The Steady Drift toward Oligarchy

Taxation is theft and everyone should get to keep every penny they earn – but if there has to be taxation, the Takers should pay those taxes and the Makers pay no taxes at all, because if we relieve the Makers of all such burdens, because free from the burden of taxes, and all regulation too, they’ll expand their businesses and create all sorts of jobs and the economy will explode with amazing new growth, unless they use all the cash they have lying around to invest in secondary derivatives of hypothetical assets, or hedges against possible losses in those – but that’s okay. It’s their money, not anyone else’s, and this country is about freedom after all. No one should pick on them. That’s immoral. No one except for some Marxist fools and the new Pope begrudges them their success, and if the country goes broke, because there’s not enough money to fund current operations – even if we taxed everyone earning under a hundred grand a year at ninety percent we still couldn’t cover the cost of the wars and all the spying, much less Social Security and Medicare and fixing the roads and bridges – that okay. Everyone knows government is stupid. Stop those current operations, all of them, or at least privatize them. Everyone knows that things work best when someone has to turn a profit on that certain thing, whatever it is. Think about it. If you can’t make money at something, perhaps it wasn’t worth doing in the first place. No wanted to pay for that good or those services, after all. If in the end there were, say, no schools at all, or no roads in certain places, or no parks, or mail service, then the market would have spoken. Things would finally be as they should be.

The market knows. Government doesn’t know, as with Obamacare. If people wanted fancy health plans, that covered preexisting conditions and whatnot, or affordable health plans like that, they’d be more than willing to pay for those, and someone would have figured out a way to sell those to them, at a tidy profit. That there was no money to be made insuring people who had been sick and might get sick again, except at sky-high prices, simply proved that doing that sort of thing was irrational. The market had spoken, and Obama messed up everything. Government always distorts markets.

This sort of thing has to stop. If people want something badly enough, they’ll be willing to pay for it, and sooner or later someone will see there’s a fortune to be made in taking their money and giving something sort of like what they think they want. There’s no reason for the government to intervene. And it’s the same with unemployment benefits and food stamps and welfare. The market has spoken. Some people really are worthless, and it’s up to them to prove they’re not. Get a job. Sink or swim. Don’t take from those who make, because you think someone owes you something. They don’t. All that matters is self-reliance and personal responsibility. America is a meritocracy, and as Margaret Thatcher, who was more American than even Ronald Reagan once said, there’s no such thing as “society” – that word is just a convenient excuse “for individual deficiencies, disappointments and delinquency” that fools on the left like to toss out there. The whole concept is useless.

That’s one side of things, and Paul Krugman is taking his Nobel Prize in Economics and leaving Princeton, because he doesn’t believe a word of it and wants to find an even better place to say so – he will join the faculty of the Graduate Center at City University of New York, as a professor in the PhD program in economics, and also become a distinguished scholar at the Graduate Center’s Luxembourg Income Study Center, because more and more of his work has focused on income inequality and “nobody does more important work producing the hard data on which all of this work relies” than that crew in Luxembourg. He will, however, continue his columns in the New York Times, because someone has to explain to America that “the market is always right” is more of a theology than an economic theory.

And he’s at it again, because of a new book – Capital in the Twenty-First Century – which Krugman calls the most important economics book of the year, and maybe of the decade. Krugman finds that he agrees with the author, the French economist Thomas Piketty:

Piketty, arguably the world’s leading expert on income and wealth inequality, does more than document the growing concentration of income in the hands of a small economic-elite. He also makes a powerful case that we’re on the way back to “patrimonial capitalism,” in which the commanding heights of the economy are dominated not just by wealth, but also by inherited wealth, in which birth matters more than effort and talent.

To be sure, Mr. Piketty concedes that we aren’t there yet. So far, the rise of America’s one percent has mainly been driven by executive salaries and bonuses rather than income from investments, let alone inherited wealth. But six of the ten wealthiest Americans are already heirs rather than self-made entrepreneurs, and the children of today’s economic elite start from a position of immense privilege. As Mr. Piketty notes, “the risk of a drift toward oligarchy is real and gives little reason for optimism.”

Krugman sees that happening here:

America’s nascent oligarchy may not yet be fully formed – but one of our two main political parties already seems committed to defending the oligarchy’s interests.

Despite the frantic efforts of some Republicans to pretend otherwise, most people realize that today’s GOP favors the interests of the rich over those of ordinary families. I suspect, however, that fewer people realize the extent to which the party favors returns on wealth over wages and salaries. And the dominance of income from capital, which can be inherited, over wages – the dominance of wealth over work – is what patrimonial capitalism is all about.

