Distorting Democracy: How ultraweathy Plutocrats and their campaign donations counteract the policies that a majority of Americans want

The New York Times over the weekend had this must-read investigative report. The Families Funding the 2016 Presidential Election:

Just 158 families have provided nearly half of the early money for efforts to capture the White House.

Income-InequalityThey are overwhelmingly white, rich, older and male, in a nation that is being remade by the young, by women, and by black and brown voters. Across a sprawling country, they reside in an archipelago of wealth, exclusive neighborhoods dotting a handful of cities and towns. And in an economy that has minted billionaires in a dizzying array of industries, most made their fortunes in just two: finance and energy.

Now they are deploying their vast wealth in the political arena, providing almost half of all the seed money raised to support Democratic and Republican presidential candidates. Just 158 families, along with companies they own or control, contributed $176 million in the first phase of the campaign, a New York Times investigation found. Not since before Watergate have so few people and businesses provided so much early money in a campaign, most of it through channels legalized by the Supreme Court’s Citizens United decision five years ago.

These donors’ fortunes reflect the shifting composition of the country’s economic elite. Relatively few work in the traditional ranks of corporate America, or hail from dynasties of inherited wealth. Most built their own businesses, parlaying talent and an appetite for risk into huge wealth: They founded hedge funds in New York, bought up undervalued oil leases in Texas, made blockbusters in Hollywood. More than a dozen of the elite donors were born outside the United States, immigrating from countries like Cuba, the old Soviet Union, Pakistan, India and Israel.

But regardless of industry, the families investing the most in presidential politics overwhelmingly lean right, contributing tens of millions of dollars to support Republican candidates who have pledged to pare regulations; cut taxes on income, capital gains and inheritances; and shrink entitlement programs. While such measures would help protect their own wealth, the donors describe their embrace of them more broadly, as the surest means of promoting economic growth and preserving a system that would allow others to prosper, too.

* * *
In marshaling their financial resources chiefly behind Republican candidates, the donors are also serving as a kind of financial check on demographic forces that have been nudging the electorate toward support for the Democratic Party and its economic policies. Two-thirds of Americans support higher taxes on those earning $1 million or more a year, according to a June New York Times/CBS News poll, while six in 10 favor more government intervention to reduce the gap between the rich and the poor. According to the Pew Research Center, nearly seven in 10 favor preserving Social Security and Medicare benefits as they are.

Republican candidates have struggled to improve their standing with Hispanic voters, women and African-Americans. But as the campaign unfolds, Republicans are far outpacing Democrats in exploiting the world of “super PACs,” which, unlike candidates’ own campaigns, can raise unlimited sums from any donor, and which have so far amassed the bulk of the money in the election.

The 158 families each contributed $250,000 or more in the campaign through June 30, according to the most recent available Federal Election Commission filings and other data, while an additional 200 families gave more than $100,000. Together, the two groups contributed well over half the money in the presidential election — the vast majority of it supporting Republicans.

The campaign finance system is now a countervailing force to the way the actual voters of the country are evolving and the policies they want,” said Ruy Teixeira, a political and demographic expert at the left-leaning Center for American Progress.

Like most of the ultrawealthy, the new donor elite is deeply private. Very few of those contacted were willing to speak about their contributions or their political views. Many donations were made from business addresses or post office boxes, or wound through limited liability corporations or trusts, exploiting the new avenues opened up by Citizens United, which gave corporate entities far more leeway to spend money on behalf of candidates. Some contributors, for reasons of privacy or tax planning, are not listed as the owners of the homes where they live, further obscuring the family and social ties that bind them.

But interviews and a review of hundreds of public documents — voter registrations, business records, F.E.C. data and more — reveal a class apart, distant from much of America while geographically, socially and economically intermingling among themselves. Nearly all the neighborhoods where they live would fit within the city limits of New Orleans. But minorities make up less than one-fifth of those neighborhoods’ collective population, and virtually no one is black. Their residents make four and a half times the salary of the average American, and are twice as likely to be college educated.

Most of the families are clustered around just nine cities. Many are neighbors, living near one another in neighborhoods like Bel Air and Brentwood in Los Angeles; River Oaks, a Houston community popular with energy executives; or Indian Creek Village, a private island near Miami that has a private security force and just 35 homes lining an 18-hole golf course.

