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>> We are very honored today to have Jacob Hacker of the Yale
with us to speak on the subject, Department of Political Science
"Has American Politics Betrayed the Middle Class?" I can think of no more important
question than this, the year of the Wisconsin Idea. Many of you in this room, I'm sure know that the original
Wisconsin Idea gave rise to the great wave of progressive reform
ideas were the progressive in the late 19th and early 20th centuries, and know these core
income tax, the abolition of monopoly, and the control of "predatory wealth," and the
idea that no advancement of human welfare or progress could take place without a minimum
labor rights. As we all know, these issues living standard and strong
Hopefully, we'll learn a little bit more about that. have been settled for about 100 years here in Wisconsin.
lecture, and our sponsoring departments and programs, We including the School ofale Fund Journalism and Massf this
Communication; the LaFollette School of Public Affairs; the Departments of Community and
and Women's Studies; Political Environmental Sociology; Gender
School of Human Ecology; Science; and Sociology; as well as the program in Civil Society and Community Research in the
and the Center for Communication and Democracy.
opportunity to thank I also want to take this
has made this lecture possible. iShe's in the back of the room. Mass Communication, whose work
And also the staff of the Social [applause]
Jacob Hacker is the Stanley B. Resor Professor whose great work has also helped us make this possible.
of Political Science at Yale University.
He's also a resident fellow at the Center for the Study of American Politics. He's the director
of the Institution for Social and Policy Studies. He is an expert on
and social policy. the politics of U.S. health
And across a national perspective, he most notably promoted a proposal during
the healthcare reform to create a public health insurance option, competing with private
healt[applause]ies.
I guess we won't expect too much
hostile questioning. [laughter]
books, given my age, I'm not too Hacker is the author of five
happy about that. [light laughter] Including The Great Risk Shift,
which is a fine book, a wonderful book. I urge all of you to read it, which argued before the crash of
2006, that much of the burden of
inequality has been shifted onto the American middle class.
written with Paul Pierson, is Winner Take All Politics: How Washington Made The Rich Richer And Turned Its Back ok,
On The Middle Class.
more about. HeIt has received extensiveic sattention, and Jacob ism a frequent media commentator,
often testifying
before Congress. It is with great pleasure and honor that we welcome
Jacob Hacker. [applause]
Jacob Hacker: Thank you so much.
this space. What a beautiful setting for It's an honor to be here, and it's really a pleasure to be in
this conversation. I'll try to match the setting
with some dynamism, and not too much depressing news, because I know that at this point in our
get extremely distraught about nation's politics, it's easy to
what's happening. But I want to try to offer, both embracing, I think, a realistic
vision of what's gone wrong, but
also some idea about what could be done to make politics better. Now, it's a little intimidating
for me to come up here, not so
much because of the size of the crowd, I understand you guys are a little bit favorable to
the public insurance option,
that's always good to hear, but because I'm following in the heels of a Nobel Laureate.
But I'm not too intimidated on
that front, because a few months ago, I gave a talk to which the warm-up speaker
was President Barack Obama. [laughter]
being the disappointing speaker. So, at this point, I'm pretty capable of dealing with that,
In fact, at that talk, I told people, you know,
have a lot in common. For example, me and President Obama
is his books actually sell we've both write books. One difference, of course,
a lot of copies. So I will note that if you want to double my book sales, you can
purchase a copy over here.
[laughter] And I will be signing it. But in all seriousness,
we academics don't often get
a kind of respect. and so it's easy to make these
I was reminded of that when I was starting out as a new assistant professor at Yale. self-deprecating jokes.
a glowing evaluation. It said, "Professor Hacker, if I received what at first seemed
I had just 15 minutes to live, I want to spend it in your
class, because that way,
it would seem like an hour." [laughter]
that I should speak for about 40 minutes. I'll try make that 40 minutes Okayseem like 40 minutes.y Lew
At the risk of using up any more
a thanks for putting of my valuable time, I want to thank one more person. Wendy, of course, deserves
this together. Lew, thank you for that kind
Thanks to the Hilldale Fund for having me out. introduction.
you learned, you know, you did Thanks to Social Studies. Isn't it fun that something
in fifth grade-- I actually was a Social Studies concentrator at Harvard,
so I had a warm glow when I saw that Social Studies was one of the sponsors here. Also, I'm now a director of
an institution, so I realize
just how hard it is to get two programs to agree on anything.
