When David Koch ran on the ticket of the Libertarian Party as vice presidential candidate in the 1980 US presidential elections, he barely got 1% of the vote. Their platform was to drastically shrink the size of the state through massive reductions in social spending programs, the elimination of public education, the dismantling of environmental protection, the abolition of the IRS and the income tax, and on the side they were also quite liberal on social issues like LGBT rights or prostitution legalization (Sanders n.d.). However, it was evident that the two-party system could not so simply be undermined by the attraction of electoral votes for these libertarian principles. It simply wasn’t true that the vast majority of the American people would willingly vote for this libertarian agenda, which was about the massive transfer of wealth from the working and middle class to the rich. Instead of endlessly repeating the election bonanza, the Koch brothers turned to funding right-wing think tanks and Republican politicians (Skocpol and Hertel-Fernandez 2016). In this way, they ensured that they could expand their wealth and make it very hard for the popular masses to reclaim some of that oligarchic income via a genuinely populist electoral platform. Now, the passage of the Republican tax bill will further entrench the wealth and power of the oligarch class.
Two Party Oligarchy
In the 2016 elections, Gary Johnson had run on the libertarian ticket, and received 3% of the vote. By this point, David and his politically activist brother Charles Koch had abandoned direct electoral campaigns on their own party platform. There just wasn’t any likelihood of succeeding with the libertarian party platform. The more successful strategy of the business community has been to infiltrate the Republican Party and to some extent the Democratic Party. It was clear, however, that the mega-donors tended to side with the Republicans in more cases, because of the weird coalition of big oil, big finance, big real estate on the one hand (i.e. the oligarchs), with evangelical Christians and the white working class (i.e. the popular class) on the other. The former group would deliver the campaign cash, and the latter group would deliver the votes. The popular class does not materially benefit much from the economic policies of the Republican Party, but as part of the conservative tradition they tend not to vocally or openly resist the leadership (Frank 2007). Donald Trump seemed to upset that established order, but it turns out that he is a skilled showman, who doubles down on behalf of the oligarchs, to which he belongs. More on that later.
The Democratic Party, on the contrary, also has to contend with two major factions, which were personified by the Clinton and Sanders campaign in 2016. Hillary Clinton represented the establishment, which includes the big law firms, big tech firms, big Wall Street/ finance firms, big pharma and similar industries (some of which clearly overlap with the Republican Party as part of the donor base). Her popular base consisted of white and older voters, the latter feature of which was important for her to clinch the nomination. Among older Democratic voters, there was a strain of thinking that also tended to favor the establishment. Bernie Sanders was the only meaningful presidential candidate, who dared to run a campaign without any direct financial support from parts of the oligarchy. He ran a purely popular campaign financed by small donations and could get the entire progressive grassroots of the Democratic Party on his side (Sanders 2016). The party machine, which supported Clinton, ensured that Sanders ballots are miscounted in some states. In addition, it took time for his message to spread around the country, and there wasn’t enough for him to win the nomination.
When Clinton clashed against Trump in the general elections, there were several features that disadvantaged the Clinton campaign: (1) the Democratic Party was the incumbent ruling party and Clinton explicitly ran on continuity with the Obama administration, which some liberal voters took as justifiable betrayal to abstain from voting, which would not have happened with Sanders. (2) The mainstream media kept on receiving and airing Clinton’s email leaks, which many in the Democratic Party had traced back to Russia and Vladimir Putin, which publicly tarnished Clinton’s reputation (which is also her favored account of why she had lost the elections). (3) Clinton had been in the national spotlight for nearly 25 years. The public dislike against her and the system that she represents created so much anger that some people preferred the bully billionaire on the other side, who had promised to blow up the political system.
Trump Electoral Campaign
The Trump campaign created some electoral momentum in the states, which Clinton’s campaign had deemed “safe”, i.e. Pennsylvania, Michigan and Wisconsin. In each of these deindustrializing states, the mass mobilization of rural, working class white voters proved crucial and more than compensated for the few urban clusters (e.g. Philadelphia) that solidly vote Democratic (and were rather unenthused by the Clinton campaign). Trump’s promises included building a wall to Mexico (unrealized), tearing up the trade agreements (unrealized), and a nebulous attack against the corruption that had pervaded the oligarchic political economy of the country: “drain the swamp” (the opposite happened with the greatest swamp ever). It appears to be that the popular base bought the argument, even as the Republican donors and the establishment politicians were less than convinced that these promises made any sense, financially nor politically. Was there also the fear that draining the swamp could unravel the cozy crony capitalist arrangements they had so much gained from?
