s just a remarkable sense that Washington isn’t working for the middle class. And after writing this book I think Paul and I feel as if that assessment, while excessively harsh, is grounded in a reality that Washington isn’t working well for most Americans.

BILL MOYERS: Did either of you happen to catch the Senate hearings last summer when a procession of ordinary Americans came and testified about what was happening?

AMANDA GREUBEL: We did everything we were always told to do to have the American dream. We finished high school, we went to college, we got married, we work hard, we pay our bills. We have no credit card debt. We waited to have children until we believed we were ready. We both got graduate degrees to be better at our jobs and make ourselves more marketable and increase our worth as employees. We volunteer, we donate to help those in need, and we vote. We did everything that all the experts said we should do, and yet still we’re struggling. And when you work that hard and you still feel sometimes like you’re scraping, it gets you really down really quick.

JACOB HACKER: When I hear stories like that I think, what is wrong with the priorities of our society that we cannot figure out how to translate our great wealth, our ingenuity, the hard work of our citizens, into a better standard of living that is shared broadly across the population? That’s a fundamental thing that a well-functioning democracy should do.

BILL MOYERS: And you say we are way behind in mobility. Behind Australia, Norway, Finland, Germany, France, Spain, and Canada. We are way down the list in terms of social mobility. Am I reading you right?

JACOB HACKER: Over this period in which those at the very top have done better and better the chance of climbing up the economic ladder hasn’t grown at all, it may have actually declined. And that is reflected, I think, in a sense of pessimism that you see among many middle class Americans about whether the American dream still holds true.

At the individual level Americans are extremely optimistic. And if you ask them, “Will you achieve the American dream?” Most Americans say yes. But at a collective level when you ask people, “Does the American dream still hold true?” We’re seeing in surveys for the first time that only about, you know, half of Americans are agreeing that the American dream still holds true. And that’s remarkable.

BILL MOYERS: What’s the practical consequences of that? Of giving up faith and hope in that dream?

JACOB HACKER: The fact is that for most middle class and working class Americans the politics seems increasingly removed from their everyday experience and their life. And there is a current of distrust and anger towards Washington is that is so deep right now.

AMANDA GREUBEL: When we turn on our TV’s, our radios, or pick up our newspapers, we read about what is going on in our federal and state governments, and we start to believe that you don’t care about us. We hear that corporate welfare continues and CEO’s get six-figure bonuses at taxpayer expense, and we wonder who you’re working for. And we look across the kitchen table at our families eating Ramen noodles for the third time this week and wonder how that’s fair. We read that the wealthy get bigger tax breaks in hopes that their money will “trickle down” to us, then we turn the page and read about how our school districts are forced to cut staff again. We know that money talks around here, and that means you don’t hear us.

JACOB HACKER: That is one of the big changes that occurs over this period. Money becomes more important for campaigns and it also becomes much more important in terms of lobbying, which in some ways is the more important way that money changed American politics. It’s really the development of lobbying over this this last 25, 30 years that stands out as the most dramatic role of money in American politics.

We tell the story in the book of the Tax Reform Act of 1986, because this was one of these great examples when the lobbyists were overcome. You know, the Gucci Gulch right outside the Senate chamber where the well-heeled lobbyists attend to members of congress. Well, Gucci Gulch was a place of, not of celebration, but of despair after 1986 because all these tax loopholes were closed, rates were brought down in a way that was actually making the tax code more equitable. And that was considered to be a big step forward for the public interest.

Well, a few years later lobbyists had written a lot of these loopholes back into the tax code. Ten years later, you know, you could hardly see any traces of the 1986 Tax Reform Act. Almost all of the good government public interest reforms that were put into the tax code in 1986 overcoming the lobbyists have been put back in, have been overwhelmed by the day in, day out lobbying to get those tax provisions right back into place.

BILL MOYERS: Quite a cycle, I mean, if you’re creating a winner-take-all economy the winners have more money to contribute to the politicians, who turn it into a winner-take-all politics. I mean, it just keeps—

PAUL PIERSON: Right. It is the story that we try to tell in this book that there has been a 30 year war in which the sound of the voice of ordinary Americans has been quieter and quieter in American politics and the voice of business and the wealthy has been louder and louder. Many people, I think, read this book and think it’s a pessimistic book, that it’s grim reading and there are ways in which that’s true.

