David Cay Johnston on the Perils of Our Growing Inequality

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David Cay Johnston is a clear and lively conversationalist, and I anticipate readers will enjoy his discussion of his work over the last 20 years on inequality. Johnston stress that inequality is primarily a result of political and economic arrangements, including anti-trust policy and how much investment society and parents make in their children’s health and education. He also points out that shifts in who is in newsrooms (blue collar intellectuals have over time been displace by scions of the wealthy) has led to more flattering coverage of our elite-favoring status quo and neglect of its failings, like high levels of hunger.

Johnston also discusses the role of the financialization of corporations and the changing and expanded role of limited liability corporations, specifically, that historically profit-making ones were regarded with great suspicion, and on explosive levels of executive compensation. This is a wide ranging discussion, and includes the rise of oligarchical thinking, the various policy choices that serve squeeze workers, governmental capture, and the loss of faith in democracy.

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  1. Carla

    David Cay Johnson might be surprised and gratified to see the response of citizens when they are asked to sign petitions to put the Move to Amend on local ballots. These petition drives counter cynicism and give voters hope for democracy. They actually provide Americans with the opportunity to vote on whether we want basic democratic values to prevail in our country.

    So far, everywhere the demand to amend the Constitution to state that “Corporations are not people, and money is not speech” has been on the ballot, it has passed. Why do we do this at the local level? Because it’s the only place we can. And each ballot initiative that passes is considered an “instruction” to Congress and to state legislators to pass a Constitutional amendment that specifically restricts Constitutional rights to human beings, and abolishes the legal doctrine that money equals speech.

    In my community, this was the ballot language:
    “Shall the proposed ordinance entitled “Political Influence by Corporate Entities,” establishing annual public hearings before City Council on this subject, and sending a summary of the public hearing to Congressional and State representatives, and calling for an amendment to the U.S. Constitution declaring that only human beings, not corporations, are legal persons with Constitutional rights and that money is not the equivalent of speech, be adopted?”

    The ordinance was approved last November with 77.6% of the vote. Our campaign to get it on the ballot and win passage involved a couple dozen volunteers, who labored for 18 months on the project. We had $1,200 in small donations to work with; this was spent on 100 yard signs and 10,000 pieces of union-printed campaign literature that we delivered, walking door to door.

    The idea that we simply need a Constitutional amendment addressing campaign finance reform is faulty, because we will no sooner get the money out of politics than corporations and wealthy individuals will put it back in.

    As David Cay Johnson says in the video, we have to change the rules. Neither the Udall amendment, nor Lawrence Lessig’s so-called “Rootstrikers” effort, changes the rules.

    House Joint Resolution 29 introduced by Rep. Nolan on 2/14/2013 DOES change the rules:

    The end of slavery abolished the fiction that a person was property. Now we must abolish the fiction that property (a corporation) is legally a person.

    1. diptherio

      It seems to me that most people are cynical about the political system mainly because they are rarely if ever offered any actual solutions. When the right sort of option is offered, though, more people respond that you might otherwise expect.

    2. wat

      i don’t think move to amend is a very good idea


      June 7, 2014
      This is the print preview: Back to normal view »
      ‘Fixing’ Citizens United Will Break the Constitution
      Posted: 06/28/2012 7:21 pm

      In “Fixing Citizens United,” Professor Geoffrey Stone — usually a friend to the First Amendment — argues for a constitutional amendment to “fix” the Citizens United Supreme Court decision. Professor Stone mentions the proposal rather offhandedly, but the idea is a nuclear option. A constitutional amendment — specifically an amendment limiting the right to political speech — would fundamentally “break” the Constitution and endanger civil rights and civil liberties for generations.

      First, it’s important to be clear on what Citizens United did. The case allowed corporations and unions (including non-profit corporations like the ACLU or National Rifle Association) to spend “general treasury” (non-political action committee) funds on political communications that are not coordinated with a campaign. Citizens United itself has very little to do with the dreaded “Super PACs,” which are primarily funded by individual donations. Individuals have been allowed to spend their own money on political speech since time immemorial (or at least since adoption of the First Amendment). Further, Citizens United has nothing to do with direct contributions to candidates, which are still totally verboten for corporations and unions and strictly limited for individuals.

