4. Inequality from Structure of US Governance and Financial Influence – Inequality Book Reviews–scroll to index for reviews https://inequalitybookreviews.com Overview of many aspects of inequality Sun, 22 Aug 2021 06:43:50 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.2 19. How Democracies Die (from within by elected officials, rather than coups, when norms abandoned) https://inequalitybookreviews.com/2021/08/21/19-how-democracies-die-from-within-by-elected-officials-rather-than-coups-when-norms-abandoned/ https://inequalitybookreviews.com/2021/08/21/19-how-democracies-die-from-within-by-elected-officials-rather-than-coups-when-norms-abandoned/#respond Sat, 21 Aug 2021 21:58:20 +0000 https://inequalitybookreviews.com/?p=154 How Democracies Die.  Steven Levitsky and Daniel Ziblatt. 

Historically, we think of democracies as giving way to dictatorships after violent military coups or violent revolutions.  However, since the end of the Cold War, most breakdowns have not been from violent overthrow by outsiders but from subversion of democratic institutions from within government by elected leaders.  This has been the case in Venezuela, Georgia, Hungary, Nicaragua, Peru, the Philippines, Poland, Russia, Sri Lanka, Turkey, and Ukraine.  This process is dangerously deceptive, since it fails to command the immediate public recognition of a violent coup, as in Pinochet’s Chile.

The authors assess US vulnerability to this sequence by focusing on its ability to identify and stop would-be autocrats before they come to power and to defend the constitution from their subversion if they do come to power.  They focus on the major role of political parties in this defense by acting as gatekeepers to filter out dangerous candidates in early stages of their careers and by standing against their abuse of constitutional processes if elected.  They note that the US Republican Party has failed badly on both counts for these roles.

A checklist of four behavioral warning signs is provided to identify an authoritarian politician: 1) rejection of democratic rules, 2) denial of opponents’ legitimacy, 3) toleration or encouragement of violence, 4) willingness to curtail civil liberties of opponents and the media.  With the exception of Richard Nixon, no major-party presidential candidate met even one of these criteria over the last century, but Donald Trump meets all four.  Not even Nixon demonstrated such a weak public commitment to constitutional rights and democratic norms.

The authors emphasize that paralyzing polarization and dysfunctional government cannot be avoided by constitutional requirements alone.  Following well established norms is essential, including for recognition and respect of loyal opposition and for forbearance from using legally possible but extremely disruptive partisan measures. 

The constitution created the Electoral College to provide defense by nonpartisan notables against popularly elected dangerous individuals.  However, the constitution did not envision political parties, and the Electoral College soon surrendered this gatekeeping authority to the parties, which then sent party loyalists rather than local notables to the Electoral College.

In 1972, the role of the parties as filters was greatly weakened by creation of a system of binding presidential primaries.  Thereafter, the parties were presented with candidates who had already preselected themselves by performance in primaries and caucuses, greatly assisted by wealthy donors and alternate media.

Perhaps the most striking example of rewriting the rules within government to lock in authoritarian, single-party rule occurred in the US with the end of post-Civil War reconstruction in the 1870s.  Democracy was essentially killed by quasi-legal measures, despite African American constitutional protections and African American majorities or near-majorities in many states.  The Great Compromise of 1877 for the R. B. Hayes election and many Supreme Court rulings ended Union enforcement of voting rights and most other African American rights in the South. 

Subsequently, all eleven post-Confederate states ended elective democracy by reforming their constitutions and electoral laws to disenfranchise African Americans.  Black turnout fell from 96% in 1876 to 11% in 1898 and remained low until the 1940s, when registration was only 5%.  This shameful, markedly autocratic situation was tolerated by both parties until the Civil Rights laws of the 1960s.  Evidently, this craven toleration was the price for maintaining relatively lower polarization between the parties that persisted until the issue of Civil Rights was finally addressed in the 1960s.

Since the 1960s, US political polarization and dysfunction have steadily increased, at least partly due to backlash from the Civil Rights Laws.  Other contributing factors include greatly increased special interest money in politics, Republican fear of changing demographics for Whites and Christians, and increasingly divisive tactics of the leaders of the Republican Party who are now willing to hang on to power by any means possible, democratic or not. 

For instance, Newt Gingrich led in the 1990s by refusing to compromise, obstructing government, and instructing Republican candidates to describe Democrats with negative words like pathetic, sick, bizarre, betray, antiflag, antifamily, and traitors.  Mitch McConnell led in the 2010s by preventing any Republican votes for almost all Democratic legislation, bringing use of the filibuster to new levels, and flouting constitutional requirements for Senate approval of Supreme Court appointees.  In the 2016 Republican convention, leaders called their Democratic rival a criminal and led chants to “lock her up”.      

From the 1870s to the 1960s, the norms of respect for loyal opposition and forbearance from extremely destructive partisan acts were essentially maintained and polarization was avoided.  Sadly, this was because both parties ignored racist abuses in the Jim Crow South, and essentially threw Southern African Americans under the bus.  After the 1960s, the forces of racism moved to mostly one party, and the seeds for subsequent extreme polarization were sown and have continued to grow.

The path out of this mess is complicated.  One path would include the parties learning to cooperate, as has been done in other countries.  Good luck with that.  Another path includes proposed reforms, including ending gerrymandering, open primaries, obligatory voting, and the like.  Good luck in passing those reforms.  Finally, reshuffling of what the parties stand for, particularly the Republican Party, whose leadership has been eviscerated by numerous well-funded outside groups and donors.  Reducing polarization requires that the Republican Party be reformed, if not refounded outright.  Perhaps a series of electoral defeats will be required to accomplish this. 

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20. The Triumph of Injustice (marked imbalance in US tax system favoring the rich and corporations) https://inequalitybookreviews.com/2021/08/21/20-the-triumph-of-injustice-marked-imbalance-in-us-tax-system-favoring-the-rich-and-corporations/ https://inequalitybookreviews.com/2021/08/21/20-the-triumph-of-injustice-marked-imbalance-in-us-tax-system-favoring-the-rich-and-corporations/#respond Sat, 21 Aug 2021 21:54:00 +0000 https://inequalitybookreviews.com/?p=150 The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay.  Emmanuel Saez and Gabriel Zucman.

From 1980 to 2019, US inequality has grown rapidly from capture of government by free market ideologues serving ultra-rich donors.  During this time, the share of US wealth has doubled for the top 1% from 20% to 40%, but has fallen for the bottom 90% from 40% to 25%.  Simultaneously, the share of US national income has doubled for the top 1% from 10% to 20%, but has fallen for the bottom 50% from 20% to 12%. 

In Western Europe, these shifts of income shares were much smaller—from 10% to 12% for the top 1% and from 24% to 22% for the bottom 50%.  Hence, the US shifts are not inevitable change from globalization and automation as claimed, but rather, mostly from political choice.

The book divides average adult annual incomes into four groups: 1) $18,500 for the working class (bottom 50%), 2) $75,000 for the middle class (next 40%), 3) $220,000 for the upper middle class (next 9%), and 4) $1.5 million for the rich (top 1%).  Remember, the average for the top 1% is markedly increased by inclusion of many billion dollar and hundreds of million dollar incomes at the very top. 

Taxes, which are the focus of the book, are divided into four groups: 1) individual income taxes, 2) payroll taxes, 3) capital taxes, and 4) consumption taxes.  Despite Romney’s 2012 claim about the bottom 47%, everybody pays taxes.  Collectively, these taxes add up to about 28% of national income: 11.5% from income, 8% from payroll for Social Security and Medicare, 4.7% from consumption, and 4% from capital (which represents 30% of national income).

The US tax system is a giant flat tax, except at the top, where it’s regressive.  The bottom 50% pay around 25% (payroll and consumption); the next 40% pay around 28% (payroll and income), the next 9% pay around 28% (income); and the top 1% pay around 28%, except for the very top who pay 23% (income, corporate, etc.).

