Sunday, February 28, 2016

The real political "establishment" in America is wealth

We hear a great deal these days about the political "establishment".  Some opine that the "establishment" will try to prevent Donald Trump or Bernie Sanders from becoming Presidential candidates for their respective parties.  Others claim that the popularity of those individuals is precisely the result of a rebellion against the "establishment" . . . but what, precisely, is the "establishment"?

It's not career politicians, that's for sure.  They're nothing more than servants of and flunkeys for the real establishment - which is wealth and those who hold it.

I'm no socialist;  I absolutely believe that your money is yours, and you should be free to use it as you see fit, without a government trying to redistribute it or make better use of it than you would.  (For a start, what, precisely, qualifies 'government' to be a better steward of your resources than you are?)  Nevertheless, I think there is a real problem with the concentration of wealth in the USA at the moment.

That problem has been largely created by the wealthy themselves, and if they don't solve it, the people of this country will act to solve it for them - one way or another.  That may be by forcing redistribution in socialist style, which is what Bernie Sanders represents.  It may be by depriving the wealthy and their corporate interests of cheap (illegal) labor, and adjusting taxes to a realistic level in relation to their income and assets (something they've been working against for decades, as I'll show).  It may be by simple confiscation, which would be the progressive/Communist approach.  However, one way or another, it will happen.  That's inevitable, as any student of history will acknowledge.  When economic inequality becomes too great, something will happen to restore balance.  It always does.  The pendulum swings one way, then it swings back.  The cycle is never-ending.

Let's take a look at a few indicators.  I suggest you read the linked articles for yourself, then make up your own mind about their present and future implications, both political and social as well as economic.

Robert Reich is a left-wing commentator who sees the present political conflict in economic terms.  His article is, I believe, a realistic assessment of what's going on.

Something very big has happened, and it’s not due to Bernie Sanders’ magnetism or Donald Trump’s likeability.

It’s a rebellion against the establishment.

The question is why the establishment has been so slow to see this.

. . .

Economic indicators may be up but they don’t reflect the economic insecurity most Americans still feel, nor the seeming arbitrariness and unfairness they experience.

Nor do the major indicators show the linkages Americans see between wealth and power, crony capitalism, declining real wages, soaring CEO pay, and a billionaire class that’s turning our democracy into an oligarchy.

Median family income lower now than it was sixteen years ago, adjusted for inflation.

Most economic gains, meanwhile, have gone to top.

These gains have translated into political power to rig the system with bank bailouts, corporate subsidies, special tax loopholes, trade deals, and increasing market power – all of which have further pushed down wages [and] pulled up profits.

Those at the very top of the top have rigged the system even more thoroughly. Since 1995, the average income tax rate for the 400 top-earning Americans has plummeted from 30 percent to 17 percent.

Wealth, power, and crony capitalism fit together. So far in the 2016 election, the richest 400 Americans have accounted for over a third of all campaign contributions.

Americans know a takeover has occurred and they blame the establishment for it.

There’s no official definition of the “establishment” but it presumably includes all of the people and institutions that have wielded significant power over the American political economy, and are therefore deemed complicit.

At its core are the major corporations, their top executives, and Washington lobbyists and trade associations; the biggest Wall Street banks, their top officers, traders, hedge-fund and private-equity managers, and their lackeys in Washington; the billionaires who invest directly in politics; and the political leaders of both parties, their political operatives, and fundraisers.

. . .

The establishment doesn’t get that most Americans couldn’t care less about economic growth because for years they’ve got few of its benefits, while suffering most of its burdens in the forms of lost jobs and lower wages.

Most people are more concerned about economic security and a fair chance to make it.

. . .

Eventually, those with significant economic and political power in America will have to either commit to fundamental reform, or relinquish their power.

There's more at the link.  I urge you to read the whole thing, and follow the links he provides.

