Money Talks, Big Time: 1% Politics and the Scandals of A New Gilded Age

The Conceit of Humanitarian Intervention. Originally published at TomDispatch

Despair about the state of our politics pervades the political spectrum, from left to right. One source of it, the narrative of fairness offered in basic civics textbooks — we all have an equal opportunity to succeed if we work hard and play by the rules; citizens can truly shape our politics — no longer rings true to most Americans. Recent surveys indicate that substantial numbers of them believe that the economy and political system are both rigged. They also think that money has an outsized influence on politics. Ninety percent of Democrats hold this view, but so do 80% of Republicans. And careful studies confirm what the public believes.

None of this should be surprising given the stark economic inequality that now marks our society. The richest 1% of American households currently account for 40% of the country’s wealth, more than the bottom 90% of families possess. Worse yet, the top 0.1% has cornered about 20% of it, up from 7% in the mid-1970s. By contrast, the share of the bottom 90% has since then fallen from 35% to 25%. To put such figures in a personal light, in 2017, three men — Jeff Bezos, Warren Buffett, and Bill Gates — possessed more wealth ($248.5 billion) than the bottom 50% of Americans.

Over the last four decades, economic disparities in the U.S. increased substantially and are now greater than those in other wealthy democracies. The political consequence has been that a tiny minority of extremely wealthy Americans wields disproportionate influence, leaving so many others feeling disempowered.

What Money Sounds Like

Two recent headline-producing scandals highlight money’s power in society and politics.

The first involved super-affluent parents who used their wealth to get their manifestly unqualified children into highly selective colleges and universities that previously had reputations (whatever the reality) for weighing the merits of applicants above their parents’ wealth or influence.

The second concerned Texas Senator Ted Cruz’s reported failure to reveal, as election laws require, more than $1 million in low-interest loans that he received for his 2012 Senate campaign. (For that lapse, the Federal Election Commission (FEC) fined Senator Cruz a modest $35,000.) The funds came from Citibank and Goldman Sachs, the latter his wife’s longtime employer. News of those undisclosed loans, which also cast doubt on Cruz’s claim that he had funded his campaign in part by liquidating the couple’s assets, only added to the sense that favoritism now suffuses the politics of a country that once prided itself on being the world’s model democracy. (Journalists covering the story couldn’t resist pointing out that the senator had often lambasted Wall Street’s “crony capitalism” and excessive political influence.)

The Cruz controversy is just one reflection of the coming of 1% politics and 1% elections to America at a moment when the first billionaire has been ensconced in the Oval Office for more than two years, posing as a populist no less.

Since the Supreme Court’s 2010 ruling in Citizens United v. Federal Election Commission, money has poured into politics as never before. That’s because the Court ruled that no limits could be placed on corporate and union spending aimed at boosting or attacking candidates running for political office. Doing so, the justices determined in a 5-4 vote, would be tantamount to restricting individuals’ right to free speech, protected by the First Amendment. Then came the Court’s 2014 McCutcheon v. Federal Election Commission decision (again 5-4), which only increased money’s influence in politics by removing the aggregate limit on an individual’s contribution to candidates and to national party committees.

In an age when money drives politics, even ex-presidents are cashing in. Fifteen years after Bill Clinton departed the White House, he and Hillary had amassed a net worth of $75 million — a 6,150% increase in their wealth. Barack and Michelle Obama’s similarly soared from $1.3 million in 2000 to $40 million last year — and they’re just warming up. Key sources of these staggering increases include sky-high speaking fees (often paid by large corporations), including $153 million for the Clintons between February 2001 and May 2016. George W. Bush also made tens of millions of dollars in this fashion and, in 2017, Obama received $400,000 for a single speech to a Wall Street firm.

No wonder average Americans believe that the political class is disconnected from their day-to-day lives and that ours is, in practice, a democracy of the rich in which money counts (and counts and counts).

Cash for College

Now let’s turn to what those two recent scandals tell us about the nexus between wealth and power in America.

First, the school scam. Parents have long hired pricey tutors to coach their children for the college admissions tests, sometimes paying them hundreds of dollars an hour, even $1,500 for 90 minutes of high-class prep. They’ve also long tapped their exclusive social and political connections to gin up razzle-dazzle internships to embellish those college applications. Anyone who has spent as much time in academia as I have knows that this sort of thing has been going on for a long time. So has the practice of “legacy admissions” — access to elite schools especially for the kids of alumni of substantial means who are, or might prove to be, donors. The same is true of privileged access to elite schools for the kids of mega-donors. Consider, for instance, that $2.5 million donation Charles Kushner made to Harvard in 1998, not long before his son Jared applied. Some of the folks who ran Jared’s high school noted that he wasn’t exactly a whiz-bang student or someone with sky-high SAT scores, but — surprise! — he was accepted anyway.

