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The perfect storm and our receding democracy

Robert Reich, professor of public policy | October 19, 2010

It’s a perfect storm. And I’m not talking about the impending dangers facing Democrats. I’m talking about the dangers facing our democracy.

First, income in America is now more concentrated in fewer hands than it’s been in 80 years. Almost a quarter of total income generated in the United States is going to the top 1 percent of Americans.

The top one-tenth of one percent of Americans now earn as much as the bottom 120 million of us.

Who are these people? With the exception of a few entrepreneurs like Bill Gates, they’re top executives of big corporations and Wall Street, hedge-fund managers, and private equity managers. They include the Koch brothers, whose wealth increased by billions last year, and who are now funding tea party candidates across the nation.

Which gets us to the second part of the perfect storm. A relatively few Americans are buying our democracy as never before. And they’re doing it completely in secret.

Hundreds of millions of dollars are pouring into advertisements for and against candidates  — without a trace of where the dollars are coming from. They’re laundered through a handful of groups. Fred Malek, whom you may remember as deputy director of Richard Nixon’s notorious Committee to Reelect the President (dubbed Creep in the Watergate scandal), is running one of them. Republican operative Karl Rove runs another. The U.S. Chamber of Commerce, a third.

The Supreme Court’s Citizens United vs. the Federal Election Commission made it possible. The Federal Election Commission says only 32 percent of groups paying for election ads are disclosing the names of their donors. By comparison, in the 2006 midterm, 97 percent disclosed; in 2008, almost half disclosed.

We’re back to the late 19th century when the lackeys of robber barons literally deposited sacks of cash on the desks of friendly legislators. The public never knew who was bribing whom.

Just before it recessed the House passed a bill that would require that the names of all such donors be publicly disclosed. But it couldn’t get through the Senate. Every Republican voted against it. (To see how far the GOP has come, nearly ten years ago campaign disclosure was supported by 48 of 54 Republican senators.)

Here’s the third part of the perfect storm. Most Americans are in trouble. Their jobs, incomes, savings, and even homes are on the line. They need a government that’s working for them, not for the privileged and the powerful.

Yet their state and local taxes are rising. And their services are being cut. Teachers and firefighters are being laid off. The roads and bridges they count on are crumbling, pipelines are leaking, schools are dilapidated, and public libraries are being shut.

There’s no jobs bill to speak of. No WPA to hire those who can’t find jobs in the private sector. Unemployment insurance doesn’t reach half of the unemployed. 

Washington says nothing can be done. There’s no money left.

No money? The marginal income tax rate on the very rich is the lowest it’s been in more than 80 years. Under President Dwight Eisenhower (who no one would have accused of being a radical) it was 91 percent. Now it’s 36 percent. Congress is even fighting over whether to end the temporary Bush tax cut for the rich and return them to the Clinton top tax of 39 percent.

Much of the income of the highest earners is treated as capital gains, anyway — subject to a 15 percent tax. The typical hedge-fund and private-equity manager paid only 17 percent last year. Their earnings were not exactly modest. The top 15 hedge-fund managers earned an average of $1 billion.

Congress won’t even return to the estate tax in place during the Clinton administration – which applied only to those in the top 2 percent of incomes.

It won’t limit the tax deductions of the very rich, which include interest payments on multi-million dollar mortgages. (Yet Wall Street refuses to allow homeowners who can’t meet mortgage payments to include their primary residence in personal bankruptcy.)

There’s plenty of money to help stranded Americans, just not the political will to raise it. And at the rate secret money is flooding our political system, even less political will in the future.

The perfect storm: An unprecedented concentration of income and wealth at the top; a record amount of secret money flooding our democracy; and a public becoming increasingly angry and cynical about a government that’s raising its taxes, reducing its services, and unable to get it back to work.

We’re losing our democracy to a different system. It’s called plutocracy.

Cross-posted from Robert Reich’s blog.

Comments to “The perfect storm and our receding democracy

    By JEANNE CUMMINGS | 10/26/10 7:27 PM EDT Updated: 10/27/10 9:05 AM EDT
    To hear top Democrats tell it, the party is being wildly outgunned this year in the fight for campaign cash as Republicans rely on outside groups to funnel money to GOP contenders.

