Saturday, November 18, 2017

The New Gilded Age

Has arrived.  The Citizens United Supreme Court decision (= every dollar has an equal voice) paved the way for the oligarchy which is now developing in the United States.  We might soon be openly ruled by a handful of very rich families, pulling the strings of their politician marionettes.

There are clear signs of that.  One is the rise in all kinds of mega-mergers*, even inside the media industry.  If a free press is a necessary condition for democracy, we are going to be in deep trouble when most of the media is owned by a handful of very rich families, with conservative agendas.  Some evidence of that tendency toward market concentration in the media — and toward concentration into conservative hands — can be seen in the Sinclair Broadcasting case and in the Koch brothers' plan to be involved in the purchase of the Time magazine.

Another sign is the clear influence of the rich donors on both the House and Senate versions of the Republican tax cut proposals**:

The potential winners in the proposals include the heirs of those who die and leave more than 5.5 million dollars, the owners of private jets who in the Senate bill could deduct the expenses of that aircraft from their taxes, and all rich people who currently end up having to pay taxes based on the Alternative Minimum Tax which would be repealed in both proposals. The Alternative Minimum Tax was created to stop extremely rich people (coughTrumpcough) from using various accounting tricks to pay less taxes than you or I.  Well, the Republican tax proposals lets them do exactly that.

Finally, a third sign is that some Republican politicians are bluntly admitting that they are doing the business for their rich donors.  Examples from some ten days ago:

“The most excited group out there are big CEOs, about our tax plan,” Gary Cohn, the leading White House economic adviser and former chief operating officer at Goldman Sachs, said in an interview with CNBC on Thursday.

“My donors are basically saying, ‘Get it done or don’t ever call me again,’” Rep. Chris Collins (R-N.Y.), himself a millionaire, said on Tuesday.

Sen. Lindsey Graham (R-S.C.) told reporters on Thursday that a failure to pass tax reform would fracture the Republican Party and lead to more far-right wing primary challengers. “The financial contributions will stop,” he added.
“(Donors) would be mortified if we didn’t live up to what we’ve committed to on tax reform,” Steven Law, the head of Senate Leadership Fund, a super PAC affiliated with Senate Majority Leader Mitch McConnell (R-Ky.), told the New York Post.
What's the problem with any of that, you might ask.  How does that differ from how any voter decides on the allocation of their political donations?  You stop giving if you don't like what the politicians achieve, right?  And so do those rich guys.

Right.  But note that if  an ordinary Jane or Joe stops a $50 political donation, the impact on either political party is miniscule***.   If,  on the other hand,  the Koch brothers withdraw a $50 million dollar donation, the impact could be catastrophic. 

This difference makes politicians pay attention to the wealthy donors and focus on doing their bidding.  It creates a concentration of power in a democratic system which hampers the basic functions of democracy, turning some parts of it into a clientelist system which benefits the few at the expense of the many.  It also exacerbates the already large income inequalities in this country.

Those income inequalities existed during the previous gilded age which was anything but gilded for most.  Still, it was very gilded for some.  I once found a book on Newport during the gilded age at a yard sale.  One of the stories it told was about the dinner parties at the great Newport mansions:

The table would be covered with sand and in the sand were hidden rubies, diamonds, emeralds and pearls.  Each dinner guest would be allotted a silver spade with which they could search for those treasures, and at the end of the dinner they could take home all the jewels and pearls they had found.

Think of the Republican tax reform bills as the sand and the goodies inside it for the super-rich as the jewels and pearls.  Think of Donald Trump as the host at that mansion.  The guests at his table can take the goodies home.  The rest of us are the staff, there to clean off the sand. 


These two articles explain why consumers should be wary of mergers.  Some might benefit consumers, of course, if any efficiency advantages from the merger are passed on to consumers in the form of lower prices.  But note that mergers also increase the market power of the new merged firm, making it bigger.  It has now fewer competitors, having eaten at least one, and less competition. That may allow higher pricing.

**  It's clear that the whole tax "reform" is just a smokescreen to give the wealthy donors what they regard as their dues (what they have paid for).  From last September:

Cutting taxes for high-income people, however, has long been a major priority for Republican donors. The GOP's repeated failures to repeal the Affordable Care Act have also grated on the right's wealthiest patrons for some time. At a conference in June, several of them reportedly threatened to withhold financial support if Trump and congressional Republicans could not find a way to cut taxes. Earlier this month, that perspective was confirmed during a closed-door meeting where Sen. Cory Gardner of Colorado reportedly told his colleagues that "donors are furious" at the GOP for not being able to pass conservative legislation.

***  We would need a million Janes and Joes, ,giving fifty dollars each,  working together to negate one fifty million donation by someone like the Koch brothers.  That is not good for democracy.