Political Science to agree So to get Sociology and
to have me out is probably an achievement. But I also want
my co-author, Paul Pierson, who's listed right here.
His was very much a key project. I just spoke with Paul
a few minutes ago.
He wished me the best. He's in Berkeley, California. I said I'd really love to have
you here in Wisconsin speaking
I said never mind. today, and he goes, well, what's the weather right now? [laughter]
The first gap we've been hearing Never mind! So, I'm going to talk today about two gaps.
more and more about, thanks to the Occupy Wall Street protests,
the richest of Americans and the the other 99%, the gap between
rest. A gap that has been growing over the last generation, and which
I'll argue has been deeply
caused by changes in our politics and what government
But I also want to talk about another gap. has done over that generation.
This is the gap that will lead to my conclusion at the end, my
prescription, if you will.
That's the gap between expectations between when President Barack Obama came into
office and the reality of four
It doesn't matter whether you are liberal or conservative. It doesn't matter which side of the partisan aisle you are on.
You can't but watch what's played out with the debt ceiling
today, with the fight over the
Great Depression and not feel deficthat our politics ise to even act in the face of the worst economic crisis since the
dysfunctional. We didn't need the Occupy Wall
Street protest to remind us of
that, or to remind us that the common thread in this dysfunction, a concern that's
shared by the tea party and Occupy Wall Street, is the
been taken over by Wall Street degree to which it seems like our government has basically
in recent years. We don't need those reminders to
But I think it's worth tell us that.
remembering just how common the sense of despair is, and cynicism, and how different it
is from how Americans felt about
their government at mid-20th century, or about how they felt during the ferment of
progressive reform that Lew alluded to earlier. There was a poll done in 2010 that asked Americans
a simple question.
Then there was a list of groups. Do you think that the federal government has helped the following groups a great deal?
government has helped Wall Wall Street and financial institutions. Do you think the federal
you betcha, yes. Street financial institutions a great deal? 53% of Americans said,
What about large corporations? Well, 44% of Americans said they
had been helped a great deal. Then the pollster asked about that group that's supposed to be thought that large corporations
politics, the middle class. Does anyone want to hazard a the lone star of American
guess what percentage of Americans asked in this survey
said that they felt the federal government helped the middle
17. >> Two! class[laughter]eal? >> 12.
Two percent. You cannot be too cynical.
When you can get people to agree, almost two percent of Americans at least, to agree
to almost anything, that two
percent could well have been around the error of people who
right? didn't understand the question,
[laughter] That's a pretty remarkable fact.
we are a middle class country. After all,
Socialism had no chance here, because of this sense of strong allegiance to the middle class, Uthe idea that we were allt
prosperous and together, that we
Socialist utopia is floundering. all were part of the American dream, he said, on racks of roast beef and apple pie,
This idea, right, of prosperity, of forward progress, of education and hard work leading
to achievement of the American
Dream, of a piece of the American pie, that idea is at the heart of the American
experiment. So what is he saying, that
people feel today, that that experiment has gone awry, and
why do they feel that way?
the promise of our economy, that Well, I want to argue that they feel that way because they have to, that the promise of America,
those who worked hard and played by the rules would get ahead, that there is alongside, an
equality, an opportunity, and fairness in our policies, that
being broken. I want to show you that. our democracy is not overrun by money, that that promise is
often results, and try to lift Then, as I take you away from the pessimistic despair that
you up with a vision of how our politics could be changed. It's obviously not going to be a
vision that's going to take us
way that we understand the out of this room into the promised land, but which will show, I think, that the common
transformation of our economy is much more pessimistic than it is
today. than what I'm going to offer
Often, what we're told is that rising inequality is, as Henry
simply an economic reality. It's neither fair nor useful, I'm continuing his quote, to blame either party.
Well, of course, right? We know who Hank Paulson thought
was being unfairly and uselessly blamed for rising inequality.
But notice what he said.
It's simply an economic reality. It's a fact.
held, and continues to be held That's a view that actually was
by many economic analysts and pundits. On this view, globalization,
technological change, de-industrialization, these are vast economic forces, against which we've had really no
recourse but to try to help those left behind with education
or some minimal social supports. I want to tell you a different
story.
with our economy. I His name, and you may recallh someone who I think embodies, epitomizes what's gone wrong
him, is Sandy Weill. Yes? No?