The easiest way to make a small fortune is to inherit a large one, and the Republicans have been working on that:

It’s generally understood that George W. Bush did all he could to cut taxes on the very affluent, that the middle-class cuts he included were essentially political loss leaders. It’s less well understood that the biggest breaks went not to people paid high salaries but to coupon-clippers and heirs to large estates. True, the top tax bracket on earned income fell from 39.6 to 35 percent. But the top rate on dividends fell from 39.6 percent (because they were taxed as ordinary income) to 15 percent – and the estate tax was completely eliminated.

Some of these cuts were reversed under President Obama, but the point is that the great tax-cut push of the Bush years was mainly about reducing taxes on unearned income. And when Republicans retook one house of Congress, they promptly came up with a plan – Representative Paul Ryan’s “road map” – calling for the elimination of taxes on interest, dividends, capital gains and estates. Under this plan, someone living solely off inherited wealth would have owed no federal taxes at all.

All that matters is self-reliance and personal responsibility? That sort of happy-talk doesn’t make sense with these policies and policy proposals, but the Republicans had a way to fudge that issue, by not talking about wage-earners at all:

This tilt of policy toward the interests of wealth has been mirrored by a tilt in rhetoric; Republicans often seem so intent on exalting “job creators” that they forget to mention American workers. In 2012 Representative Eric Cantor, the House majority leader, famously commemorated Labor Day with a Twitter post honoring business owners. More recently, Mr. Cantor reportedly reminded colleagues at a GOP retreat that most Americans work for other people, which is at least one reason that attempts to make a big issue out of Mr. Obama’s supposed denigration of businesspeople fell flat. (Another reason was that Mr. Obama did no such thing.)

Yep, say wonderful things about those business owners and people think “the boss” – and with wages stuck in neutral for a generation, the boss isn’t the good guy. Cantor did have to remind his party that ninety percent of Americans who work do work for other people, and you don’t want to lose their votes. His fellow Republicans thought Cantor must have been wrong about those figures, but he wasn’t, and Krugman adds more:

In fact, not only don’t most Americans own businesses, but business income, and income from capital in general, is increasingly concentrated in the hands of a few people. In 1979 the top 1 percent of households accounted for 17 percent of business income; by 2007 the same group was getting 43 percent of business income, and 75 percent of capital gains. Yet this small “elite” gets all of the GOP’s love, and most of its policy attention.

Of course it does:

Bear in mind that both Koch brothers are numbered among the ten wealthiest Americans, and so are four Walmart heirs. Great wealth buys great political influence – and not just through campaign contributions. Many conservatives live inside an intellectual bubble of think tanks and captive media that is ultimately financed by a handful of mega-donors. Not surprisingly, those inside the bubble tend to assume, instinctively, that what is good for oligarchs is good for America.

As I’ve already suggested, the results can sometimes seem comical. The important point to remember, however, is that the people inside the bubble have a lot of power, which they wield on behalf of their patrons. And the drift toward oligarchy continues.

At Salon, Matt Bruenig adds this:

A 2011 study by Edward Wolff and Maury Gittleman found that the wealthiest one percent of families had inherited an average of $2.7 million from their parents. This was 447 times more money than the least wealthy group of people – those with wealth less than $25,000 – had inherited. In between the wealthiest and least wealthy groups, inheritance levels ran in exactly the direction you would expect: the wealthier a group of people was, the more they had inherited.

As outrageously lopsided as these inheritance disparities seem, they only reflect half of the inheritance problem. The funny thing about piles of wealth is that they deliver to their owners passive, unearned streams of income variously called rents, dividends, profits, capital gains, interest and so on. Those who get big inheritances can park those inheritances in investment accounts that just get bigger and bigger without them having to lift a finger. As a result, the gaping inheritance disparity actually grows even more gaping each year after the inheritances have been received.

Everyone knows what comes next:

Children of the wealthy could wind up receiving increasingly larger shares of the national wealth bequeathed to them, wealth that will allow them to generate soaring incomes from capital income alone. If that happens, the meritocratic rhetoric that we use to justify America’s extraordinary levels of inequality will only become even more preposterous and delusional. Inheriting big piles of wealth and then using those piles to bring in even more unearned wealth is the exact opposite of meritocracy.

It seems not everyone who is successful makes it all on their own, or they don’t any longer. Why bother?

Ed Kilgore puts it this way:

Conservatives have benefited for decades from the claim that they are the champions of a meritocratic view of economic incentives providing the most efficient – and most morally defensible – distribution of resources. But this position should become increasingly untenable when “merit” is associated with birth privilege, “talent” with power, and “hard work” with success as its own justification.