But Jacob and I genuinely believe that it’s an optimistic story compared with the story that we’re typically told about what’s been happening to the American economy. Because what we’re typically told is there’s nothing you can do about this, that it’s just an economic reality, there’s no point in blaming any political party.

And I think the main punch line of our story and the optimistic message is that politics got us into this mess and therefore potentially politics can get us out of it.

BILL MOYERS: But if both political parties are indebted to the winners where do the losers find an army to join?

JACOB HACKER: When citizens are organized and when they press their claims forcefully, when there are reformist leaders within government and outside it who work on their behalf, then we do see reform. This is the story of the American democratic experiment of wave after wave of reform leading to a much broader franchise, to a much broader understanding of the American idea.

In the mid-20th century we saw a period in which income gains were broadly distributed, in which middle class Americans had voice through labor unions, through civic organizations and through, ultimately, their government. We’ve seen an erosion of that world, but just because it’s lost ground doesn’t mean it can’t be saved. And so in writing this book we were hoping to sort of tell Americans that what was valuable in the past could be a part of our future.

BILL MOYERS: Jacob Hacker and Paul Pierson, thank you.

PAUL PIERSON: Thank you so much.

JACOB HACKER: Thank you.

http://billmoyers.com/segment/jacob-hacker-paul-pierson-on-engineered-inequality/

The Source of Corporate Power

by Robert C. Koehler, January 28, 2010 by CommonDreams.org

Excerpt

…Cit­i­zens United vs. Fed­eral Elec­tion Com­mis­sion case over­turns restric­tions on cor­po­rate spend­ing to influ­ence elec­tion results, giv­ing enti­ties with mil­lions (in some cases, bil­lions) of dol­lars at their dis­posal unlim­ited license to elec­tion­eer for the can­di­date with the friend­liest atti­tude toward their inter­ests. The ten­dency of money and power is to con­cen­trate, of course. The big trick, from a human per­spec­tive, is to make sure our core val­ues remain pre-eminent, that they are served by the ways in which we con­cen­trate power. Democ­racy is the great mech­a­nism for doing so…the con­cept of democ­racy is mor­tally wounded…This is an “activist” judi­cial deci­sion, that is to say, a deci­sion that serves a prior agenda, with any prin­ci­ples cited (e.g., the sanc­tity of free speech) sheer win­dow dress­ing in ser­vice to a larger, and covert, cause…I see lit­tle hope for a gullible nation that allows the tube to hem­or­rhage urgent inani­ties directly into its con­scious­ness for 18 hours a day. This gulli­bil­ity is the source of cor­po­rate power. Democ­racy can only thrive where peo­ple think for themselves.

Full text

“If the First Amendment has any force, it prohibits Congress from fining or jailing citizens, or associations of citizens, for simply engaging in political speech.”

The words are those of Justice Anthony M. Kennedy, writing for the majority in last week’s landmark Supreme Court decision marking some sort of culmination in the long corporate trek to personhood. It’s the word “simply” that gets to me: Exxon-Pinocchio is a real boy now, and has his opinions, and the government has no right to stop him from “simply engaging in political speech.”

What a cheap cover story; it’s up there with “bringing democracy to Iraq” in its tawdry manipulation of iconic national values to justify a raw power grab. The 5-4 decision in the long-awaited Citizens United vs. Federal Election Commission case overturns restrictions on corporate spending to influence election results, giving entities with millions (in some cases, billions) of dollars at their disposal unlimited license to electioneer for the candidate with the friendliest attitude toward their interests.

The tendency of money and power is to concentrate, of course. The big trick, from a human perspective, is to make sure our core values remain pre-eminent, that they are served by the ways in which we concentrate power. Democracy is the great mechanism for doing so, the hope of the world, or so we are told, but the wakeup message in this nakedly cynical ruling by the Roberts Court, with its slim (but sufficient) right-wing majority, is that the concept of democracy is mortally wounded.

As former Sen. Bob Kerrey wrote recently on Huffington Post: “Instead of doing the nation’s business, elected officials are spending a third of their time or more dialing for special interest dollars in never-ending campaigns for re-election.

“Industry lobbyists,” he goes on, “are helping to write the very bills in Congress that affect their bottom line, placing private profit ahead of the public good. Billions of taxpayer dollars are going to benefit big contributors through earmarks, subsidies, and special regulations.”

