Closing the Revolving Door: Income Inequality, Wage Stagnation & Deficits Make an Urgent Case for Campaign Finance Reform

If poor people knew how rich rich people are, there would be riots in the streets.

— Chris Rock

The wealthiest 20 individuals in the United States — a group small enough to fly together on a Gulfstream jet — have as much wealth as the 152 million people who comprise the bottom half of the U.S. population, The Institute for Policy Studies reports in “Billionaire Bonanza: The Forbes 400 and the Rest of Us“.

But what’s really driving the widening gulf between the haves and the have nots in America?

Among the more widely appreciated reasons for declining economic growth is the advance of automation. But other factors have begun to collide with technology to launch what may be a Perfect Storm: reshaping the economy to a “new normal” marked by economic uncertainty.

Another culprit is the rise of lopsided trade deals in the 1980s and ’90s, which have provided greater incentive to offshore jobs. The late billionaire and financier Sir James Goldsmith in his book “The Trap” predicted that poorly crafted free trade deals would produce a “net job loss”. In the early 1990s, Goldsmith testified before Congress advising against entry into another globalization deal known as GATT. Goldsmith also called out the Clinton administration on the Charlie Rose show in opposition to NAFTA, again predicting an outflow of jobs and capital.

If the wage stagnation of the late 1970s had not persisted to the present — some four decades! — the average American would earn $92,000 per year, reports Forbes in “Average America vs the One Percent“. In today’s dollars, those who identify as middle class are less secure than families that relied upon on a single breadwinner in the 1960s and earlier. We have gone from a society that can pay its bills and raise a family on a single income — and often a blue-collar income at that — to one in which the norm is for two able-bodied adults to work full time to support a family. (And because this is the new normal, illness and divorce are now the leading causes of child poverty and personal bankruptcy, according to the book “The Two-Income Trap“.) During this same period household debts have grown and savings diminished.

While cynics use these economic indicators to berate Americans — promoting the simplistic conclusion that Americans are eager to live beyond their means — reality is far more nuanced. In recent years recessions have gone deeper, last longer and recoveries are that much weaker. In part this is because our economy is nearly 70 percent dependent upon consumer spending for its health. Economic growth has instead remained tenuous in ways that economists typically ascribe to “lack of consumer confidence”. Behind the euphemism lies the unsettling reality that fewer Americans have the discretionary income necessary to stimulate the economy. More than 2/3 of Americans struggle to come up with $400 in an emergency.

Economic recoveries are indeed hampered by weak consumer demand. What is lesser appreciated is that job growth and wage growth face similar constraints. This traps the American economy in a self-reinforcing cycle in which GDP remains weak largely because the American middle class is poorer than the middle class of decades past. For many households, fixed expenses consume a higher percentage of Americans’ take-home pay. In some of the nation’s strongest job markets, for example, housing costs exceed a third of median income earners’ monthly take-home pay. For other households, tax burdens combined with rising healthcare costs consume nearly half of their incomes. Food, housing and childcare costs are also up.

America’s broken bookkeeping also helps explain why we’re headed for a Perfect Storm. We rely upon inflationary measures that do not account for many of the unavoidable fixed expenses all Americans, at every income segment, incur. We calculate the federal poverty line to account for the cost to feed a family of three for a year — with no provision in the formula for energy and shelter! As long as our government insists on papering over its public policy failures with misleading federal statistics, economists will continue to fret over equally misleading economic indicators. A primary concern among economists, for example, is how to promote greater levels of inflation to counter the risk of deflation when, in fact, the rising cost for healthcare, food, childcare, housing and higher education amount to significant inflationary pressures on American families.

The final and least appreciated aspect of this Perfect Storm, which deserves a much broader discussion among voters, is the dysfunctional relationships between career politicians and their leading campaign contributors. Although we hear it time and time again, it is difficult to wrap our minds around how lopsided the playing field really is. Democrats and Republicans alike have failed to commit to closing tax loopholes that allow companies like GE, Verizon and Google to pay zero — even negative! — federal taxes. Influence buying will undoubtedly continue as long as Citizens United, and Supreme Court decisions like it, continue to give Corporate Citizens a bigger megaphone with which to petition elected leaders.

In the wake of 9/11 America has become involved on a growing number of fronts in the Mideast, yet we wage the War on Terror using deficit dollars — which, in turn, is largely a function of borrowing from China and ballooning our trade deficits in the process. All the while, America’s broken entitlement systems, some of which are projected to go insolvent with the baby boomers (retirees), have gone without politicians’ commitment to shore them up despite decades of warnings. Middle class taxpayers bear a disproportionate responsibility to maintain our aging infrastructure even as the safety nets put in place a generation ago have begun to hit the skids. Americans — to include the children and grandchildren of America — are on the hook for the cost of regime change, nation building and the war on terror. All the while, our elected leaders fail to muster the political will to address outrageous higher education costs, to shore up the social security trust fund or to provide sufficient funding to feed Americans who face food insecurity. What politicians have done, instead, is telling: They have collectively enabled America’s most successful corporations to skip out entirely on federal income taxes.