* * *

More than 50 members of these families have made the Forbes 400 list of the country’s top billionaires, marking a scale of wealth against which even a million-dollar political contribution can seem relatively small. The Chicago hedge fund billionaire Kenneth C. Griffin, for example, earns about $68.5 million a month after taxes, according to court filings made by his wife in their divorce. He has given a total of $300,000 to groups backing Republican presidential candidates. That is a huge sum on its face, yet is the equivalent of only $21.17 for a typical American household, according to Congressional Budget Office data on after-tax income.

The donor families’ wealth reflects, in part, the vast growth of the financial-services sector and the boom in oil and gas, which have helped transform the American economy in recent decades. They are also the beneficiaries of political and economic forces that are driving widening inequality: As the share of national wealth and income going to the middle class has shrunk, these families are among those whose share has grown.

monopolybThe accumulation of wealth has been particularly rapid at the elite levels of Wall Street, where financiers who once managed other people’s capital now, increasingly, own it themselves. Since 1979, according to one study, the one-tenth of 1 percent of American taxpayers who work in finance have roughly quintupled their share of the country’s income. Sixty-four of the families made their wealth in finance, the largest single faction among the super-donors of 2016.

But instead of working their way up to the executive suite at Goldman Sachs or Exxon, most of these donors set out on their own, establishing privately held firms controlled individually or with partners. In finance, they started hedge funds, or formed private equity and venture capital firms, benefiting from favorable tax treatment of debt and capital gains, and more recently from a rising stock market and low interest rates. In energy, some were latter-day wildcatters, early to capitalize on the new drilling technologies and high energy prices that made it economical to exploit shale formations in North Dakota, Ohio, Pennsylvania and Texas. Others made fortunes supplying those wildcatters with pipelines, trucks and equipment for “fracking.”

In both energy and finance, their businesses, when successful, could throw off enormous amounts of cash — unlike industries in which wealth might have been tied up in investments. Those without shareholders or boards of directors have had unusual freedom to indulge their political passions. Together, the two industries accounted for well over half of the cash contributed by the top 158 families.

* * *

[W]hile blue-chip corporations largely shy away from super PACs, wary of negative publicity about unlimited campaign spending, these families have poured millions of dollars into such efforts.

Some are even betting on candidates shunned by their party’s traditional donor establishment. The three families who have provided the largest donations in the campaign to date — the Wilks family of Texas, which made billions providing trucks and equipment in the shale fields; the Mercers of New York, headed by the hedge fund investor Robert Mercer; and Toby Neugebauer, a Texas-born private equity investor — have backed Senator Ted Cruz of Texas, a socially conservative Tea Party firebrand disdained by Republican leaders.

“Making a big bet on something before anyone else really grasps it. That is what success has in common in energy and in equities,” said Tim Phillips, the president of Americans for Prosperity, a conservative advocacy group with ties to Charles G. and David H. Koch.

A number of the families are tied to networks of ideological donors who, on the left and the right alike, have sought to fundamentally reshape their own political parties. More than a dozen donors or members of their families have been involved with the twice-yearly seminars hosted by the Kochs, whose organizations have pressed the U.S. Chamber of Commerce and other business groups to eliminate the Export-Import Bank. They include Mr. Deason and his wife; the brokerage pioneer Charles Schwab, whose wife, Helen, is among the donors; and Karen Buchwald Wright, whose family company makes compressors used to extract and transport natural gas.

“Most of the people at the Koch seminars are entrepreneurs who have built it from the ground up — they built it themselves,” said Mr. Deason, who said he supported eliminating corporate subsidies and welfare, including those that benefit his own investments.

Another group of the families, including the hedge fund investor George Soros and his son Jonathan, have ties to the Democracy Alliance, a network of liberal donors who have pushed Democrats to move aggressively on climate change legislation and progressive taxation. Those donors, many of them from Hollywood or Wall Street, have put millions of dollars behind Hillary Rodham Clinton.

The families who give do so, to some extent, because of personal, regional and professional ties to the candidates. Jeb Bush’s father made money in the oil business, while Mr. Bush himself earned millions of dollars on Wall Street. Some of the candidates most popular among ultrawealthy donors have also served in elected office in Florida and Texas, two states that are home to many of the affluent families on the list.

