The list of top sectors in lobbying is like a who’s who of bad corporate behavior. Table 7.1 shows the total lobbying outlays by sector during 1998–2011, according to the Center for Responsive Politics. The top sectors are the same ones where the economy is in the deepest trouble, and for reasons directly tied to regulatory failures: finance, health care, transport, agribusiness, and others. Each has landed remarkably cushy federal contracts, subsidies, tax breaks, and lax regulation and oversight. It should also be no surprise that finance, real estate, health care, and pharmaceutical companies rank among the lowest in public approval in Gallup polls, in all cases receiving “net negative” rankings by the public (in the August 2009 survey).8 These industries epitomize the destructive policies produced by the corporatocracy, and the public knows it.
Table 7.1: Lobbying by Sector (1998–2011)
Source: Data from Center for Responsive Politics.
America’s Two Right-of-Center Parties
Every recent president has been caught in the same web of campaign financing and well-heeled special interests. Every candidate draws funds from the same sources, and all must hone their policy positions accordingly. Even as politics heats up in shouting matches on the air, the real range of policy prescriptions is shockingly narrow. For all the times that Obama has been accused by the right wing of dragging America to socialism, the actual content of Obama’s policies is often nearly indistinguishable from his predecessor’s. For all of the talk about the logjams in Washington, what have been the real differences between Bush and Obama?
Bush wanted tax cuts for 100 percent of households; Obama campaigned on tax cuts for 95 percent of the households but, when the deadline approached in December 2010, agreed to extend tax cuts for all.
Bush supported large deficits, in order to maintain low taxes and high military spending; Obama also supported large deficits, mainly as a macroeconomic stimulus.
Bush bailed out the banks and the auto companies; Obama continued those policies.
Bush supported immigration reform but was blocked by his own party; Obama favors immigration reform but is blocked by both parties.
Bush favored nuclear power and deep-sea oil drilling; Obama favors nuclear power and deep-sea oil drilling.
Bush filled his White House with Goldman Sachs and Citigroup executives; Obama has done the same.
There are, of course, several reasons for these very narrow differences. Most important, each party pulls its campaign contributions from the same sources and therefore does not deviate far from the core messages of the corporate sector and high-net-worth individuals. America has thereby been pulled to a “median” that is politically far to the right of center and to the right of the public’s true values. On issue after issue, Washington politics back the special interests rather than broad public values.
We can consider America’s political system today to be not so much a true democracy as a stable duopoly of two ruling parties, whose members shout at each other from time to time but which both basically stand for many of the same things when it comes to issues touching the interests of business, the rich, and the military. Both parties are instruments of powerful businesses and the rich. Rather than aiming for the median voter, as in the textbook two-party election theory, both parties actually aim to the right of center to attract high-income campaign contributors. For the Republican Party, this is easy and natural. For the Democrats, who ostensibly represent the needs of the poor, it means party leaders such as Presidents Clinton and Obama, who relentlessly side with Wall Street and the rich and just as relentlessly apologize to their base.
The overpowering role of money in politics has led to a fairly stable bipartisan consensus among politicians (though not necessarily the broad public) on five major points of policy in the past thirty years that reflect a fidelity to vested interests. These are low marginal tax rates for the rich, as sponsored by campaign contributors; the contracting of public services to well-connected private interests; the neglect of the budget deficit when voting on tax and spending issues, leaving the debt to future generations; the favoring of large military outlays, even as domestic spending is squeezed; and the lack of serious long-term budget planning. These five policy biases have been maintained through the thick and thin of presidents since Reagan.
The famous “triangulation” of Obama and Clinton with conservative positions is designed less to win centrist voters than to fill campaign coffers with corporate funds. Corporatocracy, the over-representation of corporate and wealthy interests, is the essential feature of the duopoly. Campaign financing and lobbying are the key elements that keep the system intact.
The compromises made with the rich are consistently out of line with public opinion. The public desires to tax the rich more heavily, cut military spending, and develop renewable energy alternatives to oil. The outcome instead is tax cuts for the rich, unchecked military spending, and a continued stagnation in alternatives to oil, gas, and coal.
Both parties have consistently downplayed the importance of budget balance in favor of other political objectives. Reagan’s supply-side advisers argued that tax cuts would spur enough growth to pay for themselves. Obama’s stimulus supporters have argued something analogous: that deficits in the midst of a downturn have little or no longer-run cost, and even that deficit cutting in a recession is not feasible. These are both magical arguments without any empirical support but lots of ideological fervor. More important, they are arguments of convenience, allowing each party to favor its constituencies with short-term benefits (more tax cuts or spending increases) while downplaying the buildup of debt that will inevitably ensue. There have been only two short-lived exceptions to the chronic neglect of budget deficits. The first was George H. W. Bush, who broke his 1988 campaign pledge of “no new taxes” in order to reduce the budget deficit in 1990. The second was Bill Clinton, who pushed a modest hike in the top income tax rate (from 31 to 39.6 percent) and agreed to Republican-led budget cuts that helped move the budget to a temporary surplus at the end of the 1990s, albeit one that was quickly reversed under George W. Bush.
