Notes on Excessive Wealth Disorder

How not to repeat the mistakes of 2011.

In a couple of days I’m going to be participating in an Economic Policy Institute conference on “excessive wealth disorder” — the problems and dangers created by extreme concentration of income and wealth at the top. I’ve been asked to give a short talk at the beginning of the conference, focusing on the political and policy distortions high inequality creates, and I’ve been trying to put my thoughts in order. So I thought I might as well write up those thoughts for broader dissemination.

While popular discourse has concentrated on the “1 percent,” what’s really at issue here is the role of the 0.1 percent, or maybe the 0.01 percent — the truly wealthy, not the “$400,000 a year working Wall Street stiff” memorably ridiculed in the movie Wall Street. This is a really tiny group of people, but one that exerts huge influence over policy.

Where does this influence come from? People often talk about campaign contributions, but those are only one channel. In fact, I’d identify at least four ways in which the financial resources of the 0.1 percent distort policy priorities:

1. Raw corruption. We like to imagine that simple bribery of politicians isn’t an important factor in America, but it’s almost surely a much bigger deal than we like to think.

2. Soft corruption. What I mean by this are the various ways short of direct bribery politicians, government officials, and people with policy influence of any kind stand to gain financially by promoting policies that serve the interests or prejudices of the wealthy. This includes the revolving door between public service and private-sector employment, think-tank fellowships, fees on the lecture circuit, and so on.

3. Campaign contributions. Yes, these matter.

4. Defining the agenda: Through a variety of channels — media ownership, think tanks, and the simple tendency to assume that being rich also means being wise — the 0.1 percent has an extraordinary ability to set the agenda for policy discussion, in ways that can be sharply at odds with both a reasonable assessment of priorities and public opinion more generally.

Of these, I want to focus on item (4), not because it’s necessarily the most important — as I said, I suspect that raw corruption is a bigger deal than most of us can imagine — but because it’s something I think I know about. In particular, I want to focus on a particular example that for me and others was a kind of radicalizing moment, a demonstration that extreme wealth really has degraded the ability of our political system to deal with real problems.

The example I have in mind was the extraordinary shift in conventional wisdom and policy priorities that took place in 2010-2011, away from placing priority on reducing the huge suffering still taking place in the aftermath of the 2008 financial crisis, and toward action to avert the supposed risk of a debt crisis. This episode is receding into the past, but it was extraordinary and shocking at the time, and could all too easily be a precursor to politics in the near future.

Let’s talk first about the underlying economic circumstances. At the beginning of 2011, the U.S. unemployment rate was still 9 percent, and long-term unemployment in particular was at extraordinary levels, with more than 6 million Americans having been out of work for 6 months or more. It was an ugly economic situation, but its causes were no mystery. The bursting of the housing bubble, and the subsequent attempts of households to reduce their debt, had let to a severe shortfall of aggregate demand. Despite very low interest rates by historical standards, businesses weren’t willing to invest enough to take up the slack created by this household pullback.

Textbook economics offered very clear advice about what to do under these circumstances. This was exactly the kind of situation in which deficit spending helps the economy, by supplying the demand the private sector wasn’t. Unfortunately, the support provided by the American Recovery and Reinvestment Act — the Obama stimulus, which was inadequate but had at least cushioned the effects of the slump — peaked in mid-2010 and was in the process of falling off sharply. So the obvious, Economics 101 move would have been to implement another significant round of stimulus. After all, the federal government was still able to borrow long-term at near-zero real interest rates.

Somehow, however, over the course of 2010 a consensus emerged in the political and media worlds that in the face of 9 percent unemployment the two most important issues were … deficit reduction and “entitlement reform,” i.e. cuts in Social Security and Medicare. And I do mean consensus. As Ezra Klein noted, “the rules of reportorial neutrality don’t apply when it comes to the deficit.” He cited, for example, Mike Allen asking Alan Simpson and Erskine Bowles “whether they believed Obama would do ‘the right thing’ on entitlements — with ‘the right thing’ clearly meaning ‘cut entitlements.’”