And as Chris Hedges explains on TruthDig: “Corporations have 35,000 lobbyists in Washington and thousands more in state capitals that dole out corporate money to shape and write legislation.”

The interests of Big Oil, Big Pharma, Big Coal, agribusiness, the financial sector, the insurance sector and, of course, the military-industrial complex, have infinitely more clout in government than the collective popular will and the voices calling for eco-sanity, universal health care and an end to war. Note: This is already the case.

Corporate entities have thoroughly gamed the system, leaving us with little more than a textbook-democracy façade. What the latest Supreme Court decision does is legitimize all this, shoving the corruption in our faces by declaring the absurd: Corporations are people too! They have a right to weigh in on the candidates just like the rest of us – to get their billion-dollar opinions out to the public throughout the election campaign.

This is an “activist” judicial decision, that is to say, a decision that serves a prior agenda, with any principles cited (e.g., the sanctity of free speech) sheer window dressing in service to a larger, and covert, cause.

As a New York Times story points out, the case itself – involving a conservative, not-for-profit corporation called Citizens United, which was restricted in its ability to distribute an attack film about Hillary Clinton, “Hillary: The Movie,” during the 2008 presidential primary elections – could have been decided on narrow grounds. The court chose instead to expand the scope of the case, making it into a challenge of existing laws that regulate corporate election spending, most notably the Bipartisan Campaign Reform Act of 2002, a.k.a. McCain-Feingold, which prohibits corporate electioneering within 60 days of an election. This is what we’ve lost.

The good news is that the decision has generated a huge outpouring of anger around the country. Within a day of the ruling, the website MoveToAmend.org had garnered some 40,000 signatures (it’s now close to 50,000) in support of a constitutional amendment to establish that money is not speech and only human beings have constitutional rights. The amendment would also guarantee our right to vote and participate in elections, and to have our votes count.

A number of bills and legislative actions are also in the works, attempting to circumvent the Supremes. The proposals range from patch jobs to cries for profound change, both of which are necessary in the process of resuscitating democracy.

No matter what, though, the Roberts Court has hastened the propagandizing of the national discourse, mostly through the medium of television, as corporate interests amp up their thought-control machines in the name of free speech. I see little hope for a gullible nation that allows the tube to hemorrhage urgent inanities directly into its consciousness for 18 hours a day. This gullibility is the source of corporate power. Democracy can only thrive where people think for themselves.

© 2010 Tribune Media Services, Inc.

Robert Koehler is an award-winning, Chicago-based journalist and nationally syndicated writer. His new book, Courage Grows Strong at the Wound is now available. Contact him at koehlercw@gmail.com or visit his website at commonwonders.com.

https://www.commondreams.org/view/2010/01/28-2

What Watchdog? How the Financial Press Has Failed the American Public

AlterNet [1] / By Laura Gottesdiener [2]  January 9, 2013  |

…2013 is already shaping up to be another year of government-backed wins for Wall Street. As the New York Times’ Gretchen Morgenson wrote, “If you were hoping that things might be different in 2013 — you know, that bankers would be held responsible for bad behavior or that the government might actually assist troubled homeowners — you can forget it.…”…The lack of outrage or investigation by mainstream media comes in stark contrast to the public response to the settlement announcements….So if readers are hungering for more information and outrage, why is the mainstream press so soft on Wall Street? Is it the last three decades’ rampant media consolidation, which has put 90 percent of the nation’s media in the hands of only six major corporations? [5] (That’s down from 50 companies in 1983.) Pulitzer Prize-winning investigative journalist Dean Starkman, whose 2009 Columbia Journalism Review article “Power Problem [6]outlined just how badly the financial press failed in the lead-up to 2006 [was asked]  what’s the role of the press–if it’s doing its job? [ and said] “To me, journalism is particularly important because it is the oxygen of democracy. At its best, it is the main thing that is capable of explaining complex problems to a mass audience.That’s its most critical role–and its most difficult task.”…

Full text

From revelations about this week’s hasty, multibillion-dollar bank settlement [3]s to AIG’s brief threat to sue the federal government for its own $128-billion bailout (which the company contends wasn’t as generous as other bailouts), 2013 is already shaping up to be another year of government-backed wins for Wall Street.

