United States’ Plutocracy, Economic Elite, Impact on Public Policies, Corporate Interest

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Released a month ago a Princeton university study.

A plutocracy is defined by Merriam-Webster as “government by the richest people; a country that is ruled by the richest people; a group of very rich people who have a lot of power.”

With the rapid concentration of wealth in a few well-manicured hands and the right-wing U.S. Supreme Court declaring money to be speech, the American surge toward “oligarchy” has gained what looks like an unstoppable momentum. Not surprisingly, the policy desires of the 90 Percenters (earning at least $146,000 per year) are the most likely to become policy outcomes. If they support a policy, it has a 45% chance of being enacted. But if they oppose a policy, there is an 82% chance it will be defeated, derailed on the way to becoming a law, even if a majority of Americans support it.

These findings are more daunting when we consider that the study’s data-set ends before Citizens United, the sanctification of money as constitutionally-protected speech and the growing post-crash spike in inequality. But one word the authors did not use to describe the ruling class was “oligarchy.”Although it’s being peddled in the news cycle, this somewhat imprecise term ignores the authors’ own characterization of the ruling class as “economic elites.” The more precise, but just as ominous-sounding term “plutocracy.”

The plutocratic power of America’s “economic elite” is strongly implied by the macro-snapshot of the Gilens-Page study. But it is wholly evident in an actual outcome of an actual policy with huge implications for actual plutocrats — the so-called Dodd-Frank financial reform.

During the post-crash effort to rein-in the financial industry, curtail exotic financial device-makers and limit dubious debt obligation salesmen, the industry used its well-funded access to add key exceptions to Dodd-Frank before it became law. By the time the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 was finally signed, the industry and its associations spent over $1 billion on related lobbying efforts.

The Center for Responsive Politics tracked the spending of three interested lobbying sectors, noting an uptick for the years 2008, 2009 and 2010, when the Dodd-Frank dust-up was finally settled. During the final frenzy of 2010, the Securities and Investment sector spent an all-time high of $105,699,730, Business Associations spent an all-time high of $199,738,789 and Commercial Banks spent $54,912,363, a number they then exceeded for the each of the following three years.

Those costly efforts “watered down” the Volcker Rule’s limits on banks taking risks in the investment business, preserved a loophole for derivatives trading and retained the “too-big-to-fail” orthodoxy that forces taxpayers to bail out gigantic financial institutions when they play fast and loose with other people’s money

By 2013, a bevy of banks, private equity firms, law firms and trade associations were, according to another Sunlight Foundation analysis, present at 90 percent of the Fed’s meetings, at 82.7 percent of those held by the Treasury Department and at 74.8 percent of the meetings held at the CFTC. And “pro-reform” groups? They were present at 13.7 percent of Treasury’s get-togethers, at 3.3 percent of the Fed’s meetings and reform advocates sat in on just 4.4 percent of the CFTC’s meetings concerned with, among other things, the exotic financial instruments and dangerous derivatives trading that catalyzed the crash of 2008.

This is the privilege of plutocracy. Not only did America’s cozy financial cartel enjoy open door access into meetings to “help” regulators shape regulations meant to regulate their risky businesses, but they were given an intimate look at how the rules were being formulated and, therefore, privy to any gaps or loopholes that may be written into the rules.

And while they were pouring money into affecting the outcome of the rulemaking process, they also spent much of 2013 writing new laws for those lazy-sausage makers on Capitol Hill. In fact, they successfully lobbied for reforms of the financial reforms before the reforms could be fully implemented. Using their “influence” and copious campaign contributions, the financial industry shepherded the Swaps Regulatory Improvement Act through to passage in the House. But it doesn’t stop there.

Joining the Plutocracy

Now that the financial industry has chimed in on the Volcker Rule and the rules governing the still-massive derivatives market are basically set, the Securities and Exchange Commission (SEC) is moving into the enforcement phase. So, America’s financial cartel is seeking out the unique insights of the regulators who worked in deep consultation with them as they hashed out all those rules.