Since 1950, minimum wage worker’s incomes have fallen compared to the national average from more than half to just one fifth, while their payroll taxes have increased form 3% to 15%.  Also, consumption taxes reach larger portions of these lower incomes by application to necessities, while sparing application for higher incomes on items like country club membership, opera attendance, and lawyer’s fees.   

Meanwhile, the rich have gotten richer while paying lower taxes for many reasons.  Progressive marginal income tax rates have fallen from over 90% in the 1950s to less than 40% today.  Corporate taxes have fallen from 50% to 21%, and actual revenue has fallen even further from shifting of corporate profits to tax havens.  Since the 1950s, tax rates actually paid have fallen for the top 0.1% of income earners from 55% to less than 30% (mostly from falling corporate tax rates), while for the bottom 90% they have risen to nearly 30%.    

Furthermore, tax avoidance by outright evasion is more common at higher incomes—20 to 25% for the rich compared to 10 to 12% for the middle and working classes.  This situation has been greatly facilitated by sabotage of IRS enforcement by political allies of the ultra-rich.  As a consequence of deliberate slashing of IRS funding, audits of the largest estates have declined from 65% in 1975 to 8.6% today.  In addition, revenues from estate taxes have fallen by a factor of five, mostly from reduced enforcement. 

A great deal of additional tax avoidance by large fortunes occurs because taxation can be restricted to only the tiny portion from which shares are sold rather than applied to the much larger total income from all shares.   The income from remaining shares is then allowed to grow exponentially without income or capital gains taxes as long as it is retained.  Finally, for many large fortunes, those delayed taxes are never paid because they are forgiven as readjusted capital gain at the time of death or transfer to a foundation.   

Thus, Warren Buffett, the “good billionaire” with a fortune of $65.3 billion in 2015, declared only $11.6 million as income (from shares sold) rather than at least $3.2 billion of actual wealth income (est. at 5%).  Thus his taxation of only $1.8 million represented 16% of his declared income but only 0.055% of his actual wealth income.  The scandal here is not, as he states, the low tax rate paid for his declared income compared to that for his secretary, but rather the ridiculously low portion of income he is allowed actually to declare for taxation.

The authors propose many steps to address the growing tax imbalance in the US.  These include international coordination to stop the race to the bottom for corporate tax rates, an optimal maximal tax rate of 60% from all sources, a public protection bureau against tax scams, rehabilitation and refunding of the IRS, universal health insurance, and a wealth tax for the super-rich (2% above $50 million, 3.5% above $1 billion).  The important role of corporate tax and wealth tax as means to combat the enormous tax avoidance industry for the rich is discussed.

Complexities, difficulties, justifications, and steps to achievement of these proposals are discussed.  The usual arguments in favor of the status quo are addressed.  A table is provided of a sample reform proposal that provides universal health care, education for all, elimination of sales tax, extra taxes for the rich, and a funding package.

Finally, the authors refer the reader to their interactive website taxjusticenow.org.  This website lets you enter whatever values you like for the components of national taxation to see them all graphed together.  This is easy and satisfying to do.  Examples are included from below for various values entered into the interactive graph system:

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21. The Business of America is Lobbying (enormous advantage v. unions and public interest groups) https://inequalitybookreviews.com/2021/08/21/21-the-business-of-america-is-lobbying-enormous-advantage-v-unions-and-public-interest-groups/ https://inequalitybookreviews.com/2021/08/21/21-the-business-of-america-is-lobbying-enormous-advantage-v-unions-and-public-interest-groups/#respond Sat, 21 Aug 2021 21:49:56 +0000 https://inequalitybookreviews.com/?p=146 The Business of America is Lobbying.  Lee Drutman.

During the past forty years, wealthy special interests have managed to create a cycle of increasing influence on US government leading to ever-increasing inequality (as well as decreasing protection for the environment and the economy). This influence is exerted by a variety of means, such as lobbying, campaign contributions, think tanks, university institutes, media outlets, and quasi-grass roots groups, all generously funded by the fruits of inequality. Author Lee Drutman focuses on the increasing importance of corporate lobbying as a component of this special interest influence on government. Lobbying by politically active groups increased from $200 million to $3.55 billion per year from 1983 to 2010 (corrected for inflation), of which more than three-quarters represented corporate America.

Prior to the 1970s, few corporations had their own lobbyists, and the trade associations that represented them were of limited scope. In the late 1960s and early 1970s congress passed a series of environmental and consumer regulations that business lacked the capacity to stop. This awakened the sleeping giant. Between 1971 and 1982, the number of firms with registered lobbyists in Washington grew from 175 to 2,445. The number of registered lobbyists in Washington reached a peak of 14,849 in 2007. Corporations’ approach to lobbying was initially merely reactive against their perceived enemies in labor and government. But as labor was defeated and government became much more pro-industry, corporate lobbying became more proactive and particularistic to exploit government as a source of profits and assistance. Also, lobbying increased from its own internal momentum (stickiness). Once fixed start-up costs were met, marginal costs for additional lobbying declined. Lobbyists themselves drove the process with the advantage of asymmetric information to sell their services to managers.

Corporations now have more political power than at any time since the 1920s and are favored by the status quo. Any major policy change now generally requires mostly one-sided lobbying, which is increasingly unlikely in today’s dense and competitive lobbying environment. The need to respond to many lobbyists also makes legislation more complicated. This complication hides the growing tendency to redistribute resources upward to the wealthy and the organized. Also, it overwhelms the limited capabilities of congressional staffers who must then rely on lobbyist specialists for information and drafting of bills. This imbalance is exacerbated by the siphoning off of more and more talent from the public sector by the much higher salaries in the lobbying industry. Between 2001 and 2011, almost 5,400 congressional staffers had registered as lobbyists with increased salaries of up to $200,000 to $300,000 per year.

Mostly, these changes benefit corporate interests because they increase the importance of money. While other interests may enjoy more legitimacy, corporations have substantially more money and easily overwhelm these interests. In 2012, corporations spent $56 for every $1 dollar spent by labor unions and $34 for every $1 spent by diffuse interest groups and unions combined. Financial companies that lobbied the most aggressively on mortgage lending and securitization in the 2000s subsequently engaged in the riskiest lending practices and were most likely to be bailed out after the crisis. Studies have shown that the more firms lobby, the lower their effective tax rate, and that policy outcomes lean toward corporate interests and wealthy donors.

Numerous examples are provided to show the overwhelming influence of high priced lobbying. Since the Tax Reform Act of 1986, more than 100 acts of congress have made almost 15,000 changes to the tax code. Consequently, in 2010, GE was able to use 1000 employees to file a 57,000 page tax return that enabled it to pay no federal taxes. The 2003 Medicare Modernization Act was essentially written by lobbyists to provide a prescription drug benefit, but without bulk government purchasing. This bill was a boon to industry of $242 billion over ten years at a cost of a mere $130 million in lobbying in 2003. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ran to 383,013 words after lobbying by 900 unique organizations, including 509 corporations and 201 trade associations. The Affordable Care Act of 2010 ran to 327,911 words after lobbying by 1,483 unique organizations, including 514 businesses, 242 institutions (mostly hospitals), 224 trade associations, and 162 professional associations.

Major lobbying operations in Washington are mostly conducted by the very biggest companies of which 127 account for almost half of lobbying expenditures. The top 20 companies on average employ 18 full time lobbyists and contract with 28 different Washington lobbying firms. On average, they have weighed in on 17 different issue areas, before 20 agencies, and on 63 different pieces of legislation. In 2007 Blue Cross/Blue Shield had the biggest lobbying presence with 56 in-house lobbyists and contracts with 30 different Washington lobbying firms. Still, the majority of publicly traded companies (close to 90%) do not have their own lobbyists and instead rely on trade associations for representation. Large companies participate in trade associations, as well. They do so to avoid ceding leadership to others, for coordination among companies for a strategy of divide and conquer, and to obtain cover on difficult issues for which they do not want to be up front. In 2007, 1,820 lobbying firms represented clients in Washington, but 75% had three or fewer registered lobbyists. The top 20 firms (about 1%) had from 26 to 145 registered lobbyist and took in 25% of lobbying revenue.

