A review of Winner-Take-All Politics: How Washington Made the Rich Richer–and Turned Its Back on the Middle Class, by Jacob S. Hacker and Paul Pierson
Winner-Take-All Politics is destined to become an influential book. In his New York Times column Frank Rich lauded it as a "devastating indictment of both parties." The glowing blurbs on the book's back cover come from a who's who of liberal pundits: James Fallows, E.J. Dionne, Robert Kuttner, Thomas Edsall. Winner-Take-All Politics is a well-written and engaging polemic designed to get the juices flowing on the Left. But unlike most such books, it makes a serious effort to rise above invective and to inject evidence into contemporary political debates. Jacob Hacker and Paul Pierson are exceptional political scientists—at Yale and Berkeley, respectively—as well as partisan Democrats. CRB readers inclined to dismiss their arguments out of hand should take a closer look. Although the book has flaws, careful examination of its claims can illuminate the excesses and blind spots of both the Left and the Right.
Hacker and Pierson make three arguments. First, they maintain that economic inequality in the U.S. has increased dramatically in recent decades. On this there can be little disagreement. They show that since 1979 only those at the top have seen their income rise significantly: since 1979, 36% of all after-tax gains went to the most affluent 1% of the population; over 20% of those gains went to the top thousandth (0.1%) of the income distribution. Economic inequality in the U.S. is now greater than at any time since the beginning of the Great Depression.
Second, they argue that this trend was not the result of changes in the world economy, as the conventional wisdom holds, but rather the product of public policy. The book's central theme is, "American politics did it." Don't blame globalization or America's failing schools for the decline of the middle class—blame Republican policies coming out of Washington.
Third, these inequality-producing policies were themselves the result of a fundamental change in American politics that began in the late 1970s. During the Carter Administration an "organizational revolution" took place "that would transform the rules of Washington seemingly overnight." As a result, "American politics came to slam closed the long era of shared prosperity and usher in the winner-take-all economy." So profound was this transformation that it put "in jeopardy" our "fundamental principles of free government." The United States is on the verge of becoming an oligarchy—a fate Hacker and Pierson are determined to prevent.
The authors have not produced a 300-page attack on the Republican Party. They also scorn those triangulating Democrats who were drawn into this corrupt, pro-business vortex. Lured by hedge-fund campaign contributions and forced to woo centrists in order to collect 60 votes in the Senate, their party morphed into "Mark Hanna Democrats." Reviving American democracy therefore requires reforming the Democratic Party, which means moving it to the left. Their target is as much the Democratic Leadership Council as the GOP.
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By far the most convincing and disturbing chapters of Winner-Take-All Politics are those that describe the stagnation of middle-class income and the phenomenal increase in the wealth of those at the very top. Since there are many ways to measure inequality, it is easy to quibble with some parts of their analysis. For example, they ignore immigration. The period in which inequality fell substantially—1929 through the early 1970s—was also one of low immigration. In 1970 less than 5% of those living in the U.S were born abroad. Today that figure is over 11%. These new immigrants tend to be relatively unskilled, not just in comparison with native-born Americans, but also in comparison with pre-1970 immigrants. Their presence not only adds a large number of low-pay workers to the economy, but depresses wages for native-born Americans with few skills. Yet these immigrants come to America because they can earn far more here than in their country of origin. As Gary Burtless and Ron Haskins of the Brookings Institution have noted, "America's current immigration policy probably reduces global inequality at the same time it increases inequality within the United States."
At the other end of the spectrum, allegedly egalitarian countries such as Sweden make their income distribution figures look better by encouraging their wealthiest families to escape to tax havens, a move that is much more difficult for American billionaires. In his fascinating recent book The Narcissism of Minor Differences (2009, reviewed in the Spring 2010 CRB), UCLA's Peter Baldwin has estimated that if we take into account the wealth of such tax exiles, "the overall share of wealth held by those in the top Swedish percentile" would be "twice as intense a concentration of wealth as is found in America." This method of "reducing" inequality hardly seems worthy of emulation.
Nonetheless, the problem of growing inequality is undeniable and alarming. Tocqueville noted that Americans profess a "profound scorn for the theory of permanent equality of goods," but that "fortunes turn there with incredible rapidity and experience teaches that it is rare to see two generations collect its favors." Polling data shows that Americans accept substantial inequality because they believe their children can strike it rich. But as Hacker and Pierson show, intergenerational mobility has declined in the U.S. over the past several decades, and is now lower for native-born Americans than for citizens of many other advanced industrial democracies. Burtless and Haskins conclude that those born in the U.S. no longer "enjoy exceptional opportunities for upward mobility…. Particularly at the bottom end of the income distribution, American institutions are less successful than those in other rich countries in equalizing the opportunities available to children." For a nation that has always prided itself on being a land of opportunity, this development is profoundly disturbing.