As Megan Wilson at The Hill reported, “More than two dozen federal officials who helped enact new rules for Wall Street have decamped from government for lucrative jobs in the private sector.” Ms. Wilson indentified some of the “foot soldiers in the Dodd-Frank effort” who’ve spun their inside knowledge of the “complex rules” into advisory gold:

–Timothy Geithner, former Secretary of the Treasury, joined leverage buyout firm EM Warburg, Pincus & Co.

–Mary Schapiro, former Chair of the Securities and Exchange Commission (SEC), went to Promontory Financial Group

–Ronald Rubin, Consumer Financial Protection Bureau (CFPB) enforcement attorney, became a partner at Hunton & Williams

–Raj Date, former Deputy Director of the CFPB, left and formed his own firm—Fenway Summer

–Benjamin Olson leveraged his time at the CFPB and the Federal Reserve into a gig at the financially-focused law firm BuckleySandler

However, Mr. Olson wants to disabuse Americans of the idea that there could be anything untoward in this revolving door. He told Ms. Wilson, “there is this popular notion of there being loopholes in the Dodd-Frank law that are there to be exploited. In my experience, those loopholes are a myth.”

The myth, though, may be the mantra of “public service” chanted by the merry-go-rounders who move from government to the businesses they once oversaw, or from scrutinized businesses to prime positions in “public service” that have them overseeing their previous employers. Wall Street is, in fact, a two-lane superhighway that leads directly to and from Pennsylvania Avenue. It is the fast-track lane to the plutocracy.

Public Service Plutocrats

The most notable recent commuter on this fact-track was Treasury Secretary Jack Lew who was handed a “golden parachute” from Citigroup on his way to Treasury. The Wall Street Journal reported on Lew’s guaranteed bonus if and when he walked out of Citi for a “high level position with the United States government or regulatory body.”

Kevin Drum at Mother Jones proposed an innocent explanation for Lew’s contract provision. He suggested that this type of pre-arranged “severance” for public service-minded big-wigs merely protects big-wigs from taking “a big financial hit” if and when they go to Washington. It also eliminates a sticky decision by Citi of whether or not to pay a big bonus “to someone who will exercise power over it in the future.”

But Lew, like so many others in “public service,” seems to be living a charmed life filled with severance payouts. According to the New York Times, Lew also “got a $685,000 severance payment when he left a top post at New York University in 2006 to take a job at Citigroup.” That’s five times the base yearly earnings needed to qualify as a 90 Percenter.

Citigroup has also rolled out the red carpet for financial wizards like former Obama budget director Peter Orszag (now Vice Chairman of Citigroup) and Clinton’s Treasury Secretary Robert Rubin (co-architect of Alan Greenspan’s bubble economy during the 1990s).

Although those bubbly Clinton years continue to mesmerize nostalgic Democrats, it was his all-star economic team that wanted desperately to break the Great Depression’s last regulatory taboo — the Glass-Steagall Act. They lobbied from within the White House for the Financial Services Modernization Act of 1999 which allowed “investment banks, insurers and retail banks” to merge into the financialized monster that ate the middle class.

In fact, Jack Lew worked alongside Citi-banker extraordinaire Rubin in the Clinton Administration and replaced Orszag as Obama’s Director of the Office of Management and Budget.

The Governing Plutocracy

Ultimately, it’s not just anyone who gets a pre-arranged severance package if and when they decide to quit their job. These payouts are the dues corporations pay to gain membership in an elite plutocratic club that has unique access to Washington’s sausage factory.

As Lee Fang at The Nation reported, this practice is rife in the “public service” industry. He reviewed documents showing that staffers serving the leadership of “both Democratic and Republican lawmakers have received six-figure bonuses and other incentive pay from corporate firms shortly before taking jobs in Congress.”