Recent reforms have included the 1995 Lobbying Disclosure Act, the 2006 Honest Leadership and Government Act (which slowed the revolving door for senators and staffers to lobbying firms and limited gifts but not campaign contributions from lobbyists), and Obama’s exclusion of registered lobbyists from his administration. These reforms have accomplished very little because they addressed the wrong problems. The author maintains that there is not much outright quid pro quo corruption or bribery. Instead, he identifies three genuine problems that need to be fixed: 1) Balance of power. The fight is not fair when corporate interests spend $34 for every $1 of unions and diffuse interests combined. 2) Complexity and asymmetry of information. When government actors are forced to rely on outside lobbyists, outcomes are distorted. 3) Particularism. Companies are increasingly oriented towards narrow, rent-seeking outcomes that crowd out the capacity of the political system to address larger problems.

The author goes on to suggest three solutions: 1) The Madisonian Solution—the best way to counter faction is for faction to counteract faction. This is complicated by the markedly unequal resources between corporations and their opponents and by the problem of collective action when issues affect a handful of companies greatly but most citizens only marginally. The solution would involve government subsidies to even the fight, similar to the use of court-appointed lawyers for indigent criminal defendants. One approach would be for a diffuse interest group to show that its perspective was shared by a threshold percentage of citizens (perhaps 25,000) and that it was outspent by a threshold ratio (perhaps 4 to 1). Another approach would be to establish an Office of Public Lobbying to identify and represent under-represented voices.

2) The Genuine Public Conversation Approach. In 1946, Congress passed the Administrative Procedure Act that resulted in most executive agencies requiring public comments from all interested parties and public responses from agencies before a rule could be finalized. What if Congress passed a Congressional Lobbying Procedure Act that established a uniform process for congressional lobbying? This process could require that advocacy be posted within 48 hours on a central website that would include a summary of the meeting, who attended, and what was advocated. This real-time electronic transparency would enable watchdogs to identify narrow provisions that are now hidden in legislation until they become very difficult to oppose or change. Also, it might make congressmen more wary about sneaking rent-seeking provisions into bills, and it might help to limit the complexity of bills.

3) Increasing Government Policy Capacity—which would limit the need for staffers to turn to lobbyists for help. Congressional policy capacity has declined while policy complexity and specialization have increased. Hence, Congress needs to improve working conditions and salaries of congressional staff to attract and retain more top policy talent. Congress could significantly increase the budgets of the Congressional Research Service (CRS) and Government Accountability Office (GAO) to increase their ability to provide independent expert advice and research. Congress could partner with universities, such as by providing a congressional clerkship program analogous to the judicial clerkship program. Finally, Congress could fund policy research consultants that would be available to congressional offices as the lobbyist equivalent of public interest law firms.

The author spends little time on campaign finance because corporations spend roughly 13 times more on lobbying than they do on PAC contributions. However, he does note that members of Congress spend far too much time fundraising. In the 2012 campaign cycle, 28% of the nearly $6 billion in contributions came from 0.01% of the US population. Those who can appeal to these donors can run for office, and those who can’t usually can’t. Appealing to wealthy donors involves taking policy positions they like and not wasting time on issues that don’t concern them. Partial or full public funding of elections (as is the norm in almost all other industrialized democracies) would help to level the playing field. However, it would not solve the expertise, complexity, and revolving door problems, and would likely push corporations to redouble their efforts for influence in other areas, including lobbying. Hence, focusing only on electoral reform has limited benefit and needs to be part of a larger package to reform the greatly exaggerated influence of wealthy special interest groups on government.

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22. Democracy in America? (how average citizens are underrepresented and what to do about it) https://inequalitybookreviews.com/2021/08/21/22-democracy-in-america-how-average-citizens-are-underrepresented-and-what-to-do-about-it/ https://inequalitybookreviews.com/2021/08/21/22-democracy-in-america-how-average-citizens-are-underrepresented-and-what-to-do-about-it/#respond Sat, 21 Aug 2021 21:48:29 +0000 https://inequalitybookreviews.com/?p=143 Democracy in America?  What has gone wrong and what we can do about it.  Benjamin Page and Martin Gilens.

Our government in Washington is so mired in gridlock and inaction that it is unable to provide the obvious solutions desired by most Americans to the many problems that continue to plague them.  The authors believe this results from two main causes: clashes between our sharply divided political parties and obstructive actions by corporations, interest groups, and wealthy individuals.  They believe these problems can be most effectively addressed by more democracy that gives an equal opportunity for all citizens to shape the policies they need.

The authors define democracy as policy responsiveness to ordinary citizens—that is popular control of government.  This commonsense definition reflects the foundational value of political equality in our amended Constitution.  Yet this sort of “majoritarian” democracy—which is widely embraced by ordinary citizens—is now increasingly rejected by a number of political theorists and by many social and political elites.  Hence, the authors seek to show how democracy has been diminished, why it is necessary, and what remedies and strategies are needed for its restoration.

Most Americans favor the kinds of taxes, regulations, and government spending that support equity and many public goods by countering market failures and externalities.  Nevertheless, many of our elected officials disregard this majority support and instead thwart these policies to cater to special interests and the super-rich.  Examples of thwarted policies include those for climate change, transportation infrastructure, immigration, gun violence, universal affordable medical care, universal affordable high-quality pre-k through college education, assistance with wages and employment, and progressive taxation for high personal and corporate incomes.

Graphs are provided to document this almost complete lack of influence by average citizens for their policy preferences compared to the influence of interest groups and affluent Americans.  These graphs are based on the results of 1,791 proposed policy changes between 1981 and 2002.  Unlike average citizens, interest groups and the affluent get most of the policies they want, although not all of them because the system is biased toward inaction.

Not surprisingly, interest groups and affluent Americans have very different policy preferences than ordinary citizens and have considerable success in purchasing what they want by unrestricted enormous spending for campaigns, PACs, and lobbying.  Their desired outcomes are focused on high-end tax cuts, minimal government spending, free trade agreements, business subsidies, bank bailouts, and limited regulation for protecting the public interest.   Equally as important, they have demonstrated the ability to block policies favored by democratic majorities that they believe are not in their interest, particularly in a system that favors the status quo.

Admirable features of our political system are not sufficient to ensure popular control of government.  Many problems contribute to declining democracy, including power from unrestricted spending by wealthy individuals, corporations, and organized interest groups, domination of primaries by extreme activists and polarized parties, restricted electoral choices dictated by activists and donors, manipulated turnout by voter suppression, misinformation in elections, unrepresentative institutions (the Senate and Supreme Court), lobbying by the affluent and well-organized, and gridlock aggravated by procedures like holds and filibusters.

Many reforms are identified as necessary to enable the majority of Americans to get the government they want through the democratic means that should be available to them.  Many of these reforms are very predictable, including those for remedying the outsized role of money from super-rich donors and special interests in elections and lobbying, the imbalance of representation in the Electoral College, marked over representation of rural states in the Senate, structure of Congressional and state legislature election districts that favors rural interests and is made worse by Gerrymandering, Supreme Court decisions that greatly favor moneyed interests and fail to protect voting rights, and procedural abuses like filibusters and holds in the Senate and the Hastert Rule in the House.

The path to achieving these reforms to bring about a major increase in government’s responsiveness to average citizens appears to be daunting.  The authors state that it can only be attained through a broad, energetic, and persistent social movement: a coalition of millions of people joined together to bring about democratic reforms over the long term.  Such powerful egalitarian currents in American political life have periodically triumphed over entrenched interests.  This happened in the Jacksonian period, the Progressive Era, the New Deal, and the Civil Rights Movement of the 1960s.  The authors review the history of these movements and abstract lessons from them that can be applied to today’s struggle.