In any case, there was no chance for the Republican establishment politicians to do well with Trump making brazen promises, while the establishment had to stick with conventional promises of general tax cuts and “strengthening the private sector” (understandably not an emotional connection to generate votes). The social mobilization agenda via the evangelical voters also became a spent force, because that voter base is now much smaller than under Reagan and Bush sr. and jr (Jones 2014). Rick Santorum could Biblethump the whole day against the practically agnostic (nominally Christian) Trump, but it wasn’t resonating. In fact, evangelical voters might even be inclined to support Trump (Smith and Martinez 2016) because while he doesn’t share their religious values, he at least formed credible mass support, which might also help beleaguered evangelicals.
It is not true that racial minorities are better off than whites on average because of affirmative action or President Obama, but it is certainly true that the working class white Trump voter is hurting really badly. It is a rare feat for an industrialized country to regress on basic social indicators like the spread of the hookworm disease (McKenna 2017), opioid addiction deaths (Rudd et al. 2016) or life expectancy (Case and Deaton 2017). Blacks in America are still worse off on many social indicators and experiences than whites, e.g. the high imprisonment rate of blacks (NAACP; Pettit and Western 2004), but it is the perception and experience of deterioration among the white working class, which encourages their search for scapegoats. Trump exploited the atmosphere of anxiety by whipping up the hate among the crowds, which became evident in his campaign rallies, where he incited violence against his protesters. He hired the right-wing media strategist Steve Bannon to run his public messaging. Academics like to think that in a democracy rational people vote for candidates that promote their best interest (Meltzer and Richard 1981), but that is not true. Simply because some of us can read the New York Times hours on end and make informed political judgments does not mean that the average person will do so. Politics, at least from the perspective of the masses, is about raw emotions, and strong emotions whether it is hope, fear or anger are each strongly mobilizing forces.
To return to the donor class, it is rather strange how the candidate they did not initially support turned out to be just fine for their interests. When the Republican nomination came up, the donors finally backed Trump. The Koch brothers said they wanted to support down-ballot Republican candidates, but they were not as terrified of Trump as they would have been of Sanders. Trump made clear that he expected the full financial backing of the oligarchs now that he was the party-bearer. Upon his election, the public held its breath on Trump’s cabinet appointments, which were all either part of the oligarchic elite (oil executive Rex Tillerson became secretary of state, former Goldman Sachs banker Steven Mnuchin became secretary of treasury, heiress Betsy DeVos became secretary of education etc.), standard Republican politicians of the conservative (i.e. pro-oligarchic) variety (senator Jeff Sessions as attorney general; Congressman Mike Mulvaney as budget chairman etc.), or retired generals (chief of staff John Kelly, defense secretary Jim Mattis etc.). Only the generals did not clearly represent the oligarchic elite, though they were part of the military-industrial complex, one of the few departments that were beefed up with the Trump budget.
Pierre Bourdieu had distinguished between the nurturing left hand of the state (social security administration, education, health care, social services etc.) and the punishing right hand of the state (finance, treasury, justice, military, internal security) (in Droit and Ferenczi 1992), and it is quite evidently only the right hand that is prevailing under the Trump administration. This makes Trump one of the most regressive US presidents, thus standing in line with policies that battered the popular classes since at least Ronald Reagan.
By appointing wealthy heirs like Betsy DeVos or businesspeople like Ross Wilbur, Trump’s cabinet became by far the wealthiest cabinet in US history. This cabinet is a big change from historical precedent, where the oligarchs control politicians (mostly lawyers by training) indirectly via the financing of elections. But in the current cabinet, the middlemen have been partly displaced by the oligarchs themselves, most obvious of which is the real estate mogul Trump himself. Ironically, it is precisely Trump’s wealth, which had allowed his message of “draining the swamp” to resonate given that he genuinely could afford to not care about the views of his fellow oligarchs. But he was nothing more than a wolf in sheep’s clothing.
The problem of politics, as had been noticed by Max Weber (1994) long ago, is that even the most populist of all leaders still has to rely on an army of bureaucrats to run the country. The disruptive cultural effect of the Mongolian conquest of the Chinese empire was tempered by the Chinese literati that formed the bureaucratic class, which continued to run the empire as before at least in rural areas (in the big cities, there was a substitution for Central Asian and European officials). With the exception of Trump’s own family (his three children and son-in-law Jared Kushner), Trump does not really trust anyone else that closely, and as real estate mogul it wasn’t necessary to trust many more people, but the federal government is a giant bureaucracy which needs to be re-staffed whenever a new president enters office (Collins 2017).
Failing Trump Administration?