In March of 2013, The Project on Government Oversight detailed some of the plum “public service” bonuses offered to employees who decide to leave their jobs to serve patriotically in government and politics:

–Morgan Stanley offers a bonus you would ‘ordinarily forfeit for leaving the company prematurely’

–Goldman Sachs hands out a ‘lump sum cash payment’

–JPMorgan Chase promises possible stock awards and other rewards for a ‘bona fide full-time campaign’

–Citigroup has an ‘outstanding’ stock and pro-rated incentive and retention award

–The Blackstone Group says departing employee will “continue to vest in units as if [you] had not left our firm”

–Fannie Mae reassures servants-to-be of ‘qualification for a financial benefit’

As POGO noted, the problem is particularly stunning at the SEC where former employees “routinely help corporations try to influence SEC rulemaking, counter the agency’s investigations of suspected wrongdoing, soften the blow of SEC enforcement actions, block shareholder proposals, and win exemptions from federal law.”

Plutocracy Is Too Big To Fail

So, is it any surprise that in spite of Dodd-Frank the IMF recently issued a report detailing the persistence of “too big to fail” banks and their continued reliance on “implicit public subsidies” to counter their continued risky behavior? As the Financial Times reported, “The world’s largest banks still receive implicit public subsidies worth as much as $590bn because of their status as ‘too big to fail’ and the assumption of a government bailout if they get into trouble.”

With that security blanket in tow and the revolving door always just a short private jet flight away, Wall Street has reveled in the post-crash economy, scooping up assets, reaping big profits and paying tax-deductable fines to purchase “get out of jail” cards from the public servants currently minding the bank in America’s grand Monopoly game.

Duly emboldened by the façade of reform, by 2013 many of the “same old players” who “know how to push the boundaries” were again bundling debts into investment opportunities called “collateralized debt obligations.” According to Nathaniel Popper of the New York Times, “The revival partly reflects the same investor optimism that has lifted the stock market to new heights.” Those “heights” have persisted into the first quarter of 2014 and new Federal Reserve Chair Janet Yellen is unlikely to break that streak.

After initially signaling a possible end to the Fed stimulus party, she’s been “easing investor concern” about a possible rise in interest rates and reassuring her constituents that government support — with bond purchases so far totaling $4.23 trillion — is as reliable as ever.

Thus, the plutocracy has good reason for optimism, despite a new “leverage ratio” rule that increases the amount of capital a bank holds against its assets from 3 percent to 5 percent and new scrutiny for both high-frequency trading and dark pool markets.

Their influence over the political system is secure. This is particularly true as a growing number of Americans live on the edge of economic ruin, their voices increasingly muted by a system that translates money into speech and into policies.

While the elite of the elites get richer and richer and, therefore, can afford to exercise more and more influence over elections, another new study shows that nearly “one-third of American households — 38 million of them — are living a paycheck-to-paycheck existence.” “The Wealthy Hand-to-Mouth,” by economists at Princeton and New York University, finds that roughly one-third of American households — 38 million of them — are living a paycheck-to-paycheck existence. These are families who hold little to no liquid wealth from cash, savings or checking accounts. But a staggering two-thirds of these households are not actually poor; while they resemble poor families in their lack of liquid wealth, they own substantial holdings ($50,000, on average) in illiquid assets. Because this money is locked up in things like their houses, cars and retirement accounts, they can’t easily dip into it when times get tough.

And a new Gallup poll shows an increasing number of households teetering on the brink of “hardship” due to a lack of savings.

This rise in economic insecurity reinforces the plutocracy’s political strength by diminishing ability of non-plutocrats to exercise power or force their policy preferences through the machinery. Most Americans simply cannot afford to lobby lawmakers, attend rulemaking meetings or hire people away from agencies to guide them through the system.

With millionaires increasingly taking over Congress

Vermont Senator Bernie Sanders recently put Federal Reserve Chair Janet Yellen on the spot at a Capitol Hill hearing regarding the state of America as an oligarchy, Yellen basically admitted that’s what our nation has become.

In the U.S. today, the top one percent own about 38% of the financial wealth of America, the bottom 60 percent own 2.3 percent…” the Senator began, running down a harrowing description of the wealth gap in our nation which has helped to shift all the power into the hands of an elite few.