      With that background, here’s the proposed amendment.

      In order to ensure a fair and well-functioning electoral process, Congress and the States shall have the authority reasonably to regulate political expenditures and contributions.

      When Professor Stone says federal and state governments “shall have the power to regulate political expenditures,” he means to give them the ability to place limits on, and control the content of, political speech, even when it is non-partisan and independent of a campaign. This speech would include typical “vote for X” ads, but would also extend to political “issue” advertisements (“call Senator Reid and tell him to support bill Y”), documentaries by Michael Moore and other political filmmakers and probably even social media platforms like Twitter or Facebook. The problems with such an approach are many.

      The Constitution’s radical stability is its greatest strength. The high bar for amending the Constitution — agreement by two-thirds of both the Senate and the House (or the states), and then three-fourths of state legislatures or constitutional conventions — exists precisely to deter ill-considered but temporarily popular amendments, which I would argue this is. People are wary to invest resources and time in promoting or championing constitutional amendments because the chances of failure are high. That’s why our Constitution works so well. It’s easy to interpret broadly, but textual change requires effort and sustained support.

      Clearly cognizant of this particular concern, Professor Stone suggests that his amendment would not be unprecedented. On the contrary, while not the first amendment responsive to a Supreme Court case, this would be the first amendment in history to limit individual, constitutionally guaranteed rights. The four amendments he mentions as precedent all either clarified the scope of existing constitutional provisions or expanded individual rights. For the curious, I believe the amendments he is referring to are the 11th (states can’t be sued by people in federal court), 14th (expanding equal protection and due process rights in the wake of the Civil War), 16th (federal income tax not unconstitutional) and 26th (voting age no higher than 18).

      Further, although success of an amendment limiting individual rights is thankfully unprecedented, proposed amendments certainly are not.

      The ACLU has been on the (often lonely) frontline against ill-considered but temporarily popular constitutional amendments to limit civil liberties since its inception. For 20-plus years, we’ve been fighting amendments prompted by Supreme Court decisions in United States v. Eichman and Texas v. Johnson, which held unconstitutional state and federal laws banning flag desecration. We’ve repeatedly opposed the “Victims’ Rights Amendment,” which would unfairly limit certain due process rights, including the right to a fair trial. And (this is the best), Republicans today are calling for an amendment repealing the 14th Amendment’s guarantee of citizenship if you are born in the United States. Some grotesquely call it the “anchor baby” amendment.

      Now imagine a world where Stone’s proposed Citizens United amendment serves as real precedent for using the amendment process to limit rights, and both houses of Congress are two-thirds Republican (the latter is not inconceivable even in the next Congress). Flag desecration, victims’ rights and birthright citizenship amendments would just be the beginning. Undoubtedly, you would see additional attempts to limit individual rights through the amendment process simply on the strength of the argument: well, we did it with political speech, why not with pornography, affirmative action, voting requirements, warrantless national security surveillance or any other similarly hot-button issue? You can bet a successful Citizens United amendment would be talking point number one for groups pushing an amendment to overturn Roe v. Wade.

      Reasonable minds can and should differ on the influence of “big money” in politics. The legal and policy questions raised by the link between concentrated wealth and political speech are numerous and complicated. We should be discussing the health of our politics, and we should be doing more to, for instance, provide for public financing and promote transparency without quelling anonymous speech. But if there is one thing we absolutely should not be doing, it’s tinkering with our founding document to prevent groups like the ACLU (or even billionaires like Sheldon Adelson) from speaking freely about the central issues in our democracy. Doing so will fatally undermine the First Amendment, diminish the deterrent factor of a durable Constitution and give comfort to those who would use the amendment process to limit basic civil liberties and rights. It will literally “break” the Constitution.

      1. ewmayer

        @wat: It would be helpful if you could clarify what “this is a print preview” of – are those your words or someone else’s? (I’ll structure my reply as if the former were true, but it’s not crucial).

        “The Constitution’s radical stability is its greatest strength.”

        That can be debated – and while “stability” clearly applies to the actual text, it is the interpretation thereof by latter-day courts which defines the “law of the land”, and that is a fraught issue. So first off, let’s look at the history of legal precedent here:

        Citizens United v. Federal Election Commission … followed a line of decisions starting with Buckley v. Valeo, 424 U.S. 1 (1976) interpreting freedom of speech to include spending money. The case has remained intensely controversial for increasing the influence in elections that money can have, in contrast to most other developed countries where limits are imposed on all election spending.

