Thursday, October 11, 2012

the last book I ever read (Twilight of the Elites, excerpt four)

from Twilight of the Elites: America After Meritocracy by Christopher Hayes:

In most cases, of course, money does confer power: the ability to make decisions about which products will be made, what innovations will be nurtured or abandoned. Those with capital to lend exert tremendous dominion in their capacity as creditors (as we've seen during the foreclosure crisis): the International Monetary Fund's role as lender of last resort to developing countries has empowered it to issue decrees that completely remake a nation's social contract and domestic policy as a condition of its extension of credit.

But in a society as fully monetized as our, money is also crucial because it can readily be exchanged for all other kinds of power. Money can purchase platform: When Fox News mogul Roger Ailes bought an expansive estate in the Hudson Valley, he also purchased two local newspapers, which he used to crusade for changes to local zoning laws. ("Freedom of the press," New Yorker writer A. J. Liebling famously quipped, "belongs to those who own one.")

Likewise, money can grant you access to powerful social networks, whether on Park Avenue or in country clubs, because people with money tend to socialize with other wealthy people. These bonds of association lower coordination costs and make organizing toward some mutually beneficial goal easier and more effective.

Money can also buy political power: it pays for lobbyists, PACs, political donations, and the all-important access. In his book Oligarchy, political scientist Jeffrey Winters focuses on what he calls the income defense industry, made up of "lawyers, accountants, lobbyists, wealth management agencies" who "have highly specialized knowledge and can navigate a complex system of taxation and regulations, generating a range of tax 'products,' 'instruments,' and 'advice' that enable oligarchs to keep scores of billions in income annually that would otherwise have to be surrendered to the state."

Over the last decade, the political arm of the income defense industry has been wildly successful. The tax cuts passed by Bush and extended by Obama represent a total of $81.5 billion transferred from the state into the hands of the richest 1 percent. Meanwhile, hedge fund managers and their surrogates have deployed millions of dollars to lobbyists to maintain the so-called carried interest loophole, a provision of tax law that allows fund managers to classify much of their income drawn from investing gains as "carried interest" so that it is taxed at the low capital gains rate of 15 percent, rather than the marginal income rate, which would in most cases be more than twice that. It was this wrinkle in the law that helped Mitt Romney, a man worth an estimated quarter of a billion dollars, pay an effective tax rate of just under 14 percent in 2010. In 2008, 2009, and 2010, the House of Representatives passed a bill closing the loophole, only to see it beaten back by an intense wave of lobbying in the Senate.

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