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NY Review of Books, DECEMBER 7, 2017 ISSUE
Big Money Rules
by Diane Ravitch
Democracy in Chains: The Deep History of the Radical Right’s Stealth
Plan for America
by Nancy MacLean
Viking, 334 pp., $28.00
The One Percent Solution: How Corporations Are Remaking America One
State at a Time
by Gordon Lafer
ILR/Cornell University Press, 259 pp., $29.95
I grew up in the 1950s, an era when many believed that our society would
inevitably progress toward ever greater economic equality. Desperate
poverty would recede, it was assumed, as new federal programs addressed
the needs of those at the very bottom of the ladder and as economic
growth created new jobs. The average CEO at the time earned only twenty
times as much as the average worker, and during the Eisenhower
administration the marginal tax rate for the highest earners was 91
percent. Today, the goal of equality appears to be receding. The top
marginal tax rate is only 39 percent, far below what it was during the
Eisenhower years, and most Republicans would like to lower it even more.
Employers now make 271 times as much as the average worker, and half the
children in American schools are officially classified by the federal
government as low-income and eligible for free or reduced-price lunch.
Union membership peaked in the mid-1950s and has declined ever since;
the largest unions today are in the public sector and only about 7
percent of private sector workers belong to a union.
Despite these alarming developments, however, politicians who support
the deregulation of business and champion pro-employer legislation—from
state legislators to members of Congress—have a firm electoral foothold
in most states. During the 2016 presidential campaign, candidate Trump
promised to support basic government services like Medicare and pledged
to bring back jobs that had been outsourced to other nations. However,
once he was president, Trump endorsed health care bills that would have
left millions of low- and lower-middle-income Americans without health
insurance, and his insistence on reducing corporate tax rates suggests
his determination to act in the interest of wealthy elites.
Two recent books—Nancy MacLean’s Democracy in Chains: The Deep History
of the Radical Right’s Stealth Plan for America and Gordon Lafer’s The
One Percent Solution: How Corporations Are Remaking America One State at
a Time—seek to explain several puzzling aspects of American politics
today. Why do people of modest means who depend on government-funded
health care and Social Security or other supplements to their income
continue to vote for candidates who promise to privatize or get rid of
those very programs? Why do people who are poor vote for politicians who
promise to cut corporate taxes?
Both books follow in the path of Jane Mayer’s Dark Money: The Hidden
History of the Billionaires Behind the Rise of the Radical Right (2016),
which documented an astonishing effort by the Koch brothers, the DeVos
family, and other billionaires to purchase politicians in support of
such goals as the elimination of welfare programs and the privatization
of health care and education. Lafer’s describes how in recent years
those goals have been achieved in state after state. MacLean’s
book—which set off a heated dispute among historians and economists when
it appeared in June—aims to describe their historical, theoretical, and
academic underpinnings.
At the center of Democracy in Chains is the work of the Nobel
Prize–winning economist James M. Buchanan, who died in 2013. Buchanan is
associated with the doctrine of economic libertarianism: he is widely
credited as one of the founding fathers of the “public choice” model of
economics, which argues that bureaucrats and public officials serve
their own interests as much as or more than the public interest, and he
was the leading figure in the Virginia School of economic thought. He
trained many economists who came to share his libertarian views, and his
acolytes have protested MacLean’s view that he had “a formative role” in
the evolution of an antidemocratic “strand of the radical right.”
MacLean discovered Buchanan by chance. About a decade ago, she began
researching a book about Virginia’s decision to issue state vouchers
that would allow white students to attend all-white schools, avoiding
compliance with the Brown v. Board of Education decision of 1954. While
studying the writings of the voucher advocate Milton Friedman, she came
across Buchanan’s name. She started reading his work and visited a
disorganized archive of his writings and papers at the Fairfax,
Virginia, campus of George Mason University, where she found materials
scattered in boxes and file cabinets. In uncatalogued stacks of papers
she came across personal correspondence between Buchanan and the
billionaire Republican donor Charles Koch.
What she pieced together, she writes, was a plan “to train a new
generation of thinkers to push back against Brown and the changes in
constitutional thought and federal policy that had enabled it.” This was
indeed a bold project: most mainstream economists in the postwar era had
long accepted Keynesian doctrines that affirmed the power of the federal
government to regulate the economy and protect the rights of workers to
organize in unions. Buchanan’s rejection of governmental actions that he
thought infringed on individual liberty and his defense of states’
rights gave intellectual ammunition to those who opposed both Keynesian
economics and federal interventions in the states to enforce desegregation.