So where did this consensus come from? To be fair, the general public has never bought into Keynesian economics; as far as I know, most voters, if asked, will always say that the budget deficit should be reduced. In November 1936, just after FDR’s reelection, Gallup asked voters whether the new administration should balance the budget; 65 percent said yes, only 28 percent no.

But voters tend to place a relatively low priority on deficits as compared with jobs and the economy. And they overwhelmingly favor spending more on health care and Social Security.

The rich, however, are different from you and me. In 2011 the political scientists Benjamin Page, Larry Bartels, and Jason Seawright managed to survey a group of wealthy individuals in the Chicago area. They found striking differences between this group’s policy priorities and those of the public at large. Budget deficits topped the list of problems they considered “very important,” with a third considering them the “most important” problem. While the respondents also expressed concern about unemployment and education, “they ranked a distant second and third among the concerns of wealthy Americans.”

And when it came to entitlements, the policy preferences of the wealthy were clearly at odds with those of the general public. By large margins, voters at large wanted to expand spending on health care and Social Security. By almost equally large margins, the wealthy wanted to reduce spending on those same programs.

So what was the origin of the conventional-wisdom consensus that emerged in 2010-2011 — a consensus so overwhelming that leading journalists abandoned the conventions of reportorial neutrality, and described austerity policies as the self-evident “right thing” for politicians to be doing? What happened, essentially, was that the political and media establishment internalized the preferences of the extremely wealthy.

Now, 2011 was an especially dramatic example of how this happens, but it wasn’t unique. In their recent book “Billionaires and Stealth Politics,” Page, Seawright, and Matthew Lacombe point out the enduring effects of plutocratic political influence on the Social Security debate: “Despite the strong support among most Americans for protecting and expanding Social Security benefits, for example, the intense, decades-long campaign to cut or privatize Social Security that was led by billionaire Pete Peterson and his wealthy allies appears to have played a part in thwarting any possibility of expanding Social Security benefits. Instead, the United States has repeatedly come close (even under Democratic Presidents Clinton and Obama) to actually cutting benefits as part of a bipartisan ‘grand bargain’ concerning the federal budget.”

And here’s the thing: While we don’t want to romanticize the wisdom of the common man, there’s absolutely no reason to believe that the policy preferences of the wealthy are based on any superior understanding of how the world works. On the contrary, the wealthy were obsessed with debt and uninterested in mass unemployment at a time when deficits weren’t a problem — were, indeed, part of the solution — while unemployment was.

And the widespread belief among the wealthy that we should raise the retirement age is based, literally, on failure to understand how the other half lives (or, actually, doesn’t). Yes, life expectancy at age 65 has gone up, but overwhelmingly for the upper part of the income distribution. Less affluent Americans, who are precisely the people who depend most on Social Security, have seen little rise in life expectancy, so there is no justification for forcing them to work longer.

Where do the preferences of the wealthy come from? You don’t have to be a vulgar Marxist to recognize a strong element of class interest. The push for austerity was clearly linked to a desire to shrink the tax-and-transfer state, which in all advanced countries, even America, is a significant force for redistribution away from the wealthy toward citizens with lower incomes.

You can see the true goals of austerity a couple of ways. First, by comparison with other advanced countries the U.S. has low taxes and low social spending, yet almost all the energy of self-proclaimed deficit hawks was expended on demands for reduced spending rather than increased taxes. Second, it’s striking how much less deficit hysteria we’re hearing now than we did seven years ago. The full-employment budget deficit now is about as large, as a share of GDP, as it was in early 2012, when unemployment was still above 8 percent. But this deficit, although far less justified by macroeconomic considerations, was created by tax cuts — and somehow the deficit hawks are fairly quiet.

No doubt many wealthy backers of tax cuts for themselves and benefit cuts for others manage to convince themselves that this is in everyone’s interest. People are in general good at that sort of self-delusion. The fact remains that the wealthy, on average, push for policies that benefit themselves even when they often hurt the economy as a whole. And the sheer wealth of the wealthy is what empowers them to get a lot of what they want.