The duopoly also applies to foreign policy. Both parties view the Middle East and its greater neighborhood (stretching from the Horn of Africa and Yemen in the west to Afghanistan in the east) as the core theater of U.S. foreign policy, with the primary concern the continued flow of Middle East oil to the world economy. Carter enunciated a military doctrine that any threat to the flow of Middle East oil would be viewed as a security threat to the United States. There have been marginal differences in military proclivities between the two parties, with Bush Jr. being the most trigger-happy of recent presidents, but the differences should not be exaggerated. Obama not only retained Bush’s secretary of defense but also expanded the war in Afghanistan while drawing down troops in Iraq. As the author and former army colonel Andrew Bacevich makes clear, the core U.S. military doctrine—based on the global projection of force—has remained constant on a bipartisan basis for more than forty years.9
The final feature of the two-party duopoly during the past three decades has been the willful neglect of longer-term thinking in government. The only place where even a modicum of long-term budgeting takes place is the Congressional Budget Office, which provides a nonpartisan budget “score” of legislative proposals, usually on a ten-year time horizon, though occasionally longer. But this budget score is a far cry from systematic thinking about long-term issues: infrastructure, budget balance, education, energy policy, and climate change. It is hard to think of a single recent case in which the U.S. government, led by either party, has produced a quantitative assessment of any long-term challenge and then followed through with a considered policy reform based on that assessment. For decades, Washington has been improvising through the repeated alternations of power.
The Four Big Lobbies
The corporatocracy is a quintessential example of a feedback loop. Corporate wealth translates into political power through campaign financing, corporate
lobbying, and the revolving door of jobs between government and industry; and political power translates into further wealth through tax cuts, deregulation, and sweetheart contracts between government and industry. Wealth begets power, and power begets wealth.
Four key sectors of the American economy exemplify this feedback loop. The military-industrial complex is perhaps the most notorious example. As Eisenhower famously warned in his farewell address in January 1961, the linkage of the military and private industry created a political power so pervasive that America has been condemned to militarization, useless wars, and fiscal waste on a scale of many tens of trillions of dollars since then.10
The second powerful lobby is the Wall Street–Washington complex, which has steered the financial system toward control by a few politically powerful Wall Street firms, notably Goldman Sachs, JPMorgan Chase, Citigroup, Morgan Stanley, and a handful of other financial firms. The close ties of finance and Washington paved the way for the 2008 financial crisis and the megabailouts that followed, through reckless deregulation followed by an almost complete lack of oversight by government. Wall Street firms have provided the top economic policy makers in Washington during several administrations, including the likes of Donald Regan (Merrill Lynch) under Reagan, Robert Rubin (Goldman Sachs) under Clinton, Hank Paulson (Goldman Sachs) under Bush Jr., and several Wall Street–connected senior officials under Obama (including William Daley, Larry Summers, Gene Sperling, and Jack Lew).
The third sector is the Big Oil–transport–military complex that has put the United States on the trajectory of heavy oil import dependence and a deepening military trap in the Middle East. Since the days of John D. Rockefeller and the Standard Oil Trust a century ago, Big Oil has loomed large in American politics and foreign policy. Big Oil teamed up with the automobile industry to steer America away from mass transit and toward gas-guzzling vehicles driving on a nationally financed highway system. Big Oil has consistently and successfully fought the intrusion of competition from non-oil energy sources, including nuclear, wind, and solar power. Big Oil has been at the side of the Pentagon in making sure that America defends the sea-lanes to the Persian Gulf, in effect ensuring a $100 billion–plus annual subsidy for a fuel that is otherwise dangerous for national security. And Big Oil has played a notorious role in the fight to keep climate change off the U.S. agenda. ExxonMobil, Koch Industries, and others in the sector have underwritten a generation of antiscientific propaganda to confuse the American people.
The fourth of the great industry-government tie-ups has been the health care industry, America’s single largest industry today, absorbing no less than 17 percent of GDP. The key to understanding this sector is to note that the government partners with industry to reimburse costs with little systematic oversight and control. Pharmaceutical firms set sky-high prices protected by patent rights; Medicare, Medicaid, and private insurers reimburse doctors and hospitals on a cost-plus basis; and the American Medical Association restricts the supply of new doctors through the control of placements at American medical schools. The result of this pseudo–market system is sky-high costs, large profits for the private health care sector, and no political will to reform.
Recent Case Studies of Corporatocracy
Now it’s time to see the corporatocracy at work, to understand how the lobbies dominate policy making at the expense of the nation and contrary to the expressed opinions of the American people. I will explore these workings in four recent case studies.
Case 1: The Extension of Tax Cuts for the Rich
During the 2008 campaign, President Obama said he would support a rollback of the Bush-era tax cuts on the richest 5 percent of taxpayers but sustain the Bush tax cuts for the remaining 95 percent of the population. His campaign pledge to tax the rich involved little more than a rise in the marginal tax rate from 35 percent to 39.6 percent on households with incomes above $250,000. Despite all the sound and fury on tax policy, there was in fact little difference between John McCain and Obama, a difference in essence of 4.6 percentage points on the highest incomes.