In 1956 Buchanan founded a research-and-design center at the University
of Virginia to combat what he called “the powerful grip that
collectivist ideology already had on the minds of intellectuals” and the
“increasing role of government in economic and social life.” Three years
later, as the state of Virginia sought a way to avoid racial integration
in schools, Buchanan and a colleague proposed using tax-funded vouchers
to avoid compliance with the Brown decision. This would destroy public
education and preserve racial segregation, since white children could
use publicly funded vouchers to attend all-white schools.
During his years at UVA, Buchanan collaborated with such “old-fashioned
libertarians” as Frank Knight of the University of Chicago, F.A. Hayek,
Ludwig von Mises, and other partisans of the Austrian School who railed
against socialism and championed the virtues of individual self-reliance
and economic liberty. In 1969, after a brief and unhappy stint at UCLA,
he took his center—now called the Center for Study of Public Choice—with
him to Virginia Tech. Thirteen years later he brought it to George Mason
University, where it remains today.
GMU had been founded in 1957 in a shopping mall in suburban Washington
as a two-year college. Buchanan was its prize catch. When he was hired
in 1982, he came with a team of colleagues and graduate assistants and
attracted what the school’s senior vice-president later called
“literally millions of dollars” in funding from corporate-friendly
political interests, such as Charles Koch and the Scaife Family
Charitable Trusts. The economics department and the law school of GMU
were devoted to advancing his ideas.
By the mid-1980s, MacLean argues, the center had become a channel
through which scholars were funneled into “the far-flung and purportedly
separate, yet intricately connected, institutions funded by the Koch
brothers and their now large network of fellow wealthy donors,” notably
the Cato Institute (whose founding seminar Buchanan attended) and the
Heritage Foundation (which gave him a welcoming reception when he
arrived at GMU). Stephen Moore, the research director for Ronald
Reagan’s Commission on Privatization who later served on The Wall Street
Journal’s editorial board, was one of GMU’s early master’s degree
recipients. Three of Buchanan’s first doctoral students at the school
went on to work in the Reagan administration, which made the reduction
of federal authority one of its primary goals.
In MacLean’s account, Buchanan was responding to the threats that
democratic institutions posed to the preservation of wealth in America.
Early American democracy had limited this threat by confining the
franchise to white male property owners. But as voting rights were
extended, the nation’s elites had to reckon with the growing power of
formerly disenfranchised voters, who could be expected to support ever
more expensive government programs to benefit themselves and ever more
extensive ways to redistribute wealth. MacLean asserts that Buchanan
supplied his benefactors with arguments to persuade the American public
to go along with policies that protect wealth and eschew federal
programs reliant on progressive taxation.
If everyone is motivated by self-interest, he argued, government can’t
be trusted to do what it promises. Indeed, it cannot be trusted at all.
Bureaucrats can be expected to protect their turf, not the public
interest. Every politician, Buchanan wrote, “can be viewed as proposing
and attempting to enact a combination of expenditure programs and
financing schemes that will secure him the support of a majority of the
electorate.” For Buchanan, this was reason enough to endorse economic
liberty, freedom from taxes, and privatization of public services, such
as schools, Social Security, and Medicare. In MacLean’s view, those
proposals promised a return to
the kind of political economy that prevailed in America at the opening
of the twentieth century, when the mass disenfranchisement of voters and
the legal treatment of labor unions as illegitimate enabled large
corporations and wealthy individuals to dominate Congress and most state
governments alike, and to feel secure that the nation’s courts would not
interfere with their reign.
Charles Koch well understood the power of academic experts, and he
directed millions of dollars toward developing what are now called
“thought leaders” to defend his self-interested political and economic
vision. Buchanan was one of those academics. Koch bypassed Milton
Friedman and his “Chicago boys,” MacLean writes, because “they sought
‘to make government work more efficiently when the true libertarian
should be tearing it out at the root.’” Instead, in the early 1970s, he
funded the Libertarian Party and the Cato Institute, designed to
advocate for what MacLean summarizes as “the end of public education,
Social Security, Medicare, the U.S. Postal Service, minimum wage laws,
prohibitions against child labor, foreign aid, the Environmental
Protection Agency, prosecution for drug use or voluntary
prostitution—and, in time, the end of taxes and government regulations
of any kind.” Koch also funded the libertarian Reason Foundation, which
advocated for privatizing all government functions. Another Koch-backed
organization, the Liberty Fund, hired Buchanan to run summer conferences
for young social scientists.