“Are we still a capitalist democracy or have we gone over into an oligarchic form of society in which incredible economic and political power now rests with the billionaire class?” Sanders point-blank asked Yellen.

“So, all of the statistics on inequality that you’ve cited are ones that greatly concern me, and I think for the same reason that you’re concerned about them. They can shape the — determine the ability of different groups to participate equally in the democracy and have grave effects on social stability over time.

— And so I don’t know what to call our system or how to — I prefer not to give labels; but there’s no question that we’ve had a trend toward growing inequality and I personally find it very worrisome trend that deserves the attention of policy-makers.”

America is a land where wealth is greatly concentrated into the hands of the few rich elitists in the billionaire class — and all the real power in this country has concentrated with it.

The study authors wrote:

“When the preferences of economic elites and the stands of organized interest groups are controlled for, the preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact upon public policy.”

They went on to clarify:

“In the United States, our findings indicate, the majority does not

American democracy is no longer very democratic, according to a new university study (4/9/14; Perspectives on Politics, Fall/14). Instead, it’s dominated by moneyed elites in a process where public opinion has little to no impact on policy. Released a month ago by Princeton’s Martin Gilens and Northwestern’s Benjamin I. Page, the study concludes:

Economic elites and organized groups representing business interests have substantial independent impacts on US government policy, while average citizens and mass-based interest groups have little or no independent influence.

The political scientists looked at more than 1,700 policies over 20 years to find out how public opinion translates into policy, and concluded that where economic elite views diverged from those of the public, the public had “zero estimated impact upon policy change, while economic elites are still estimated to have a very large, positive, independent impact.”

See Also : Corporation’s Global Market Shares Control, The 1 % & Corporations Attack Democracy, Bribe Both Parties

 

Bracing news? The study went viral in social media, but has hardly shown up in the US corporate press. A month after its release there have been no network news mentions, nor has it appeared in the most influential newspapers–the New York Times, Washington Post and Los Angeles Times. (The New York Times, 4/21/14 and the Washington Post, 4/8/14 published blog posts on the study.)

The Baltimore Sun (5/12/14) was a rare exception with an op-ed calling for public financing of campaigns to counter the influence of wealth. “Rather than curl up in a fetal position and cede the fate of our democracy to those with the fattest bank accounts,” Kate Planco Waybright and Jennifer Bevan-Dangel wrote in a response to the study, “our organizations are taking action. We believe public financing of elections has enormous potential to transform our democracy and to help ordinary Americans regain our voices in the political sphere.”

There are likely several reasons why corporate media have ignored the study, chief among them that its findings hit too close to home: The same well-heeled elites and their representatives who dominate US politics and policy are also the owners of US corporate media.

In one study after another, FAIR has shown how corporate media discount popular views and the opinions of the less powerful in favor of elite viewpoints. Pro-business think tanks are favored over those viewed as less than business friendly; and corporate sources in news stories are far more numerous than those who might be seen as their counterweights– representatives of labor unions, consumer and environmental groups. FAIR studies have repeatedly shown how the subject of poverty is slighted in news coverage, including a study to be published next month (Extra!, 6/14) that finds coverage of the poor nearly nonexistent, and news sources who are affected by poverty even scarcer. Indeed, according to the study, America‘s 482 billionaires received many times as much coverage as America‘s 50 million poor.

Not that you need a study to demonstrate the media’s corporate deference–not when major media figures will come right out and tell you. As when NBC’s Meet the Press anchor David Gregory (11/11/12) faulted Barack Obama for not cozying up more to CEOs, telling an approving Jim Cramer of CNBC:

Jim, I always thought that one of the big mistakes of the first Obama term is that he never had a moment in the Rose Garden where he was flanked by the biggest business leaders in America and said, “Look, we’re going to work together in common cause to deal with this economy, to deal with our fiscal position, and ultimately affect America‘s influence in the rest of the world.” Can he have that moment now?