What’s new about the recent revelations is that they show the extent to which today’s deep-pocketed helicopter parents have gone into overdrive, using brazen schemes to corrupt the college admissions process yet more. One unnamed parent spent a cool $6.5 million to ensure the right college admitted his or her child. Others paid hefty amounts to get their kids’ college admissions test scores falsified or even hired proxies to take the tests for them. Famous actors and financial titans made huge payments to university sports coaches, who then lied to admissions officers, claiming that the young applicants were champions they had recruited in sports like water polo, crew, or tennis. (The kids may have known how to swim, row, or play tennis, but star athletes they were not.)

Of course, as figures on the growing economic inequality in this country since the 1970s indicate, the overwhelming majority of Americans lack the connections or the cash to stack the deck in such ways, even assuming they would do so. Hence, the public outrage, even though parents generally understand that not every aspirant can get into a top school — there aren’t enough spots — just as many know that their childrens’ future happiness and sense of fulfillment won’t depend on whether they attend a prestigious college or university.

Still, the unfairness and chicanery highlighted by the admissions scandal proved galling, the more so as the growing crew of fat cats corrupting the admissions process doubtless also preach the gospel of American meritocracy. Worse, most of their kids will undoubtedly present their fancy degrees as proof that quality wins out in our society, never mind that their starting blocks were placed so far ahead of the competition.

To add insult to injury, the same parents and children may even portray admissions policies designed to help students who lack wealth or come from underrepresented communities as violations of the principles of equal opportunity and fairness, democracy’s bedrock. In reality, students from low-income families, or even those of modest means, are startlingly less likely to be admitted to top private universities than those from households in the top 10%. In fact, applicants from families in the top 1% are now 77 times more likely than in the bottom 20% to land in an elite college, and 38 of those schools admit more kids from families in that top percentage than from the bottom 60%.

Buying Politics (and Politicians), American-Style

Now, let’s return to the political version of the same — the world in which Ted Cruz swims so comfortably. There, too, money talks, which means that those wealthy enough to gain access to, and the attention of, lawmakers have huge advantages over others. If you want political influence, whether as a person or a corporation, having the wealth needed to make big campaign contributions — to individuals or groups — and to hire top-drawer lobbyists makes a world of difference.

Official data on the distribution of family income in the United States show that the overwhelming majority of Americans can’t play that game, which remains the preserve of a tiny super-rich minority. In 2015, even with taxes and government-provided benefits included, households in the lowest 20% accounted for only about 5% of total income. Their average income — not counting taxes and government-provided assistance — was only $20,000. The share of the bottom 50% — families making $61,372 or less — dropped from 20% to 12% between 1978 and 2015.  By contrast, families in the top 1% earned nearly 50% of total income, averaging $215,000 a year — and that’s only income, not wealth. The super-rich have plenty of the latter, those in the bottom 20% next to none.

Before we proceed, a couple of caveats about money and political clout. Money doesn’t always prevail. Candidates with more campaign funds aren’t guaranteed victory, though the time politicians spend raising cash leaves no doubt that they believe it makes a striking difference. In addition, money in politics doesn’t operate the way simple bribery does. The use of it in pursuit of political influence works more subtly, and often — in the new era opened by the Supreme Court — without the slightest need to violate the law.

Still, in Donald Trump’s America, who would claim that money doesn’t talk? If nothing else, from inaugural events — for Trump’s inaugural $107 million was raised from a host of wealthy donors with no limits on individual payments, 30 of which totaled $1 million or more — to gala fundraisers, big donors get numerous opportunities to schmooze with those whose campaigns they’ve helped bankroll. Yes, there’s a limit — currently $5,600 — on how much any individual can officially give to a single election campaign, but the ultra-wealthy can simply put their money into organizations formed solely to influence elections as well as into various party committees.

Individuals, companies, and organizations can, for instance, give money to political action committees (PACs) and Super PACs. Though bound by rules, both entities still have lots of leeway. PACs face no monetary limits on their independent efforts to shape elections, though they can’t accept corporate or union money or take more than $5,000 from individuals. They can provide up to $5,000 to individual election campaigns and $15,000 per party committee, but there’s no limit on what they can contribute in the aggregate. Super PACs have far more running room. They can rake in unlimited amounts from a variety of sources (as long as they’re not foreign) and, like PACs, can spend limitless sums to shape elections, providing they don’t give money directly to candidates’ campaigns.