Buchanan’s challenge was to develop a strategy that would enlist the
public’s support for the ideas he shared with Charles Koch. This
challenge was especially daunting in the case of Social Security.
Overwhelming majorities of Americans supported Social Security because
it ensured that they would not be impoverished in their old age. In an
influential 1983 paper, Buchanan marveled that there was “no widespread
support for basic structural reform” of Social Security “among any
membership group” in the American political constituency—“among the old
or the young, the black, the brown, or the white, the female or the
male, the rich or the poor, the Frost Belt or the Sun Belt.” Pinochet’s
Chile—which Buchanan visited for a week in May 1980 to give what MacLean
calls “in-person guidance” to the regime’s minister of finance, Sergio
de Castro—had privatized its social security system, and libertarians
hoped to do the same in the United States. We now know that the
privatization of social security in Chile was a disaster for many, but
the libertarians were unshakable in their enthusiasm for market
solutions and ignored the risks.
Buchanan laid out the strategy needed to divide the political coalition
that supported Social Security. The first step was to insist that Social
Security was not viable, that it was a “Ponzi scheme.” If “people can be
led to think that they personally have no legitimate claim against the
system on retirement,” he wrote in a paper for the Cato Institute, it
will “make abandonment of the system look more attractive.” Then those
currently receiving benefits must be reassured that nothing will change
for them. “Their benefits,” as MacLean puts it, “would not be cut.”
Taxpayers, in turn, would have to be promised, as Buchanan says, “that
the burden of bailing out would not be allowed to fall
disproportionately on the particular generation that would pay taxes
immediately after the institutional reform takes place.” Cultivating
these expectations would not only make taxpayers more ready to abandon
the system; it would also build resentment among those who expect never
to get payments comparable to those receiving the initial bailout.
After they announce the insolvency of Social Security, Buchanan argued,
the system’s critics should “propose increases in the retirement age and
increases in payroll taxes,” which would, MacLean writes, “irritate
recipients at all income levels, but particularly those who are just on
the wrong side of the cutoff and now would have to pay more and work
longer.” Calls for protecting Social Security with progressive taxation
formulas would emphasize the redistributive character of the program and
isolate progressives. “To the extent that participants come to perceive
the system as a complex transfer scheme between current income classes
instead of strictly between generations,” Buchanan predicted, “the
‘insurance contract’ image will become tarnished” and its public support
will be compromised.
Critics of MacLean claim she overstates her case because Buchanan was
merely presenting both sides of the issue. But it is indisputable that
Cato and other Koch-funded policy centers favor privatization of
government programs like Social Security and public education. The
genius of their strategy was in describing their efforts to change
government programs as “reforms,” when in fact they were intended from
the outset to result in their destruction. This rebranding depended on
think tanks amply funded by Charles Koch, his like-minded brother David,
and other ideologically friendly sponsors. Charles Koch funded the James
Buchanan Center at GMU with a gift of $10 million. The libertarian
philosophy funded by Koch and developed by Buchanan has close affinities
with the Tea Party and Freedom Caucus of the Republican Party, which
oppose federal spending on almost anything other than the military and
has placed its members at the highest levels of the Trump
administration, including Vice President Mike Pence and Mick Mulvaney,
the director of the Office of Management and Budget.
MacLean’s argument that Buchanan knowingly engineered a strategy for the
wealthy to preserve their hold on American democracy has prompted
intense resistance. She has been repeatedly attacked on libertarian
blogs, historical websites, and even in The Washington Post. The attacks
are sometimes personal: Steve Horwitz, a libertarian economist who
called MacLean’s book “a travesty of historical scholarship,” earned his
degrees at GMU, where Buchanan was one of his professors. Most of her
prominent critics—Michael Munger, David Bernstein, Steven Hayward, David
Boaz—are libertarians; some receive funding from the Koch brothers. They
accuse her of unjustly berating a legitimate area of economic inquiry
and overstating the evidence against Buchanan in support of her
position. Other critics have come from the political center. The
political scientists Henry Farrell and Steven Teles, for instance, have
argued that MacLean overstates the extent to which Buchanan and his
supporters were “implementing a single master plan with fiendish
efficiency.” MacLean has replied to her critics that her book
demonstrates that Buchanan was part of a much larger movement.