        So the “radical stability” you mention consists, in the present instance, of legal precedents going back less than 40 years. Seen that way, the legal equating of money and speech would appear to be more “recent innovation” than “legal stability.”

        Going beyond Citizens United, do you think the framers of the Bill of Rights would have seen the 1944 SCOTUS affirmation of the legality of Roosevelt’s executive order for internment of Japanese Americans as an example of radical stability or a pliable court bending to wartime exigencies and popular sentiment?

        The high bar for amending the Constitution — agreement by two-thirds of both the Senate and the House (or the states), and then three-fourths of state legislatures or constitutional conventions — exists precisely to deter ill-considered but temporarily popular amendments, which I would argue this is. People are wary to invest resources and time in promoting or championing constitutional amendments because the chances of failure are high. That’s why our Constitution works so well.

        Here we agree — but by the same line of reasoning your scenario “Now imagine a world where Stone’s proposed Citizens United amendment serves as real precedent for using the amendment process to limit rights, and both houses of Congress are two-thirds Republican” is a strawman, because, as you note, it takes far, far more than a 2/3 majority in both house of congress to amend the constitution.

        Clearly cognizant of this particular concern, Professor Stone suggests that his amendment would not be unprecedented. On the contrary, while not the first amendment responsive to a Supreme Court case, this would be the first amendment in history to limit individual, constitutionally guaranteed rights.

        I would continue here with “…to individuals, as the framers surely intended.” Casts the issue in a different light, don’t you think?

      2. Carla

        Full text of the “We the People” Amendment introduced in Congress. It addresses never-intended constitutional rights granted to corporations since 1886, which you might note, quite pre-dates Citizens United. And how you trump the concept of one person, one vote, with First Amendment protection for buying elections and politicians is certainly beyond me.

        BTW, very few ACLU members knew that the ACLU filed an amicus brief in Citizens United, since the organization did not broadcast this to its dues-paying members. When they found out, many ACLU members were mighty upset. This may be why the ACLU was silent on McCutcheon — I’m just guessing.

        ” House Joint Resolution 29 introduced February 14, 2013

        Section 1. [Artificial Entities Such as Corporations Do Not Have Constitutional Rights]

        The rights protected by the Constitution of the United States are the rights of natural persons only.

        Artificial entities established by the laws of any State, the United States, or any foreign state shall have no rights under this Constitution and are subject to regulation by the People, through Federal, State, or local law.

        The privileges of artificial entities shall be determined by the People, through Federal, State, or local law, and shall not be construed to be inherent or inalienable.

        Section 2. [Money is Not Free Speech]

        Federal, State, and local government shall regulate, limit, or prohibit contributions and expenditures, including a candidate’s own contributions and expenditures, to ensure that all citizens, regardless of their economic status, have access to the political process, and that no person gains, as a result of their money, substantially more access or ability to influence in any way the election of any candidate for public office or any ballot measure.

        Federal, State, and local government shall require that any permissible contributions and expenditures be publicly disclosed.

        The judiciary shall not construe the spending of money to influence elections to be speech under the First Amendment.

    3. TheCatSaid

      I like the wording of the Constitutional Amendment change proposed by Vermont.
      It’s clear and limited to having a constitutional convention only to discuss this sole issue, using only the proposed specific wording (to prevent a constitutional convention from being hijacked to promote other agendas or policies).

      The text of what was passed is here: http://www.leg.state.vt.us/docs/2014/resolutn/Senate/JRS027.pdf

      The key wording:

      Resolved by the Senate and House of Representatives:
      That the General Assembly, pursuant to Article V of the U.S. Constitution, hereby petitions the U.S. Congress to call a convention for the sole purpose of proposing amendments to the Constitution of the United States of America that would limit the corrupting influence of money in our electoral process, including, inter alia, by overturning the Citizens United decision, and be it further

      That this petition shall not be considered by the U.S. Congress until 33 other states submit petitions for the same purpose as proposed by Vermont in this resolution and unless the Congress determines that the scope of amendments to the Constitution of the United States considered by the convention shall be limited to the same purpose requested by Vermont . . .