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23. Kill Switch (how obstruction in the Senate, particularly from the filibuster, is subverting our democracy) https://inequalitybookreviews.com/2021/08/21/23-kill-switch-how-obstruction-in-the-senate-particularly-from-the-filibuster-is-subverting-our-democracy/ https://inequalitybookreviews.com/2021/08/21/23-kill-switch-how-obstruction-in-the-senate-particularly-from-the-filibuster-is-subverting-our-democracy/#respond Sat, 21 Aug 2021 21:46:59 +0000 https://inequalitybookreviews.com/?p=139 Kill Switch: The Rise of the Modern Senate and the Crippling of American Democracy.  Adam Jentleson.

As America faces enormous challenges, the Senate has become a kill switch that cuts off broad-based solutions and shuts down our democratic process.  Consequently, dysfunctional government and gridlock frustrate the wishes of sizable majorities in our democracy for solutions to climate change, gun violence, failure to tax the super-rich, and many other issues.  A major cause of this gridlock is Senate procedure that allows a minority to block bills by requiring a supermajority for passage, rather than the simple majority envisioned by our founders in the Constitution.  The most destructive tactic is the filibuster, recently augmented by all-or-none hierarchical party voting directed by the minority leader.

When first invented, the filibuster merely artificially prolonged debate to prevent or delay passage of a bill.  Initially, this imposed a considerable burden on the filibustering senator, who had to keep talking, and the senators of his party, who had to remain in attendance to prevent a successful vote to end debate.  Eventually, rules were eased so the purpose of the filibuster could be achieved by just threatening it, without requiring the speaker to speak, the remaining senators to attend, or delaying other business of the Senate.  In addition, a single senator could now deter action on a bill by simply placing a “hold” that signaled the intent to filibuster.  Nevertheless, the mere threat of the filibuster still forced a supermajority vote of 60% for “cloture” to end it and allow enactment of the contested bill.

The founding fathers created a constitution for a democratic republic for which the defining feature was majority rule.  Supermajority thresholds were not required to limit debate, but were reserved for matters of greatest consequence, such as impeachment, treaties with foreign nations, and amendments to the Constitution.  On all other matters, the Senate was to be a strictly majority-rule institution.  Hence, the Constitution includes no mention of additional supermajority thresholds, the filibuster, or even the principle of unlimited debate.

The Framers saw debate as a critical protection for the minority to make its voices heard, not to block or nullify, but to persuade.  However, they also feared the possibility of abuse of this protection by using endless debate to obstruct majority rule democracy.  Five of the original nineteen rules the Senate adopted in 1789 placed limits on debate.  The filibuster, which attempted to obstruct legislation by limitless debate, did not appear until the 1830s, after Senate rules limiting debate were inadvertently weakened.  The term filibuster did not reach common usage until the 1850s.

Until the late 20th Century, the filibuster was used almost entirely by Southern Democrats in service of one cause—White supremacy.  It was introduced in the 1830s by Senator John Calhoun of South Carolina as he led Southern efforts to defend slavery prior to the Civil War.  Its use was later resumed by Southern Democrats, particularly Richard Russell of Georgia, to defend the racist Jim Crow system that replaced slavery after the Civil War.  Major defeats of these forces finally occurred when master Democratic politician Lyndon Johnson managed to pass the Civil Rights and Voting Rights laws of 1964 and 1965 by garnering the 67% of votes needed in the Senate to end the filibuster.

A predictable backlash from the Civil Rights victories of the 1960s resulted in a great realignment of racially motivated Southern senators from the Democrats to the Republicans.  The filibuster was still used, but now by newly Republican senators, for some additional White supremacy causes, such as the filibuster that defeated efforts in 1970 to end the Electoral College (which was perceived as favoring anti-civil rights forces).  However, by the 21st Century, use of the filibuster had greatly expanded to block any achievements by opposing parties for almost all areas of governance, not just civil rights.

This new extensive use of the filibuster is compounded by mal-allocation of seats for votes in the Senate due to marked over representation of small, rural states.  Throughout the 21st Century, Republicans have managed only 35-45% of the vote for senators, but have received disproportionately larger numbers of seats, sometimes enough to claim the majority, and always enough to prevent ending a filibuster. 

Also, Senate leadership has taken control of campaign funding to enforce a hierarchical system over senator’s voting.  This was pioneered by Lyndon Johnson and Harry Reid but taken to new heights by Mitch McConnell.   Consequently, McConnell can now ensure the votes of all Republican senators to prevent ending the filibuster for any legislation by Democrats, even against the wishes of Republican constituents.

The filibuster benefits conservatives far more than progressives.   Republicans mostly serve their wealthy donors by using procedure such as the filibuster to block Democratic efforts to increase expenditures for the safety net, to regulate their industrial and financial empires, and to extend fair taxation to their fortunes.  This is much easier than enacting constructive solutions to the nation’s problems, particularly if they may be undermined by the filibuster.  Also, the procedure has been used shamelessly to deny Democratic presidents Obama and Biden any legislative accomplishments, even those supported by most Republicans.

The author acknowledges that the outlook for the Senate and our democracy is grim.  The decline began in the early 19th Century with the invention by White supremacists and subsequent strengthening of the filibuster, accelerated in the mid-20th and early 21st Centuries with consolidation of Senate leadership power by Lyndon Johnson and Harry Reid, and reached its zenith with the pairing of those tools by Mitch McConnell to give a reactionary minority veto power over everything the majority attempts to accomplish.

However, while broader developments such as polarization may seem intractable, the Senate could be fixed.  It will not require Constitutional amendments, fox news ceasing to exist, or even a supermajority vote.  All it takes to fix it is fifty-one votes, political will, and a reasonable plan to restore the Framer’s vision of a majority rule Senate with real extended debate for minorities and Senators free of hierarchical control.

The plan to fix the Senate centers on the filibuster.  If senators claim to be delaying a bill to debate it, they should actually debate it.  After a minimum period for debate, say five days, a cloture vote with a majority threshold should automatically occur.  To reclaim status as a deliberative body, Senators need to be present during filibusters to act.  Every Senate decision point should be majority rule, except for those assigned supermajority thresholds by the Constitution. Leadership power and control of information should be democratized to facilitate Senator’s independent action.

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24. Supreme Inequality (Supreme Court bias toward rich and business makes inequality worse) https://inequalitybookreviews.com/2021/08/21/24-supreme-inequality-supreme-court-bias-toward-rich-and-business-makes-inequality-worse/ https://inequalitybookreviews.com/2021/08/21/24-supreme-inequality-supreme-court-bias-toward-rich-and-business-makes-inequality-worse/#respond Sat, 21 Aug 2021 21:44:40 +0000 https://inequalitybookreviews.com/?p=136 Supreme inequality: The Supreme Court’s Fifty-year Battle for a More Unjust America.  Adam Cohen

Despite its idealized image, the reality of the US Supreme Court throughout its history is that it has been a protector of the rich and powerful.  It sided with slaveholders before the Civil War, upheld Jim Crow repression and segregation in the South after the Civil War, ruled against laws protecting workers in the Progressive Era, struck down early New Deal programs during the Great Depression, and endorsed Japanese internment camps during World War II.

The Warren Court of 1953 to 1969 provided a brief exception.  Particularly from 1962 to 1969, after a strong liberal majority was achieved, the Warren Court championed the poor, working people, and racial minorities to build a more equal and inclusive America.  It ruled against school segregation (Brown v. Board of Education) and recognized rights of poor people, rights of unions, rights protecting welfare recipients, rights of non-Christians, and rights of criminal defendants (Miranda, etc.).  It developed a model called “strict scrutiny” to give extra protections to groups most discriminated against and least able to protect themselves. 