I'd also strongly suggest that you read as many as possible of the following articles, particularly the last one.  You'll note that they come from all sides of the political spectrum.  Most tend to support Mr. Reich's thesis, directly or indirectly.  They provide much food for thought.

  1. The Forbes 400
  2. The Sunday Times Rich List (for a European equivalent to the Forbes 400)
  3. What the Forbes 400 List Says about American Wealth
  4. Billionaire Bonanza: The Forbes 400 and the Rest of Us
  5. The Gains From the Economic Recovery Are Still Limited to the Top One Percent
  6. The Biggest, Most Influential Political Donors On The 2015 Forbes 400
  7. Forbes 400 Contribute Record Amount To Presidential Campaigns, Super PACs
  8. Nearly 60 donors give one-third of all 2016 campaign cash
  9. Wealth Inequality
  10. Weimar America (Victor Davis Hanson at his best)

Those articles effectively outline and illustrate who is the "establishment" in the USA today.  They are the people who have controlled, and now control, and intend to continue to control, our economic and political and social destiny.  They aren't interested in what the 'little people' (i.e. we) want;  they're interested in perpetuating their privilege and power in society . . . and they're not about to give that up without a fight.  Want more evidence of that?

  1. Bombshell: Insider Leaks Koch Bros, Rubio Plan to Stop Trump
  2. Inside the Republican Party’s Desperate Mission to Stop Donald Trump
  3. Bernie Sanders vs. Hillary Clinton: The Democratic Party’s existential choice
  4. 'Establishment' pick Clinton draws in early endorsements

The "establishment" on both sides of the political aisle is basically the property of the wealthy who bankroll them.  Both establishments have made their choices (or had their choices dictated to them) over who will best represent their (and their backers') interests.  They're doing their best to shut out the others.  Trump gives the Republican establishment nightmares, because he's not beholden to them for political or financial support.  He's rich enough to run on his own if necessary.  Sanders is fiercely socialist and populist - the opposite of the Democratic establishment, which in its own way is just as oligarchical and elitist as the Republican.

Furthermore, no matter who wins the election, the "establishment" will ensure that Republicans and Democrats work together to further its interest, despite any differences in party political platforms.  Just look at how Republicans have spinelessly caved in to Democratic pressure on taxation and expenditure since they regained the majority in Congress.  Their "conservative" credentials have largely been demonstrated to be meaningless.  Money talks . . . and they listen.  It's precisely the same on the other side of the aisle, of course.

Another example is how the "establishment" influences the organs of government to make rulings, produce statistics, and enact policies and regulations that favor their interests over those of "the people".  We discussed GDP earlier this morning.  Why do you think politicians have interfered so blatantly in the calculation of inflation, GDP and other economic statistics?  It's because doing so allows the wealthy to become wealthier, by manipulating economic policy in accordance with the flawed statistics.  Want more?  Just look at the Federal Reserve, and the 'revolving door' between the Fed and the commercial banking sector.  Many commentators have opined that the latter effectively runs the Fed in its own interest, and it's hard to gainsay them.  It's logical that such interest is dictated, not by domestic political considerations, but by those of the banks' owners and investors - i.e. the wealthy.

I think the evidence is clear.  Above any and all other qualifications or distinctions, the "establishment" is wealth.  That buys, influences and controls all the other "establishments", political, social and economic, that support the interests of the wealthy.

Food for thought indeed . . .



kurt9 said...

Yep. Its the keynesian fraud of the Federal Reserve over the past 2 decades (since 1995) that have made the wealthy superwealthy and everyone else worse off.

Anonymous said...

Peggy Noonan, establishment figure par excellence, writing in the Wall Street Journal, seems to have finally figured it out. Her opinion piece, "Trump and the Rise of the Unprotected, Why political professionals are struggling to make sense of the world they created." is well worth reading. Unfortunately, it's behind a paywall, but here's the link:

Old NFO said...