What happened? The conventional argument focuses on the shift to a global, skill-based economy. Our troubled educational system has not provided our children with the advanced skills they need to compete in this new economic world. Just as importantly, increased competition and declining transaction costs have multiplied the rewards that flow to the most talented competitors, whether they are baseball pitchers, singers, novelists, tort lawyers, software engineers, or hedge fund managers. The title of Hacker and Pierson's book alludes to Robert Frank and Phillip Cook's The Winner-Take-All Society (1996), which develops at length this explanation for changes at the top of the income distribution. Hacker and Pierson never really refute such arguments, but nonetheless claim they are wrong. It wasn't the economy, stupid; it was politics. Their central claim is that good policies could have counteracted these troubling economic trends, but the federal government refused to enact them.
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Unlike most writers who promote policies to counteract growing inequality, Hacker and Pierson have nothing to say about the troubled state of American public education or about changes in family structure. They focus almost exclusively on taxation, financial regulation, and labor relations at the national level. Their bête noire is the tax-cutting policy of the Reagan and George W. Bush administrations. While recognizing that the extent to which the U.S. could have increased the progressivity of the tax code and tax revenues without dampening economic growth is a complex and controversial topic, I am inclined to agree with them that the Bush cuts went far beyond what was necessary to promote economic growth.
The elephant in the room for their "politics did it" argument, however, is that the pre-tax income of those at the top ballooned during the period they examine. A 2005 report of the American Political Science Association noted that during the 1980s and '90s increasing inequality "appears to be largely the result of shifts in pre-tax and -transfer income; the amount by which taxes and transfers reduce inequality has not markedly changed, though it has also certainly not increased." It added, "The first important point to make, then, is that public policy is not straightforwardly responsible for the general rise in economic inequality in recent decades." One of the three authors of this section of the report was Jacob Hacker. In other words, at least before 2005, tax policy didn't do it.
Hacker and Pierson make two further arguments about how policy changes encouraged inequality. The first, deregulation of the financial sector, has real bite. The second, on labor regulation, is more of a stretch. They argue, often convincingly, that excessive deregulation of banking and securities trading over the past three decades led to the financial debacle of 2008, pointing to the many warning signs ignored by policymakers, sometimes as a result of political pressures exerted by well-connected financiers. Those who have read the many journalistic accounts of the events leading up to the 2008 crisis will have no trouble coming up with dramatic examples. It is also hard to deny that some people became amazingly wealthy while doing serious harm to the American economy. Influence peddling by the infamous "well-heeled interests" certainly contributed to this problem.
But it was not the sole cause. Ideology mattered—some deregulators were like the boy who knew how to spell Mississippi, but just didn't know when to stop. So did the ease with which capital can now flow from one country to another. So did the complexity of the financial instruments created by Wall Street whiz kids who, it turns out, did not always understand what they were doing. So did Fannie Mae and Freddie Mac, "quasi-governmental" enterprises strongly supported by liberal Democrats who believed, cynically or naïvely, these were a risk-free way to expand home ownership. To paraphrase the title of one recent account, all the devils were there. Of course, the housing bubble has also wreaked havoc with financial institutions in many countries whose politics the authors implicitly praise. Creating a regulatory system that can promote the accumulation and efficient allocation of capital while staying one step ahead of extremely clever financial managers is not easy.
Hacker and Pierson also argue that administrative rulings by the National Labor Relations Board (NLRB) are responsible for the decline of the American labor movement. NLRB "placed few real limits on increasingly vigorous antiunion activities." They show that in the U.S. the unionized portion of the workforce has dropped steadily from the 1960s to the present. Why NLRB would be so anti-union under Democratic presidents and Democratic Congresses remains something of a mystery. At times Hacker and Pierson accuse Democrats of abandoning unions. But they have hardly turned their back on public-sector unions, whose influence has grown steadily over the past several decades. The authors' real complaint is that Democrats failed to pass legislation such as common-sites picketing and card-check that would have given unions more weapons in labor-management disputes. But as the late University of Chicago political scientist J. David Greenstone pointed out many years ago, the AFL-CIO was always much better at winning victories for its political allies (e.g. the Civil Rights Act and Social Security expansion) than for its own members. Is it so surprising that as private-sector unions shrank—and many of their members deserted the Democratic Party—they would have a hard time adding to their legal authority? The Economist recently reported that since 1979 unions' share of the private sector work force has fallen from about 33% to 7% in America and 44% to 15% in Britain. In France, only 5% of the private sector workforce is unionized. If 13 years of British Labour government could not revive unions there, it is hard to see what NLRB could have done here.
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The heart of Hacker and Pierson's policy argument is not that any particular policy caused inequality to grow, but rather that inequality has been the product of "policy drift," that is, the government's failure to "master" economic change. They invoke Walter Lippmann's 1914 book Drift and Mastery to decry "the failure of government to respond to new economic realities." Part of the problem, they contend, is the American Constitution, which makes concerted action difficult. But unlike many of their fellow progressives, they do not call for constitutional change. Rather, they define the problem as our leaders' "deliberate failures to act in the face of rapid economic and social change." "Intentional inaction" is a phrase that recurs throughout the book.