      1. Carla

        So corporations claiming rights under the Constitution is okay with you?

        How do you think people of Vermont are going to do when Monsanto sues the state for its recently voted-in GMO labeling law? Monsanto will be relying on the “rights” granted to it as a “corporate person” under the Constitution. Hasn’t Vermont been through this with Monsanto once already? Do you recall who won?

        When corporations have Constitutional protections, we cannot pretend that those protections apply equally to individual human citizens. The power imbalance is too vast.

  2. /L

    “… Back then [1968] most journalists was blue collar intellectuals today news rooms of the major news organizations are full of people that grew up in wealthy households so we shouldn’t be surprised that their attitude about things is the world seems to be doing just fine its quite just, because that’s their life’s experience…”

  3. Banger

    DCJ does as good a job as anyone commenting today on describing today’s political economy and the issues that result. He is almost spectacularly clear and erudite in what he is saying. I believe what he is describing is what he said towards the end of his interview that we are witnessing the end of the USA as such. This is a very serious assertion and it is being made by an increasing number of intellectuals yet, intellectual culture has yet to touch it. Essentially, in the USA, we aren’t only dealing with the end of the Constitutional republic with democratic institutions we are seeing the end of Western civilization as it developed over millennia.

    We live, as Chris Hedges, tells us in an Empire of Illusion. America was seen, in many ways, as the great experiment where a society can be ruled rationally without grounding its political economy in a hereditary aristocracy and a religious establishment. But today we see the resurrection of the hereditary aristocracy and a movement towards theocracy in many parts of the country. How did this happen? This is a question we really need to address before we try to find a way to change all this.

    I blame, chiefly, two categories of institutions for our situation. The first is the mainstream media that includes the entertainment media, news media, advertising and so on. These sets of institutions have become the most critical and important in our society–they determine the values, myths, and narratives. They create the mythological frameworks of our society that transcend the other part of society that I blame. The second is the educational system from preschool to graduate education and also includes the general intellectual milieu of the U.S. including intellectually oriented publicantion, journals and so on. The problem with these institutions is that they have done little to counteract what is, frankly, a mind-control regime where I suggest that, intellectuals in the United States have almost as little grasp of the essential realities as the average person. We have the blind leading the blind and the average person is right, at this point in history, to suspect anything coming out of intellectual culture–even science.

    1. Carla

      The mainstream media now consists of multinational corporate monopolies. So-called “public” tv and radio have been captured by their corporate sponsors. Public education has been privatized via charter schools and corporatized via the Common Core.

      If we pass an amendment to “regulate” money in politics and do not address never-intended corporate constitutional rights, we will have done nothing. David Cay Johnston speaks brilliantly to this.

      BTW, I should have thanked Yves for posting this video. Thank you!

      1. bluntobj

        I would merely disagree with your generalization that public education has been privatized by by charter schools. The smallest fraction has, but the 98-99% are run by public unions, which have bent schools to their bidding. Further, Common Core is not so much corporatized than politicized by interests that are deeply invested in the education industry, which are the functional equivalents of monopoly corporations.

        Other than those important semantic differences, we agree on the evils on corporate monopolies.

        1. Carla

          Well, I call the Common Core “corporatized” because it has been heavily funded by the Gates Foundation.

    2. Teejay

      I’m late to the party. Banger, you had me right up to the end and then your brush got too wide. Do scientists have have almost as little grasp of the essential realities as the average person? “[T]he average person is right, at this point in history, to suspect anything coming out of intellectual culture–even science.” Anything?coming out of science. Really? This assertion/conclusion is far too broad.

  4. Ulysses

    David Cay Johnston hits the nail on the head at the end, when he points out that the “government is not responding to John Q. Citizen, it is responding to the political donor class.”

    Government has now been fully captured by the wealthy. We cannot expect to solve our enormous problems through polite appeals to the wealthy and their political lackeys to start treating the rest of us a little more fairly. We need to confront the kleptocrats directly with their crimes, and refuse to collaborate with this illegitimate regime until they are overthrown, brought to justice, and honest servants of the people put in their place.

  5. Carolinian

    Great, great plain talk. Thanx NC.

    My solution to our current dilemma: let’s make David Cay Johnson president!