Predictably, these changes provoked a strong backlash of bitter opposition.  When Richard Nixon became president in 1969, he immediately moved to destroy the Warren Court and everything it had achieved.  He managed to appoint four conservative Justices to the Court.  One of these was Lewis Powell Jr., a former corporate and tobacco lawyer, whose infamous, militantly pro-business 1971 “Powell Memo” distributed by the Chamber of Commerce was unknown by the Senate at the time of his confirmation.   

Also, Nixon was able to appoint archconservative Warren Burger as Chief Justice because the position remained open after Lyndon Johnson’s choice of Abe Fortas to replace Earl Warren was blocked by a Republican filibuster.  One of Nixon’s four appointments was enabled when Fortas was later driven from the court by harassment from Assistant AG William Rehnquist.   Eventually, the markedly conservative Rehnquist became Nixon’s fourth appointment to the Court.   Thus the Warren Court was killed off and replaced by the Nixon Court.

The post-1969 Court changed directions almost immediately, and these changes have more or less persisted through the following five decades until today.  During this time, there have been only conservative Chief Justices, and they have consistently had conservative majorities behind them.  For the justices who left since the mid-1960s, the six most conservative were replaced by Republican presidents, but only one of the six most liberal was replaced by a Democratic president.  This sequence is partly related to Republican hard-ball tactics, from using the filibuster and harassment against Abe Fortas to denying a Senate vote on Merrick Garland for the last year of the Obama presidency. 

The conservative justices have been extraordinarily pro-business.  In 2013, the five conservative justices were all among the top ten most pro-business since 1946, and Alito and Roberts were in first and second place.  Consequently, the Court has issued numerous pro-corporate rulings and established special protections for corporations by extending the 14th Amendment “due process” clause meant for freed slaves to corporations.  Meanwhile, it has repeatedly reversed the protections for ordinary citizens and especially for the poor and disabled, for whom it declined use of the Warren Court’s “strict scrutiny” category.

The past fifty years of conservative rulings from the Supreme Court have coincided with the period of US soaring inequality to near-historic levels.  By 2014, 20% of all income went to the top 1% and only 12.5% went to the bottom 50%, and the richest 0.1% owned as much as the bottom 90%.  Globalization and automation were contributing factors, but policy choices by US government, supported by Supreme Court rulings, were a central factor (compared to Europe, where similar inequality did not arise). 

These policy choices included tax cuts for the rich, massive education inequalities, failure to regulate business and finance, undermining unions, and mean-spirited welfare reform.  The Court contributed by many rulings, such as those that enhanced corporate and top executive profit, weakened unions, gutted campaign finance law to favor the wealthy, gutted voter protection to favor Republicans, and facilitated markedly increased incarceration that has devastated minority families.   

The author documents his findings by reviewing an exhaustive list of partisan rulings during the last fifty years that are mostly split decisions of the conservative majority over the liberal minority to favor corporations, the wealthy, and Republican minority rule.  This list is far too long to be included in a brief review.  However the rulings are organized into categories, which will be noted, and a few examples of individual rulings will be provided:

  • Turning against the poor:

1970 Dandridge ruling:  By a 5-3 vote, Court conservatives abandoned “strict scrutiny” that gives extra protections to the poor in favor of the more lenient “rational basis review”.  Also, the ruling caused great hardship for children in large welfare families by upholding caps that didn’t consider family size. 

1996 welfare reform: AFDC was replaced by TANF that reduced beneficiaries from 12 million to 3 million and doubled the number of persons in deep poverty, a change that went unchallenged due to previous Court rulings.

2012 Sebelius ruling: By a 5-4 vote (with Roberts joining the liberals), the Court upheld the individual mandate of the ACA but conservative dominance overturned the requirement for federally funded expansion of state Medicaid and led to withholding of this benefit in fourteen Republican states that resulted in an estimated 15,600 needless deaths. 

  • Education:

1973 and 1974 Rodriguez and Milliken rulings: By 5-4 and 5-4 votes, the Court conservatives again abandoned “strict scrutiny” in favor of the more lenient rational basis review.  Thus it overturned lower court findings that public education systems had failed to equalize educational opportunity due to unequal funding for the poor and inadequate desegregation plans for minorities.  The 2018 World Inequality Report by Piketty and others found massive educational inequalities to be one of the two primary causes of the United States’ “income-inequality trajectory”.

  • Campaign finance

1976 Buckley ruling:  By a per curium (unsigned) ruling with several partial dissents, the Court overturned earlier campaign finance laws by finding that money was speech, creating the paradox that you are entitled to the amount of free speech you can afford to buy.  Unsurprisingly, by 2012, the top 0.04% bought as much “free speech” (and political influence) as the entire bottom 68%. 

2010 Citizens United ruling:  By a 5-4 vote, Court conservatives gutted McCain-Feingold campaign finance reform by declaring that contributions by corporations and the super-rich could be unlimited and anonymous.  Thus the already enormous influence of corporations and the super-rich was greatly enhanced by limitless funding of Super PACs and untraceable “dark money”.

  • Democracy:

2000 Bush v. Gore ruling: By a 5-4 strictly partisan vote, Court conservatives stopped the Florida vote recount and handed the presidency to Bush.  This was done despite a pre-election voter purge by elected Republicans that wrongly removed an estimated 4,725 black Gore voters mislabeled as felons in an election Bush won by just 537 votes.  The US Commission on Civil Rights concluded that this voter removal was likely “outcome determinative”. 

2013 Shelby County ruling: By a 5-4 vote, Court conservatives facilitated Republican minority rule by gutting the seminal 1965 Voting Rights Act, which in 2006 had been reauthorized by 99-0 in the Senate and 390-33 in the House and signed by President Bush.  The essential provision for preclearance of new voting laws by states with a history of abuse was overturned.  This was done with the bizarre justification that it was no longer needed since abuses by these states had decreased as a result of its use.  Justice Ginsburg objected that this “is like throwing away your umbrella in a rainstorm because you are not getting wet.”

  • Workers:

2007 Ledbetter, 1989 Antonio, 2009 Gross, 2011 Wal-Mart, and 2013 Vance rulings: By 5-4, 5-4, 5-4, 5-4, and 5-4 votes, the Court conservatives ruled against worker’s claims of sex discrimination in pay, racial discrimination in job assignment, age discrimination, class action sex discrimination, and racial harassment. 

2018 Janus: By a 5-4 vote, Court conservatives ruled against mandatory agency fees for public sector unions.  This and many other rulings against unions contributed to the 1973 to 2007 decline of private-sector union membership from 34 to 8% for men and from 16 to 6% for women.  A Harvard and University of Washington study concluded that union loss contributed as much as one-third to the growth of US inequality during this period.

  • Corporations (rulings that advanced corporate goals to limit punitive damages, limit class actions, favor forced arbitration, and limit environmental and other regulation):

2008 Exxon Valdez: By a 5-3 vote, Court conservatives plus Souter (Alito was recused) ruled to limit punitive damages to a 1:1 ratio for this enormous corporate fiasco.

2013 Comcast: By a 5-4 vote, Court conservatives denied class action status to Comcast subscribers in their suit claiming $875 million of overcharges in violation of anti-trust laws.

2000 Green Tree: By a 5-4 vote, Court conservatives ruled to enforce forced arbitration based upon a faulty clause.

2009 Coeur Alaska: By a 6-3 vote, Court conservatives plus Breyer ruled that a mining company pumping toxic wastewater into an Alaska lake could disregard Environmental Protection Agency regulations.

  • Criminal Justice:

1987 McCleskey: By a 5-4 vote, Court conservatives ruled against challenges to sentencing based on racial discrimination, despite a great deal of evidence of enormous differences related to race.

Numerous rulings weakening Miranda, Mapp, and Gideon (warning against self-incrimination, exclusionary rule for search without reasonable cause, and right to competent counsel).

Rulings supporting abuses of plea bargaining, harsh sentencing, and unprovoked checks for trivial outstanding warrants to justify searches: These rulings coincide with the rapid rise of US mass incarceration, with rates per 100,000 that have increased from 100 in the 1970s to 698 today.  The US has only 4.3% of the world’s population, but 22% of its prisoners.

