Rules America? Bill Domhoff Outlines

¶ … Rules America?

Bill Domhoff outlines some statistics and arguments about wealth and power in America. He notes the substantial increase in the wealth of the richest Americans and the utter lack of wealth of the nation's poorest. He also notes that CEO pay has increased substantially while worker pay has not. Domhoff delves into issues such as taxation and how the way different types of income are taxed can affect tax policy. Power is tied into this because the political system is subject to access costs, via lobbyists for the legislative branch, and lawyers for the judicial branch. As the wealthy are better able to afford the access costs to government, they are better able to influence the laws that are written, and ensure that those laws are written in their favor. The cycle is a positive feedback loop that accelerates wealth generation for the richest, but does not accelerate wealth generation for people of other socioeconomic classes.

Synthesizing the views of many, arguably neither side of the argument -- the haves and the have-nots -- would dispute the facts and disagree with the article. Rather, the presentation of these facts is subject to dispute. The author certainly seems to favor a greater degree of wealth distribution or at best views the wealthy with skepticism. The interpretation that many of the poor Americans and working class would give is that Domhoff is correct in pointing out this problem in America's economic system. They would certainly sympathize with the view that the wealthy in America have grown too powerful, not just be virtue of their dramatic increases in wealth in the past few decades but by the way that this wealth and political power are intertwined.

The wealthiest Americans might not even dispute that they have benefitted tremendously from recent tax policy, and there are even some such as Warren Buffet (2011) who believe the system is too geared towards their interests. The assertion, at least the one you see in public, is that they deserve their money. CEOs will argue that CEO talent is hard to come by, especially experienced and good CEO talent. Given how much more complex business is in this era of globalization, CEO pay escalation is a function of scarcity of talent in a world where more talent is needed. Boards respond to this by seeking to outbid each other (Allen, 2012).

Similarly, we hear rhetoric about job creators, that being investors, and how important it is to have low tax rates for capital gains in order to entice investors. While it is true that investors today can move their money around the world, especially major investors, capital gains tax is just one consideration. Moreover, investing in a company does not imply that jobs are created, or if they are that they are created domestically. As a job creation tool, lower capital gains taxes are poor. But the argument remains that there are specific benefits to tax policy with respect to capital gains and other investments. Thus, investors are taxed at low rates and CEOs receive high pay specifically because they deserve it.

Thus, the facts are not contested by any side of this debate. The reality is that one must draw the line somewhere with respect to what sort of society one prefers to live in. The wealthy seek political power because they want to design a society in which they receive most of the benefits of opportunity while avoiding as much of the cost (taxation, regulation) as possible. Their ideal society probably already exists somewhere in the developing world, but alas American voters have sought to strike a more balanced approach to opportunity and cost. Many Americans -- some of them among the wealthy -- argue that too much wealth disparity is harmful to the country. First, as many Americans as possible should have the opportunity to succeed, something that does not come from a life of poverty, poor education, poor health, hunger and substandard living conditions. The social safety net, this side argues, should not be sacrificed so that the wealthy can have a little bit more of that wealth.

The wealthy who stand in opposition to such thinking do not hold a social safety net in as high a regard. They simply do not need it, and in many cases cannot understand why anybody would. In all likelihood, they have not been anywhere needing such a safety net for a long time, if ever. Their priorities, therefore, are elsewhere, and typically emphasize freedom of opportunity. They have the means to succeed, and with more opportunity can enjoy more success.