So, Sandy Weill, the head of
asked him to reflect on the last Citigroup, was interviewed in 2007 by the New York Times. The New York Times' interviewer
25 years, in which he has become fabulously rich, so rich that at
of money to philanthropic causes the time, he was giving a bunch
within New York. Here's what Sandy Weill said. People are going to look back on
the last 25 years and say, this has been and incredibly unique
to build what we built. This is 2007, before Citigroup period of time. We didn't rely on somebody else
joke. Sandy Weill was reflecting on his self-made qualities in this begreat era of prosperity.a
So let me tell you something
about Sandy Weill, about what he did, what sits on his office
When he was head of Citigroup, wall.
up on his wall there was a plaque. It was about four feet wide,
apparently. It was the equivalent of a
stuffed lion's head. It was glass on wood.
And on the glass was etched a picture of Sandy Weill. And below that picture it said, "Sandy Weill,
shatterer of Glass-Steagall." [audience reacts] Now, for those of you who don't get the inside financial
baseball, this play on words
that was so funny for Wall Streeters.
depression era rule that set up a wall between financial Glass-Steagall was the
bets in the wild financial institutions on the one hand, that were placing casino-like
markets, and the sort of staid banking activities that were
this reckless financial speculation. supposed to be protected from
And Glass-Steagall was overturned in 1999 by a law that
was passed by both House of Congresses, as all laws are, and
Glass-Steagall was not the cause signed by, yes, President Clinton.
of the financial crisis, but it was a capstone of a whole series of financial laws that
essentially transformed Wall
Street over 25 years, from a relatively stable and a not particularly lucrative place to
work, okay, into the epicenter
of America's winner take all economy.
capacity for creating outside rewards for its --, and no other No other industry developed such
industry, as we learned, had such an ability to privatize
gains and socialize the losses
that resulted. The reckless financialization of
occurred because, in important the economy that occurred,
part, because of changes in government policy. We know that, because leading
the charge against
else to build what he built, he Gwent out there and he did it than Sandy Weill. So he didn't rely on somebody
himself, by fighting to repeal the depression-era law that
prevented the kind of reckless
financial conglomerates that he would soon head. Now, I don't want to pick on
Weill too much. I mean, I do, but that wouldn't be a very interesting talk. Rather, I'm going to suggest
that there's a larger lesson in this story. We tend to assume that what's happened to our economy, or at
least we thought this before the
downturn, that it was all these natural forces beyond individual control.
What I want to do is step back
our economy? and just look at what happened. How is Sandy Weill's story like the story of what happened to
Well, for one thing, when we talk about inequality, we miss
talking about really is the pulling away of the very rich from the rest of America. This is not a story about thee
gaps on the ladder, the rungs on
the ladder moving apart across the board, it's a story about huge amounts of concentration at
the very top, levels of concentration we have not seen
in this country since before the Great Depression, and in fact on
some dimension, we have never seen before since we have evidence, when we started collecting this evidence in the
early 20th century with the development of the income tax.
Well, why? So, that top-heavy inequality raises a puzzle, right?
Why did it happen? I'll show you that the common answers to the puzzle of why
inequality has risen don't work very well for understanding the super rich have pulled away from
This is not about the educated the nearly rich.
getting ahead from the uneducated. It's not about those who stuck
through college doing better
than those who dropped out. This is about a very small slice of Americans pulling
dramatically away from the rest.
It's about the other 99% losing ground to the top one percent, and even the top 1/10 of one
percent, and the top 1/100 of one percent, men like, and I'm
John Paulson was, of course, the going to bring up another Paulson, John Paulson.
hedge fund guru who made billions, and at one point was
person in the United States. the most highly compensated
He didn't do as well this year. You may have seen that his funds lost on average, about 40% of
their value.
So lamentably, I think they'll only make about $600 million
Paulson was recently in the news, talking about the Occupy Wall Street protests. this year.
our most successful businesses, we should be supporting them, encouraging them to remain He said, instead of vilifying
and continue to grow. So, another Paulson arguing that in New York City
these are important jobs that our economy has created. we should not be seeing this as a negative development, in fact
Paulsons, John not Hank, have done so well, and how government So I will talk about what's happened to the economy, why the
policy has played a crucial role in that.