    But the numbers tell a different story. Read more

  2. “The American Federation of State, County and Municipal Employees (AFSCME), a 1.6 million member public sector union, has taken the lead as the biggest outside campaign spender in the 2010 election cycle, the Wall Street Journal reports. ”

    You can relax now, Prof. Reich, AFSCME has stepped in to save the day and the perfect storm is more like a dreary drizzle. Also, George Soros is helping out by funding more reporters for NPR so it can propandize even more effectively for the Democrats. Does anyone but me have a problem with AFSCME being allowed to make donations to a political campaign? Some have charged that politicians give high salaries and generous pension benefits in return for campaign donations, particularly here in California. Is it a coincidence that AFSCME gives to the party that is always in favor of increasing the size of government? Again, the biggest threat to our Democracy, economy and overall well being is our entrenched ruling class, failure to address our real problems and the fact that government is the biggest obstacle to real economic recovery.


    GOOGLE gave 75% of contribs to Dems…

    I would think Google should be in the top-tax bracket, but I guess Obama’s supporters which are Googlees gets a tax break by Obama. Wow, and the left always claims some mysterious and unamed republican source for all problems of history, including the comets that ended the Jurasic periods — It’s alll boooossshhhhheeeee’s Fault!

    No it is not. it is the dems fault.

  4. Steve:
    You are so pompous,yes we make grammatical errors poor usage of English,but we are here blundering along because of outrage!I will challenge you to come up with antidotes.Many have made suggestion maybe that Big Brain of yours can illuminate us.

  5. Both parties are ponzi schemers.We are their slaves,we pay for their bad decisions without recourse.Do you feel helpless?

      • Hi Terrell, thanks for your question. We only accept Berkeley faculty and scholars to write at the Berkeley Blog at this time. But feel free to respond to posts in the comments! Sincerely, Caley, editor for the Berkeley Blog

  6. Sorry professor, but you come off sounding like Louis Renault in Rick’s Cafe Americain.

    It is hard to take this highly partisan call to arms from you professor – where was your clarion call when team Clinton (your team) was accepting offshore money in an outrageous and illegal manner and when George Soros and many like him bankrolled your team in the last national election – outraising the Republicans by a significant amount and not being transparent about their sources of funds. Wall Street, the hedge funds and big business gave a lot more to your team last election. Your highly partisan screed belongs on or some other lefty website.


    • Great post, Vince. The idea that foreign money is helping Republicans has been debunked already and I’ve seen raw data that suggests Democrats are slightly ahead in accepting money from PAC’s that have ties to foreign countries. Meanwhile the foreigner George Soros is funding organizations and just made a major contribution to NPR (National Propaganda Radio). The fact that so many Americans are hurting right now has more to do with misguided government policies than anything else and things would improve if the IRS code was reformed, the Bush tax cuts would be renewed and government scaled back. The biggest threat to our democracy is that so many people depend on transfer payments already, which everybody knows is a bribe by the ruling class to keep them in power. Government spending is ruining the economy, debasing the currency, forcing the next generation to pay huge interest payments and is turning us into a second rate economic power. Nothing Professor Reich suggests is going to reverse that trend, it will only enhance the position of the current ruling elite and a continuation of failed policies. Also, I read recently that Reagan cut taxes but federal receipts grew due to increased business activity. The problem was that he lost control of the budget and a lot of spending was forced on him by Democrats in the House and Senate. Also, he had to increase the defense budget because Carter let the military slide. Clinton actually had smaller deficits but that was due to Republicans in the House and Senate holding the line on spending. Meanwhile Clinton and revisionist historian want us to believe that the opposite true because it would hurt their case against cutting taxes and spending to stimulate the economy. Obama has spent a record amount of money in his two years, and look at the mess we are in. Meanwhile Professor Reich follows the same old prescription of more taxes, more welfare, more government programs when that sort of thinking has led to the problems we are facing. A lot of Americans are desperate for real solutions based on freedom, limited government and private enterprise that built this country and I think that explains the growing popularity of the Tea Party.

      • In G.O.P. Calls to Cut Spending, Hows are Few: “The (political) parties share blame for the current fiscal situation, but federal budget statistics show that Republican policies over the last decade, and the cost of the two wars, added far more to the deficit than initiatives approved by the Democratic Congress since 2006, giving voters reason to be skeptical of campaign promises.

        “Calculations by the nonpartisan Congressional Budget Office and other independent fiscal experts show that the $1.1 trillion cost over the next 10 years of the Medicare prescription drug program, which the Republican-controlled Congress adopted in 2003, by itself would add more to the deficit than the combined costs of the bailout, the stimulus and the health care law.