    Barring that, his suggestion that the voters can take back their country if they try seems unlikely in the current two party setup. The Democratic party long ago sold its soul to the Devil and the Devil’s not giving it back.

    The other predicted result, “riots in the streets,” may well come to pass. If it does then that at least will get the one percent’s attention. They are a fearful lot, as witnessed by how few of them serve in the wars they are constantly advocating. Give the old time WASPy masters of the universe credit for one thing if nothing else…they had a lot more “noblesse oblige.”

    1. MyLessThanPrimeBeef

      I have not seen a link here yet (and my apologies if I missed it), but the news out of California earlier was that an indicted lawmaker got nearly 30,000 votes for the office of the Secretary of State.

      You come across words, such as stupid, ridiculous, startling, nuts, in describing the result.

      It makes one wonder about voters taking back their country.

    2. MyLessThanPrimeBeef

      As for the alternative, riots in the streets, it helps to look at Red China.

      Today, not all descendants of the veterans of the Long March are doing well, not counting those of other early revolutionaries.

      And in France, after the revolution, it was Bonaparte who became emperor.

      Inequality within revolution, it would seem.

      1. MikeNY

        ITA Beef. As MLK said, evolution is preferable to revolution.

        God I hope we’re smart enough for that.

  6. mellon

    I think that under the current power imbalance I think its only a matter of time before there is a series of great uprootings will have the effect of rendering huge numbers of former urban dwellers homeless.Perhaps some scheme will be proposed to resettle them in rural areas, which will be framed as helping them escape poverty, but that will be problematic because they don’t drive or own cars.

    I think its going to be engineered via a huge jump in energy prices which i expect to come in 2016 because of the change in export gas policy buried in the imminent TTIP/fracking plan. The climate plan is both a distraction and a way to capitalize on the high global prices.

    The huge jump in electricity/natural gas prices will come about because of the irreversible fracking rampup/ offshore drilling/ LNG export section of TTIP.

    See http://www.tni.org/sites/www.tni.org/files/download/nofrackingway.pdf



    Look to the core price to consumers of natural gas and probably also electricity to rise to global norms, which are two or three times higher than they are currently in the US-

    Electricity, to a great extent, aparently follows natural gas prices.

    Many large urban landlords will probably then “decide to go out of business” because of the rise in energy cost, especially in older buildings, which will have the effect of throwing millions of people out on the streets with no place to go.

    If this happens it would profoundly effect the country, uprooting millions of urban dwellers similarly to Katrina..

    lets not forget that Obama has been described by Fitch and others as having been an attorney working for real estate developers and with corrupt Chicago machine politicians, assisting in escorting the poor out of the way to make way for huge, high rent condos.

    The point that I am trying to make is that the poor will never be able to hold on to anything of value which they cannot defend, and a corrupt, neoliberal Administration (working with neoliberals on the right) breaks that defense.

    Many cities economic makeup is protected by rent control laws but those laws are based on limiting the rent increases permissible with a specific apartment.

    If the landlord is given an excuse, such as a sudden jump in the cost of energy, they can and will go out of business, tear the old buildings down, and replace them with new ones which will be orders of magnitude more expensive, and they hope, profitable..

    The tenants, in fact, own nothing. Their protection would have been dependent on the apartment building remaining standing.

    So, lets fight against the fracking expansion/TTIP/ and US natural gas export change!

    1. LifelongLib

      Er, but urban dwellers generally use less energy per person than rural dwellers do, because apartment buildings are more energy-efficient than single-family houses, and driving distances are shorter in urban areas. Rising energy prices would hit rural areas harder.

  7. susan the other

    Interesting that Ralph Nader’s new book, “Unstoppable” was mentioned. It is about how the rational, sensible politicians of both the left and right have come together and are forming a political center that will not allow any more ventudre vulturism to take over the country. The other interesting point made by DKJ was that capitalism is not controlled adequately on a global level and what were once checks and balances against a corporation sucking money out of society are useless because those corporations can simply move to another clueless country and continue on. Free trade is wonderful no matter how it diminishes society.

  8. mellon

    >Er, but urban dwellers generally use less energy per person than rural dwellers do, because apartment buildings are more energy-efficient than single-family houses, and driving distances are shorter in urban areas. Rising energy prices would hit rural areas harder.