Something odd is going on here, and it could spilt the Republican Party between those who believe the happy-talk about self-reliance and personal responsibility, and there being no such thing as society, and those who just want to keep the rich as rich as possible:

Anti-tax activist Grover Norquist and the billionaire, pseudo-libertarian Koch brothers are often fighting on the same side in American politics. But what’s less common is their latest opponent – the ruling Republican Party of blood-red Tennessee.

Yet according to a report in Politico, that’s the situation currently in the state that just recently was ground zero for free-market absolutists like Norquist and the Kochs who hoped to stop a UAW union drive at a Volkswagen plant in Chattanooga. At issue is the repeal of a tax on investments, which Norquist and co. thought was a done deal but which lawmakers in Tennessee, including Gov. Bill Haslam, now say the state cannot afford.

“Philosophically, I would love to repeal the tax,” Haslam told reporters, “but realistically, you all know our revenue is down this year.”

Haslam also argued, in an interview with Politico, that Tennessee’s reputation for low taxes was well deserved and should grant state lawmakers more protection from the wrath of outside groups.

“Tennessee is one of the three or four lowest tax states, so I certainly don’t feel like we need to apologize for our tax rates,” Haslam said.

That wasn’t good enough for the outside groups, who are bigger than any one state and bigger than the Republican Party:

“If by some chance we don’t get this passed, we will take this to districts,” said Andrew Ogles, the state director for the Koch-backed Americans for Prosperity. “We’ll campaign on this across the state and get people involved.”

But lawmakers on both sides of the aisle in Tennessee have balked at these threats, describing Americans for Prosperity and Norquist as outsiders looking to have an illegitimate degree of influence over the state’s internal politics.

“I certainly don’t think the people of Tennessee would like people they didn’t elect, who don’t even live and vote here, coming in and trying to influence what we do with our budget,” said House Democratic Leader Craig Fitzhugh.

Norquist’s response to that charge is rather simple. “Sometimes an outside group can help to build consensus,” he said.

Now you know who is running things, and Simon Maloy confirms it’s the Koch brothers and their Americans for Prosperity:

The animating purpose of a party is to have control – over the influence, over the money, over the policy. And it has to have control of the agenda. That is what makes a party a party. It sets an agenda and then uses money, policy and influence to get the public on its side. Republicans have not been very successful over the past decade at selling their agenda to the public. All the while, conservatives have been left to sit and stew while the Obama agenda slowly, inexorably marches toward fruition. There’s palpable frustration from movement conservatives at the Republican establishment.

The GOP left a vacuum, and the Koch brothers are filling it by constructing a competing political operation, competing fundraising operations, and competing ideological foundations. Right now the GOP and the Koch machine are largely in sync; their political arguments are congruent (Obamacare sucks!) and they share a common enemy in Barack Obama. But what happens when their interests start diverging?

AFP campaigned hard against Obamacare’s Medicaid expansion, and as Greg Sargent pointed out, they’re going to keep fighting to make sure those states that rejected the expansion hold the line. “Critical to AFP’s agenda is to block the expansion from moving forward or succeeding wherever possible.” While AFP may be stalwart in its commitment to denying health coverage to the poor, Republican lawmakers from states that rejected the Medicaid expansion are starting to crack…

Many of the wavering lawmakers are looking to carve out compromise proposals – block grants, work requirements, etc. Could AFP and the Republicans themselves find a happy compromise by attaching conditions to the receipt of federal Medicaid funds?

That’s not going to happen, and Maloy provides a recent example of how there’s no way these two sides will agree:

Arkansas was one of the few Southern states to agree to the Medicaid expansion, but it needed a bit of compromise. Gov. Mike Beebe, a Democrat, worked out a deal with the GOP-controlled Legislature to use the federal money to buy private insurance for people who would otherwise be eligible for Medicaid. They called it the “private option.” AFP called it “Medicaid expansion by another name” and concluded that “advocates for taxpayers should not expand Medicaid through the traditional expansion mechanism or through the modified private insurance model.”

In short, the markets are always right, and extreme income inequality indicates a properly functioning economy, and the poor deserve their lot, and there’s no such thing as society. Even some Republicans don’t believe that:

As more states jump on board with the expansion, or as Republicans start making peace with the fact that Obamacare’s future is almost certainly secure, the GOP and the Koch Empire are going to find themselves increasingly at odds on an issue that right now holds them together. AFP backs full repeal of Obamacare, but as more people start receiving benefits through Obamacare, full repeal becomes an increasingly untenable position, which puts pressure on Republicans to moderate.

