Winner-Take-All Politics: How Washington Made the Rich Richer--and Turned Its Back on the Middle Class Audio CD – Audiobook, CD, Unabridged
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"Important.... The collapse of the American middle class and the huge transfer of wealth to the already wealthy is the biggest domestic story of our time." ---Jonathan Alter, The New York Times Book Review
About the Author
Jacob S. Hacker is a professor of political science at Yale University and the author or coauthor of several books, including Winner-Take-All Politics and The Great Risk Shift.
Paul Pierson is a professor of political science at the University of California, Berkeley, and the author or coauthor of several books, including Dismantling the Welfare State? and Winner-Take-All Politics.
John Allen Nelson's critically acclaimed roles on television's 24 and Vanished are among the highlights of his twenty-five-plus years as an actor, screenwriter, and film producer. As a narrator, he won an AudioFile Earphones Award for his reading of Zoo Story by Thomas French.
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The underlying argument is straightforward. The sources of American economic inequality are largely political - the result of deliberate political decisions to shape markets in ways that benefit the already-privileged at the expense of a more-or-less unaware public. The authors weave a historical narrative which Kevin Drum (who says the same things that I am saying about the book's importance) summarizes cogently here. This is not necessarily original - a lot of leftwing and left-of-center writers have been making similar claims for a long time. What is new is both the specific evidence that the authors use, and their conscious and deliberate effort to reframe what is important about American politics.
First - the evidence. Hacker and Pierson draw on work by economists like Picketty and Saez on the substantial growth in US inequality (and on comparisons between the US and other countries), but argue that many of the explanations preferred by economists (the effects of technological change on demand for skills) simply don't explain what is going on. First, they do not explain why inequality is so top-heavy - that is, why so many of the economic benefits go to a tiny, tiny minority of individuals among those with apparently similar skills. Second, they do not explain cross national variation - why the differences in the level of inequality among advanced industrialized countries, all of which have gone through more-or-less similar technological shocks, are so stark. While Hacker and Pierson agree that technological change is part of the story, they suggest that the ways in which this is channeled in different national contexts is crucial. And it is here that politics plays a key role.
Many economists are skeptical that politics explains the outcome, suggesting that conventional forms of political intervention are not big enough to have such dramatic consequences. Hacker and Pierson's reply implicitly points to a blind spot of many economists - they argue that markets are not `natural,' but instead are constituted by government policy and political institutions. If institutions are designed one way, they result in one form of market activity, whereas if they are designed another way, they will result in very different outcomes. Hence, results that appear like `natural' market operations to a neo-classical economist may in fact be the result of political decisions, or indeed of deliberate political inaction. Hacker and Pierson cite e.g. the decision of the Clinton administration not to police derivatives as an example of how political coalitions may block reforms in ways that have dramatic economic consequences.
Hence, Hacker and Pierson turn to the lessons of ongoing political science research. This is both a strength and a weakness. I'll talk about the weakness below - but I found the account of the current research convincing, readable and accurate. It builds on both Hacker and Pierson's own work and the work of others (e.g. the revisionist account of American party structures from Zaller et al. and the work of Bartels). This original body of work is not written in ways that make it easily accessible to non-professionals - while Bartels' book was both excellent and influential, it was not an easy read. Winner-Take-All Politics pulls off the tricky task of both presenting the key arguments underlying work without distorting them and integrating them into a highly readable narrative.
As noted above, the book sets out (in my view quite successfully) to reframe how we should think about American politics. It downplays the importance of electoral politics, without dismissing it, in favor of a focus on policy-setting, institutions, and organization.
First and most important - policy-setting. Hacker and Pierson argue that too many books on US politics focus on the electoral circus. Instead, they should be focusing on the politics of policy-setting. Government is important, after all, because it makes policy decisions which affect people's lives. While elections clearly play an important role in determining who can set policy, they are not the only moment of policy choice, nor necessarily the most important. The actual processes through which policy gets made are poorly understood by the public, in part because the media is not interested in them (in Hacker and Pierson's words, "[f]or the media, governing often seems like something that happens in the off-season").
And to understand the actual processes of policy-making, we need to understand institutions. Institutions make it more or less easy to get policy through the system, by shaping veto points. If one wants to explain why inequality happens, one needs to look not only at the decisions which are made, but the decisions which are not made, because they are successfully opposed by parties or interest groups. Institutional rules provide actors with opportunities both to try and get policies that they want through the system and to stymie policies that they do not want to see enacted. Most obviously in the current administration, the existence of the filibuster supermajority requirement, and the willingness of the Republican party to use it for every significant piece of legislation that it can be applied to means that we are seeing policy change through "drift." Over time, policies become increasingly disconnected from their original purposes, or actors find loopholes or ambiguities through which they can subvert the intention of a policy (for example - the favorable tax regime under which hedge fund managers are able to treat their income at a low tax rate). If it is impossible to rectify policies to deal with these problems, then drift leads to policy change - Hacker and Pierson suggest that it is one of the most important forms of such change in the US.