Then I want to turn to the
that if governmental policy has played an important role in this Well, if, as I show you, and as I believe you will be convinced,
story, why, right? I mean, democracy may not be
good at a lot of things.
We don't often think that democracy is always the best way to deal with foreign
negotiations, for example, but
majorities of citizens. When lots of people, say 99% of people are losing out to a very rsmall slice, you would think
that democracy would respond And
why hasn't it? In fact, why has it, instead of pushing back against rising
inequality, piled on? That's the question I want to focus on after I talk a little
Then finally, I want to talk bit about the trend.
about what can be done. Because I think behind the diagnosis of what's gone wrong,
are some prescriptions that you may not have thought as much
about amid this acrimony that we now have around the debts and
redistribution. What I'll argue is two things.
First, a lot of what's happened, happens before government steps
in at all to redistribute income. So all the talk about, on the one hand, the rich were not
paying enough in taxes, on the
other hand, those lucky duckies, those that the Wall Street
of Americans who pay no federal income taxes, who actually pay Journal talks about, those 40%
huge amounts in payroll taxes, and sales taxes, and state
excise taxes. Those debates miss entirely an
important part of what I'll talk about, which is so much of this
is happening before government
actually redistributes income. It's pre-distribution, and we have to pay attention to that.
In many ways, our market has
been structured against the middle, even before government steps in to try to level the
playing field with government re-distribution, or not.
is fundamentally a story about a Then, the second that I think draws out of this, is that this
transformation of our government over the last generation. Then it's an organizational
story, it's not an electoral
story. In fact, the story begins in the
the White House, Congress and they had a dominant role in the Supreme Court. late 1970s, when democrats had
And not, by the way, in 1972, when Nixon was in power. It begins in 1978, not 1981.
It begins because of a fundamental transformation in
how Washington works and for
whom, but carries through in subsequent decades. Until we see that, and until we
recognize that there's a need for an organization on the other
side, the kind of organization that's stirring that, with the
Occupy Wall Street protest, we're not going to have an
with the story of what's effective response. So I said that I would start
for statistics. My defense against this is, once inequality. I should warn you, I'm a sucker
be deeply moved by statistics. I heard Bill Moyers say this is the mark of an educated man, to
[laughter] And I should note, I'm not the
Of the Occupy Wall Street protests-- only one who feels that way.
Oh, wait, I have to show you one thing, because Madison,
I thought, okay-- I apologize for not showing this
the book, some of it positive, sooner. I've gotten lots of feedback on
some of it quite negative. But the best feedback I got was from the journalist
Thomas Frank. You may know him. He wrote, What's the Matter with Kansas?
He was in the Madison capitol during the protests, and he sent
phone. me a very rough, grainy picture that was taken with his cell
"Excellent book. It is a copy of the cover of our book, with the following statement below it,
Tells how our government was stolen over the last 30 years." I consider this the best blurb
I have ever received. [laughter and applause] Okay, so, and I was just going
who believes that educated to say, I'm not the only person
people should be deeply moved by statistics. This is actually a sign from the
Occupy Wall Street protest. It's Congressional Budget Office
going, where you'll have one data. You can really see where this is
Congressional Budget Office group of profigures.with Office of Management budget figures, and the other one with
But anyway, I show it because I want to show you exactly the How will we ever get along? [laughter]
same data, in slightly different form, in a version that's in my
book, an animated version of
what's in my book. This basically sums up the core argument about what's happened
to our economy. Okay, so you go back to 1979. And by the way, this is Congressional Budget Office
data. I mentioned that already. It includes federal taxes, all
benefits like Medicaid, and private benefits, such as employer-provided health public benefits, even in-kind
So this is basically household benefits and pensions.
income after you count up everything, with a few small exceptions.
Go back to 1979, let's take a trip back in time.
the rest. As you can see here, each of In 1979, there were clear differences between the top and
these are the --, at the bottom, 20%, the second, 20%, up to the
80th and 99th percentile, then
I've broken out the top one percent. You can see the top one percent,
the average incomes in the top
one percent are around $300,000 a year, and that compares with an average among the middle
fifth of around, I can't really see it here, but it's around
$45,000 a year, or $44,000 a year.
So let's fast forward to 2007.
This is the moment when I feel like I should get a lift, like Al Gore had
with Inconvenient Truth,
In 2007, we have the top one and get up there and point to it. [laughter] So now, we're in 2007.
percent, the average income of the top one percent is $1.3 million.