To reduce income inequality we must bring about a more equitable “Globalization 2.0”. But that will not happen if special interests continue to draft the legislation our elected leaders vote upon. To reduce the federal deficit we must reform corporate taxes in a way that acknowledges that while American corporations are among the highest taxed in the world on paper those taxes are also among the easiest to dodge. But few of these necessary changes will occur as long as there exists a tolerance for the revolving door between high-level politics and Corporate America.

To solve many of the problems outlined in this piece we must adopt a “Choose Your Team” approach to public versus private service. At some level we already know this, which explains the popularity some years ago of imposing term limits on politicians. But there are downsides to sending political novices into high elected office. We value the experience of an effective public servant. Nonetheless, we don’t want our elected leaders to take their marching orders from campaign donors (special interests). It is equally unwise to allow politicians to use public office as an audition for an even more lucrative private-sector career in which they can continue to steer government policy from the other side of the negotiating table. So what do we do? We come to appreciate as Americans that these seemingly disconnected problems are entrenched by a political class that is beholden on the Right and Left to the corporate class. We appreciate before it is too late — before we suffer another 40 years of wage stagnation, tax hikes and nation-endangering deficits — that we must reform campaign finance.

There are several options to this end: Public finance of political campaigns by which to reaffirm that politics in this country is of, by and for the people, and — in lieu of term limits — implement Revolving Door Limits. Follow the money: There are countless numbers of career politicians who, upon using their position to benefit certain industry interests — such as financial and energy deregulation under the Clinton administration in the ’90s — have gone on to serve the very corporate interests their legislation has enriched. (One possibility is for public servants who parlay their time in government into lucrative careers in the private sector to surrender their taxpayer-funded pensions.)

The conflict between the public interest and the narrower scope of private interests helps explain why so many federal policies seem ill conceived in hindsight. Consider the many political policies that have backfired: the MF Globals, Enrons, Worldcoms and the the rise of the too-big-to-fail banks that came about after a Depression-era prohibition between investment banking and commercial banking was eliminated under the guise of “financial modernization” in 1999.

Almost all failed policy traces back in some form or fashion to an imbalance of power between transnational corporations in contrast to domestic public interests. When powerful interests become paramount, competition between competing interests — which is necessary to the health and sustainability of our nation — breaks down in a myriad of ways. Big businesses back regulations that disadvantage up-and-coming competitors. A pro-Big Business, anti-Small Business regulatory climate, in turn, blunts the competitive edge the United States is known for throughout the world. This, in turn, limits job and wage growth.

This phenomena also accounts for issues that do not typically bring to mind campaign finance reform. Corporations sell taxpayers (government) on costly contracts to provide defense systems that are unneeded or obsolete before they are complete — to the tune of billions of dollars per year. Corporations market food that has been genetically modified without long-term safety testing and without disclosure requirements. Chemical companies introduce herbicides and pest control products — over 80,000 since the 1940s — that under laws they helped write must be presumed safe for use in our homes, gardens and agriculture lands. (This is how DDT managed to endanger the Bald Eagle in the ’70s and Colony Collapse Disorder came to threaten the world’s most agriculturally valuable insect — the honeybee — linked to neonicotinoid pesticides in more recent times.) Students face ever-increasing amounts of debt in pursuit of a higher education with no relief in sight from politicians who are preoccupied with the concerns of interests wealthy enough to donate to their campaigns and fund equally powerful lobbies. In short, every conceivable check-and-balance — trade, tax, healthcare, food and environmental safety, wage growth and federal deficits — are undermined by the conflicts of interest that arise between wealthy private sector interests and the public interest.

A primary way to move from bad governance toward good governance is for Americans to fully appreciate that the future of this country hinges upon campaign finance reform. Until our politicians refocus on their mandate to serve the public interest they will continue to serve a small number of private interests, many of which promote an agenda that is far more global than domestic. The sooner we address the role of campaign finance in creating these intrinsic conflicts of interest within our political system the sooner we can begin to right the many manifestations of wrong that have divided Americans and, beyond undermining jobs and wages, also serve to erode American sovereignty.

In simpler terms, if the United States government were a football game the result of Special Interests legislation and Special Interests campaign finance is to put the 1 percent on one team (smaller by the numbers but bigger by wealth) and the American people — over 300 million of us — on the other team. In declaring that “corporations are people” the Supreme Court has given the 1 percent the power to run multiple plays to every one play by the American people. We have lopsided trade, poor wage growth, record deficits and bitter partisan divides in a large part due to scapegoating symptoms rather than root causes.

The symptoms are many but the causes of what undermines our future as a nation are few: An imbalance between wealthy private interests and the rest of us. Patriotic Americans, Democrats and Republicans alike, must agree on this much: We must take our country back from special interests. Taking our country back begins with a national focus on the revolving door between the private and public sector, which has remade government into a closed-loop, zero-sum game that no longer functions of, by and for the people.


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