As the New York Times’ Gretchen Morgenson wrote, “If you were hoping that things might be different in 2013 — you know, that bankers would be held responsible for bad behavior or that the government might actually assist troubled homeowners — you can forget it. A settlement reportedly in the works with big banks will soon end a review into foreclosure [4] abuses, and it means more of the same: no accountability for financial institutions and little help for borrowers.”

This type of clear condemnation of Wall Street and its lack of accountability remains a rare voice in mainstream media, with few willing to join Morgenson and Rolling Stone’s Matt Taibbi on their crusades against banking abuses.

The lack of outrage or investigation by mainstream media comes in stark contrast to the public response to the settlement announcements. The comments sections of settlement-related articles are bursting with scathing comments–including demands for both criminal prosecution for bankers and more investigative journalism in the U.S. In an LA Times poll, 94 percent [3] of respondents said that this latest settlement agreement lacked appropriate transparency.

So if readers are hungering for more information and outrage, why is the mainstream press so soft on Wall Street? Is it the last three decades’ rampant media consolidation, which has put 90 percent of the nation’s media in the hands of only six major corporations? [5] (That’s down from 50 companies in 1983.) What about the increasing magazine and newspaper ad revenue coming directly from Wall Street? Or perhaps it’s even due to a redefinition of what constititues financial journalism?

Pulitzer Prize-winning investigative journalist Dean Starkman, whose 2009 Columbia Journalism Review article “Power Problem [6]outlined just how badly the financial press failed in the lead-up to 2006, has some ideas.

Laura Gottesdiener: Thanks, Dean, for taking the time to talk. To start simple: In your mind, what’s the role of the press–if it’s doing its job?

Dean Starkman: To me, journalism is particularly important because it is the oxygen of democracy. At its best, it is the main thing that is capable of explaining complex problems to a mass audience.That’s its most critical role–and its most difficult task.

Looking back over the 20th century, the great stories are the ones that pull the curtain back on things that are truly complex, baffling and dangerous problems. I’m thinking particularly of an iconic story that journalists stand up and salute: the Standard Oil series from 1902-1904. This knowledge allowed the public to participate in the question of trusts, and the rest is literally history. The government filed an anti-trust case, and Standard Oil was broken up in 1911. That’s the gold standard, the benchmark for journalism.

LG: So how does this relate to today’s financial press?

DS: The financial system is almost deliberately complex; there’s that famous quote by the head of Morgan Stanley, when he said something along the lines of, “We create things that people don’t understand on purpose.”

To me the business press is put on earth to help the public understand complex problems, and certainly the mortgage frenzy was one of them. And that’s where I have a bone to pick with the financial press.

LG:That’s a nice way of putting it. In your piece you call the lead-up to 2006 a “general system failure” for the media, and wrote that the post-crash reporting gave the “short shrift to the breathtaking corruption that overran the mortgage business.”You also diagnosed the financial press today with Stockholm Syndrome.

So what’s going on?

DS: It’s not fully appreciated that there’s been a big power shift between the big media and the institutions that it covers in the last 20 years. When you think of the 1990s, finance was a really powerful industry, but so was media. In the mid-1990s, Dow Jones, which publishes the Wall Street Journal, was almost the same size of Morgan Stanley. Now Morgan Stanley is literally 30 times larger than the New York Times company.

This power shift is almost an intangible thing, but you cannot discount it as part of the story of the rising sense of empowerment and entitlement on Wall Street and an increasing sense of deference from the business press. Also, you can’t deny that the collapse of financial regulation in the early Bush administration plays a role. The press relies, not to a fully appreciated degree, on a financial regulatory system because that generates a lot of paperwork.

LG:Still, sometimes it feels like mainstream media doesn’t only fail to investigate Wall Street’s crimes–they actually helped facilitate them. Is the business press itself an accomplice?

DS: The biggest problem during this period was this narrowing definition of what constitutes a business story. There are fights over what journalism is, and you can divide journalism into two great competing schools. One is the access school, and the other is the accountability school.

In the lead-up to 2006, the accountability school was increasingly marginalized and in retreat, while the access school–doing the profile and getting the scoop on deals–became much more prominent. And so the big missed story–the accountability story–was the radicalization of the financial system, particularly in mortgage lending and discussions of subprime and predatory lending.