And the middle fifth has seen its income rise from around $45,000 to around $55,000.
in percentage terms, and this is So what this translates into,
all adjusted for inflation, of course, is about a 25% increase for the middle fifth,
and a 281% increase for the top one percent.
I'll just stop there for a moment.
Think about how remarkable
this is. What does this mean?
numbers, that about 40% of all It means, if you look at the
the gains in household income over this period went to the top one percent.
That's after you take into
account government benefits, after you take into account Medicaid, after you take
into account federal taxes. That 40% that went to the top one percent is more than went to the bottom 80% combined.
That's actually understating how
percent that have dramatically concentrated the gains have been, because it's really the top slices of the top one
pulled away. Say, take the top 1/10
The top 1/10 of one percent has seen, and its average pre-tax income in 2007 is about $7 million, that top 0.1%
has seen its share of income
quadruple the last 30 years. In 2007, that top 0.1% was
about one in eight dollars. One in a thousands households earning about one in eight earning about, was taking in
level we've ever seen. dollars, which was the highest
We have these statistics back to the beginning of the income tax in 1913.
We've never seen it that high.
think, sports celebrities Thand entertainment stars.p that top one percent? Well, it's not, as you might
They're certainly a lot of people who are entertainment
stars who make that kind of money, but there just aren't
a lot of entertainment stars relative to that one
in a thousand.
so one-third of that 60% About 60% of the top 0.1% are executives. And about 20% or so,
are financial executives. So when you talk about the top one in a thousand households,
we're really talking about
people who have made their money as executives or off of real estate.
That's important to keep in mind. Now, it'd be one thing if this
class Americans were continuing to get ahead, and you can see that there was a 25% gain in development occurred as low
inflation. income after adjusting for
What you can't see is that virtually all of it,
fact that middle class families were working more hours, okay, about two-thirds, was due to the
because there is much more likely to be two earners in the
workplace, and those individuals
favorable picture you can draw, earners are wright? more hours. What you also can't see is that this is probably the most
happening over this period. People are less likely to have Forget about the hours. Think about what else is
secure health insurance. People do not have
the prime benefit pension plans.
Well, you might say, people are more likely than they used to be to climb into the pot.
Wrong.
Actually, over this period, every study we have suggests that social mobility, moving up
the income ladder has either
been stable, or declines. Studies across nations suggest that the United States has less
upward social mobility, intergenerational upward social mobility, your father to son, than almost any other nation.
They've looked at many nations. We're basically at the bottom of
being a world leader in college completion, that is, we had the most educated population, thanks Over this period, we went from
14 for 15 among rich to the GI bill, to being about
democracies. In other words, this is really
The middle class got clobbered just the tip of the iceberg.
over this period in far more ways than just falling behind relatively to those at the top.
Now one thing I said already, and I just want to reiterate, if
this is the pattern, if it's the bottom 99% falling away from the
top one percent, then the story that this is all about education
is just not going to get us very far.
It's also pretty hard to argue
that this is inevitably a result of globalization, technological change, when the United States
turns out to be very distinctive
number of rich democracies, and I just want to give you a sense So, there'of how muchprehensive todifferent the United Statesge
looks compared to other countries that are similarly
Okay, so go back to 1973, these countries look relatively globalisimilar.ilarly computerized as we are.
top one percent is around 6%-8% in all of them, a little higher in France, Germany, Italy, and The share of income going to the
Now let's fast forward to the last year of the data. the Netherlands--
that's seeing increases in the You can see here the United States is not the only country
share of income going to the top.
seen some increase. It's very modest, perhaps not even statistically significant In fact, most countries have
the Netherlands. for France, Germany, Italy, and
countries that are most like us, But notice that the countries that have seen the most substantial increase are
and that are following similar patterns of policy. That is, Australia, Canada,
New Zealand and UK, and even
We've gone from being relatively they are far behind us. So we have transformed as a country.
similar to other countries in terms of the shared income going to the very top, to being
radically different.
inequalities, they are far more stark over that same period that is just income. If you look at wealth
So we're talking about a 40% of income gains went to the top, about 80% of wealth gained.
transformation of our society, as I said, the standard view is that this was just an economic
change. For one thing, that's hard to sustain when you look at this figure, right?