That gets to the key philosophical difference between the Kochs and the GOP. As extreme as they often are and as infuriatingly obstructionist as Republicans can be, they are still vulnerable to prevailing public sentiment and beholden to the realities of governing. The Kochs answer only to themselves. They act according to self-interest and the interests of their tax bracket. “Leaders of the effort say it has great appeal to the businessmen and businesswomen who finance the operation and believe that excess regulation and taxation are harming their enterprises and threatening the future of the country,” the New York Times noted.

That’s what Krugman was talking about, which Maloy echoes:

AFP has a functionally unlimited budget and no reason to alter its agenda. The Koch network is outspending everyone in its attempt to bring down big government in 2014. If it can be demonstrated that they played a key role in the Republicans’ (likely) electoral gains this year, then the money, power and ideology of the Koch brothers will stand alongside that of the Republican establishment. And if there’s one thing political parties don’t do well, it is share power.

The drift toward oligarchy continues. A meritocracy based on self-reliance and personal responsibility – work hard and you’ll make it, because of your hard work – was only happy-talk for the rubes. Wage-earners are the new rubes, convinced Obamacare is evil and that there must be a market-based solution to everything out there, and that freeing the rich from all their burdens will improve their own lives. Sure, and the fortune Paris Hilton inherited improved their lives?

And what happens when the rubes figure out that the ten families and their children have grabbed everything, and that Paris Hilton didn’t make their lives better, and the wage-earners outnumber the bosses nine to one? The Koch brothers will shout FREEDOM! Krugman and others will patiently explain the freedom’s just another word for nothing left to lose. No, wait. That was Janis Joplin. Or maybe it was every economist possessed of the facts, not possessed by free-market theology.

What happens when that day comes? That day may not come. Shouting works too well.

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About Alan

The editor is a former systems manager for a large California-based HMO, and a former senior systems manager for Northrop, Hughes-Raytheon, Computer Sciences Corporation, Perot Systems and other such organizations. One position was managing the financial and payroll systems for a large hospital chain. And somewhere in there was a two-year stint in Canada running the systems shop at a General Motors locomotive factory - in London, Ontario. That explains Canadian matters scattered through these pages. Otherwise, think large-scale HR, payroll, financial and manufacturing systems. A résumé is available if you wish. The editor has a graduate degree in Eighteenth-Century British Literature from Duke University where he was a National Woodrow Wilson Fellow, and taught English and music in upstate New York in the seventies, and then in the early eighties moved to California and left teaching. The editor currently resides in Hollywood California, a block north of the Sunset Strip.
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One Response to The Steady Drift toward Oligarchy

  1. Rick says:

    The odd thing about Margaret Thatcher’s comment about society not existing is — “society” meaning an “aggregate of people living together in a more or less ordered community”, rather than just one individual person — Margaret Thatcher was elected to parliament by “society”, not just one random dude or dudette somewhere in her district — and she certainly didn’t proclaim herself Prime Minister.

    But here’s something I’m curious about:

    We hear a lot about what percentage of Americans own what percentage of its wealth, but I wonder if there are statistics somewhere of what percentage of American heirs and heiresses own what percentage of American wealth. I suspect that statistic would dispute those conservatives who argue that people who earned all that wealth should be steering the ship, since heirs and heiresses, in most cases, I think, don’t actually earn their wealth.

    Of course, that’s not the total answer to those who argue for oligarchy, since — while the Koch Brothers, Charles and David, did inherit lots of wealth from their dad, Fred, who’s fame is derived from being a guy who developed a better way to turn oil into gasoline, and who helped found the John Birch Society — they didn’t just sit on their asses and do nothing. They hugely expanded the family oil-refining business into other things like Dixie Cups and Quilted Northern toilet paper, and of course, continue their dad’s right-wing jabberjabber, mostly by spending their billions to make sure their own political viewpoints prevail over the will of millions of other American voters.

    And that, instead of the existence of all those presumably lazy heirs and heiresses, is our main problem. Whether or not there’s any short-term political gain to be made by Democrats in pointing out that their main adversary isn’t the Republican party but the Koch brothers, there has to be some long-term advantage to reiterating something very important about how America should be run, which needs to be said:

    America is not an Oligarchy, it’s a Democratic Republic — and that means one human, one vote, whether that human has $65-billion, or no dollars at all.

    And that means the winning side in any political argument should be the one with the most votes, not the most money. And if some rich right-wingers (and, of course, Grover Norquist) then argue that “money talks” — it has been deemed “free speech”, after all — and that all that money just helps those billionaires be heard over the din, tell them that democracy is a political system in which the din of the people is supposed to drown out the din of dollars.

    And maybe also tell Norquist that, if he really wants to help American democracy work they way it should, he can help us convince the Koch brothers and their billionaire friends to just leave their checkbooks in their pockets, and let us voters run the country the way we want it to run.

    Rick

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