Why do the rich have so much power?

Income inequality has soared in America. Photo / Woody Harrington, The New York Times

COMMENT:

America is, in principle, a democracy, in which every vote counts the same. It's also a nation in which income inequality has soared, a development that hurts many more people than it helps. So if you didn't know better, you might have expected to see a political backlash: demands for higher taxes on the rich, more spending on the working class and higher wages.

In reality, however, policy has mostly gone the other way. Tax rates on corporations and high incomes have gone down, unions have been crushed, the minimum wage, adjusted for inflation, is lower than it was in the 1960s. How is that possible?

The answer is that huge disparities in income and wealth translate into comparable disparities in political influence. To see how this works, let's look at a fairly recent example: the budgetary Grand Bargain that almost happened in 2011.

At the time, Washington was firmly in the grip of deficit fever. Even though the federal government was able to borrow at historically low interest rates, everyone who mattered seemed to be saying that the budget deficit was the most important issue facing America and that it was essential to rein in spending on Social Security and Medicare.

So the Obama administration offered congressional Republicans a deal: cuts in Social Security and Medicare in return for slightly higher taxes on the wealthy. The deal foundered only because the party refused to accept even a small tax increase.

The question is, who wanted such a deal? Not the American public.

Voters in general weren't all that worried about budget deficits. While most Americans believed that the deficit should be reduced — they always do — a CBS poll in early 2011 found only 6% of the public named the deficit as the most important issue, compared with 51% citing the economy and jobs.

Both the Obama administration and Republicans were staking out positions that flew in the face of public desires. A large majority has consistently wanted to see Social Security benefits expanded, not cut. A comparably large majority has consistently said that upper-income Americans pay too little, not too much, in taxes.

So whose interests were actually reflected in the 2011 budget fight? The wealthy.

A groundbreaking study of rich Americans' policy preferences in 2011 found that the wealthy, unlike voters in general, did prioritise deficit reduction over everything else. They also, in stark contrast with the general public, favoured cuts in Social Security and health spending.

And while a few high-profile billionaires like Warren Buffett have called for higher taxes on people like themselves, the reality is that most billionaires are obsessed with cutting taxes, like the estate tax, that only the rich pay.

In other words, in 2011 a Democratic administration went all-in on behalf of a policy concern that only the rich gave priority and failed to reach a deal only because Republicans didn't want the rich to bear any burden at all.

Why do the wealthy have so much influence over politics?

Campaign contributions, historically dominated by the wealthy, are part of the story. A 2015 New York Times report found that at that point fewer than 400 families accounted for almost half the money raised in the 2016 presidential campaign. This matters both directly — politicians who propose big tax increases on the rich can't expect to see much of their money — and indirectly: Wealthy donors have access to politicians in a way ordinary Americans don't and play a disproportionate role in shaping policymakers' worldview.

However, the influence of money on politics goes far beyond campaign contributions. Outright bribery probably isn't much of a factor , but there are nonetheless major personal financial rewards for political figures who support the interests of the wealthy. Pro-plutocrat politicians who stumble, like Eric Cantor, the former House whip — who famously celebrated Labor Day by honouring business owners — quickly find lucrative positions in the private sector, jobs in right-wing media or well-paid sinecures at conservative think tanks. Do you think there's a comparable safety net in place for the likes of Alexandria Ocasio-Cortez or Ilhan Omar?

And even the issues that the news media discuss often reflect a rich person's agenda. Advertising dollars explain some of this bias, but a lot of it probably reflects subtler factors, like the (often false) belief that people who've made a lot of money have special insight into how the nation as a whole can achieve prosperity.

Perhaps the most striking aspect of the fixation on cutting benefits in the early 2010s was the extent to which it was treated not as a controversial position but as the undeniably right thing to do. As Ezra Klein pointed out in The Washington Post at the time: "For reasons I've never quite understood, the rules of reportorial neutrality don't apply when it comes to the deficit. On this one issue, reporters are permitted to openly cheer a particular set of highly controversial policy solutions."

In a variety of ways, then, America's wealthy exert huge political influence. Our ideals say that all men are created equal, but in practice a small minority is far more equal than the rest of us.

You don't want to be too cynical about this. No, America isn't simply an oligarchy in which the rich always get what they want. In the end, President Barack Obama presided over both the Affordable Care Act, the biggest expansion in government benefits since the 1960s, and a substantial increase in federal taxes on the top 1%, to 34% from 28%.

And no, the parties aren't equally in the wealthiest Americans' pocket. Democrats have become increasingly progressive, while the rich dominate the Republican agenda. Donald Trump may have run as a populist, but once in office he reversed much of that Obama tax hike, while trying (but failing, so far) to take away health insurance from as many as 23 million Americans.

But while you shouldn't be too much of a cynic, it remains true that America is less of a democracy and more of an oligarchy than we like to think. And to tackle inequality, we'll have to confront unequal political power as well as unequal income and wealth.

Written by: Paul Krugman
Photographs by: Woody Harrington
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