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How inequality makes our government corrupt and our democracy weak

He had opportunities to help the working class, and he passed them up.

June 28, 2017  |  by Matt Stoller
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On his way to an early retirement from Congress later this week, Rep. Jason Chaffetz (R-Utah) has asked for a housing subsidy for members of Congress. “I flat-out cannot afford a mortgage in Utah, kids in college and a second place here in Washington, D.C.,” he said. Chaffetz showed no indication that he cared about affordable housing when he chaired the committee that oversees the District of Columbia, and he recently mused that if families can’t afford health insurance, maybe they shouldn’t buy new iPhones; he deserves no sympathy.

But he did point, however unwittingly, to a deep problem with the way we understand political corruption. President Barack Obama also noted it accidentally when he discussed his departing press secretary, Robert Gibbs, noted Gibbs’s “relatively modest pay” of $172,000 in the White House in relation to what he would earn elsewhere.

The problem is this: We undervalue our public-sector leaders relative to private sector leaders, and that gap helps entrench and deepen corruption. The issue goes beyond the fact that government work is increasingly a means of much higher pay later on from the private sector. Radically disparate pay for public servants isn’t punishing public servants, it is simply setting up a different system of power.

In 1975, you could hire six senators for the price of one CEO of a large corporation. In 1992, you could hire twenty-three senators for the price of a single CEO. By 2000, you could buy the whole Senate, plus five additional senators, for one CEO. Since 2000, that ratio has bounced around, mostly in tandem with the stock market, but the number of senators you could get for just one CEO compensation package has never dropped below 50.

In absolute terms, lawmakers have had their pay cut by 10 percent since 2009. And like most Americans (but not CEOs), they received less compensation in 2015 than they did in 1975. It seems odd to say that members of Congress have more in common with the average American than they do with corporate CEOs, but in this case, it is true. Of course, $174,000 is pretty great compared to most people in a country where the median household income is about a third of that. And it is. But it’s peanuts relative to CEO pay; the average CEO made $12.2 million in 2015. And the salary for members of Congress is actually less than an average 26-year-old first-year lawyer gets at a top corporate law firm. The differential is often starker with state level legislators. In fact, politicians have actually seen relative pay stagnation along with teachers, social workers, journalists, and most American workers.

This differential shows how much we value our public sector leadership versus our private sector leadership. We are say that CEOs are the essential actors in our culture, while public leadership is a sinecure for the already wealthy.

We are also contributing to conditions that encourage politicians to view rich business leaders as different than other constituents. In 1975, CEOs were wealthier, but still lived in the same economic world as politicians and regulators. A world of public schools, reasonably priced health care and college, and shared public services meant that money could buy a slightly fancier but not fundamentally different life. Today, however, the wealthy and everyone else inhabit vastly different cultures. Politicians can’t help but treat powerful economic actors differently when those people make so much more than they do, a situation complicated by the fact that many politicians’ real compensation is likely to occur through unofficial channels, like lobbying contracts after they leave office.

This disparity also suggests that we’re misunderstanding the source of political corruption. Since the 1970s, advocacy groups have argued we must place restrictions on lobbyists and the public sector to root out corruption. In the early 1990s, Ralph Nader encouraged this with a campaign against hiking congressional pay. In 1995, Newt Gingrich continued it by gutting congressional committees and destroying the Office of Technology Assessment, which Nancy Pelosi did not restore in 2007. In his 2008 campaign, Barack Obama often noted his work on an anti-corruption measure to reign in lobbyists. This theory misses half the problem. Private lobbyists are too powerful precisely because public servants are too weak.

In political science parlance, lobbying is known as a “legislative subsidy”. The work of lobbyists is largely not bribery. Lobbyists write statutes, track process, enact legislative strategy, and work with administrative agencies to make sure the laws are carried out. It’s just government work, on a private payroll. And corporate interests are a lot more effective if most Hill staffers are 23-year-olds with second jobs bartending to make the rent. Current anti-corruption models, like underpaying congressman, staff, state legislators and regulators, will simply lead to more power for corporate interests that are only too happy to pay for governing work that favors them. The combined attack on the public sector and its ability to govern, and the dramatic concentration in the control of corporate resources, has led to a dangerously weak and unbalanced political culture.

But this can be reversed. After all, the trend isn’t that old: While Ronald Reagan increased CEO pay relative to government leaders, the real quantum change happened in the 1990s under Bill Clinton, likely because of a legal changes during his administration that linked CEO pay with the stock market. And the 1970s vision of corruption that misconstrues the real problem with diminishing politicians’ pay and budgets ignores a much older tradition in American society, which is an understanding that inequality leads to an enormous loss of freedom, and de-concentration of power is the solution. As Revolution-era weaver-turned-politician William Findley put it, “Wealth in many hands operates as many checks.”

If we want to restore a democratic culture, we’re going to have to not just raise the pay of public servants, but reduce inequality dramatically. We must attack the problem of a two-tiered society. We must go after the concentration of corporate assets through strong competition and anti-monopoly policy so that we don’t have a society split between billionaires with rights and powerless peasants living with varying degrees of comfort. Basic public goods – quality education, health care, transportation, nutrition — must be available to all without the need to incur huge debts. Private sector CEOs perhaps should be able to have more lavish lifestyles than the rest of us, but it should be a matter of living a fancier version of the same life. No one should go broke if they have a medical problem, not just because that’s a problem in and of itself, but because that is a route to social corruption.

There is no free lunch. If we want a functioning democracy, we need to pay for a functioning public sector. If public servants are treated poorly relative to corporate CEOs, then we will get bribed and subservient public servants and government via the board room. Public servants, and citizens themselves, will become dependent upon private concentrations of power. If we want to stabilize our society, we must strengthen the public institutions designed to protect our democracy. If we don’t, we may not have a democracy for much longer.

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In America today, wealth and political power are more concentrated than at any point in our country’s history.

The Open Markets Institute, formerly the Open Markets program at New America, was founded to protect liberty and democracy from these extreme -- and growing -- concentrations of private power.

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