    It would hit both areas hard, but the point I was trying to make about urban renters is that their ability to rent their below market rate homes is depedent on a precarious situation which would be rapidly destroyed by an “excuse”. In some places its an earthquake, in others its a storm. But the pattern seems to be that the owners of these large buildings, many of which started out as public co-ops in the postwar era, are increasingly huge corporations who bought buildings anticipating this shift in the power structure.

    They knew that the cards were all in their favor and it was only a matter of time until they would be able to drive the below market rate tenants out. Many buildings wre probably bought with the intent of demolishing them.

    The difference in rent is often huge because rent control rents are often pegged to inflation plus some small arbitrary percentage, while real world rents have been going up much faster due to the lack of afford-ability of owning.

    So the crisis might be immediate for urban dweller/renters while rural homeowners will be likely to be able to hang on a year or two paying the hugely increased energy bills. If the rural dwellers are lucky they may be able to figure out a way to reduce their energy costs (burning wood) but urban apartment dwellers wont be owners so the decisions aren’t theirs. Additionally they have to work so their existence is dependent on stability. The slumlord knows this and they take advantage of tricks like moving short term tenants (people throwing week long parties, to give one extreme example) into a building.

    The state cannot force them to do or not do much, really, all it can do is regulate a few parameters, like the rate of rent increases as long as somebody stays in the same apartment. People have lost their apartments because they were put into the hospital for some health issue. (argument, their apartment was no longer their primary residence, the landlord claimed the hospital was. of course, that person could have spent a few thousand dollars for a lawyer and successfully defended their rights, but…)

    Get the picture?

    1. JTFaraday

      Yeah, back in the day, I think Computer City or something like that ran into a bit of trouble firing everyone on a Friday and rehiring them on Monday at a cut rate. If nothing else, they pissed their employees off.

      These days I imagine they’ve learned to devise some overly elaborate overly complicated excuse no one can seem to untangle, and then go hire the long term unemployed.

      Which is why (or one reason why) I don’t buy the idea that the unemployed are “unemployable.” That doesn’t mean the future is rosy…

    2. Yves Smith Post author

      I don’t know where you get this idea that people in urban areas rent at below market rate. Leases are short (typically 1-2 years) and turnover in mutlifamily buildings is high (typically 40% a year) so landlords know very well where “market” is. You’ve got a lot of assumptions about city life that are really off base.

      There are not many rent control units in New York City nor all that many rent stabilized relative to total rental stock. San Francisco is the only other major city with strong tenant protections.

  9. Anthony Alfidi

    Consumers contribute to income inequality every time they go into debt to make unneeded purchases. This now includes the unnecessary burden of a worthless college degree. The answer to inequality is frugality, which sadly is practiced only by a small minority of Americans. They are the future 1%, after the deluge.

    1. LifelongLib

      As has often been pointed out here, we Americans actually spend less on “stuff” today than we did 40 years ago. Meanwhile most wages have stagnated while the costs of basics like housing, health care, and education have skyrocketed. These are the causes of inequality.

  10. MikeNY


    I just watched the whole thing. A brilliant interview of a brilliant man. This is among the best posts I can recall at NC, Yves.

    This is why I come here. Thanks.

  11. OpenThePodBayDoorsHAL

    When I ask myself “Why?” I usually arrive at “the triumph of hopelessness”. Not just hope for a better future but hope about whether anything at all can be done to get there. The machinery of elite corporo-fascism seems so unassailable: locked down media groupthink, the iron grip of finance, the pervasive police and surveillance state. We must resist hopelessness: look at how hopeless the Tienanmen protestors must have felt. But their efforts cracked open their society, they don’t have perfect freedom but wealth and freedom are much more equitable today. GET UP AMERICANS: you have nothing to lose but your chains

  12. Deloss

    This video is fascinating, and I thank you for posting it. I would not under any circumstances describe it as “enjoyable,” as in “readers will enjoy.” NC readers will be educated, be outraged, be terrified, absolutely.

  13. TheCatSaid

    Brilliant interview.

    In the middle DCJ says he revealed a simple way to expose and deal with RE fraud. He & the host talked “around” it (e.g., who should be doing it) but DCJ never said what this method is. Does anyone here know what it is?

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