In very important ways, the Trump administration had appeared to be a failure: the Muslim travel ban was halted in courts, though most recently the Supreme Court has granted the ban. The coal miners, who were promised a restoration of jobs, cannot hope to return to employment when natural gas is displacing coal use. The much feared wall on the Mexican border, which “Mexico will pay for”, turns out to be rather modest in scope, and quite nonsensical given that there are not as many Mexicans coming across the border as in the past.
The biggest failure appeared to be in health care, where 3 Republican senators proved the crucial vote to sink the Obamacare repeal in the Senate. But Obamacare is not out of the woods, because the tax bill will pull the plug on the mandate and the financial penalty for not carrying health insurance, which could sky-rocket insurance premiums. Many insurance companies had already pulled out of the insurance market. The Trump administration had carried out administrative measures, which already weakened pillars of Obamacare. It, for instance, shortened the time period of the open enrollment, which is limited to a little over a month every year, which is a peculiar arrangement given that other insurance policies (life, car, home etc.) don’t have such an open enrollment window. The administration also reduced advertising expenses, such that fewer new people are reached to sign up for insurance. The essential weakness of Obamacare is that it is fragile to political attacks by an unfavorable administration, and it builds on the dysfunction of the existing health insurance system, which is largely built on administrative waste and greed. It takes enlightened leaders unencumbered by oligarchic lobbying interests to promote policies that are more durable, such as a single-payer Medicare for all system.
The repeal of the Dodd-Frank financial policy had long been announced by Trump, which he alleged to prevent job creation via the limitation on reckless bank lending procedures. While the policy remains largely intact, Republican legislators are pushing for its repeal, which could accelerate another round of speculation.
Oligarchic Regulatory Success
On another front, Trump has been a splendid success: by appointing an EPA (Environmental Protection Agency) administrator, who was the former attorney general of Oklahoma (Scott Pruitt) and has sued the EPA on behalf of oil, gas and coal companies to diminish government regulation on CO2 emissions or environmental protection measures, the fossil fuel interests have come to prevail, as environmental regulation is continuously removed, even when it comes at the price of polluted groundwater and increased sickness in the population (Worland 2017).
Organized labor, which has been on a downward trajectory since the 1950s, as deindustrialization, automation, outsourcing, the displacement of labor and pro-business government policy have combined to exert pressure on labor unions, got another shellacking by the new administration, which appointed two new members to the NLRB (National Labor Relations Board), thus tilting the balance to 3 Republicans and 2 Democrats. The business community demands a deregulation of franchisors (like McDonalds), who were previously ordered to maintain decent working conditions to the employees in the franchises, the repeal of so-called micro-unions and a slowing down of union election procedures (Wheeler 2017). In August 2016, the NLRB had given graduate students at universities the right to organize in a union, because research and teaching assistants provided necessary labor to their universities. Universities are capable of keeping a low-cost and docile workforce by maintaining the legal fiction that a stipend is not really a wage payment, and thus graduate student activity is not really work. Subsequently, some university students jumped on the bandwaggon and filed petitions for a unionization vote and certification of student labor unions, which succeeded in some cases. But the time window had been rather narrow, as the new Trump appointments to the NLRB suggest that the NLRB will be less favorable to unions, and the university administration is hoping to drag their feet to effectively prevent unionization (Flaherty 2017). The same fate might await home health aides, airport staff and other workers in the service sector that had campaigned on unionization. As the government sides with big business, oligarchic interests prevail.
Another deregulation example is the Federal Communication Commission, which is led by Ajit Pai (former legal counselor to Verizon), who wants to repeal the net neutrality rule, which has prevented Verizon and Comcast from charging higher rates or slowing speed for different users using different websites (Fung 2017). Given the quasi-monopoly power of the major internet providers, the profits will almost certainly increase while the quality of consumer services will decrease, at least for people with less resources.
Oligarchic Tax Bill
The latest sign of the success of the oligarchic agenda is the passage of two versions of the tax bill in the House and the Senate, which somewhat differ in their scope, but both have in common their intent to shift a substantial amount of economic resources from the bottom and the middle of the income distribution to the top. Reported here are some of the provisions in the Senate plan, which are slightly less regressive than the House given the much smaller positive margin of Republican votes there.
(1) The corporate tax rate will be reduced from 35 to 20%, which is permanent in the tax code, i.e. does not require re-authorization by Congress in the future. This is by itself a staggering provision and is justified by the Republican leaders as encouraging the repatriation of foreign capital, which will magically result in job growth, even as some honest corporate leaders claim that this will not really happen. It is also remarkable that the Republican Party has a zeal to reduce the nominal tax rate, when the effective corporate tax rate is rather low in international average (13%). The long-term trend has been that the US government became less and less dependent on corporate tax revenues, and here they are gifted with even more presents to hand out to top shareholders and executives. Another corporate provision is to allow a complete tax write-off for investments in buildings for the next five years.