Bought and paid for... Except us peons are finally waking up to that fact. The real question is what will this election cycle bring?

bmq215 said...

What will this election cycle bring? Well by any indication more of the same. Sure, voters are all hopped up on righteous indignation but let's look at the candidates:

Rubio: Controlled by wealth
Trump: is wealth
HRC: Controlled by wealth
Sanders: Socialist

The only potential change I'm seeing is socialism and that both doesn't look likely and doesn't sound good. So is there really anything different about this year? Besides the fact that one of the candidates cut out the middleman and just decided to run as a rich guy?

bmq215 said...

Oh, and Cruz. Forgot that's technically still in the race. Seeing as the last time I checked he was second only to HRC in money and has more PAC money than any GOP candidate (now that Jeb is gone) I'm gonna go with "Controlled by wealth".

JK Brown said...

Don't get hung up on tax rates. It is a diversion. The top earners have been paying an increasing percentage of all taxes (68% paid by the top 10% of earners in most recent data) since 1982.

And really isn't the bottom line the actual cash the Treasury receives vs the percentage of income?

As you might see, the lower 50% of earners spend a higher percentage of their income on housing, food, cell phone plans, etc. than the top 10% of income earners.

However, breaking up the cronyism that has crept in and increased under the current administration as well as, refining regulation vice repealing so that the public safety is protected but at the lowest burden possible for the entrepreneur/business.

Oh, but do repeal and outlaw the regulatory burdens imposed solely to keep bureaucrats busy, such as the recent reporting of employee earnings by sex, race, etc. Those burdens neither protect the environment, the employee or anyone else from getting hurt, it is a takings for the benefit of loser sociologists.

JK Brown said...

Forgot the supporting link for my comment on the percentage of taxes paid vs tax rates

Paul, Dammit! said...

This was well done, and timely, Peter, as are some of the comments here. The only caveat I'd add to JK Brown's thoughts on taxes is that the tax code is so far removed from the raw numbers for large interests that I don't think it's a reasonable metric to justify the current system, as it's also far too easy for low earners to not pay taxes as well. The bottom line is not static. The goalposts are moving further apart, and, to me, that means that there's no virtue in claiming what percentage high earners contribute when it gets easier for both they and low earners to not contribute.
In my own head, I sound more socialistic (ugh) when I say that the current tax system is weighted adventitiously towards the ends, not the middle, but that doesn't make me incorrect.

B said...

"adjusting taxes to a realistic level in relation to their income and assets" Are you going to advocate taxing people on their assets as well as their income?

What, exactly, is the "realistic" level here?

The top 10: pay most of the taxes (nearly 70%)

The bottom 25% paid NO TAXES AT ALL.

It sounds very much like Barry Obama (and Hillary's, come to think of it) saying "Fair Share". I find that disturbingly ....socialist. Especially coming from you. What, exactly, is the "realistic level in relationship to their incomes and assets"?

You do realize that you are in the top 25% or so of household income groups, right?

Truly, taxes oughta be a flat percentage of income, no deductions....and the budget should be hashed out on what LAST years tax take was.

SiGraybeard said...

Reich's statement that, "Since 1995, the average income tax rate for the 400 top-earning Americans has plummeted from 30 percent to 17 percent." is a deliberate distortion; the so-called Buffet Rule (which is the link) It reports the tax rate on investment income and calls it ordinary income. The tax code; steaming, fetid pile of **** that it is, encourages people to invest and grow companies because it's an economic good which should benefit more than just the investor and company. That's why "Warren Buffet pays 15% tax and his secretary pays 30%" (that's close to what they were saying).

Notice, by the way, that Reich, Obama, Buffet and all never said we should lower his secretary's taxes? In this example Reich didn't say, "lower everybody's taxes to 15%", they just wanted an excuse to take more of everyone's money.

When the Government got so big and so involved in everything that it became easier and cheaper to buy a senator than any other way of improving yourself, this outcome became guaranteed.