Even more tellingly, when push finally came to shove in 2010 on whether to extend the Bush tax cuts even for the rich, Obama rather quickly sided with the Republicans in favoring an across-the-board extension of the Bush-era tax cuts, including for the richest households. The two-party duopoly held firm, despite the crying need for more revenues to stanch the hemorrhaging of red ink.
It might be supposed that public opinion had forced Obama’s hand, but this is patently not the case. In the months leading up to the Obama-Republican agreement to extend tax breaks for the rich, the broad public supported a rollback of the tax breaks at the top. According to the Pew Research Center, a consistent majority of Americans from September 2004 to December 2010 called for repealing the Bush tax cuts on the wealthy or repealing the tax cuts altogether (see Table 7.2).
At the moment of truth during the lame-duck session of Congress in December 2010, only one-third of the public actually supported the extension of the tax cuts for the richest Americans, and nearly 60 percent opposed it. The minority viewpoint prevailed. The political system paid no heed to the public.
Obama and his top advisers have known from the start of the administration about the deep contradictions between Obama’s tax policies and his activist objectives on education, science, and infrastructure. They promised low taxes to get elected and have held to the line. In private the top advisers routinely acknowledge the need for higher tax revenues but declare that they are politically infeasible. Rather than explaining the basic truths to the public and defending a truly defensible position, they instead pander to the public and especially to their rich campaign contributors. Obama aims to raise perhaps $1 billion for the campaign war chest for 2012, which will require a political environment highly favorable to wealthy campaign contributors.
Table 7.2: Attitudes About Ending the Bush Tax Cuts
Source: Richard Auxier, Pew Research Center for the People & the Press, “Taxed Enough Already?,” September 20, 2010, and Pew Research Center, “Mixed Views on Tax Cuts, Support for START and Allowing Gays to Serve Openly,” December 7, 2010.
The proof of this pandering is the behavior of key advisers after they leave office. No sooner had Office of Management and Budget (OMB) Director Peter Orszag left the White House than he wrote about the need for higher tax revenues as a share of GDP, a position he never took publicly while OMB director.11 The head of the Council of Economic Advisers, Christina Romer, also called for tax increases—once she had left office:
Finally, the President has to be frank about the need for more tax revenues. Even with bold spending cuts, there will still be a large deficit. The only realistic way to close the gap is by raising revenue.12
It’s a funny thing about being frank. We spend billions of dollars every two years to elect politicians who in turn bring top academic experts to Washington. Is that merely so that the experts can then hide the truth from the American people until those experts leave office and begin to write the truth once again?
Case 2: The Health Care Reform Debacle
The health care reform effort also exemplified the power of special interests. Obama worked very hard to make some progress in this area, and he achieved some progress, but at huge costs to public morale and huge sacrifices to corporate power. When the administration began its legislative efforts in early 2009, it decided not to put forward a plan, on the grounds that the last attempt to prepare a health plan, in Clinton’s first year of office, had gone down to defeat. A plan, it was argued, would leave too many hostages to the lobbyists’ whims.
Obama was determined to avoid a confrontation with two key corporate sectors, the health insurers and the pharmaceutical industry. If he put forward a plan that would really control costs, for example, or that introduced government competition into the insurance market (through the so-called public option), the private insurance industry would bolt. Therefore, from the start, Obama winked at the industry and assured i
ts lobbyists that there would be no heroics on the critical cost and competition issues. He did not say as much to his constituents and the general public, who were told repeatedly that cost control was central and that a public option was very much on the table. Similarly, Obama negotiated an early truce with the big pharmaceutical companies, assuring the industry that the United States would not explore new methods of drug pricing. This too was never clearly articulated to the public.
The entire health care debate then took on a surreal air for the next fifteen months. Obama could not table a plan because the outlines of the implicit agreement with industry ran counter to the views of much of his own party, and indeed a majority of the public at large. During 2009, the public repeatedly indicated in opinion surveys that it backed the option of a government-run plan to compete with private plans. According to CBS/New York Times polls, the margin was 66 percent to 27 percent in favor of the public option in June–July 2009; in a Pew survey, it was 52 percent to 37 percent.13 Obama aimed to keep supporters of the public option satisfied by assuring them that such a policy was still on the table, while not explaining clearly to the public the outlines of the actual White House understandings with private industry.
The situation was even murkier because the costly part of the proposal—subsidies to expand health care coverage—meant additional annual outlays of around 1 percent of GDP in the latter years of this decade, but paying for this through tax increases on higher incomes was very unpopular with politically powerful groups. Eventually a hodgepodge financing package was cobbled together, including some planned future cutbacks in Medicare spending that are unlikely to be implemented when the time comes, as well as some modest increases in payroll taxes on high-income households and excise taxes on high-premium private insurance plans held mainly by high-income households. (Revenues from the latter two sources are expected to raise around 0.1 percent of GDP in fiscal year 2015, 0.2 percent of GDP in fiscal year 2018, and 0.3 percent of GDP in fiscal year 2021.)14
The Price of Civilization Page 11