Meanwhile, when I went back and reread some of the coverage by really good reporters from really good magazines, the coverage of Wall Street, even if it was well intended, actually helped to exacerbate the crisis and add flames to the frenzy. Things like positive profiles of Wall Street executives made things worse and made the world worse. Unwittingly maybe, but so what?

LG:That reminds me of Vanity Fair’s glowing profile [7] of Jamie Dimon recently.

So what about today? Even now that the radicalization of Wall Street is obvious, it still seems like mainstream media oscillates between blaming borrowers and banks.

DS: In another debate between schools of journalism, right now it’s a jump ball between the structuralists and the behavioralists. In the case of the mortgage crisis, behavioralists argue that people lost their ability to understand and manage debt, while structuralists believe that people don’t change, that markets change–and that the market changed.

Of course, structuralists are right and behavioralists really don’t have a leg to stand on. The structuralists aren’t only right, all the evidence is on their side.

But the cultural argument of behavioralists still has a lot of saliency, and for lazy reporters it’s easy because all you have to do is make the assertion about human nature, and that’s the end of the discussion.

LG:So, what’s the effect of having the behavioral-based articles in mass media?

DS: What it really does is that it shifts the gaze entirely off the institutions that these papers are supposed to be covering and onto an amorphous public that can’t fight back. Put it this way: If you blame Goldman Sachs, you will hear from Goldman Sachs. But if you blame the public, no one is going to call you. No one is there to stick up for the borrowers.

LG:It’s well documented now that minorities were widely discriminated against by the mortgage industry, and continue to be abused by banks’ failures to upkeep real estate-owned property, just to name one current problem. But if mainstream media articles are using the behavioralist theory, how does this type of blame get allocated?

The behavioralists theory does align with racist attitudes. For example: the mortgage crisis was one of these huge generational setbacks for the black community, and that’s one of those things that was essentially dropped by the press. It’s very poorly understood and documented, and it’s one of the most under-covered aspects of this story.

LG: I understand you’re working on a new book that’s going to take the financial press to task. Can you give us a sneak preview?

DS: Sure. It’s calledThe Watchdog That Didn’t Bark, and it’s forthcoming from Columbia University Press. The book is going to be an argument for watchdog journalism and accountability reporting.

There’s a long tradition of accountability reporting in American business media, and I hope this book will be a revelation to people who think the financial press only reports on investor news, because it’s actually done things that are quite radical in the past. Starting in the early 20th century, we had an emerging business press covering the market, but it had a completely different gaze. It used this form to expose the monopolies and to set the country on the road to reform.

So, I’ll be talking about that particular line of journalism, the origins of business news and the things that impair business news today. In the past the financial press has taken on quite a robust watchdog function.

LG:Last question: It doesn’t seem like financial reporting today is all that much better than it was in the lead-up to the crisis. But what about the future?

DS: There’s no reason to think it’s going to get dramatically worse from here. What we went through was crazy. It was a near-death experience.


Source URL: http://www.alternet.org/corporate-accountability-and-workplace/what-watchdog-how-financial-press-has-failed-american-public

Links:
[1] http://www.alternet.org
[2] http://www.alternet.org/authors/laura-gottesdiener
[3] http://www.latimes.com/business/la-fi-mo-banks-settlement-20130106,0,6497379.story
[4] http://topics.nytimes.com/top/reference/timestopics/subjects/f/foreclosures/index.html?inline=nyt-classifier
[5] http://www.businessinsider.com/these-6-corporations-control-90-of-the-media-in-america-2012-6
[6] http://www.cjr.org/cover_story/power_problem.php?page=all
[7] http://www.vanityfair.com/business/2012/11/jamie-dimon-tom-brady-hang-in-there
[8] http://www.alternet.org/tags/banking-0
[9] http://www.alternet.org/tags/watchdog
[10] http://www.alternet.org/tags/mainstream-media
[11] http://www.alternet.org/tags/bailout-0
[12] http://www.alternet.org/tags/settlement
[13] http://www.alternet.org/tags/wall-street
[14] http://www.alternet.org/tags/crimes-0
[15] http://www.alternet.org/%2Bnew_src%2B

Congress gives out end-of-year perks to interest groups

By Editorial Board, Washington Post, January 2, 2013

CONGRESS, APPARENTLY, couldn’t end the year without showering billions on a handful of interest groups, some of which you probably didn’t even know existed.