White Collar Paradox: Conservative justices are more sympathetic to defendants with wealth and power than liberals—Scalia and Rehnquist voted in favor of defendants in 7% and 8% of non-white-collar criminal cases and in 82% and 62% of white-collar cases.

Sadly, these findings reveal the Supreme Court to be just another political branch that can be counted upon to create the illusion of legal scholarship to impose outcomes desired by the politicians who appointed them.  For the last fifty years, the resultant conservative majority of the Court has waged an unrelenting war on the poor and the middle class and enthusiastically championed wealthy individuals and corporations—and changed the law dramatically to suit its vision of society. 

This sequence advances the long standing conservative goal of rolling back progress the nation made in the 1960s.  However, for many conservatives, the drive for epochal change is even more focused on what has always been the real battleground—the gains of the New Deal.  Their targets include Social Security, federal welfare programs, the federal minimum wage, a federal right to unionize, and federal regulatory agencies.  Under only slightly different political circumstances, the work of the Warren Court could have continued to create a society with more equality, inclusion, and opportunity for all.

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25. We, the Corporations (marked expansion of Corporate rights by courts makes inequality worse) https://inequalitybookreviews.com/2021/08/21/25-we-the-corporations-marked-expansion-of-corporate-rights-by-courts-makes-inequality-worse/ https://inequalitybookreviews.com/2021/08/21/25-we-the-corporations-marked-expansion-of-corporate-rights-by-courts-makes-inequality-worse/#respond Sat, 21 Aug 2021 21:42:51 +0000 https://inequalitybookreviews.com/?p=133 We the Corporations: How American Businesses Won Their Civil Rights.  Adam Winkler.

The earliest version of a corporation, the societas publicranum, was created in ancient Rome in about 300 B.C. as an organization with an identity separate from its owners.  Corporations facilitated commerce because they were authorized to own property and make contracts in their own names and did not need to be dissolved if a member died or went bankrupt.  The form persisted through the centuries, such as with the Catholic Church in the fourth century A.D., with Oxford University in the eleventh century A.D., and eventually with the formation of the English colonies in America, including the 1606 Virginia Company and the 1639 Massachusetts Bay Company.

England did not have a written constitution, but in 1758 Sir William Blackstone published Commentaries of the Law in England, which is still commonly cited in US Supreme Court rulings.  In Commentaries, Blackstone describes corporations as “artificial persons” distinct from the people who form them with certain legally enforceable rights.  The three core rights were to own property, to make contracts, and to have access to courts to sue.  Corporations were both public and private in that they required the king’s consent and had to be of service to the public, but could take home profits.  Their rights and duties were distinct from those of ordinary citizens.

As best we can tell, the people who wrote and ratified the US Constitution simply never considered whether the Constitution applied to corporations.  The word “corporation” appears neither in the constitution nor in the Federalist Papers.  Records of the Constitutional Convention mention only that a proposal to give Congress the power to charter corporations was defeated.  Nevertheless, business lawyers soon began a two century campaign to extend all the Constitutional rights of citizens to corporations, which originally had no Constitutional rights.  The relentless, incremental, prolonged pursuit of that goal through a multitude of individual well-funded cases is the topic of this book.

Since the earliest days of the nation, corporate lawyers have known that it is far easier to get what they want by changing the interpretation of the Constitution than by the almost impossible task of trying to change it by amending it.  Hence, many of their cases seek judicial review, by which the Supreme Court claims the authority of five justices to determine the constitutionality of laws and strike them down, even when the other four justices disagree and when the laws represent the democratic will of the entire US by way of the president and Congress.  The origin of this power of the courts to invalidate duly passed laws has long been obscure.  Chief Justice Marshall has been credited with inventing this process out of the “constitutional vapors”. 

For most of American history, the Supreme Court has used judicial review to benefit business.  In doing so, the Court has often used piercing the corporate veil as the conceptual tool to justify extending a wide variety of personal constitutional rights to corporations.   This tool retains corporate personhood as a barrier to protect members from liability but looks past this barrier to allow members to assign their individual rights to corporations.  This tool has been used since 1809, when the US Bank ruling pierced the corporate veil to assign members’ rights to sue in Federal Court to the corporation.   It continues to be used, such as in 2014, when the Hobby Lobby ruling pierced the corporate veil to assign members’ right to religious freedom to the corporation, which had never before had any such right.

 After piercing the veil, corporate lawyers repeatedly claimed constitutional protections meant for citizens for the corporate artificial persons who were their clients.  Egregious examples of this practice include the 1882 and 1886 rulings that granted 14th Amendment “due process” and “equal protection” rights to the Southern Pacific Railroad as a corporate person.  Meanwhile, states’ rights were claimed as a justification to deny enforcement of this same protection to the freed slaves for whom it was intended.  In 2010, the Citizens United ruling gave corporate artificial persons a 1st Amendment right to influence elections with unlimited secret funding by essentially equating free speech with money.

Thus, in a two-hundred year struggle, corporate “persons” succeeded in moving from having no constitutional rights at all to having almost all of the original constitutional rights intended only for actual, non-corporate persons.  This sequence progressed from first winning the English Commentaries’ rights of property, contract, and access to court, then 14th Amendment rights of due process and equal protection and protections for criminal procedures, followed by property rights but not liberty rights, and finally by liberty rights such as freedoms of the press, association, and political speech.

While these corporate victories may seem to be the result of a handful of landmark cases, a main point of the book is that corporate victories often reflect a less visible and much more incremental process of the cumulative effect of many small victories by coming back to the Supreme Court over and over and over again.  This process can only be achieved by the far greater resources possessed by corporations and the super wealthy rather than by their opponents.  Another important factor is the usual make-up of the court by justices from privileged backgrounds and elite institutions who have very little sympathy or understanding for the lives of ordinary people and who tend to perpetuate and defend social, economic, and racial inequality. 

The author supports this narrative of progressive expansion of corporate rights with many cases too numerous for inclusion in a brief review.  A list limited to representative cases follows:

Before the Constitution

  • 300 BC Societas Publicoranum: Corporations were invented in ancient Rome.
  • 1758 William Blackstone: In English law, corporations were described as “artificial persons” with rights to property, contracts, and access to court.

1787-1860 First Corporate rights cases

  • 1809 Bank of the United States v. Deveaux: Corporation artificial persons were found to be entitled to access to federal court, just as real people are.
  • Dartmouth College v. Woodward: Corporations were found to be private entities, akin to individuals, without public responsibilities.
  • Marshall v. B & O Railroad: The Taney Court used personhood for corporations to limit their powers.  

1861-1935 Property rights but not liberty rights

  • 1882 & 1886 San Mateo & Santa Clara County v. Southern Pacific Railroad: After being misled by Lawyer Roscoe Conkling, the Court assigned 14th Amendment due process and equal protection to corporate artificial persons, while in other rulings claimed states’ rights to deny enforcement of those rights to benefit the freed slaves for whom they were intended.
  • 1888 Pembina Consolidated v. Pennsylvania: A majority led by industry-connected Stephen Field ruled that corporations are persons entitled to 14th Amendment due process and equal protection.
  • 1896 Marc Hanna: Corporate political money was solicited for William McKinley’s presidential race.
  • 1897-1936 Lochner Era: Although friendly to business, this era gave corporations property rights but not liberty rights.
  • 1906 Hale v. Henkel: Corporations have 4th Amendment right against unreasonable searches and seizures but do not have 5th Amendment right against self-incrimination.
  • 1907 Tillman Act: Congress enacts campaign finance law banning corporate contributions after the Great Wall Street Scandal of 1904 that included enormous illegal secret campaign contributions, particularly to Republicans William McKinley and Theodore Roosevelt.
  • 1907 & 1908 Western Turf Association & Berea College: Corporations do not have freedom of association, a liberty right.
  • 1916 Brewers Cases: Corporations do not have the right to influence elections with corporate money, a liberty right.
  • 1919 Dodge Brothers v. Ford: Business corporations must be run in the interest of stockholders, not for the interest of consumers, workers, or the public (as desired by Ford).