(2) The top income tax rate will drop from 39.6% to 38.5%. The Senate plan keeps the seven current tax brackets, but shifts up the thresholds. The top tax threshold will shift from 470,000 to 1 million dollars
(3) The estate tax threshold is doubled to 11 million dollars for individuals and 22 million dollars for couples, which reduces the overall take from this revenue source, which only affects the richest people.
(4) The state and local tax deduction, which has a greater benefit to high tax states along the coasts and mostly Democratic, is completely scrapped.
(5) The personal deduction of 4,050 dollars will be scrapped and replaced by an increase in standard deduction (12,000 for individuals, 24,000 for married couples).
(6) The individual health insurance mandate will be scrapped, which will undermine a key pillar of Obamacare. (Long 2017)
The first part of the Republican agenda is to ensure that the donors get what they want. House Republican Chris Collins said that he could either vote to pass the tax bill or not bother to call his rich donors ever again (Scott 2017). This will inevitably drive up the fiscal deficit, as 1.4 trillion dollars are added to the debt in 10 years, which comes on top of the already projected debt increase without any legal change (Carney 2017). The second part of the agenda is to blame the deficit in the federal budget on Social Security, Medicare and other programs, which will then receive cuts, a point that Senator Marco Rubio admitted to (Hiltzik 2017). In a heated exchange in the senate between Bernie Sanders and Pat Toomey, the former pressed Toomey on whether he would cut the entitlement programs in the future, and Toomey gave the evasive answer that current beneficiaries would experience no cuts to their benefits, which Sanders called out on as suggesting that future recipients will experience enormous cutbacks. Toomey claimed that if the Republicans wanted to slash entitlement spending, they could have packed it in the current legislation (CHAOS- Youtube 2017). But that is disingenuous, because there is nothing that will prevent Republican politicians in the future from cutting these programs given the enlarged deficit following their tax policy.
The ascendancy of the Trump presidency has given the faint hope to the working class base that Trump will have the charismatic ability to shift the balance of the political forces on their behalf. The reality, however, is that his election reinforces the power and influence of the oligarchic elite, in large part because Trump himself belongs to the ruling elite. David Koch may have been a peripheral figure 37 years ago on the ticket of the Libertarian Party, but their success is best achieved behind closed doors. Domhoff (1967) maintains that within the corporate elite there is a moderate and an ultra-conservative faction with the former being okay with some Keynesian investment policies, while the latter want to massively slash taxes and otherwise reduce government spending. To the extent that the latter succeeds, there is no corresponding pressure to balance the books by immediately slashing spending, which is, in fact, increasing with regard to military expenditures, which reminds us of the functionalist Neo-Marxist account that rising state expenditures that are associated with the social costs and infrastructure requirements created by capitalism will generate a fiscal crisis of the state (O’Connor 2001).
However, the tax cut agenda for the rich will provide no temporary economic stimulation, because rising corporate profits and shareholder returns to the wealthy in the past have not contributed to a jobs boom (Lazonick 2014). A jobs boom can at best happen if the lower and the middle class receive higher incomes given their low propensity to save, which stimulates the economy. The Republicans claim that they are providing a tax cut agenda for the lower and middle classes too, though these rate cuts are sunset at 2026, and for even lower income people various cuts in tax deductibility will ultimately eat up the small gains they have made via the tax cuts.
It is hard to imagine how the political economy effects of the tax cut can drive an even more regressive agenda. The leaders of the tech and finance companies have already raked massive profits, and the Trump deregulatory agenda will pile up more short-term gains for big oil, fossil fuels and real estate developers. The ever more extreme oligarchic demands placed on the state will further sap resources that could be used to retrain the workforce or invest in their education. Structural factors like technological change and the unrestrained mobility of capital will further enhance inequality and contribute to less stable and more precarious employment relationships.
The only realistic hope for the masses is some external force that will shift the balance of power in their favor. Scheidel (2017) argues that only four interventions can realistically reduce extreme levels of inequality that have built up as a result of the path-dependence of allowing private property to accumulate: war, social revolution, state breakdown and pandemics. He does not believe that democracy can dent the level of inequality, as the rich continue to control the political institutions that make up the democracy. It will take some time before progressive counter-mobilization can oppose the normalized path toward oligarchy.
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