Finally - the role of organizations. Hacker and Pierson suggest that organizations play a key role in pushing through policy change (and a very important role in elections too). They typically trump voters (who lack information, are myopic, are not focused on the long term) in shaping policy decisions. Here, it is important that the organizational landscape of the US is dramatically skewed. There are many very influential organizations pushing the interests of business and of the rich. Politicians on both sides tend to pay a lot of attention to them, because of the resources that they have. There are far fewer - and weaker - organizations on the other side of the fight, especially given the continuing decline of unions (which has been hastened by policy decisions taken and not taken by Republicans and conservative Democrats).
In Hacker and Pierson's account, these three together account for the systematic political bias towards greater inequality. In simplified form: Organizations - and battles between organizations over policy as well as elections - are the structuring conflicts of American politics. The interests of the rich are represented by far more powerful organizations than the interests of the poor and middle class. The institutions of the US provide these organizations and their political allies with a variety of tools to promote new policies that reshape markets in their interests. This account is in some ways neo-Galbraithian (Hacker and Pierson refer in passing to the notion of `countervailing powers'). But while it lacks Galbraith's magisterial and mellifluous prose style, it is much better than he was on the details.
Even so (and here begin the criticisms) - it is not detailed enough. The authors set the book up as a whodunit: Who or what is responsible for the gross inequalities of American economic life? They show that the other major suspects have decent alibis (they may inadvertently have helped the culprit, but they did not carry out the crime itself. They show that their preferred culprit had the motive and, apparently, the means. They find good circumstantial evidence that he did it. But they do not find a smoking gun. For me, the culprit (the American political system) is like OJ. As matters stand, I'm pretty sure that he committed the crime. But I'm not sure that he could be convicted in a court of law, and I could be convinced that I was wrong, if major new exculpatory evidence was uncovered.
The lack of any smoking gun (or, alternatively, good evidence against a smoking gun) is the direct result of a major failure of American intellectual life. As the authors observe elsewhere, there is no field of American political economy. Economists have typically treated the economy as non-political. Political scientists have typically not concerned themselves with the American economy. There are recent efforts to change this, coming from economists like Paul Krugman and political scientists like Larry Bartels, but they are still in their infancy. We do not have the kinds of detailed and systematic accounts of the relationship between political institutions and economic order for the US that we have e.g. for most mainland European countries. We will need a decade or more of research to build the foundations of one.
Hence, while Hacker and Pierson show that political science can get us a large part of the way, it cannot get us as far as they would like us to go, for the simple reason that political science is not well developed enough yet. We can identify the causal mechanisms intervening between some specific political decisions and non-decisions and observed outcomes in the economy. We cannot yet provide a really satisfactory account of how these particular mechanisms work across a wider variety of settings and hence produce the general forms of inequality that they point to. Nor do we yet have a really good account of the precise interactions between these mechanisms and other mechanisms.
None of this is to discount the importance of this book. If it has the impact it deserves, it will transform American public arguments about politics and policymaking. I cannot see how someone who was fair minded could come away from reading this book and not be convinced that politics plays a key role in the enormous economic inequality that we see. And even if it is aimed at a general audience, it also challenges academics and researchers in economics, political science and economic sociology both to re-examine their assumptions about how economics and politics work, and to figure out ways better to engage with the key political debates of our time as Hacker and Pierson have done. If you can, buy it.
Why then? Not, as popular commentary would have it, because public opinion shifted. Hacker and Pierson cite studies showing that public opinion on issues such as inequality has not shifted over the past thirty years; most people still think society is too unequal and that taxes should be used to reduce inequality. What has shifted is that Congressmen are now much more receptive to the opinions of the rich, and there is actually a negative correlation between their positions and the preferences of their poor constituents (p. 111). Citing Martin Gilens, they write, "When well-off people strongly supported a policy change, it had almost three times the chance of becoming law as when they strongly opposed it. When median-income people strongly supported a policy change, it had hardly any greater chance of becoming law than when they strongly opposed it" (p. 112). In other words, it isn't public opinion, or the median voter, that matters; it's what the rich want.
That shift occurred in the 1970s because businesses and the super-rich began a process of political organization in the early 1970s that enabled them to pool their wealth and contacts to achieve dominant political influence (described in Chapter 5). To take one of the many statistics they provide, the number of companies with registered lobbyists in Washington grew from 175 in 1971 to nearly 2,500 in 1982 (p. 118). Money pouring into lobbying firms, political campaigns, and ideological think tanks created the organizational muscle that gave the Republicans a formidable institutional advantage by the 1980s. The Democrats have only reduced that advantage in the past two decades by becoming more like Republicans-more business-friendly, more anti-tax, and more dependent on money from the super-rich. And that dependency has severely limited both their ability and their desire to fight back on behalf of the middle class (let alone the poor), which has few defenders in Washington.