The Post’s Brad Plumer points out that the “fiscal cliff” bill that passed Congress on Tuesday contained a bonanza for single-issue lobbyists, extending supports for Puerto Rican rum distillers, Hollywood studios, tribal-lands coal, electric-scooter makers and other corporate interests that Congress will subsidize through the tax code for another year or two. It’s easy to blame some combination of policy inertia and congressional distraction for the largely rote reauthorization of some of these items; most lawmakers simply didn’t have the capacity to think much about the relatively small tax loophole for NASCAR racetracks. Yet that’s not true of some of the biggest-ticket items, which have been the subject of reform discussions all year long.

One of those is the production tax credit (PTC) for wind energy. Extending the decades-old subsidy will cost more than $12 billion through 2022, Congress’s Joint Committee on Taxation reckons. True, lawmakers have a more legitimate interest in supporting renewable electricity than they do in rum. Yet the PTC is an unnecessarily crude and expensive way to do it, and a group of lawmakers wanted to cancel, or at least reform, the policy. Even the wind industry agreed last month that, after two decades of direct assistance, Congress should set the PTC to phase out by 2019. Instead, lawmakers made only one change as they extended the credit for another year, and that change made the policy more generous.

Yet another expensive piece of the cliff deal was a nine-month extension of the 2008 farm bill, a monstrous money-waster that lawmakers had also aimed to reform last year. Reform bills had even advanced in both houses of Congress. Among other things, members were finally contemplating the elimination of one of the most egregious wastes of taxpayer money, the direct-payments program, which hands cash to folks who don’t even farm. Instead, direct payments will linger on, along with much of the rest of the government’s byzantine farm-support apparatus, until September.

The most positive spin on these measures is that Congress has given itself more time to fine-tune reforms; perhaps the fiscal wrangling scheduled for 2013, in which the big budget renovation that the nation’s leaders keep talking about is supposed to happen, will even provide a more favorable context. Yet lawmakers have already had plenty of time, and the fiscal cliff did not force a policy breakthrough. Congress has no excuse for more procrastination.

http://www.washingtonpost.com/opinions/congress-gives-out-end-of-year-perks-to-interest-groups/2013/01/02/3f53759a-552e-11e2-a613-ec8d394535c6_story.html?wpisrc=nl_headlines

Fiscal Cliff Deal Sneaked In Wall Street Gifts, NASCAR Perk

by Ben Hallman,  Christina Wilkie,  Chris Kirkham, huffingtonpost.com,  01/02/2013

The 11th-hour deal to avert the so-called fiscal cliff preserved billions of dollars in corporate tax giveaways even as it slashed take-home pay for millions of American workers.

Tucked inside the last-minute fiscal cliff package were more than a dozen tax loopholes, many of which will benefit Wall Street financial firms and some of the nation’s biggest corporations. These breaks will cost billions of dollars in the coming year, underscoring the lobbying power of corporate interests.

The deal was less kind to the middle class. Congress permitted a cut in the payroll tax to expire, meaning that the tax burden for the average worker will increase about $1,000 in 2013.

“This shows that the lobbyists are able to get what they want even when everyone else is starving,” said Phineas Baxandall, senior analyst for tax and budget policy at the U.S. Public Interest Research Group. “It also shows they are best able to get what they want when no one else is paying attention.”

The corporate loopholes were part of a package of so-called tax extenders tacked onto the main bill. The extenders package, first approved by the Senate in early August, mixes popular benefits, like a deduction for teachers who buy classroom supplies, with corporate-friendly carve-outs, such as the “active financing” exception that permits businesses earning interest on overseas lending to defer U.S. taxes on that income indefinitely. There is even a tax break for construction of new racetracks.

The tax extenders were passed for only one year, and they still need to clear another potential hurdle: upcoming negotiations over mandated spending cuts and the debt ceiling. President Barack Obama and congressional leaders have indicated they’d like to see a “grand bargain” on taxes, which would feature lower overall rates but close a slew of loopholes.