Then there are the dark money groups, which can receive financial contributions from any source, American or foreign. Though their primary purpose is to push policies, not individual campaigns, they can engage in election-related work, provided that no more than half their funds are devoted to it. Though barred from donating to individual campaigns, they can pour unlimited money into Super PACs and, unlike PACs and Super PACs, don’t have to disclose who gave them the money or how much. Between 2008 and 2018, dark money groups spent $1 billion to influence elections.

In 2018, 2,395 Super PACs were working their magic in this country. They raised $1.6 billion and spent nearly $809 million. Nearly 78% of the money they received came from 100 donors. They, in turn, belonged to the wealthiest 1%, who provided 95% of what those Super PACs took in.

As the 2018 congressional elections kicked off, the four wealthiest Super PACs alone had $113.4 million on hand to support candidates they favored, thanks in substantial measure to business world donors. In that election cycle, 31 individuals ponied up more than $5 million apiece, while contributions from the top four among them ranged from almost $40 million to $123 million.

The upshot: if you’re running for office and advocate policies disliked by wealthy individuals or by companies and organizations with lots of cash to drop into politics, you know from the get-go that you now have a problem.

Wealth also influences political outcomes through the lobbying industry. Here again, there are rules, but even so, vast numbers of lobbyists and eye-popping amounts of lobbying money now are at the heart of the American political system. In 2018 alone, the 50 biggest lobbying outfits, largely representing big companies, business associations, and banks, spent $540 million, and the grand total for lobbying that year alone was $3.4 billion.

Nearly 350 of those lobbyists were former legislators from Congress. Officials departing from senior positions in the executive branch have also found artful ways to circumvent presidential directives that prohibit them from working as lobbyists for a certain number of years.

Do unions and public interest groups also lobby? Sure, but there’s no contest between them and corporations. Lee Drutman of the New America think tank notes that, for every dollar the former spent in 2015, corporate donors spent $34. Unsurprisingly, only one of the top 20 spenders on lobbying last year was a union or a public-interest organization.

The sums spent by individual companies to gain political influence can be breathtaking. Take now-embattled Boeing. It devoted $15 million to lobbying in 2018 — and that’s not counting its campaign contributions, using various channels. Those added another $8.4 million in the last two-and-a-half years. Yet Boeing only placed 11th among the top 20 corporate spenders on lobbying last year. Leading the pack: the U.S. Chamber of Commerce at $94.8 million.

Defenders of the status quo will warn that substantially reducing money’s role in American politics is sure to threaten democracy and civil liberties by ceding undue power to the state and, horror of horrors, putting us on the road to “socialism,” the right wing’s bogeyman du jour. This is ludicrous. Other democracies have taken strong steps to prevent economic inequality from subverting their politics and haven’t become less free as a result. Even those democracies that don’t limit political contributions have adopted measures to curb the power of money, including bans on television ads (a huge expense for candidates in American elections: $3 billion in 2018 alone just for access to local stations), free airtime to allow competitors to disseminate their messages, and public funds to ease the financial burden of election campaigns. Compared to other democracies, the United States appears to be in a league of its own when it comes to money’s prominence in politics.

Those who favor continuing business as usual like to point out that federal “matching funds” exist to help presidential candidates not be steamrolled by competitors who’ve raised mounds of money. Those funds, however, do no such thing because they come with stringent limits on total spending. Candidates who accept matching funds for a general election cannot accept contributions from individuals. Moreover, matching funds are capped at $20 million, which is a joke considering that Barack Obama and Mitt Romney spent a combined $1.2 billion in individual contributions alone during the 2012 presidential election. (Super PACs spent another $350 million to help Romney and $100 million to back Obama.)

A New American Tradition?

Rising income inequality, wage stagnation, and slowing social mobility hurt ordinary Americans economically, even as they confer massive social and political advantages on the mega-rich — and not just when it comes to college admissions and politics either.

Even the Economist, a publication that can’t be charged with sympathy for left-wing ideas, warned recently of the threat economic inequality poses to the political agency of American citizens. The magazine cited studies showing that, despite everything you’ve heard about the power of small donations in recent political campaigns, 1% of the population actually provides a quarter of all the money spent on politics by individuals and 80% of what the two major political parties raise. Thanks to their wealth, a minuscule economic elite as well as big corporations now shape policies, notably on taxation and expenditure, to their advantage on an unprecedented scale. Polls show that an overwhelming majority of Americans support stricter laws to prevent wealth from hijacking politics and want the Citizens United ruling overturned. But then just how much does the voice of the majority matter? Judging from the many failed efforts to pass such laws, not much.