MacLean’s reputation will no doubt survive. She has written a carefully
documented book about issues that matter to the future of our democracy
and established the close and sympathetic connections between Buchanan
and his far-right financial patrons. However fierce they might be, her
critics have been unable to refute the central message of her important
book: that the ongoing abandonment of progressive taxation and the
social benefits it gives most people is undergirded by a libertarian
economic movement funded by wealthy corporate benefactors. The
dismantling of basic government functions by the Trump administration,
such as Betsy DeVos’s efforts to privatize public education, shows the
continuing influence of Buchanan’s libertarian ideas.
Gordon Lafer’s The One Percent Solution is a worthy companion to
Democracy in Chains. Lafer does not write about Buchanan and the
Virginia School, but he meticulously demonstrates how the Koch brothers
and the Supreme Court’s Citizens United decision of 2010 have influenced
elections and public policy in the states. He opens his book with a
revealing anecdote about Bill Haslam, the Republican governor of
Tennessee. In 2015 Haslam wanted to expand his state’s Medicaid program
to include some 200,000 low-income residents who had no health insurance
under the Affordable Care Act. He had just been reelected with 70
percent of the vote. Republicans, who controlled both branches of the
state legislature, approved of Haslam’s plan. The public liked the idea.
But then the Koch brothers’ advocacy group Americans for Prosperity sent
field organizers into the state to fight the expansion, ran television
ads against it, and denounced it as “a vote for Obamacare.” The Medicaid
expansion proposal was defeated by the legislature.
Lafer reviews bills passed in the fifty state legislatures since the
Citizens United decision removed limits on corporate spending in
political campaigns. He identifies corporate influences on state-level
decision-making and finds that those same policies provided a template
for corporate lobbying in Congress. His most striking discovery is the
“sheer similarity of the legislation—nearly identical bills introduced
in cookie- cutter fashion in states across the country.” What Lafer
documents is a coherent strategic agenda on the part of such business
lobbies as the National Association of Manufacturers and the National
Federation of Independent Business to reshape the nation’s economy,
society, and politics—state by state.
The many goals of this agenda can be summed up in a few words: lower
taxes, privatization of public services, and deregulation of business.
The lobbies Lafer studies oppose public employee unions, which keep
public sector wages high and provide a source of funding for the
Democratic Party. The tobacco industry opposes anti-smoking legislation.
The fossil fuel industry wants to eliminate state laws that restrict
fracking, coal mining, and carbon dioxide emissions. The soft-drink
industry opposes taxes on sugary beverages. The private prison industry
advocates policies that increase the population of for-profit prisons,
such as the detention of undocumented immigrants and the restriction of
parole eligibility. Industry lobbyists oppose paid sick leave, workplace
safety regulations, and minimum wage laws. They support “right to work”
laws that undermine unions. They oppose teachers’ unions and support the
privatization of education through charter schools and vouchers.
These are not sporadic efforts to affect state policy. There is an
organization that coordinates the efforts of industry lobbyists and
turns their interests into legislation. It is a secretive group formed
in 1973 called the American Legislative Exchange Council (ALEC). It is
sponsored by scores of major corporations, which each pay a fee of
$25,000 (or more) to be members. Lafer lists the group’s current and
past corporate members, including Alcoa, Amazon, Amoco, Amway, AT&T,
Boeing, BP, Chevron, Coca-Cola, Corrections Corporation of America, CVS,
Dell, Dupont, Exxon Mobil, Facebook, General Electric, General Motors,
Google, Home Depot, IBM, Koch Industries, McDonald’s, Merck, Microsoft,
Sony, the US Chamber of Commerce, Verizon, Visa, and Walmart. In
addition to these corporations, two thousand state legislators are
members of ALEC—collectively one quarter of all state legislators in the
nation. They include state senate presidents and house speakers.
ALEC writes policy reports and drafts legislation designed to carry out
its members’ goals.* It claims, Lafer writes, “to introduce eight
hundred to one thousand bills each year in the fifty state legislatures,
with 20 percent becoming law.” The “exchange” that ALEC promotes is
between corporate donors and state legislators. The corporations pay
ALEC’s expenses and contribute to legislators’ campaigns; in return,
legislators carry the corporate agenda into their statehouses…. In the
first decade of this century, ALEC’s leading corporate backers
contributed more than $370 million to state elections, and over one
hundred laws each year based on ALEC’s model bills were enacted.
