First, let me say how pleased I am to be here, both personally and as President of the MacArthur Foundation. The issues this conference addresses are timely, important, and compelling.
We have to address the “growing skepticism and cynicism with which Americans view their government, our conviction that our leaders are out of touch with, and don’t care about, the wellbeing and the lives of ordinary people, and our belief that politicians see voters merely as pawns to be manipulated in the nasty chess game that Republicans and Democrats are playing against each other.” Francine Prose wrote that a couple of weeks ago in the New York Review of Books. It rings true with what I hear from many people.
Lack of trust in the political process cannot be good for democracy. But there are consequences of our present dysfunction that extend beyond alienated citizens.
For example, there are certainly consequences for philanthropy. I recently argued that, because almost all foundation work is done in a policy environment where government is the most powerful player, government policy is crucial to our success.
Foundation resources are tiny compared with federal or state budgets. If there is no policy, or just bad policy, in an area that we are trying to address – such as the environment, or our fiscal future, or energy – the organizations we support cannot make headway. The resources we invest buy less impact. So strengthening the causal chain of functioning democracy, good governance, and sound policy is in our interests.
MacArthur decided to take on the political process directly. We have funded work on the role of money in campaigns, the right to vote, and the modernization of voting systems. We also support efforts to make evidence-based policy debate the norm in state legislatures and in the high-quality journalism that is necessary for an educated electorate.
I believe foundations, particularly if they co-ordinate their efforts, can make a powerful contribution in this field. It is good to see that several foundations are engaging in this effort and that good collaborations among foundations are underway.
But far more important than details of the system are the consequences of democratic dysfunction for the American people. Our present crisis goes to the heart of what this nation is about and threatens the American dream.
The President has put economic inequality at the top of the political agenda, calling it “the defining challenge of our time.” It is certainly striking – and increasing. In 2012, the top ten percent earned half of the nation’s income and the top one percent alone earned 20 percent. A quarter of the gains in income since the 2008 recession have gone to the top 5 percent.
“So what?” you may ask. America has never been about equality of condition or social levelling. But there is something troubling about this concentration of wealth for our system of government. Angus Deaton, the Princeton economist, writes: “The political equality that is required by democracy is always under threat from economic inequality, and the more extreme the economic inequality, the greater the threat to democracy.”
This strikes me as simple common sense. If money buys you more representation, then the game of democracy is rigged. The rules are simple: the rich become powerful and (just as dangerous) the powerful become rich. Is this happening now in America?
Look at some simple statistics. The last presidential election cost $7 billion dollars. A Senate seat, on average, costs $10.5 million and a House seat $1.7 million. There are powerful incentives for politicians to pay attention to wealthy donors – electoral survival, to start with, but also the economic benefits that come with such relationships. It is striking that almost half our congressmen and senators, according to Mark Leibovich, become lobbyists when they retire and that, for the first time, more than half of our congressmen are net worth millionaires. Senators average out at $2.5 million. Public service appears to pay well – or to be the preserve of the wealthy.
We should notice that seven of the ten richest counties in the U.S. are in the suburbs of Washington, D.C. which, as Italian economist Luigi Zingales points out “produces little except rules and regulations.”
Some of those rules and regulations are extremely profitable for the industries whose interests they promote. They underwrite an army of lobbyists. Our government produces a complex web of subsidies, price-controls, uncompetitive contracts, preferential tax policies, and other policy devices that protect special interests. They also distort the market, protect the status quo, and undermine innovation and opportunity.
The result is a nexus of power and money, government and corporate interests in synchrony, that exists to shore up its own position and maximize its own profits.
As a symptom, one could point to the Farm Bill that just passed, which (over ten years) adds $27 billion to crop insurance subsidies for farmers who make up to $900,000 annually, while cutting food stamps by $8.5 billion for families of four making up to $31,000 a year.
It does not seem an intellectual stretch to conclude that, when the political and economic winners collude to dominate politics, the concerns of ordinary people will not be at the top of the agenda. That will, more than likely, increase inequality and make economic mobility harder to achieve.
While I certainly think that we should be trying to reduce the undue influence of money in our political system, the obstacles to upward mobility is what exercises me most. And this is where I have personal experience. I am first generation. My father worked for United Parcel Service, my mother for Macy’s. My brother and I were the first to go to college, both to our local state university at Stony Brook. He’s now a Full Professor in Quantitative Sciences at the University of Washington. Not being as smart, I went into government. We both benefited from educational and job opportunities. So have our kids. But now I worry about my grandkids.
I can accept that changes in the global marketplace account for the stratospheric wealth of the new billionaires. But what has happened to the vast majority of people in the middle? Most models seem to show that their incomes have stagnated and that insecurity in the middle class has increased.
Worse still is the picture for those at the bottom where mobility has never been as good as we thought it was. Since the 1970s, only 9 percent of children born in the bottom quintile have made it to the top quintile as adults. More than forty percent stay in the bottom quintile all their lives and never get even a foot on the ladder.
This situation is exacerbated by the “great sorting” of our society – the process in which people have been moving to live with others more like them. Over thirty years, that has produced more areas of concentrated poverty from which it is harder to escape.
What should we do? I think there needs to be a national agenda for mobility, policies to open opportunity for those at the bottom of the ladder and to help those who have made it to the middle class not to slip back – and hopefully to climb higher. I hope to see this figure prominently in our next election.
MacArthur has not worked in this area, nor do we have plans, at the moment, to do so. But others have, and developed persuasive roadmaps. A few years ago, the Pew Economic Mobility Project developed a set of proposals, with bipartisan support, that would lend help where it is most needed and foster the behaviors that produce success.
Among the proposals were these: better early conditions for children and mothers, both in health care and education; stronger family life; more effective education from K through12; accessible paths to post-secondary education; and assistance for low-wage workers to learn new skills.
Financial education, with incentives to save for education, retirement, and home ownership, is another key component.
There may have to be sacrifices at the higher end of the income spectrum: changes to the subsidy for health benefits, the way we tax dividends, or the mortgage interest deduction. CBO calculates that, of the $900 billion excluded from tax by the ten largest deductions, $450 billion goes to the top 20 percent.
This is not glamorous, or easy. But, as a nation, we need to make good on the promise that if you work hard and play by the rules, you can get ahead.
America has become known as the land of opportunity. We need to make sure that it truly is. Our work, and yours, to strengthen voting rights, modernize voting practices, and decrease the impact of campaign finance and lobbying money on the political system goes to the heart of this issue. And renewing economic opportunity for all Americans should be a high priority for that political system.
My hope is for a reinvigorated democracy, responsive to the needs and aspirations of its citizens, building consensus and goodwill and serving the common good. That kind of government can pursue sensible, bipartisan solutions to inequality and lack of opportunity in the pragmatic and meaningful ways that most Americans clearly want.
This is, I know, an ambitious vision, but it is far from impossible. I think there is a grassroots movement stirring that wants to fix America, to rekindle the “last, best hope” that has drawn people here from across the globe. We should all be a part of it.
(Note: This transcript has been edited for clarity and accuracy.)