At a high level, the lesson of Winner-Take-All Politics is similar to that of 13 Bankers: when looking at economic phenomena, be they the financial crisis or the vast increase in inequality of the past thirty years, it's politics that matters, not just abstract economic forces. One of the singular victories of the rich has been convincing the rest of us that their disproportionate success has been due to abstract economic forces beyond anyone's control (technology, globalization, etc.), not old-fashioned power politics. Hopefully the financial crisis and the recession that has ended only on paper (if that) will provide the opportunity to teach people that there is no such thing as abstract economic forces; instead, there are different groups using the political system to fight for larger shares of society's wealth. And one group has been winning for over thirty years.
1. The richer you are, the more you have benefited from economic changes over the past 30 years.
2. The poorer you are, the worse your economic life has become over the past 30 years.
3. The previous two conclusions are largely the result of government policy.
4. If we want to avoid becoming a Latin American economy where the rich get richer and the rest suffer, we need to change government policies.
I am convinced that these 4 "facts" represent our current reality.... and that we need to address them. The book is required reading for anyone interested in federal tax or regulatory policy.
Some may feel this book is just as polarizing as the current state of politics and media in America. The decades-long decline in income taxes of wealthy individuals is cited in detail. Wage earners are usually subjected to the FICA taxes against all their ordinary income (all or almost their entire total income). But the top wealthy Americans may have only a small percentage (or none) of their income subjected to FICA taxes. Thus Warren Buffett announced that he pays a lower tax rate than his secretary. Buffett has cited income inequality for "poisoning democracy."
When you search the `Net for Buffett quotes on inequality, you get a lot of results showing how controversial he became for stating the obvious. Drawing attention to the inequity of the tax regime won him powerful enemies. Those same people are not going to like the authors for writing Winner-Take-All. They say these political science people are condescending because they presume to tell people their political interests.
Many studies of poverty show how economic and political policies generally favor the rich throughout the world, some of which are cited in this book. Military spending and financial bailouts in particular favor the wealthy. Authors Jacob Hacker and Paul Pierson document a long U.S. policy trend favoring wealthy Americans. This trend resulted in diminished middle class access to quality healthcare and education, making it harder to keep up with the wealthy in relative terms. Further, once people have lost basic foundations of security, they are less willing and able to take on more risk in terms of investing or starting a business.
The rise of special interests has been at the expense of the middle class, according to the authors. Former President Carter talked about this and was ridiculed. Since then government has grown further from most of us. Even federal employees are not like most of us anymore. In its August 10, 2010 issue, USA Today discussed government salaries: "At a time when workers' pay and benefits have stagnated, federal employees' average compensation has grown to more than double what private sector workers earn, a USA TODAY analysis finds."
An excellent documentary showing how difficult it is to address income inequality is One Percent, by Jamie Johnson of the Johnson & Johnson family. Collapse: How Societies Choose to Fail or Succeed, by Pulitzer Prize-winner Jared Diamond Collapse: How Societies Choose to Fail or Succeed shows examples of what can happen when a society disregards a coming disaster until too late. I hope that Winner-Take-All will prompt people to demand more of elected officials and to arrest the growing income gap for the sake of our democracy.
And why should we care that most of the after tax income growth since 30 years ago has gone the way of the richest Americans in a "winner-take-all" economy? Because as Supreme Court justice biographer Melvin Urofsky stated, "in a democratic society the existence of large centers of private power is dangerous to the continuing vitality of a free people." (p. 81) Because if unchecked, a new economic aristocracy may replace the old hereditary aristocracy America's Founders fought to defeat (p. 298). Because unequal societies are unhappy societies, and inequality can foster individual resentment that may lead to a pervasive decline in civility and erosion of culture.
And why should we be concerned that this trend in rising inequality may not experience the period of renewal the authors are optimistic about? Because unlike the shock of the 1930s' Great Depression that served as the impetus for the politics of middle class democracy, the potential shockwaves of the 2008 Great Recession were tempered by massive government stimulus, resulting in no meaningful financial reform, and an extension of the tax cuts for the wealthy. And because of the lottery mentality of a large swath of the population which opposes tax increases on the rich. One day, they or their children too can share in the American dream. According to an October 2000 Time-CNN poll, 19 percent of Americans were convinced they belonged to the richest 1 percent. Another 20 percent thought they'd make the rank of the top 1 percent at some point in their lives. That's quite a turnover in the top 1 percent category to accommodate 20 percent of the population passing through.
Mr. Hacker and Mr. Pierson have put together powerful arguments on the root causes of income inequality in the U.S., its political and economic ramifications, and to a lesser extent, a roadmap to returning democracy to the masses. This is an eye opening and disturbing, yet informative book, even for readers who may disagree with their opinions.
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