The keynote speaker at ALEC’s lavish annual conference in Denver earlier
this year was Betsy DeVos, who used the occasion to belittle public
schools and unions and to tout the virtues of school choice. She quoted
Margaret Thatcher that “there is no such thing” as “society,” only
individual men and women and families. This position supports a vision
of America in which the country’s citizens express themselves
individually as consumers rather than collectively as, for example,
voting majorities or empowered unions. When they fall victim to fires,
hurricanes, or earthquakes—or, for that matter, when the economy
collapses—these individual men and women and families can expect to be
on their own.
Lafer contends that ALEC and its compatriots are engineering what he
calls “a revolution of falling expectations.” They have cynically played
on the resentments of many citizens, purposefully deepening antagonism
toward government programs that benefit unspecified “others.” Many
people are losing their economic security while others are getting
government handouts. Why should others get pensions? Why should others
get health insurance? Why should others have job protections? Why should
unions protect their members? “We are the only generation in American
history to be left worse off than the last one,” reads a post from the
Kochs’ advocacy group Generation Opportunity urging young people in
Michigan to vote down a ballot proposal to raise the state’s sales tax.
“We are paying more for college tuition, for a Social Security system
and a Medicare system we won’t get to use, $18 trillion in national debt
and now an Obamacare system—all that steals from our generation’s
paychecks.”
It is ironic that this fraudulently populist message, encouraging
resentment of government programs, was funded by billionaires who were,
Lafer writes, “willing to spend previously unthinkable sums on
politics.” The Citizens United decision allowed a tiny percentage of the
population, the richest, to direct vast amounts of money into political
campaigns to promote privatization, discredit unions, and divert
attention from the dramatic growth of income inequality. “For the first
time ever,” Lafer writes, “in 2012 more than half of all income in
America went to the richest 10 percent of the population.”
This concentration of wealth has produced a new generation of
megadonors: “More than 60 percent of all personal campaign contributions
in 2012 came from less than 0.5 percent of the population.” In 2010,
Republicans swept state legislatures and governorships; they used their
resulting advantage to gerrymander seats and attack the voting rights of
minorities. Even state and local school board elections became the
target of big donors, like the anti-union Walton family, the richest
family in America, who poured millions into state and local contests to
promote charter schools, more than 90 percent of which are non-union.
ALEC and likeminded organizations are particularly interested in
discrediting labor unions. Lafer gives much attention to understanding
why this is. Corporations want to eliminate unions to cut costs.
Republicans resist them because they provide money and volunteers for
Democrats. Getting rid of them also reduces employee health care costs
and pensions. But, Lafer argues, the greatest threat posed by unions is
that their very existence raises the expectations of those who are not
in unions. When they function well, unions have the power to raise
wages, reduce working hours, and demand better working conditions.
Stifling this power and making every worker an at-will employee lowers
the expectations of the nonunionized workforce.
Quite simply, Lafer argues, labor unions are the only political bodies
that can impede the efforts of ALEC’s members
to roll back minimum-wage, prevailing-wage, and living-wage laws; to
eliminate entitlements to overtime or sick leave; to scale back
regulation of occupational safety; to make it harder for employees to
sue over race or sex discrimination or even to recover back wages they
are legally owed; and to replace adult employees with teenagers and
guest workers.
In education, technology corporations are using their influence to
replace teachers with computers as a cost-saving device, a move opposed
by parents and teachers’ unions. Corporations, libertarians, and
right-wing politicians pursue these goals even in states where unions
are weak or nonexistent. The rise of the “gig economy,” in which every
employee is a self-employed contractor with no collective bargaining
rights, advances this trend, empowering big employers who put a
monopolistic downward pressure on labor costs.
Reading these two books together is not a happy experience. They give
reason to fear for the future. But they also remind us why it is
important to join with others and take action. An informed public is a
powerful public. The best counterweight to the influence of big money on
politics is the ballot. When you see the strategy that libertarians,
billionaire donors, and corporations have devised, you understand why
low voter turnout is their ally and why high voter turnout is the only
way to save our democracy.
*
Since 2011 the Center for Media and Democracy has maintained a website,
ALECexposed.org, that tracks the organization’s activities. It features
lists of corporations involved with ALEC, politicians associated with
it, and the full texts of hundreds of “model” bills and resolutions ALEC
has sponsored. ↩
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