But the giving, more broadly, reflects the political stakes this year for the families and businesses that have moved most aggressively to take advantage of Citizens United, particularly in the energy and finance industries.

The Obama administration, Democrats in Congress and even Mr. Bush have argued for tax and regulatory shifts that could subject many venture capital and private equity firms to higher levels of corporate or investment taxation. Hedge funds, which historically were lightly regulated, are bound by new rules with the Dodd-Frank regulations, which several Republican candidates have pledged to roll back and which Mrs. Clinton has pledged to defend.

And while the shale boom has generated new fortunes, it has also produced a glut of oil that is now driving down prices. Most in the industry favor lifting the 40-year-old ban on exporting oil, which would give domestic producers access to new customers overseas, and approval of the controversial Keystone XL oil pipeline.

“They don’t want anything from the government except that they’d like to export oil, and most of them want the Keystone pipeline,” T. Boone Pickens, the investor and natural gas advocate, said about his colleagues in the energy business.

“They don’t want anything from the government” — really? The energy sector is among the most heavily subsidized industries by the government and receives favorable tax treatment, as does the The Predator Class, the Banksters of Wall Street and Vulture Capitalists who were, after all, bailed out by American taxpayers just a few short years ago. Their wealth has fully recovered, while the average American has just tread water or lost ground.

The ultrawealthy receive substantial benefits from the government, far more than the average American, because they can afford to pay lawyers and lobbyists to ensure that Congress only listens to their concerns, wrapped in a hefty campaign contribution. While supreme Court Justice Anthony Kennedy may not see this as bribery and political corruption, he is wrong; it is.

See a list of the 158 families.

11 responses to “Distorting Democracy: How ultraweathy Plutocrats and their campaign donations counteract the policies that a majority of Americans want

  1. The Nobel Prize for Economics just went to this man…who said this:

    f democracy becomes plutocracy, those who are not rich are effectively disenfranchised. Justice Louis Brandeis famously argued that the United States could have either democracy or wealth concentrated in the hands of a few, but not both. 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.

    The very wealthy have little need for state-provided education or health care; they have every reason to support cuts in Medicare and to fight any increase in taxes. They have even less reason to support health insurance for everyone, or to worry about the low quality of public schools that plagues much of the country. They will oppose any regulation of banks that restricts profits, even if it helps those who cannot cover their mortgages or protects the public against predatory lending, deceptive advertising, or even a repetition of the financial crash.

    To worry about these consequences of extreme inequality has nothing to do with being envious of the rich and everything to do with the fear that rapidly growing top incomes are a threat to the wellbeing of everyone else.

    Gee, wonder if the good Dr. knows more about economics than Steve…?? One problem with this reality is that so many people would have to admit they’ve been wrong about their particular political party all along….hard for some.

    • I believe any economist knows more about economics than I do, to say nothing about a Nobel Prize winning one. In college I only took what was required in economics because the subject matter was so-o-o-o boring I could barely stay awake during the classes.

      And I agree completely that having that much wealth concentrated in the hands of so few is wrong. It is bad for the country and it is bad for the economy. Bob Lord convinced me of that several months ago. The point I was making is that those who have vast financial resources, regardless of their political affiliation, can be expected to use some of their wealth to influence to government to do what they want done.

      Thank you for sharing your reference, Cheri. It was interesting reading.

  2. Steve, I think you went 0.5 for 3 on your criticisms of BlueMeanie here, with the 0.5 you got right only being so in a technical sense, while missing a much larger point. Taking your three paragraphs in the order they appear:

    1. The actual article contained graphics showing how lopsided the big money is in favor of the Republicans, so BlueMeanie’s typical emphasis on the Republican side is justified.

    2. You have a fundamental misunderstanding of the corruption taking place. Yes, he would contribute to candidates who stand for the things he does, but his donations are a response to the positions of the candidates he supports. That’s how it works with small dollar donors. With the huge money donors, it works in the opposite direction. The candidates’ positions are in response to what the donors want (as opposed to what the voters want).