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  1. Hayek's Heelbiter

    Are there any tumbrel manufacturers still around in whom I can invest? [Snark]

    1. Peter VE

      There will soon be an opportunity for a career as a traveling guillotinist. “Have Gulliotine, will travel”.

  2. John A

    There used to be a saying in the north of England, the industrial heartland of the country, ‘clogs to clogs in 3 generations,’. That is to say, the first generation made the money, the 2nd generation sort of kept it going but the 3rd generation frittered it all away and ended up back wearing clogs (cheapest footwear).
    However, the amount of money now being accumulated by the 1%, in such billions, is utterly impossible to waste away to nothing, no matter how much of a wastrel heirs of such vast fortunes are. It can only all end in pitchforks or the modern equivalent.

    1. Brooklin Bridge

      What is the modern equivalent of a pitch fork? Thanks to technology, I’m not sure there even is one other than the blunt self contradictions off “the system” that tend to lead to empire collapse. But empire collapse has the serious problem of wide spread suffering over long periods and more recently the additional problem of potential species extinction, or perhaps more likely major societal transformation including extreme reduction in population numbers, thrown in.

      In all possible outcomes, those who suffer the most – who pay for it – are by in large the poor and the voiceless. Even in an extinction event, the haves as a whole will fare better and be subject to less suffering and trauma than the have-nots.

      1. Mike

        Bingo BB!

        The scissors crisis as postulated by Lenin & Trotsky in their writings of 1900-1916, following from economic & financial to political sclerosis. And, while I have not read Smith or Ricardo in detail, it would seem this idea is present within the writings of the classicists (regarding social control over capital). As you put it, the “solution” of pitchforks has an extremely limited and narrower freedom, and its outcome may not be different from systemic collapse for society at large.

        Take a look at Michael Hudson’s writings on debt and immiseration (“inequality”) and relate that to socialist theory of capital accumulation (falling rate of profit), and you have the formula for systemic crisis and a window into our current malaise. It is unfortunate that talent on the order of Marx did not follow him, and the socialist project ended as a middle-class academic football, to be debated and discussed rather than grown and disseminated – until recently.

        My take? The military and its political patience with status quo will determine any popular ‘solution”.

      2. JacobiteInTraining

        In the olden days, if a mob of citizens picked up pitchforks, threshers, clubs, knives, and whatnot….it was presumably not labeled nor intended to be a ‘non violent protest’…at least, presumably the mob intended to actually *use* their various farm implements and pointy things to stick someone with.

        So by that logic, the modern equivalent of a pitchfork is an AR-15, AK-47, or other weapon suitable for confronting the Lord of the Manor and his/her goons.

        Of course, then – as now – any such mob of peasants choosing this route had best be certain they have an incredible numbers advantage because the Lords Knights will swiftly and brutally turn them all into fertilizer the second it becomes apparent that ‘the peasants are revolting’. (‘you can say that again!’)

    2. Colonel Smithers

      Thank you and well said, John A.

      I used to work as a lobbyist and echo the post. In my many years as one, working for banks and fund managers, I can hardly remember coming across trade union or public interest organisations. The European Trade Union Congress and European Corporate Observatory rarely took part in deliberations.

      This said, I don’t think these organisations are as organised, sophisticated and as aggressive as they should / need to be. When was the last time an economist from the labour movement was appointed to a central bank monetary policy committee, even by parties apparently in favour of labour rights?

      Capital and its beneficiaries, even their 10% enablers, are increasingly deracinated. The rest of us need to react accordingly. There’s little sign of that.

      Further to that deracinated elite, it’s staggering how many EU27 1%ers cash out and come to London, especially from France and Germany. In the Thames valley, one sees many Russians. We call Beaconsfield Little Moscow.

      With regard to clogs, I know probably the wealthiest family in Mauritius, billionaires in USD. One of the grandmothers, she married into the family, tells me how her grandchildren, who prefer to doss about in London, will fritter away what her son, husband and father in law have built up over 100 years. One of their relatives, also the son of a billionaire, but made the money in mining well away from Mauritius, appears in the reality TV series Made In Chelsea.

      1. John A

        Yes Colonel, I often wonder if the likes of Bernie Ecclestone, to name just one example, can actually be proud of their offspring. Certainly the Tetrapak heir and the sad fate of his late American wife are classic examples of ridiculously wasteful lives and yet still nowhere near the breadline.

        1. Colonel Smithers

          Thank you, John A.

          I often saw the late Rausings at the races with their horse owner and breeder sister, very sad.

          I also saw the Bride of Wildenstein, another person with too much time and money.

