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How The 0.01 Percent Underwrites, And Undermines, Politics

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WASHINGTON -- Just four days after being named Mitt Romney's vice presidential running mate in August 2012, Rep. Paul Ryan (R-Wis.) made a pilgrimage to Las Vegas to meet the man who had, overnight, become his biggest benefactor: casino magnate Sheldon Adelson.

Throughout the 2012 campaign, the octogenarian Adelson was both everywhere and nowhere -- perhaps the greatest example of an Oz-like wizard pulling the political strings behind the scenes. He appeared in public with Romney just once, at a fundraiser that Adelson hosted for the GOP nominee during a visit to Jerusalem. But he poured more than $150 million into a network of political groups that backed Republican candidates.

Adelson was not alone, however, among the small circle of Republican mega-donors. In June 2012, billionaire industrialist brothers Charles and David Koch invited dozens of the country's wealthiest individuals to their annual "donor" conference in San Diego. There they raised nearly $400 million in three days, money they would later churn through a web of conservative nonprofit groups -- shielding the identities of the donors in the process. Two weeks after the conference, David Koch held a fundraiser for Romney at his home in the Hamptons, which guests paid between $50,000 and $75,000 to attend.

Meanwhile, the reelection campaign of President Barack Obama sought to cast a populist sheen on its glitzy fundraisers by raffling off tickets to events hosted by the likes of Vogue editor Anna Wintour and actor George Clooney. Yet while he ultimately raised more money from small donors in 2012 than he had during his historic 2008 campaign, Obama also attended more high-dollar fundraisers than any previous sitting president.

All told, the 2012 general election for president was the most expensive political campaign in American history. According to the Center for Responsive Politics, candidates, political parties and outside groups spent a total of $2.3 billion on the general election phase of the race for the White House. Add to that the cost of House and Senate campaigns and the presidential primaries, and the entire federal election cycle of 2012 reached a whopping $6.3 billion, easily setting a new record.

Just as income inequality has skyrocketed in the past 30 years, so, too, has the inequality of the campaign marketplace. Political candidates and parties today are more reliant on major campaign donors than at any other time since the early 1970s, when Congress first enacted modern campaign finance laws.

Indeed, according to a recent study, the top 0.01 percent of campaign donors -- one percent of the one percent -- contributed more than 40 percent of all the money spent in the 2012 elections.

Obama has called income inequality "the defining issue of our time" and plans to discuss it during his upcoming State of the Union address. To truly deal with inequality, however, Obama must confront the corrosive influence of money on the American political system. From the lobbyists shilling for corporations on Capitol Hill to the billionaires building their own political empires, American democracy is under siege by a modern-day class of robber barons.

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There is something new afoot in the money saturating politics in the Second Gilded Age.

In 1980, the top 0.01 percent of campaign donors accounted for just under 15 percent of all the money contributed in that year's elections. The largest donor that year was a Texas tugboat company owner named Cecil Haden, who contributed $1.72 million (in today's dollars) to independent political efforts. The second-largest independent donor was Stewart Mott, a politically liberal General Motors heir, who donated $302,247 (in today's dollars) to left-leaning causes.

In 2012, by contrast, at least 103 donors gave more than $1 million each to independent political groups. As the rich have grown richer, they have sought to solidify their status by conquering the political arena. In corporate America, some CEOs literally got the memo, from the U.S. Chamber of Commerce, instructing them to do so.

Candidates and political parties have been more than happy to accept their contributions, especially since the struggle for control of the national government has become more competitive than ever, fueling an arms race for campaign funds.

Yet even as the parties and candidates grow increasingly reliant on donations from the super-rich, so too are the super-rich changing how they engage in politics. Many of the wealthiest Americans have become dissatisfied with conventional campaign financing and have endeavored instead to create their own groups to advance their own interests.

George Soros, a progenitor of the modern billionaire political activist, founded Open Society and other organizations to advocate for criminal justice reform and democratic governance.

In recent years, much of the conversation about budget austerity in Washington has been funded by Peter G. Peterson and his foundation, which has spread money to think tanks and political consultants willing to push for cuts to programs like Social Security and Medicare.

Former New York City mayor and billionaire Michael Bloomberg runs his own super PAC, which spent millions of dollars last year in support of stricter gun control legislation, charter schools, immigration reform and same-sex marriage.

Immigration reform is also a pet cause for Facebook CEO Mark Zuckerberg, who created a political nonprofit, FWD.us, to advance the cause with support from other Silicon Valley billionaires.

The Koch brothers have cultivated a network of donors, nonprofit groups and for-profit organizations that is so sophisticated and well-funded that it rivals those of the major parties themselves. In fact, the $400 million the Kochs and their network reportedly pumped into conservative political groups in 2012 is the same amount raised by the GOP's own flagship operation, the Republican National Committee.

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The wealthy have come to dominate the American political system in a more direct way as well. "When was the last time you voted for a working-class candidate?" Duke University professor Nicholas Carnes asked the audience at a recent conference on income inequality. When he went to vote in North Carolina in 2012, Carnes said, every single candidate on his ballot came from a white-collar occupation.

But it's not just North Carolina. Financial disclosure forms released by Congress reveal that for the first time, more than half of the 535 members of the U.S. House and Senate were millionaires.

The political consequences are serious. Research has shown that the wealthy have vastly different policy priorities than the working class, regardless of how the former amassed their wealth. In a 2012 survey of wealthy people conducted by Northwestern University, respondents listed the budget deficit as the most important problem facing the nation, selecting it over unemployment, child poverty and health care.

Campaign finance reform advocates are pursuing various ways of curtailing the influence of rich donors and increasing the political clout of ordinary citizens. The House Democratic Caucus will introduce legislation aimed at that goal in February. But new rules governing campaign spending alone won't solve the larger issues stemming from the lack of working-class voices in Washington.

Benjamin Sachs, a Harvard law professor, has proposed changes to labor laws to increase the ability of workers to organize for their own political interests, while Carnes suggests the creation of more sophisticated training programs to boost working-class candidates for public office.

"Even if we somehow stopped [special] interests from buying influence, millionaires would still get to set the tax rate for millionaires," Carnes wrote in his 2013 book, White-Collar Government: The Hidden Role of Class in Economic Policy Making. "White-collar professionals would still get to set the minimum wage for blue-collar workers. People who have always had health insurance would still get to decide whether to help people without it. If we want government for the people, we've got to start working toward government by the people."

If President Obama really wants to address both income inequality and its root causes, he should seek to increase the means and opportunities for middle-class and poor Americans to engage in the political process.

This article is part of a weeklong series examining income inequality in America in advance of President Obama's State of the Union address. Read more here.

CORRECTION: Benjamin Sachs was originally referred to as a Yale law professor. He is a law professor at Harvard.

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