The financial services industry, whose leaders had earlier joined a group of other corporate executives pushing for a “fair” solution to the fiscal crisis, is one of the primary beneficiaries of special-interest tax breaks. The active-financing exception, for example, permits banks like Morgan Stanley to avoid the 35 percent U.S. corporate tax rate on interest income from money lent overseas. A handful of other U.S.-based multinational companies with financing arms, such as Ford Motor Co. and General Electric, also use that exemption to lower their tax bills. The two-year cost to taxpayers is an estimated $11.2 billion, according to the congressional Joint Committee on Taxation.

U.S. financial institutions argue that the active-financing exemption is necessary for them to compete in overseas markets with foreign banks that carry a lower tax burden. The loophole was repealed in the Tax Reform Act of 1986, but was reinstated in 1997 as a temporary measure after fierce lobbying by multinational corporations.

The exemption belongs to a small group of boutique corporate tax loopholes that are worth a lot of money to a relative handful of corporations. It even has its own lobbying coalition, the Active Finance Working Group, which serves as a prime example of how important the 20 or so companies that benefit from the exemption consider it. Founded in 2005, the group was quiet during the last few years of the Bush administration, but roared to life again in 2009.

That year, the coalition retained the services of former top Democratic congressional aide-turned-lobbyist Steve Elmendorf, whose firm, Elmendorf Ryan, has earned more than $1.2 million in lobbying fees from the working group in the past four years. Lobbying disclosure reports reveal that the coalition was housed in the same office as Elmendorf Ryan and that the coalition’s lobbyists had just one task: protect the active-financing exemption.

In Elmendorf’s firm, the Active Finance Working Group has a top-flight team: All eight of the Elmendorf Ryan lobbyists working on the issue in late 2012 were former congressional staffers, most with ties to powerful lawmakers, including to Senate Majority Leader Harry Reid (D-Nev.) and Senate Finance Committee Chairman Max Baucus (D-Mont.).

According to Citizens for Tax Justice, the financial services industry paid an average effective tax rate of 15.5 percent from 2008 to 2010, far lower than that of most other industries.

As part of the fiscal cliff deal, Congress also extended another little-known tax break that benefits large multinationals selling products through overseas affiliates. This “pass-through” exemption permits a U.S.-based company to set up a new corporation in a tax haven like the Cayman Islands and sell it a patent owned by the U.S. parent company. Royalties on overseas licensing of that patent would then route to the tax-sheltered firm, instead of the U.S. parent company. The Joint Committee on Taxation says the two-year cost of extending this shelter is $1.5 billion.

One of the more unusual tax benefits in the fiscal cliff legislation is a longstanding carve-out for racetracks used by NASCAR.

Since 2004, Congress has passed a series of stopgap measures that allow owners of motorsports complexes to accelerate their depreciation expenses. This means that owners can deduct more in expenses, reducing the taxes they must pay.

Track owners and NASCAR together have spent hundreds of thousands of dollars lobbying for the tax benefit over the past five years, according to lobbying disclosure forms. The International Speedway Corp., which owns and manages NASCAR race tracks, has spent more than $1.1 million lobbying Congress since 2008. Over the same period, NASCAR spent more than $300,000 on lobbying efforts, which included a push to “make permanent the depreciation classification.”

Supporters in Congress and industry groups have argued that the tax break is necessary to “maintain the current standard expected by our competitors and fans.” According to estimates by the Joint Committee on Taxation, the so-called NASCAR loophole will cost taxpayers $46 million this year and an additional $95 million through 2017.

A spokesman for the International Speedway Corp., Charles Talbert, said the industry is simply seeking to preserve a tax designation it has relied on for years. He said in an email that racetracks had always used the accelerated depreciation schedule, but Congress had specifically written it into law after the Internal Revenue Service argued that it was improper in the early 2000s.

Though Congress was willing to sign off on all these business-friendly goodies, legislative leaders couldn’t muster enthusiasm for extending the payroll tax holiday, which had cost the federal government $120 billion each year in lost revenue.

As a result, a worker who earns $50,000 a year will now pay at least $80 more per month in taxes. The payroll tax increase will affect as many as 160 million people.

CORRECTION: A previous version of this story overstated the cost of the business tax extenders. The cost of the rising payroll tax to an average American has also been clarified.

http://www.huffingtonpost.com/2013/01/02/fiscal-cliff-wall-street_n_2397933.html