The Real Class War

Reviewed: How Washington Made the Rich Richer–and Turned Its Back on the Middle Class, by Jacob S. Hacker and Paul Pierson, Simon & Schuster, 340 pp., $17.46

When then-Senator Barack Obama called for reforms to “spread the wealth around,” opponents labeled him a class warrior intent on stealing from the rich and giving to the poor. What they didn’t mention, and what too few Americans realize, is that precisely the opposite pattern has unfolded over the past forty years. Winner-Take-All Politics details this dramatic redistribution of wealth and shows how it is no natural outcome of economic forces. It is the result of political decisions. Increasingly dependent upon campaign funds from well-organized special interests, lawmakers on both sides of the aisle have legislated in favor of the extremely rich at the expense of everyone else.

Hacker and Pierson back up their assertions with striking data. For example, the share of the nation’s income raked in by the top 1 percent shot up from 9 percent in 1974 to 23.5 percent in 2007. The figures are even more remarkable at the very upper echelons: the top 0.1 percent has seen a fourfold increase in their share of the pie, from 2.7 percent to 12.3. Meanwhile, wages for the poor and middle class have stagnated and failed to keep up with the rising cost of living.

Experts often pin the growth of economic inequality on the shift to a knowledge-based economy, which has produced a large gap between the educated and uneducated. But Hacker and Pierson point out that extreme income disparity exists even among the highly educated. Further, the same level of disparity is not found in other developed nations. Clearly, an additional force is at work.

That force, according to Hacker and Pierson, is American government and politics. Since the 1970s, the tax code has become progressively less progressive. Not only have the super-wealthy enjoyed large tax cuts, but they have benefited from loopholes such as the capital gains tax. Since capital gains like investment income are only taxed 15 percent, private equity and hedge fund managers end up paying “a dramatically lower rate than their secretaries.” Often, policy decisions go quietly unnoticed in the form of “drift”: the government simply fails to respond to changing economic realities. The minimum wage is never updated to keep up with inflation. Legislation fails to address skyrocketing executive pay, which now approaches 300 times the earnings of average workers.

So why, if our democracy is based on the principle of “government of the people, by the people, and for the people,” have our policies so consistently favored the few? The answer lies in organization. In the past, unions provided a voice for the interests of working Americans. Yet while union representation has sharply declined (from 30% in 1960 to 13% in 2000), lobbyists representing corporate and financial interests have proliferated in the corridors of Washington. Unlike the fragmented and politically uninformed electorate, these special interest groups have banded together and pooled their vast resources to exert powerful political pressure. Hacker and Pierson describe the revolving door between Congress and K Street. Take Max Baucus, the Democratic chair of the Senate Finance Committee, who packed his office with pharmaceutical lobbyists. Or take John Breaux, former Democratic senator from Louisiana. After repeatedly undercutting progressive initiatives, Breaux made the smooth transition from elected official to lavishly paid consultant at a lobbying firm.

Despite the media spectacle that surrounds presidential elections, the growth of inequality has little to do with which party occupies the White House. In fact, it was under Carter that the dynamics of “winner-take-all” began to rapidly accelerate. Hacker and Pierson turn our attention from the presidential “horse race” toward the far more significant “politics of organized combat” that has consumed both parties. They describe a GOP that became incrementally more radicalized over the past four decades, most dramatically under the leadership of House Minority Whip Newt Gingrich in the 1990s. While the GOP shifted further to the right–a shift that would recur with the emergence of the Tea Party–the Democratic Party was forced by the fundraising arms race to become more business-friendly. In turn, business interests were keen to court Democratic leaders who could stall or water down reforms.

Meaningful reform is made even harder by the structural flaws of a system predisposed toward gridlock. Since states have equal representation in the Senate, conservative small states hold disproportionate sway over less numerous but far more populous states. The increasingly ubiquitous use of the filibuster poses another roadblock, making it easy for the minority party to–with the help of a few bought-off colleagues across the aisle–stymie legislation. Such obstructionist tactics always benefit the minority party that employs them, convincing the public that the majority party is inept and that Washington is broken. During Obama’s presidency, this has given congressional Republicans an incentive to block any reform-minded legislation rather than engage in bipartisan compromise.

If the problem is organization, Hacker and Pierson conclude, then organization is the solution. And it will have to be sustained. “Political reformers will need to mobilize for the long haul,” the authors write, “appreciating that it is not electoral competitions alone that are decisive, but also the creation of organized capacity to…turn electoral victories into substantive and sustainable triumphs.”