        “The House Republican leader, John A. Boehner of Ohio, has called for immediate cuts in “non-security discretionary” spending to prerecession 2008 levels. Independent analysts say that would require eliminating about $105 billion — or more than 20 percent of spending by departments like Education, Transportation, Interior, Commerce and Energy — a level of reductions that history suggests would be extremely hard to execute. (Since 1982, nonmilitary discretionary spending has never dropped by more than 5.5 percentage points in any given year.)

        “At the same time, most Republicans are calling for the permanent extension of all Bush-era tax cuts, which would add $700 billion more to the deficit over the next 10 years than President Obama and Democratic leaders have proposed by continuing only some of the lower rates.”

  7. It is sobering to read Reich’s analysis, which seems indisputable to me, and then to read the “comments” posted below it. Not one of them is grammatical. Not one of them discloses the ability to think in a linear, analytical fashion. Not one of them attempts to engage the actual subject matter of the essay. Regardless of ideology, they are all, quite simply, gibberish. And these are members of the public sufficiently attentive and motivated to read something as obscure and academic as the Berkeley Blog. There is a perfect storm at work here, all right–a perfect storm of inadequate schooling, excessive television watching, and excessive videogame usage. We seem to be losing the capacity to think or to express ourselves rationally.

    • Bravo!!! Well said!! I couldn’t agree more, thank you for so elegantly expressing what should be a concern of us all.

      • Steve says Reich’s analysis “seems indisputable” yet Steve has the audacity to criticize others. There are plenty of holes in what Reich has to say, particularly that he is merely repeating blindly DNC propaganda, ignoring the raw data and completely leaving out the money from dubious sources that the Democrats gets. Also ironic, is that the Tea Party has many members who never before participated in political events and this is their first real exercise in democracy. So you have a group here that is starting to participate in democracy in a big way, and it’s no good. And Steve, you are accepting blindly DNC propaganda yourself, so what intellectual level does that put you on by your own standards? If I told you to dig a hole and crawl in would you do that? Of course not, you would think about it rationally. Think about what Reich is saying, does it not in the final analysis work against the one group that is a legitimate democratic movement that is trying to restore this country to it’s founding principles Doesn’t Reich’s thinking support the ruling class that gave us this mess in the first place? So isn’t Reich himself ant-democratic? And you find his writings indisputable?

  8. “Who are these people? ”

    Democrats! They are the party of the rich.

    “Congress won’t even return to the estate tax in place during the Clinton administration ?”

    Uhhh Congress is ruled by the Democrats? So why did you vote for them if they do not do what you want to see done?

    “entrepreneurs like Bill Gates…”

    Why call democrats ‘entrepreneurs’ and Republicans ‘capitalists?’

    do you think you trick the world? They are exactly the same type.

  9. Bravo John:
    The class of wealth that is alluded to, regardless of how much we talk to each other,is untouchable insulated by such ilk as,mercenaries!the Perfect Storm is elimination of any,and all who might impede the Ruling Elite.

  10. Professor Reich:
    You are fearless,I have said more than once, on these blogs that 3.7 percent pay for all of use to live here.20,000 make 50,000,000 bucks a year!Thats in the Trillions,and what do the American people do,they are like Aunt Goldie at the door when the Gestapo came and said you must come with us. If Aunt Goldie would have met the gestapo with a Gun,and killed one or two gestapo agents each time they came to the door. I think the Gestapo would have been more careful.It has come to the point that we must be more careful.

  11. As far too many posts on this blog such as Professor Reich’s imply we are not overcoming the most self-destructive problem of the human race. Our emotions control and implement our decisions and actions before our prefrontal cortex has a chance to think out and prevent unacceptable long-term consequences.

    The paramount fact is that our Homo sapiens brain simply has not evolved far enough beyond the Pan troglodytes brain to allow us make long-term plans and actions to prevent far-off catastrophes engineered by our own species.

  12. In a “perfect storm” our efforts to change the situation are futile. The term implys that the forces are too powerful and well organized for any effort to change the situation to have an effect. It would be more advisable to prepare for the inevitable onslaught, for the worst.

    Is it really a “perfect storm”, or are there actions that can bring hope?

  13. The inescapable truth about our current “perfect storm and our receding democracy” is that our newest civilization is subject to the same failure modes as all previous failed civilizations, we just haven’t evolved enough to save ourselves from our own failures.

    Just because we can communicate with each other at the speed of light means nothing, we still do not listen to each other even when warnings such as yours begin to get out of control, and we keep proving that we do not learn from the lessons of history no matter how many advantages we have today, even when we are university professors.

    Professor Reich, you must be predicting failure of our civilization also because your severe warnings are being issued with increasing frequency.

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