‘The rich’ do not control politics
In his new book People, Power, and Profits: Progressive Capitalism for an Age of Discontent, Nobel prize winning economist Joseph Stiglitz explores the consequences of increasing economic inequality. One of his key charges is that it places disproportionate political power in the hands of ‘the rich’ who use this power to entrench their economic and political dominance even further:
Those with money and power have used their power in politics to write the rules of the economic and political game in ways that reinforce their advantage.
This argument has been taken up by politicians. According to Sen. Elizabeth Warren:
You’ve got things that are broken in your life; I’ll tell you exactly why. It’s because giant corporations, billionaires have seized our government.
One piece of research which is often cited in support of this argument comes from political scientists Martin Gilens and Benjamin Page. They investigated a database of 1,779 policy issues — which included data on the opinions of median-income Americans, the rich, business interests, and non-business interest groups like unions or the National Rifle Association — and found that actual policy outcomes are closer to the opinions of elites than to the typical or median voter. They claimed that:
Economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence.
But a little thought prompts some skepticism. After all, if ‘the rich’ really do wield this political power, surely they would have done something about the fact that the top 1% of income earners – who earn 19.7% of all adjusted gross income – pay 37.3% of all total income tax receipts? (For comparison, the bottom 50% of taxpayers earn 11.6% of all adjusted gross income but paid 3.0% of total income tax receipts) Why, if ‘the rich’ are calling the shots, has a federal sales tax – which would be highly regressive – got nowhere? Why did billionaire Tom Steyer score a pitiful 3.6% – $1,900 in campaign spending per vote – in New Hampshire?
The truth is that ‘the rich’ don’t control everything. Looking at the research on this topic in his impressive new book Big Business: A Love Letter to an American Anti-Hero, the economist Tyler Cowen makes three points.
Middle class Americans and ‘the rich’ agree on most stuff
Cowen cites research by J. Alexander Branham, Stuart Soroka, and Christopher Wlezien which looks at Gilens and Page’s sample and finds that ‘the rich’ and the middle class agree on 89.6% of the legislation in the data sample, 1,594 bills out of the 1,779. They find:
We first compare the preferences of the middle and rich and find that they rarely disagree; in nearly 90 percent of cases, majorities of the middle and rich are in agreement.
As Cowen writes:
…it’s hardly the case that the wealthy, insofar as they are in charge, are acting in gross variance with the views of the middle class.
Incidentally, the poor, middle class, and ‘the rich’ agree on 80.2% of bills.
When middle class Americans and ‘the rich’ do disagree, it isn’t by much
Looking at the 185 instances where the opinions of the wealthy and the middle class do differ, Branham, Soroka, and Wlezien find that:
…when the middle and rich disagree, it is often not by much, 10.9 percentage points on average.
So, as Cowen explains:
…something like 43 percent of of middle-class individuals might support a bill, but 53.9 of the wealthy would support it, which is hardly a chasm in opinion.
When middle class Americans and ‘the rich’ do disagree significantly, each gets their way about half the time
On those bills on which the rich and the middle class do disagree significantly, Branham, Soroka, and Wlezien find that:
For the middle, there are 87 wins (47 percent of all cases); for the rich, there are 98 wins (53 percent of all cases). This small gap in win rates is not significantly different from 50 percent
In summary, Cowen finds that:
…the evidence suggests that that the middle class is coming pretty close to getting what it wants, in terms of congressional votes, at least
There is no such thing as ‘the rich’
At the heart of this argument is the idea that there are a group of people – ‘the rich’, ‘the 1%’ – who share a set of political interests and act in concert to pursue them. But this is wrong.
Politically speaking, ‘the rich’ have little in common apart from their elevated incomes. Pew Research finds that individuals with family incomes above $150,000 are equally likely (33% to 32%) to identify as Republican or Democrat. A report by Capital Research Center titled ‘Which Party Is the Party of the 1 Percent?’ concludes: “These data are powerful evidence that affluent Americans in the most elite locales contribute significantly more money to Democrats than Republicans.” Research on voting patterns in the 2016 presidential election from the Roper Center for Public Opinion Research found that Hillary Clinton broke even among voters with incomes above $100,000 (47% to 47%).
‘The rich’ are a diverse bunch. Because of this diversity, as Branham, Soroka, and Wlezien note:
…when the rich do win, their victories be labeled “conservative’ only slightly more often than they could be identified as “liberal”
The data refute Stiglitz’ childishly simple minded characterization of a world populated by evil rich people and their brainwashed, MAGA hatted lackeys. Thus, while President Trump’s 2017 Tax Cuts and Jobs Act cut taxes for most Americans, Congressional Democrats are enthusiastically a pushing an actual, bona fide tax cut for the rich: lifting the cap for the SALT deduction from $10,000 to $20,000 for 2019 and repealing the cap entirely for 2020 and 2021. This will almost exclusively benefit high-earning homeowners in parts of the country where you must pay high taxes.
The economic historian Deirdre McCloskey once called Stiglitz “a philosopher” who dealt with models rather than data. In his new book he has become a teller of childish stories of goodies versus baddies, stories which aren’t even true.