    3. No, the finance industry is becoming ever more powerful. An increasingly larger share of our economy is being skimmed off the top by the finance industry. That’s what happens when a society declines. Britain and Spain were no different. Read American Theocracy, by Kevin Phillips if you’d like a much, much longer explanation of this (and a great book, by the way). The fossil fuel industry may decline in power, so that gets you a .5, but even here you’re missing the significance. With that industry, the ultimate decline is no secret, but the speed of the decline is crucial to society, and the money here is slowing the decline of that industry to the detriment of mankind.

    • The money is absolutely lopsided. 138 pathetically wealthy families for Rs, 20 for Ds. (So that Steve can say, “Both sides do it.”)

      • Lopsided or not, both sides take the money and the corruption that goes with it.

      • I was just thinking and I wanted to ask you, do those 20 Democrats get a pass for accepting big money donation because the GOP received so many more donations? What do you think about those 20 Democrats who obviously traded their integrity for cash? What did they trade away in order to get the cash? To quote Bob Lord (in the message to which you responded): “The candidates’ positions are in response to what the donors want (as opposed to what the voters want).” So what do those donors want and what did your politicians give away that the voters want?

        Just some things to think about as you try and minimize the Democrats culpability in this.

        • I don’t dismiss those 20 families, but their impact is miniscule in comparison, wouldn’t you say? The Democratic Party is inhabited by center right politicians. That’s why the establishment Dems want Hillary Clinton.

          I read a great comment today at a NYTimes article . It said this:

          “Never take funding and advice from the same source. It makes you prone to being made redundant….
          If you take both funding and advice (especially legislation, fully drafted, or research, preformated with charts) from the same source, you have no unique competencies as a politician. As a result, your only value becomes how extremely you can steer into your donor’s message.
          As a politician, your donors are not your friends…..If you take advice and money from the same source, it makes you expendable as a politician. You have to limit it to one or the other. But you can’t accept both or else you simply become a carrier for someone else’s message and they will replace you with more and more responsive carriers.
          Don’t take advice from donors. Don’t take donations from your research centers. One or the other, never both.”

          I think that sums it up for me.

    • WOW! That grade stings a lot! :o)

      I realize the majority of wealthy donors give to the GOP…it only makes sense they do. The GOP has traditionally been friendlier to business interests than the Democrats. But do you think it would make a difference to AZ Blue Meanie if they didn’t? That was my point although it really didn’t need to be made.

      Actually, I have often been puzzled about what motivates the extremely wealthy to contribute to the Democrats since so much of what the Democrats believe in is anti-wealth. I am particularly puzzled by George Soros who is a foreigner, lives outside the country and has been documented discussing his dislike of the United States. What is his purpose?

      Regarding the size of donations, you did give something to think about with the subtle difference between large and snall donations. I had never thought about how the size of the donation could very well make a difference in the attitude of the politican receiving it. But the point I was making is that if AZBlueMeanie had the means, he would do exactly as the rich contributors are doing today. He would use his wealth to buy influence. That is just the way things work; it is human nature.

      As far as the finance industry being a sign of our decline, I won’t argue with you. As I have said before, I am convinced we are in decline and that sounds like just one more sign. I will go on Amazon and pick up the book you recommended. It sounds interesting. Thank you for the suggestion.

  3. It’s no surprise how you selectively choose to use your ire on those that contribute to the GOP and ignore the deep pockets that fund the Democrats. This was the first time a posting of yours ever mentioned George Soros. It is always “Koch this” and “Koch that”, all the while Soros buys enormous influence with Democrats that you simply ignore.

    What about all this “dark money” secrecy you complain about? If you can so easily get the names of 158 of the top contributors it hardlay seems “secret”. And what would you expect them to do with their money if not try to influence how the government affexts them? You act shocked and yet, you contribute to candidates who SAY they will do what you want in the hopes of getting them elected so they can DO what you want. If you were in a position to donate hundreds of thousands of dollars, you would do so with a clear concience. Your problem is raw envy that you DON’T have the money to do that and it eats at you that someone else does.

    If, as your writer states, these 158 families are not in the mainstream of industry as it emerges today, then they are going to decline in influence and wealth. So just sit back and wait. They will get theirs in time just like you want. But beware…there will be others in the new industries that will replace them with money and influence to buy politicians and you will still be on the outside looking in with that hot little nugget of hate in your heart. History is against ever seeing a change where the wealthy don’t buy special favors from politicians.