Something different is happening
in the United States than has happened in other countries. I think it's even more difficult
to sustain when you start to
unpack the story of what happened to the top one percent.
here. I've mentioned already financial That's what I want to do quickly
about it in a moment. But I think the most obvious deregulation. I'll talk a little bit more
place to begin is a subject that we've been talking about a lot
in America right now, and that
tax rate than do the people who work for him. Warren BuHe is right.all, has suggested that he pays a lower
is because over the last The reason he is right,
generation, we've seen a massive decline in the progressive
not a decline across the board, but at the very top. nature of our tax code,
It used to be that rich people paid very different rates.
If you were super rich, say in
the top 1/10 of one percent, you would pay a much higher rate
rich, and you were just in the than if you were, say, modestly
top one percent. You can see for all these groups, the rates have gone
down. They've gone down mostly at the very top, that's because of declining corporate taxes,
capital gains taxes.
The most egregious example of this, as you probably may be aware of, is the carried
interest provision. It helps John Paulson.
The carried interest provision says that hedge fund managers
can pay the capital gains tax rate on their income. Their income, by the way, are on
$30 million for some of the top hedge fund managers. the range of $20 million to
So they only have to pay a 15% tax rate on their income,
because it's treated as if it's capital gains, even though it's not their money that's under
It's totally egregious. Almost everyone who's looked at it, who is independent, knows that this is not the right way
to treat these massive incomes, and yet it's managed to survive.
powerful lobbyists, and by key It's managed to survive because it's been defended by very
senators, most notably Chuck Schumer, of New York, who was a very committed liberal on many
other issues, but on this issue,
is a very committed to preserving Wall Street's
So, tax cuts for the very rich prerogatives.
are an obvious part of this story. I just want to make clear, they
make a much bigger difference than you might think from listening to some of the
Oh, there's not that much money at the top. Or, the top one percent is rhetoric.
This is the effective average rate they're paying. paying X percent of total taxes.
What this says that as even as they got massively richer,
they're paying a much lower rate
on their income. The top 400 taxpayers, we can actually collect, for those 400
taxpayers, their federal income taxes.
As late as the mid-1990s, that average effective overall income
tax to the top 400 taxpayers was
around 30%. In 2007, it was 16.5%, okay. So we've seen, essentially, over
a period in which the gains at
the top have exploded, an almost 40% cut in federal income taxes for that one group.
That's not a small amount.
That's worth about $46 million, for every taxpayer in the top 400.
Okay, so tax policy is part of the story, but I mentioned financial deregulation. I just want to make a general
point here. The market is some natural
set up for industrial relations, pre-governmental reality. The rules of the game that are
for corporate governance, and for financial regulation make an enormous difference in how the
market distributes rewards in the first place.
Financial de-regulation is obviously one example.
The implosion of the American unions has been very much shaped
by changes in government policy, governing how unions form and
what powers they have.
But here's another example that people are less familiar with, that's CEOs, right?
There have no effective power weights to CEOs as they've been pushing up their pay from peer
their pay through various forms of camouflage, to the point where CEOs are making hundreds of millions of dollars
in some cases, though average CEOs are making tens of millions of dollars, even when
It's because the compensation boards that are paying them are highly compliant. The accounting standards are
broken. So why does that maintain?
I want to bring in a third argument.
It's not just about how the market is made. It's also when the market is not policed.
So when it comes to corporate CEOs, back in the 1980s and '90s, there were a number of
use of capital gains to tighten the accounting standards, and all of them were bought, efforts to try to reign in the
powerful politicians doing the basically, behind the scenes by
bidding of these provisions. Many of them were republicans,
Some were democrats, as well. My favorite story on this is at one point, the SEC Chair Arthur Levitt went to Phil Graham, the
chair of the Banking Committee
and said he wanted to pursue tighter accounting standards, this is prior to Enron, and Phil
Graham looked at him and said,
"Unless the waters are freezing with the blood of investors, I don't want you engaging in any
regulatory flights of fancy." So a crucial part of the story, right, is the failure of
update rules as the market government to act, to try and
basically transforms before it. This is a very important lesson. I've mentioned the importance of
focusing on how government
shapes the distribution of income even before
We should also pay a lot of attention to the way in which government policy needs to be redable to keep pace withe.
transformations of the market that are putting people at risk,
or leading to these kind of vast inequalities.