1936-current Liberty Rights

  • 1936 Grosjean v. American Press: The 1st Amendment right of freedom of the press extends to newspaper corporations.
  • 1942 Valentine v. Chrestensen: Corporate commercial speech is not protected by the 1st Amendment.
  • 1958 NAACP v. Alabama: A voluntary membership corporation can assert its members’ rights of association (to deny a hostile state access to membership lists).
  • 1971 Lewis Powell Memo: Powell issued a militant plan for business, including using the courts, distributed by the Chamber of Commerce months before he was named to the Supreme Court.
  • 1976 Virginia Pharmacy Board: Corporate commercial speech is protected by 1st Amendment (overturning 1942 Valentine), according to a Ralph Nader theory—a Pyrrhic victory for Nader.
  • 1978 First National Bank of Boston v. Bellotti: Corporations have 1st Amendment free speech right to influence ballot measure campaigns (partially overturning 1907 Tillman Act).
  • 1990 & 2003 Austin & McConnell: Restrictions on corporate money in candidate elections are upheld.
  • 2010 Citizens United: Corporations are now found to have a 1st Amendment right to unlimited and secret financing to influence candidate elections (overturning Austin & McConnell and prior election law).
  • 2014 Burwell v. Hobby Lobby: Corporations are found to have religious freedom under a federal statute.
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26. Why Cities Lose (redistricting rules very unfavorable to urban Democrats, even without gerrymandering) https://inequalitybookreviews.com/2021/08/21/26-why-cities-lose-redistricting-rules-very-unfavorable-to-urban-democrats-even-without-gerrymandering/ https://inequalitybookreviews.com/2021/08/21/26-why-cities-lose-redistricting-rules-very-unfavorable-to-urban-democrats-even-without-gerrymandering/#respond Sat, 21 Aug 2021 21:41:01 +0000 https://inequalitybookreviews.com/?p=131 Why Cities Lose: The Deep Roots of the Urban-rural Political Divide.  Jonathan A. Rodden.

It is hardly surprising that a system of political representation designed 234 years ago for four million people in a handful of Northeastern former colonies is burdened by many flaws when applied to 330 million people in in today’s vastly larger and more varied US.  In recent decades these flaws have resulted in marked disadvantages for Democrats.

Since 1990, Democrats have won the presidential popular vote in seven of eight presidential elections but have won the presidency only five times.  Democrats have won the popular vote for Senate seats in eleven of the last fifteen US elections but have won control only six times.  In 2012, Democrats won 1.4 million more votes than Republicans for the US House of Representatives but only 45% of seats.  These imbalances are even worse at the state level within many legislative bodies. 

The Electoral College, two senators per state despite large population differences, and state-level gerrymandering are flaws that contribute to this imbalance.  Attempts to correct these flaws face major hurdles.  Changing the Electoral College requires either a constitutional amendment or cooperation by many states to honor the popular vote.  Changes of representation at the national and state level require major legislation.  Good luck with these approaches, since the system’s beneficiaries would have to vote to end the flaws and forgo the usual obstruction, such as by the filibuster.

BUT WAIT!  THERE’S MORE!  THE IMBALANCE IS ACTUALLY WORSE AND MORE INTRACTABLE THAN DESCRIBED ABOVE.  Even If gerrymandering and Republican malfeasance were entirely eliminated much of the problem for Democrats would still persist.  The reason for this is a combination of present urban-rural demographics and the US system of political representation by winner-take-all regional districts (majoritarian democracy).  The author explains the reasons for this and makes his case by presenting and analyzing an enormous volume of big data about politics and demographics.

The author’s discussion begins with the industrial revolution when large numbers of workers migrated to and settled in the core areas of Northern cities.  This settlement also extended along the rivers and railroad lines of the old transportation network.  Eventually, worker’s leftist political parties and unions became highly concentrated in these regions.  Subsequently, factory owner’s moved their businesses to the South or outsourced them.  Nevertheless, many workers’ families remained in the old industrial cities and retained their political allegiances.  Eventually, they were joined by migrating Southern Blacks and by many workers in the new information industry.

Today’s urban-rural political divide developed in the 20th Century as Democrats gradually transformed into a truly urban party.  In the 1960s, the coalition of the Democrats with rural Southern segregationists began to fray during the civil rights era and subsequently with the Nixon Southern Strategy to capture racially-oriented voters.  Their transition to the Republicans was complete by the 1990s when Democratic blue dogs and bool weevils could no longer disregard the Democratic national party platform.  Also, during this time, manufacturing moved from Northern cities and old transit hubs to exurban and rural places along interstates, especially in the South.  Meanwhile, dynamism and jobs for educated workers became concentrated in a small number of global cities like San Francisco, Seattle, and Boston in collaboration with universities and entrepreneurs. 

Thus, Democrats became concentrated in cities as the party of the urban poor and racial minorities as well as social progressives and the globalized knowledge economy.  Simultaneously, Republicans became more prevalent in suburbs and rural areas as the party of low taxes, deregulation, gun rights, social conservatism, traditional manufacturing, resource extraction, and agriculture.  Accordingly, terms like “left” and “right” and the context of industrial “class war” have lost much of their 20th Century meaning.  It might be more accurate to refer to this US political conflict and polarization as “urban” versus “rural.”

The author then explains how the US system of “winner-take-all” district representation combined with emerging urban-rural demographics resulted in a substantial rural advantage.  Evolutionary change since the industrial revolution has resulted in hyper concentration of Democrats in city centers, but more modest concentration of Republicans at increasing distances from the city center in suburban and rural areas (as shown by accompanying graphs).  When regions are divided into winner-take-all voting districts, those mostly composed of cities will have highly concentrated Democratic majorities and those composed of suburbs and rural areas will have much less concentrated Republican majorities.

Thus, Democrats waste many votes winning a smaller number of urban districts by large margins, while Republicans spread their votes more efficiently to win a larger number of districts by smaller margins.  This results in lower numbers of seats per votes for Democrats than for Republicans, which facilitates control of congress and especially state legislatures by Republicans, even with a minority of overall votes. 

This same process does not apply to statewide elections for senators, governors, and presidents because state representation is not divided into districts, although the Electoral College imposes similar distortions at the national level.  Accordingly, states may have Democratic governors, senators, and presidential votes from statewide majorities while Republicans may still maintain long-term, iron-clad control of state legislatures, even with a minority of votes scattered efficiently in district elections.

The truly bad news is that all of this occurs even if there is no partisan gerrymandering.  It is certainly true that gerrymandering is often performed by partisan state legislatures and that it does enhance their advantages.  Nevertheless, Democrat’s substantial disadvantages are mostly structural and still occur with nonpartisan redistricting, even with no gerrymandering at all.  The author demonstrates this by hundreds of computer simulations of nonpartisan redistricting that show the Republican’s advantage with today’s demographics cannot be eliminated, even when gerrymandering is not allowed.  The author also presents much additional data analysis for all federal, state, and local governments.

Most of us probably have assumed that this is just the way democratic voting is done and that nothing can be done about it.  The author shows that this is not the case by comparing the majoritarian system of the US and other English-speaking countries with the proportional representation of many European countries.  In the European system, districts are larger, and multiple seats are assigned to parties according to the percentages of votes received.  A party that receives 30% of the vote across all regions receives 30% of the seats in parliament.  This applies to all parties and is not affected by geographic distribution of voters, so national representation is truly proportional to the pattern of votes cast. 