  3. The Rev Kev

    Perhaps it is time to update our mythology. Working your way up is becoming a less realistic option for poorer people or even middle class people. Not every girl will be able to marry a Prince and give them a life beyond their wildest dreams (or worst nightmares as the case may be). Getting super-cynical here but social contacts beats hard work and money buys your way into elite colleges. Time to bury some older myths, hence-

    In memory of Richard Hunter, Esq aka “Ragged Dick” alias Horatio Alger jr.
    Although he had worked his way up from a bootblack to a middle class job, the later years were not kind to him. After his job was shipped to Asia, he lost the apartment that he had been renting since his teenage years. In spite of frugal habits learnt from a young age, he eventually had to resort to SNAP payments to eat and found occasional work from his former occupation as bootblack via the app ‘Booter’. Eventually he succumbed to an easily treatable disease as he could not afford to get it treated. His last words were:
    “All I ever wanted to do was to turn over a new leaf, and try to grow up ‘spectable”.

  4. Bob

    So wait a minute –

    Most Americans don’t have more than $400 for emergencies.
    Ordinary individuals are limited to political contributions of no more than $ 5,000.

    And yet PACs, Super PACs, and Dark Money can raise unlimited amounts.

    No wonder that you never get that phone call asking for a donation from your Congressman. In fact it is rare to hear from any politician. They go where the money is and it ain’t with the voters.

    Everyone is equal – some are more equal than others.

  5. Carla

    The author of this piece was Rajan Menon. Somehow that was omitted when the piece was posted here.

    1. David in Santa Cruz

      From TomDispatch:

      Rajan Menon is the Anne and Bernard Spitzer Professor of International Relations at the Powell School, City College of New York, and Senior Research Fellow at Columbia University’s Saltzman Institute of War and Peace Studies. He is the author, most recently, of The Conceit of Humanitarian Intervention.

  6. jfleni

    RE: numbers of them believe that the economy and political system are both rigged.

    The PEASANTS really get ####, what else is new?

  7. Susan the other`

    The smart money, the smart neoliberals, know the game is up. They are as panicked as the rest of us. Maybe more so. Because they brought us all here but they don’t know how to get us out. Every solution diminishes their wealth but everyday they put it off endangers their very survival. They can’t survive without us. But we can survive without them. Look at the pathetic, but still self-righteous, attempt by the World Bank to control the global spending narrative. It is backing a plan to finance infrastructure, which will cost so much money that it is amusing they think they can triage it with admonitions to governments not to spend themselves into inflation. The World Bank is the clueless, desperate mouthpiece of the squillionaires facing their own extinction. They are trying to convince us we need them!

  8. Sound of the Suburbs

    The trick is to get people to believe it’s a meritocracy.

    Those at the top are the best and those at the bottom are the worst.

    We are at the top because we are the best and we deserve loads of money and the best of everything.

    You are at the bottom because you are the worst, it’s all you fault you haven’t got anything.

    The last thing those at the top want is a meritocracy.

    What does a meritocracy look like?

    Let’s work it out from first principles.

    1) In a meritocracy everyone succeeds on their own merit.

    This is obvious, but to succeed on your own merit, we need to do away the traditional mechanisms that socially stratify society due to wealth flowing down the generations. Anything that comes from your parents has nothing to do with your own effort.

    2) There is no un-earned wealth or power, e.g inheritance, trust funds, hereditary titles

    In a meritocracy we need equal opportunity for all. We can’t have the current two tier education system with its fast track of private school / universities for people with wealthy parents.

    3) There is a uniform education system for everyone with no private schools or universities.

    The level playing field where the best get to the top.


  9. templar555510

    If you haven’t seen it look up Adam Curtis’s film ‘ Entrepreneur spelt S.P.I.V ‘ . It’s a recounting of the Thatcher years in the UK when finance began to rule . A Spiv was a low-life petty criminal extant after WW2 in the UK who had his hands on all sorts of goods that were in short supply and created a black market in them. Sound familiar ? Yes, you’ve got it . Now it’s called ‘ fiancé capitalism ‘ or ‘ financialisation ‘ or some other term equally legitimate sounding, but actually it’s the same game that sits played only on a much larger scale . When Matt Taibbi coined his famous phrase ‘ the vampire squid ‘ as a description of the activities of Goldman Sachs he hit a nerve by describing this group of people for whom any and every opportunity to screw money out of the unsuspecting will be taken and maximised. Unless and until this comes to an end , or more likely stopped , the evisceration of each and every society on the planet will continue and the end result will be like the remnant still living on Easter Island at the end of the nineteenth century.

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