So that's the fundamental question, why would government
in a democracy be so beholden to the demands and claims of those
at the very top.
After all, we tend to think of government as working very much in the interest of the broad
majority, right, because that's where the votes are.
I want to argue that our focus tends to be on elections.
But we should really be paying
attention, as well, to organizations.
the last 30 years is of an The story of what happened over
organizational revolution that as I mentioned, began in the
mobilization of corporate groups late 1970s, with the
and interests and conservative activists to construct powerful new sub-pressures on politicians
for campaign finance and for
This happened in 1978. lobbying, to really pull them away from the broad majority on many issues.
As early as 1978, there were big cuts in the capital gains tax,
helped reverse the slide of unions were killed in a filibuster, but it's labor law reforms that would've
then. And one part of the story that I accelerated dramatically since
think we tend to forget is the dramatic shift in how the
government works, in particular how the Senate works. We spoke a lot about growing
polarization has taken a polarization, but this
particular form. First of all, over this period, this filibuster has been
transformed.
It used to be that the filibuster was this rare, rare
minorities trying to block weapon that was used by
And yet, filibusters were enormously uncommon back in the early 20th century. In fact, here I have
filibusters, these are cloture
votes and filibusters back to the early 1920s. So the filibuster, remember, is
a procedure that allows legislation to be blocked unless
60 senators can overcome the filibuster with a cloture vote.
The founders, it should be
noted, did not believe that these kind of routines for super majority rules were a good idea.
Hamilton was very concerned about it, but of course, he believed in granting the
of figure that that's why he was executive power, so you can kind
really worried about handing off so much power to the Senate.
should never have super majority Madison, as well, said that we
requirements outside of special instances. That would be reversing the
fundamental principle of free government. The filibuster, remember, was not in the constitution, right,
it was just a rule that was adopted by the Senate, and a
rule that did not bind very much before recent years.
Look at this. That's the last few years,
right? The filibuster has transformed
politics so that the rule of 60 prevails on almost all issues except for the budget.
difficult to address those kind of market changes or economic crises in a way that is Thnecessary, given thely
transformation that's taken place.
The lobbyists, the development But organization is really at the root of this transformation.
that I've been talking about, is of powerful interest groups pushing back against labor, and pushing for the kinds of changes
the story of the last 25-30 years. It's taken place alongside at a
time when some of the broad based civic organizations that
Americans. once gave voice to the economic concerns of middle class
Don't get me wrong, I understand there are a lot of progressive
But are progressive groups groups out there.
focused on righting economic issues? Not so much.
In fact, if you think about it, organized labor is probably the one group that has consistently been concerned about those
issues. So as it has lost ground, it has
also meant that there's been a big back of many of these
issues. On the other side, of course, lobbyists have had an enormous
Now, lobbyists and these groups do care about elections. field day.
They'd rather have sympathetic politicians in office.
But for them, elections are kind
heard the other day of the tfrom David Cook.they're the season for changing policy. There's a great quote that I
[laughter] You may not have expected me to say something like that.
Here's what Cook said, "Our main interest is not participating in campaigns,
our main interest in policy." Right?
more conservative direction, So these billionaires who are trying to push policy in a much
they want to win elections, but more important, they want to change policy on the ground.
And lobbyists, which get far
campaign finance, are trying to mordo the same thing.to lobbyists, far more money devoted to lobbying than to
If you look over the last 30 years or so, lobbying has
exploded, right?
From about $400 million in 1983, to around $400 billion in recent years.
This is a fundamental transformation of the Washington ecosystem. It's a transformation
that has had different effects
on each party, right? It has changed Washington in general, so that both parties
have had to adapt, and adapt in different ways. Republicans have moved
They see themselves as masters to the right, right?
They need to raise funds, at the of this new universe. Democrats have been cross pressured, right?
This is a common view, but I same time they want to try to appeal to traditional supporters.
think you can see this much more clearly in the patterns of
than is often assumed. polarization that we've seen
I took these numbers that have been put together by two
Poole and Rosenthal. political scientists,
They basically tried to figure out where each member of
roll call votes. Congress was based on their
Using this, you can basically construct an index of liberalism or conservatism.