Unfortunately, I don't think there's a way out of it that doesn't involve really ugly history.

Peter said...

@ Mr. B: No argument about the flat tax as the fairest way to handle things. I'd also consider the so-called 'fair tax' proposals. Either would be better than what we have now. Even better would be a tax code based purely on consumption, with basics taxed at a minimal level and 'luxuries' at a higher rate - but the states would never agree, as they already rely on consumption taxes.

As for being 'socialist' - no, not at all. That's why I emphasized in my article that the criticism comes from all sides of the political equation. Sure, socialists are critical. So are capitalists and a bunch of other "ists". The situation has reached critical mass. It can't go on - so it's got to change.

Nate Winchester said...

This is one of those things that sends up red flags for me...

First of all, how is Robert Reich NOT establishment? Served as secretary of labor and on Obama's economic transition advisory board and with a net worth of $4 mil. By his own definition, HE is establishment.

Consider also the trend in the culture right now. As Raz0rfist pointed out the only villain allowed in stories today is the rich old white dude. (he specifies games but think about movies a moment - if it's not fantastical, is the antagonist a rich old white dude?)

So what you may ask? Think about it a moment, but who is making, funding, producing, etc the games & movies of today but rich old white dudes.

Yet here, we have a rich old white dude in real life telling us that our enemies are... rich old white dudes!

I really don't have a conclusion here, just that my instinctive alarm bells are going off. The most effective lies are telling people just enough truth to come to the conclusion you want them to. A truth that, if they check, they confirm is true and increase their trust in you without ever looking a little further and seeing the whole picture that you're not telling them.

I'm just saying, Peter, something ain't right and I think they're trying to get us to look in the wrong direction.

MadMcAl said...

I think it is impossible to create a tax system that is fair and simple (aka understandable for the common people).

A flat tax sounds most fair and simple. Until you realize that the bottom x% have (without taxes) just enough income to house and feed them self, while the top x% don't need 60% of their income even with all the luxuries that are still sane (I don't consider a private A380 Flying Palace sane).
So 20% flat taxrate make the former homeless and no real differnce for the latter.
Also, I personally find the idea that investment income is not taxed as normal income abhorrent.
Income is income.
If the capital gains tax would make a difference between investments that create jobs or affordable housing and investments that just milk the markets, ok, then the former can be taxed less.
But the latter has to be taxed as high as the normal income.
Also, honestly, most tax shelters have to disapear.

Mike said...

You don't have to be a socialist to oppose crony capitalism. The Southern agrarian tradition denounces what it calls the "artificial aristocracy" that feeds off the people through a system of government favors. Once articulated by John Taylor of Caroline and John Randolph of Roanoke, it is today given voice by Wendell Berry and Thomas Fleming.

B said...


Your point is well made..Except that most of the folks you refer to who would supposedly become homeless if they had to pay their fair share of taxes also get subsidized by the rest of us....and they somehow always have money for beer and drugs and smoke.....and realize this: these people who pay no taxes get a say in how those taxes are spent....or at least who is selected to decide how those taxes are spent.

Would you go with no vote if no taxes? If you have no skin in the game, then why should you get a say?

MadMcAl said...


If they get subsidies from the taxes then they have effectively a reduced tax rate.
If they have an tax threshold then they have effectively a reduced tax rate.

That they have enough money for beer and drugs, well, if the subsidies are too high you have to take it to your politicians.
AFAIK the welfare system in the US is a bit... unbalanced.

And these people pay taxes. Sales taxes at least.

If you make your say in the democracy dependent on the taxes paid you get to the point where the weight of your votes are proportional to the taxes you pay.
If you now get to the point that corporations are "persons" and pay taxes... I think everybody sees where that will lead.
No lobbyists necessary anymore.

sdharms said...

7 doners financed Geo McGovern in his run for the Presidency. This ownership of the political class is bipartisan and historical.
I am sick of all of it.