So what does this imply going forward? First, in the near term, both during the 2020 election and after, it’s going to be really important to ride herd on both centrist politicians and the media, and not let them pull another 2011, treating the policy preferences of the 0.1 percent as the Right Thing as opposed to, well, what a certain small class of people want. There’s a fairly long list of things progressives have recently advocated that the usual suspects will try to convince everyone are crazy ideas nobody serious would support, e.g.

  • A 70 percent top tax rate

  • A wealth tax on very large fortunes

  • Universal child care

  • Deficit-financed spending on infrastructure

You don’t have to support any or all of these policy ideas to recognize that they are anything but crazy. They are, in fact, backed by research from some of the world’s leading economic experts. Any journalist or centrist politician who treats them as self-evidently irresponsible is doing a 2011, internalizing the prejudices of the wealthy and treating them as if they were facts.

But while vigilance can mitigate the extent to which the wealthy get to define the policy agenda, in the end big money will find a way — unless there’s less big money to begin with. So reducing the extreme concentration of income and wealth isn’t just a desirable thing on social and economic grounds. It’s also a necessary step toward a healthier political system.

Martin Gilens – “Affluence and Influence: Economic Inequality and Political Power in America”

Martin Gilens, professor of politics at Princeton University and a member of the executive committee of the Center for the Study of Democratic Politics, discussed his new book as part of the Wilson School’s “Talk of 2012: The Upcoming Presidential Election” thematic lecture series. The discussion was co-sponsored by the Center for the Study of Democratic Politics and the Department of Politics.

 

so in the mid-1960s in my
quantitative analysis
was a period of very low association
between public preferences and policy
outcomes the opposite set of political
conditions and the strongest period of
association between public preferences
and policy outcomes was much to my great
surprise during the early years of the
george w bush first term and when i did
that analysis and saw that not only
where the policy is adopted in 2001 and
2002 consistent with what affluent
Americans wanted but we’re also the most
consistent with what the middle class
and the poor wanted from any period of
in my data set it was fairly certain
there must be some sort of error there
in coding or something must have gone
wrong so like you know a good social
scientist that Ike scoured the data to
see like where this error had emerged
but the fact of the matter is that there
was no error there and the policies that
were adopted during those early Bush
years were in fact quite popular across
the income spectrum so so let me remind
you that you know Bush ran in 2000 as a
compassionate conservative right he
talked about his bipartisan work with
Texas Legislature and and so on and you
know I think a lot of people on the Left
kind of dismissed that as kind of a
cynical posturing but the truth is that
when Bush came into office you know
after a very close election and after
having lost the popular vote the the
most prominent policies that were
adopted were broadly supported centrist
policies in some cases bipartisan
policies adopted that he worked with
Democratic legislators so I’m thinking
of things like the Medicare drug benefit
a long-standing Democratic Party
priority No Child Left Behind education
reforms which whatever you may think of
them now was a bipartisan
policy that you know senator Kennedy
worked with the administration on Bush’s
faith-based initiative very popular
across income levels his compromise on
stem-cell funding which contrary to
widespread views actually increased the
like the range of stem cells that were
eligible for federal funding and even
his tax cuts which clearly provided most
of the benefits in terms of dollars to
the most well-off Americans were
strongly supported across the income
spectrum so so a lot of what happened
then was very consistent with what the
public wanted including what the middle
class and the poor wanted but it’s not
because of any sort of particular
commitment on the part of Bush or his
administration to you know serving as
advocates for the poor but it was
political circumstances so Congress in
2001 was more closely divided than it
had been at any time in half a century
right you may remember when Bush came
into office the Senate was split 50-50
with the vice president serving as a
deciding vote the Republicans had a very
slim majority in the house they lost
even that sort of you know deciding vote
majority in the Senate after Jim
Jeffords abandoned at the Republican
Party a couple months into the Bush’s
first term so it was a very closely
divided Congress with control being up
for grabs at the next election right and
this is the opposite of what we saw in
the mid-1960s and this these two periods
represent a consistent pattern within my
data that when control of government is
divided and uncertain you get policy
outcomes that more strongly reflect the
Preferences of the public and more
equally reflect the Preferences of low
and high-income Americans and when one
party has dominant control then you see
responsiveness to any group
the public decline and in fact that’s
exactly what happened when the
Republicans increased their control of
Congress so if you compare the
preference policy Association in the
first two years of Bush’s first term
with the first two years of Bush’s
second term right when Republicans for
the first time in half a century had
unified control of the national
government and strong majorities fairly
strong majorities in Congress not like
the 1960s but but relative to recent
years then what you saw is that the
responsiveness to the public plummeted
now I should mention if you are
concerned that 9/11 and the war on
terror and the wars in Afghanistan and
Iraq are responsible for these
relationships I was concerned about that
too I redid these analyses after
excluding all the policy questions
having to do with defense and terrorism
and in the wars and so on and when you
see the same pattern so that is some of
what was popular about the early years
of Bush’s first term was things like the
war on terror and some of what was less
popular in Bush’s later years but the
patterns remain the same even if we’re
only looking at domestic policy and
excluding things like on terror okay so
so the point here is that political
conditions right make a difference and
that’s one of the perhaps few sort of
hopeful findings from what for people
concerned about sort of normative
democratic concerns is in general and
not particularly hopeful or optimistic a
research project but but control of
government does matter and that means
parties can be constrained to pursue
policies that are more consistent with
what the public wants under the right
circumstances so there’s there’s a ray
of hope there you might expect if there
if that political circumstances to say
the tenuous nature of government control
makes a difference well so might some
other ..

Langston Hughes’ hidden influence on MLK

But during the most turbulent years of the civil rights movement, Dr. King never publicly uttered the poet’s name. Nor did the reverend overtly invoke the poet’s words.

You would think that King would be eager to do so; Hughes was one of the Harlem Renaissance’s leading poets, a master with words whose verses inspired millions of readers across the globe.

However, Hughes was also suspected of being a communist sympathizer. In March of 1953, he was even called to testify before Joseph McCarthy during the Red Scare.

Meanwhile, King’s opponents were starting to make similar charges of communism against him and his Southern Christian Leadership Conference, accusing the group of being a communist front. The red-baiting ended up serving as some of the most effective attacks against King and his Southern Christian Leadership Conference.

It forced King to distance his organization from men with similar reputations – Bayard Rustin, Jack O’Dell and even his closest adviser, Stanley Levison.

It also meant he needed to sever any overt ties to Hughes.

But my research has found traces of Hughes’ poetry in King’s speeches and sermons. While King might not have been able to invoke Hughes’ name, he was nonetheless able to ensure that Hughes’ words would be broadcast to millions of Americans.

 

.. As the leading figure in the civil rights movement, King had to toe a delicate line. Because he needed to retain popular support – as well as be able to work with the Kennedy and Johnson administrations – there could be no question about where he stood on the issue of communism.

So King needed to be shrewd about invoking Hughes’ poetry. Nonetheless, I’ve identified traces of no fewer than seven of Langston Hughes’ poems in King’s speeches and sermons.

 

.. But the roots of “I Have a Dream” go back even further. On Aug. 11, 1956, King delivered a speech titled “The Birth of a New Age.” Many King scholars consider this address – which talked about King’s vision for a new world – the thematic precursor to his “I Have a Dream” speech.

In this speech, I recognized what others had missed: King had subtly ended his speech by rewriting Langston Hughes’ “I Dream a World.”

    A world I dream where black or white,
    Whatever race you be, 
    Will share the bounties of the earth
    And every man is free.

What’s that term? The “halo effect”

.. the halo effect is a well-documented psychological bias, where a person has one trait that you like, and your positive feelings about this spill over to encompass the person as a whole. For example, if you find someone attractive, you’re also more likely to think of them as smart, considerate, approachable, and so on.

Research even shows that we tend to vote for the more attractive candidate in political elections. Something to keep in mind the next time you head to the polls!

Get the blinks for Influence, by Robert Cialdini.