They can be used to compare over time.
to 2010. So I went back to the early 1970s, and I traced it forward
conservatism in the case of Wrepublicans, of the averagee House democrat, Senate democrat, case of democrats, or
and House republican. Okay, House democrats have Senate republican,
become about 22% more liberal. Senate democrats, about 30%
more liberal, right, and you can
understand why, with the decline of conservative southern
gone into republican hands. What about Senate republicans? democrats, since the south has
About 73% more conservative. House republicans?
Well, I don't need a chart
for that, okay? [laughter] So when people say that politics
is polarized, they rarely note
that it is not equally polarized.
republican party has taken over, The conservative wing of the
basically, and it has become a much more conservative party
Now this center of gravity on these political debates have overall.
Just so you know, there is very little evidence that that's where Americans are on these right.
In fact, all over, I would issues.
issues, on average. suggSo, what we have today,etty essentially, is a system in which money talks, and in whiche
organized might talks.
You don't have to take my word But in which middle class voters' views are often neglected.
for this. Look at the key fights we've had over the last few years.
The deficit has never been a top
priority in most voters when it's compared with dealing with the economic crisis, and yet, it
has consistently been trumping
Similarly, the number one policy measures to try to reverse this economic slide that we're in, in Washington.
Even in the 2010 election exit for reducing the deficit that voters endorsed is higher taxes on those on the top.
polls, it was a majority of voters who came out in 2010 said that they would like to see the
tax cuts for the very richest,
those tax cuts for the very richest to expire. And yet, no action was taken
on either of those fronts.
This kind of agenda disconnect is nothing new. This is the story of the last
35 years. It is breeding a kind of
cynicism and despair about American politics that I think
is at the heart of many of the
reactions against what's happened on both sides of the partisan aisle.
In my view, it is public
cynicism, public distrust that is far more pervasive, powerful,
governance, than public conservatism. Right now, people to do not feel and dangerous to our collective
difference, because of a Washington can make a
vicious cycle that's occurring. And unless there is real movement to show that politics
can be used for positive
purposes, to reverse some of these slides, I feel that Americans will lose a kind of
fundamental, we'll lose fundamental faith in our
democracy. I said I wouldn't end on a
negative note, so I want to try to shift to a few final remarks that will hopefully be a little more uplifting.
One thing that I want to
emphasize is that if the standard diagnosis is that this is due to the challenge of
China, that this is due to the
to the inevitable losses that are going to be felt by people that this is due to globalization, that this is due
who don't have an advanced degree in the 21st century, then
you there's very little that our
government can do, except for maybe mop up after the mess. But if I believe, this is
fundamentally about a set of
policies that have meant that a prosperous nation that has invested in its common good in
the past, has basically lost its
way, and has pursued policies that systematically skew the market, and then skew government
policies and respond to the market in ways that disproportionately favor
If you believe that, then there is scope for change, right? It's a difficult challenge. It's a catch-22, because the
only way you can fix a broken political system is to work through it. Walter Whitman once said that
democracy has to pick itself up by its own bootstraps.
That's the challenge we face today.
But it's a far more realistic challenge to face than the idea that we're somehow going to close our borders to
globalization, or reverse the technological change that has brought such wonders to us in so
generation. So that, to me, is the many areas over the last
challenge. If my diagnosis was right, and
this is about organization, then
election of Barack Obama. the Occupy WalWhy?reet movement is one of the best developments that we've seen since the
My favorite slogan in this is that it's bringing these issues to the fore, and it's bringing issue to the fore, right?
integrated, right? them to the fore in a way that's
It's saying this is a movement that speaks to you. I believe fundamentally that
most Americans, while they may
have differing views about inequality, do not believe that our democracy should be
overwhelmed by the inequality of
the market and the powers, especially of economic interest.
American democracy, whether you are rich or poor, or middle class, whether you're on Wall ThaStreet or Main Street, you of
should have equal potential to
in the Declaration of influencIndependence.vernment That is the ideal that animated Thathe civil rights movement.ied
That is the ideal that animated the women's rights movement.
It is this basic idea that there should be flood walls between
our market and our democracy, that the wonders of the market
can be appreciated without letting economic power spill
over into the political perversion we have. We have a democracy for many, not an all about the few.
It is those bedrock beliefs that
I think will be at the core of the movement to restore the fundamental balance
of our democracy, and I hope
that today, with this conversation, I've given you a little bit of optimism and a
little ground for argument
in that larger struggle. Thank you very much.
[applause]