In fact, Obama did have a moment precisely like that, appearing with several CEOs at a press conference on January 28, 2009, shortly after his inauguration. It’s hard to imagine a Democratic president who has tried harder to make corporate interests his own.

Similarly, when former CNBC host Maria Bartiromo was launching her new Fox News show, she told the media industry website MediaBistro (3/18/14) how her new business would be different–corporations would finally get a chance to tell their side of the story:

Maria BartiromoThere’s a void in the market. We never hear business people as part of the conversation on a Sunday. I only hear politicos doing their talking points. I want to get the guy on the front line, the gal on the front line, telling us why they’re not taking money from overseas and putting it here, what should tax reform look like, what should immigration reform look like. So I’m going to bring business people into the conversation on a Sunday morning.

The only mention of the study on cable news channels came on MSNBC’s All In With Chris Hayes (4/16/14), where the host cited gun legislation requiring a background check before one could purchase a firearm, that had as high as 90 percent public backing, but was voted down in a congress swimming in gun lobby money. Hayes concluded, “In fact, it sounds like the textbook definition of oligarchy, of government by the few.” The wealthy few.

The U.S. government now represents the rich and powerful, not the average citizen. The study also found: “When a majority of citizens disagrees with economic elites and/or with organized interests, they generally lose.”

See Also: McCutcheon v. Federal Election Commission Supreme Court Strikes Down Overall limits Individuals Can Contribute to Candidates, Documents

Bonus

How Rich Are the Superrich?

A huge share of the nation’s economic growth over the past 30 years has gone to the top one-hundredth of one percent, who now make an average of $27 million per household. The average income for the bottom 90 percent of us? $31,244.

Note: The 2007 data (the most current) doesn’t reflect the impact of the housing market crash. In 2007, the bottom 60% of Americans had 65% of their net worth tied up in their homes. The top 1%, in contrast, had just 10%. The housing crisis has no doubt further swelled the share of total net worth held by the superrich.

Winners Take All

The superrich have grabbed the bulk of the past three decades’ gains.

Out of Balance

A Harvard business prof and a behavioral economist recently asked more than 5,000 Americans how they thought wealth is distributed in the United States. Most thought that it’s more balanced than it actually is. Asked to choose their ideal distribution of wealth, 92% picked one that was even more equitable.

Capitol Gain

Why Washington is closer to Wall Street than Main Street.

member	max. est. net worth
Rep. Darrell Issa (R-Calif.)	$451.1 million
Rep. Jane Harman (D-Calif.)	$435.4 million
Rep. Vern Buchanan (R-Fla.)	$366.2 million
Sen. John Kerry (D-Mass.)	$294.9 million
Rep. Jared Polis (D-Colo.)	$285.1 million
Sen. Mark Warner (D-Va.)	$283.1 million
Sen. Herb Kohl (D-Wisc.)	$231.2 million
Rep. Michael McCaul (R-Texas)	$201.5 million
Sen. Jay Rockefeller (D-W.Va.)	$136.2 million
Sen. Dianne Feinstein (D-Calif.)	$108.1 million
combined net worth:	$2.8 billion

Congressional data from 2009. Family net worth data from 2007. Sources: Center for Responsive Politics; US Census; Edward Wolff, Bard College.

Who’s Winning?

For a healthy few, it’s getting better all the time.

YOUR LOSS,THEIR GAIN

How much income have you given up for the top 1 percent?

YOU HAVE NOTHING TO LOSE BUT YOUR GAINS

Productivity has surged, but income and wages have stagnated for most Americans. If the median household income had kept pace with the economy since 1970, it would now be nearly $92,000, not $50,000.

MEET THE ELITE

ONLY LITTLE PEOPLE PAY TAXES

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Sources: http://rinf.com/alt-news/breaking-news/study-confirms-us-ruled-rich-corporate-news-ignores/ , http://consortiumnews.com/2014/04/24/americas-surge-toward-oligarchy/ , http://truthstreammedia.com/even-fed-chair-janet-yellen-admits-america-is-an-oligarchy/ , http://www.motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph