Arnold Kling  

American Excess

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From a longer essay on Inequality and Excess:


I feel awkward and defensive when the subject of economic inequality comes up. The fact is that I cannot say that I feel comfortable with the levels of inequality and excess that exist in our society.

...What the American people really should feel awkward and defensive about is the level of inequality and excess of political power. Instead of asking ourselves what we can do about Warren Buffett or Bill Gates, we should be asking ourselves about what we can do about the Clintons and the Spitzers. Those who want more and more power should be our biggest concern.


The point that the essay makes is that in the United States today political power is much more dangerously concentrated than economic power. As provocative as the thesis might be, I think I understated the case.


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COMMENTS (14 to date)
PurpleSlog writes:

Thia is OT,: What is going on at TCS Daily? Instead of multiple daily articles, there is one or so every week or so.

Curunir writes:

The math is a bit off. 5% on $80 billion gives your $4 billion per year, not $400 million. Though that doesn't change the overall point.

Brad Hutchings writes:

He obviously meant .5%, right? It kinda changes the perspective a bit. The Clintons are political entrepreneurs. It's a strange world we live in that would elevate even one of them anywhere near the zenith of political power. But even if you despise their politics and policies, you kinda have to admire how they got from 2001 to now. The money they earned will buy Hillary every chance at the Democratic nomination. Most upstart politicians can't just loan themselves $5 million when cash is short. And to think in 1992, she was claiming Bill's donated underwear as a tax deduction...

Consider... how is it that the more wealthy and more established Al Gore stayed out of the race this year? Hillary would have found a way to kick his butt up and down the block, making him spend every dollar he had.

PolyAnalyst writes:

Wow, I follow a lot of econ / political blogs, and I think that's one of the most interesting ideas I've seen in a month. It makes the pursuit of political power seem far more rational when placed into perspective of control of financial reserves.

Fascinating.

Arnold Kling writes:

No, I didn't mean 0.5 percent. It's an embarrassing math error. I submitted a corrected version.

Chuck writes:

"At this point, you may be thinking that this is not a valid comparison. It is misleading to compare legislative budgets with the wealth of Warren Buffett or Bill Gates, because legislators are spending money on all of us. They are not spending money on themselves."

I think this is a bad comparison because legislators do not have total control of how they spend the money. Each senator does not spend his part of the budget any way he wants. Furthermore, it isn't just individuals how have concentrations of money, corporations have much larger concentrations of money. And, let's face it, no one is accusing Bill Gates of abusing his power, we're accusing Exxons and WalMarts.

Firstly, much of government budgets (like most budgets) are for simple ongoing spending. Subtract out roads and pensions and whatever else, and those guys haven't got much budget left.

Furthermore, a Senator, for example, has to get other senators to agree to his spending desires (and trade some horses, no doubt) and then it gets administered by an executive branch beauracracy that has rules about bidding out the contract, etc.

On the other hand, if Bill Gates wants to fund an 'advocacy group' that gets Republicans elected who happen to favor tax cuts for the rich, no one can stop him. If Exxon wants to help get some folks elected who think we should give away our national resources to the first nice person who offers to exploit them, they sure can.

While we are talking about corporations, we should consider how much money major corporations control. I don't think it would be crazy to say that the top 3 corporations in the US control 1 trillion dollars in revenue every year. So that would be 3 CEO's with that kind of power?

All that said, I agree that money is corrupting our government and governance, but it is not just the big pot of tax revenue attracting corrupt Democrat politicians, it is the ruthless pursuit of profits by large corporations and a pro-business (not pro-market, pro-business) government that is open for, um, business.

And the Clintons personal money? Well, I would say it is more about celebrity culture. Their (and all big time politicians) campaign money is about selling influence.

If you want corruption in office, you need to take a look at the guys who are part of the old-boys network, guys like HWBush and Cheney.

John Fast writes:
I think this is a bad comparison because legislators do not have total control of how they spend the money. Each senator does not spend his part of the budget any way he wants.

No, but 51 Senators plus 218 Representatives can spend all of the budget any way they want.

corporations have much larger concentrations of money. And, let's face it, no one is accusing Bill Gates of abusing his power, we're accusing Exxons and WalMarts.

Okay, let's compare the budget of ExxonMobil or WalMart with that of the Department of Defense, the Social Security Administration, the Drug Enforcement Administration or the Environmental Protection Administration.

Or let's compare the budget of Sears with that of OSHA.

Firstly, much of government budgets (like most budgets) are for simple ongoing spending. Subtract out roads and pensions and whatever else, and those guys haven't got much budget left.

I assume when you say "ongoing spending" you mean "non-discretionary spending." First, I think road construction is obviously discretionary spending; it's one of the main examples of "pork barrel" special benefits that politicians use to reward greedy real-estate developers who donate to their campaigns.

Second, I think entitlements (like pensions, welfare, and so forth) are still discretionary spending. The only exceptions would be pensions such as those to veterans or other govenrment employees, which the government is contractually obligated to pay.

Third, even if you only count "discretionary spending" it's one third of the federal budget, which is still an enormous amount. And at the State and local level it's a majority of the budget.

While we are talking about corporations, we should consider how much money major corporations control. I don't think it would be crazy to say that the top 3 corporations in the US control 1 trillion dollars in revenue every year. So that would be 3 CEO's with that kind of power?

It's not crazy to say that, but it might be more accurate to consider profit rather than revenue. After all, if a corporation has $100 billion in sales, but its expenses are $98 billion, it really only controls $2 billion.

Even if we count revenue, the total amount controlled by the top three US corporations is under $1 trillion. If we count profit, the total amount is under $100 billion.

Jeff K writes:

Don't forget that the reason someone like Bill Gates can use his money to influence politics is because of the regulatory power the government has to control. The less power congressmen have to tweak regulations the more expensive it is for the rich to influence policy in any significant way and tap into their coercive power.

Its ironic that most of the power the super rich have over our lives is a result of massive political power given to the government with the intention of reigning in the perceived power of the super rich.

920198148 writes:

I find this to be a very interesting idea. I do think there are extreme economic inequalities in America, but at the same time many of the "Gates and Buffetts" of America worked very hard to get to where they are today and should not be criticized for enjoying the fruits of their labor. Bill Gates has done many wonderful things with his money including helping third world countries, so it makes it hard for me to criticize him for being extremely wealthy. But I do realize that not every billionaire in America got that way fairly nor do they use their money for good. With any group of people you have good ones and bad ones.

As for the political aspect of this idea I do believe that many of our politicians are power hungry. I think our politicians should be in office to help out their fellow Americans not to have leverage over them. The whole purpose of living in America is to live in the "Land of the free," and where "All men are created equal". If we allow people to become too powerful it will take away from the character that makes America America.

I believe if you've worked hard and do good by others being wealthy is something you have earned. I also believe if you've worked hard and are in politics to truly help your fellow citizens then a little power is a good thing. In both cases you can not take it to extremes and you have to do good by others.

chuck writes:

JFast:

"No, but 51 Senators plus 218 Representatives can spend all of the budget any way they want."

And there is the president's veto. And there are each representatives different constituents. And there is the constitution and statutory law and the press. I mean, the article and you seem to suggest that it is plausible that govt. officials could to spend the budget buying plasma TV's and sky boxes at the stadium for their families and friends while fire trucks can't afford gas and police aren't going on patrol. Well, no, not really, that can't happen.

"Okay, let's compare the budget of ExxonMobil or WalMart with that of the Department of Defense, the Social Security Administration, the Drug Enforcement Administration or the Environmental Protection Administration."

That's what I was doing - almost a trillion dollars in the top 3 corporations, vs. about 3 trillion in the fed. govt. budget. My point: same ballpark of money, only 3 'entities' in charge of it.

"First, I think road construction is obviously discretionary spending"

Well, I agree that much road money is spent foolishly - it's spent on roads! We should spend it on mass transit. But, that aside, my point is that most of the govt.'s budget is like most any organizations budget (like say, the 3 largest corps in the US) - it's mostly to fund previous commitments - to maintain roads and parks and libraries etc, that are already built. I don't see the act of keeping promises that someone else made as some kind of unchecked power. It isn't sensible to take the Fed budget and divide it by the senators and congressmen - they don't really go to the store with that money, so to speak.

A better measure would be to take earmarks and divide that money amongst the congress critters. That is money that they can truly target, and by the time the horse trading is done, they basically get it. The cure for this is more transparency. We do live in a 'disposable' culter, but it is possible to fix things rather just throw them away.

And when we break it down to the local level, I have to say: where I like, you can't put up a fence without 40 people lining up at the town hall to share their feelings about it. Now, if you want to say that govt has too much power, fine say that. But don't try to make out like each elected offical has some kind of personal piggy bank that some kind of 3rd world dictator. They just don't.

Ultimately, though, this is not a dictatorship. While govt can, and at times does, go too far, in the end, I think we've got what we want, by and large.

Keep in mind - there is no modern industrialized nation with a small government. I think you should consider if that is a concidence or if you need a large government to balance the other large and powerful organizations that rise up with an industrialized economy.

Snark writes:

Anyone who reads this article should never again question why anyone would want to be a politician.

Ted Berthelote writes:


Although not quite as intellectually compelling as most articles appearing on Econolog, I find the spirit and strategy of Freedom Force International to be gremane and harmonious with this discussion. Note the quotation below from their web site:


"The solution is simple. It is to take back control of the power centers of society, one-by-one, just the way they were captured in the first place. Replace the collectivists with people who have no personal agendas except to defend freedom. This will unleash the vast human potential for prosperity and happiness that can be realized only in the absence of government oppression. However, to reach that goal, it will be necessary for those who cherish freedom to do more than complain and far more than just casting a vote every few years. They must reach for power. That is the reason for the motto of Freedom Force: Impotentes defendere libertatem non possunt, which is Latin for “Those without power cannot defend freedom.”

The Freedom Force strategy can be summarized as:
Don't fight city hall when you can BE city hall"

Marc writes:

Great insights, Arnold.

What we need is an index of political inequality -- something like a Gini coefficient for public wealth distribution.

Gene writes:

"On the other hand, if Bill Gates wants to fund an 'advocacy group' that gets Republicans elected who happen to favor tax cuts for the rich, no one can stop him."

Bill Gates gives more money to Democrats than Republicans and supports a foundation -- staffed by his attorney father -- that promotes the estate tax.

And Warren Buffett, Bills Gate's bridge-playing partner, is a outspoken Democrat who also supports (the rent seeking opportunities to be found in) government regulation of the financial markets -- and the estate tax.

FYI.

You may want to revise your cartoon concepts of class war.

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