Many markedly antidemocratic results occur in the US that would never occur with proportional representation.  For instance, in Wisconsin, Republicans received 45% of the votes but 63% of the seats for the 2018 Assembly.  In Pennsylvania, Democrats won 51% of the vote but only 28% of the seats (five of eighteen) for the 2012 Congress.  From 2012 to 2018, Pennsylvania Democrats demonstrated overall majorities by winning 15 of 18 statewide contests but have never won a majority of congressional seats, and have never come anywhere near winning either chamber of the state legislature because of elections distorted by multiple winner-take-all small districts.

As the author looks to the future, he notes that the pattern of increasing suburbanization and mixed voting patterns in pivotal suburban regions is tending to favor Democrats.  This could result from more knowledge workers and Democrats in suburbs or from Republicans alienating suburbanites by emphasizing divisive rural issues over suburban issues.  But this could be just a temporary phenomenon that will pass with changing Republican leadership.  On the other hand, for Democrats to benefit from this trend, they will have to counter dominance by a strongly progressive urban faction to create the flexibility for centrist blue dogs to win in the suburbs. 

He also notes that polarization aggravates growing battles over interregional flow of resources.  The 500 counties (with the majority of votes) won by Hilary Clinton, compared to 2,500 counties won by Donald Trump, were responsible for over two-thirds of federal income taxes collected in 2014.  This revenue was then disproportionately distributed to the counties won by Trump.  The recent Republican tax cut shifted benefits to Republicans by eliminating deductions most valuable to metropolitan Democrats.  Future Democratic administrations are likely to shift the burden back to wealthy Republicans in red states.  These and many other battles are contributing to instability that undermines democracy.    

The author ends with a desultory discussion of a few possible solutions, such as electoral and redistricting reform, unbundling urban and rural issues from the two party system, and changing to proportional representation.  None of these seem to be particularly achievable.  He then notes that polarization may be here to stay and that we will have to learn to manage it.  He suggests that one possible way might be decentralization with the hope that state and local governments can govern in ways our dysfunctional central government cannot.  Unfortunately, this is also not particularly likely, given that polarization is fractal and includes similar divisions at the state and local level. 

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27. Phishing for Phools (deceit in business ignored by right wing economic models) https://inequalitybookreviews.com/2021/08/21/27-phishing-for-phools-deceit-in-business-ignored-by-right-wing-economic-models/ https://inequalitybookreviews.com/2021/08/21/27-phishing-for-phools-deceit-in-business-ignored-by-right-wing-economic-models/#respond Sat, 21 Aug 2021 21:39:25 +0000 https://inequalitybookreviews.com/?p=129 Phishing for Phools: The Economics of Manipulation & Deception. George A. Akerlof and Robert J. Shiller. 2015.

The authors, both Nobel laureates in economics, argue that the common economic model of a free market with assumed perfect conditions is woefully inadequate for formulating policy in the real world. Although free markets have contributed greatly to prosperity, they have also included many failures such as unfair distribution of income, inadequate social protections, and externalities like pollution that are mitigated by government intervention. Phishing for phools is added to this list of market failures. It is defined as manipulation and deception that are intrinsic to markets and that inexorably arise from the same profit motive that produces prosperity.

In the past four decades, behavioral economics has identified many aspects of human psychology that differ greatly from the rational man of economic models and that are highly vulnerable to phishing. These include many cognitive biases and thinking in terms of narratives onto which marketers can graft other stories. For a much longer time, advertising and marketing in both business and politics have used sophisticated techniques to understand and exploit these same vulnerabilities.

Numerous examples are drawn from all walks of life to show the pervasiveness of phishing for phools. For the financial crisis of 2007, the untoward actions of investment banks, rating agencies, and the trading of derivatives and credit default swaps are discussed. Rip-offs regarding cars, houses, and credit cards are revealed. Phishing in politics is said to undermine democracy, particularly because of the oversize role of money in elections and lobbying. For Pharma and phood, abuses before and after the Food and Drug Act of 1906 are discussed, including the 2006 lobbying victory that barred competitive bidding for Part-D Medicare drug coverage. Bankruptcy for profit by fraudulent bookkeeping in the savings and loan crisis of 1986-95 is described. The rise of Michael Milken’s junk bond industry that enabled the excesses of leveraged buyouts by corporate raiders is reviewed.

The phishing equilibrium is pervasive but not comprehensive. That is because we have individuals who step back from the profit motive and act as leaders of business and government. It is these heroes who make the free-market system work as well as it does, not the unadulterated actions of markets. Some of these individuals work in or have founded organizations that measure and enforce standards, like the Food and Drug Administration, the National Bureau of Standards, and the Better Business Bureau. Other individuals have developed legal protections for consumers or have worked to regulate business and finance in government agencies that may be strikingly underfunded by the enemies of regulation in congress.

The final section of the book discusses the competing stories of the free market. (Remember the importance of narrative in human thinking.) During the Age of Reform from 1890 to 1940, Populism, Progressivism, and the New Deal led to a new, more expansive view of the role of government. The old story is that in the post-World War II years there was a consensus that government met real needs by Social Security, Medicare, securities supervision, deposit insurance, the interstate highway system, aid to the indigent, supervision of food and drugs, environmental protection, auto safety laws, laws against mortgage-gouging, civil rights, and gender equality.

The new story achieved currency in the 1980s when Ronald Regan said, “Government is not the solution to our problem; government is the problem.” This story is derived from an unsophisticated interpretation of standard economics that says free-market economies without government interference yield the best of all possible worlds. Actually, the free market is a double-edged sword that does produce great prosperity but that also produces highly significant harmful effects from which we need protection. The authors provide three examples of important old story protections and new story efforts to end or minimize them by “reform” or defunding.

Social Security: In the old story, for those over 65, Social Security provides more than half of unearned income for the bottom 80% and still provides 31% for the top 20%. Without it, the poverty rate for those over 65 would rise from 9% to 44%. Nevertheless, in the new story, the Bush administration, in 2004, proposed to privatize a significant portion of the program. The plan essentially gave the most vulnerable citizens government loans to be paid back with high interest rates in order to speculate in stocks and bonds. The authors thought that the plan was “to be blunt, daffy.” In addition, the Paul Ryan plan to privatize Medicare that would result in a typical person over 65 paying 68% rather than 25% of health care costs out of pocket.

Securities Regulation: In the old story, securities regulation is one of the most important government functions. In the new story, these functions are to be undone by deregulation and defunding. Both of these likely contributed significantly to the financial crisis of 2007. In 2014, the SEC oversaw close to $50 trillion of assets with a budget of 0.003 cents per dollar of asset. This is 1/400 of mutual funds budget of 1.03 cents per dollar of asset. Quite possibly, this new story defunding of regulators, with workloads and salaries to match, contributed to the eight-year delay between notification of the SEC of suspicions about Madoff’s pyramid scheme and his arrest in 2008.

Citizens United: In the old story, more than a century of campaign law aimed at limiting distortions by moneyed interests in elections. The Tillman Act of 1907 disallowed direct contributions by corporations to political campaigns. New laws in 1974 created the Federal Election Commission and limited campaign contributions and spending. McCain-Feingold of 2002 prohibited PACs, which had arisen to circumvent earlier campaign law, from mentioning candidates in advertising within thirty days of primaries and sixty days of general elections. In the new story, Citizens United, a right wing nonprofit political organization challenged McCain-Feingold in 2007 by paying to release a partisan documentary about Hillary Clinton. With new story thinking, the conservative majority of the Supreme Court denied the distinction between free speech by individuals and free speech by corporations. John Paul Stevens wrote in dissent that this defies common sense. Metaphorically, we must place some limits on those with resources to unleash huge loudspeakers that can drown out the messages of less well-endowed others.

The authors conclude that it is wrong only to picture the healthy (i.e. “efficient”) working of markets because it means that modern economics fails to grapple with deception and trickery that are inherent in competitive markets. Thus phishing for phools is not just an occasional nuisance that should be considered on a case-by-case basis. It is a generality that is an inevitable and inherent part of free markets. Thus phishing for phools should be cast in an Adam Smith-style general equilibrium framework, which is the benchmark for thinking for all economists.

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