Lippmann could perhaps be excused for seriously overestimating the capacity of government to reshape the economy. But if political science has taught us anything over the past 50 years (a very big "if," I realize), it is that the type of governmental "mastery" that Lippmann, Hacker, and Pierson crave is extraordinarily difficult to realize. A central irony of the book is that some of the most important work explaining the severe limits on such governmental mastery has been done by Jacob Hacker and Paul Pierson. Both have explained why it is so difficult for governments to diverge from the paths they chose to go down decades before. No one has done more to help us understand such "path dependency" than Pierson.
It is often tempting to ignore the harsh constraints previous programs place on policymaking. But those who wish to achieve "mastery" do so at their own peril. Liberals have criticized the Obama Administration for making peace with private insurance companies and for abandoning the single-payer system. But given the fact that we have relied on private insurers for decades, did the president really have any choice but to work within that framework? Conservatives have attacked the individual mandate in Obamacare. But once we demand that private insurers enroll those with pre-existing conditions, can we allow the healthy to free-ride until they get sick? As Donald Rumsfeld might say, you go into the reform business with the health care system you have, not the one you would like to have.
Obviously, the fact that Republicans have held the presidency for 20 of the past 30 years and at least one house of Congress for 18 dramatically reduced the chances that the federal government would provide the sort of energetic response to economic change that Hacker and Pierson champion. But their emphasis is not on Republican electoral victories. One does not find here the standard liberal argument that Republicans have won tainted electoral victories by scaring people (i.e., reminding them that we're living in a dangerous international world), by appealing to downwardly mobile voters who cling to their guns and their religion (i.e., emphasizing the "social" issues), by making thinly veiled racial appeals (i.e., opposing busing and affirmative action and promoting welfare reform), and by nominating actors who are good at reading their lines (i.e., Ronald Reagan, who left office nearly a quarter of a century ago).
They maintain, instead, that elections are political "spectacles" that have less effect on public policy than we usually assume. Far more important, they claim, is the "organizational combat" that takes place between elections and often behind closed doors. And it is here—in the Gucci-filled lobbies of Congress and the vast, bewildering halls of the bureaucracy—that conservative victories have been most profound. What they describe as "the Unseen Revolution of the 1970s" gave business groups so great an organizational advantage that the U.S. can no longer be described as a representative democracy.
A number of the arguments Hacker and Pierson offer to support this ambitious and depressing argument have merit: as the administrative state grew, and divided government made legislative agreement difficult, many key policy decisions were made by unelected administrators and (to raise a topic they generally ignore) judges. In these subterranean battles organization and expertise matter, so in the late 1970s business began an organizational counterattack—significantly increasing its presence in Washington and gradually solidifying its ties with the GOP—designed to scale back escalating federal regulation. Business organizations also courted Democrats, some of whom urged the party to move to the center and avoid appearing hostile to business. Politicians in both parties engaged in a campaign finance arms race to pay for TV ads in an increasingly contentious and uncertain political environment.
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While run-of-the-mill polemicists rely on unsubstantiated assertions and extreme examples, Hacker and Pierson often rely on high-quality political science research. The problem is that they are so selective in their use of these studies. For example, they laud David Vogel's Fluctuating Fortunes (1989) as "one of the best books on the political role of business," and rely on his finding that business launched an aggressive and often successful organizing campaign in the second half of the 1970s. They note in passing that Vogel viewed this counterattack as a response to events of the preceding decade, when "virtually the entire business community experienced a series of political setbacks without parallel in the postwar period," but ignore the fact that despite Reagan's election business failed to roll back the health, safety, or environmental rules that had sparked this so-called "revolt against regulation." Nor do they mention Vogel's arguments that business influence proved to be counter-cyclical-high in bad economic times, low in good—or that compared to other advanced industrial democracies the U.S. is particularly good at representing dispersed, unorganized interests—precisely those that Hacker and Pierson claim are now ignored by our government.
Similarly, they cite a "recent comprehensive study" of interest-group influence by Frank Baumgartner, Jeffrey Berry, and their co-authors to buttress the claim that the poor and working class have few lobbyists working on their behalf. This is, like Vogel's work, high-quality social science. But it, too, calls into question Hacker and Pierson's basic argument about business dominance.
Yes, business groups are more numerous than other types of organizations that seek to influence public policy, and they clearly devote more resources to this task. But Baumgartner, Berry, et al. found "virtually no linkage between resources and outcomes." Their "surprising" finding is "that money, size, and prestige may be quite overrated in the lobbying game." Most important among the several explanations they offer for this phenomenon is that, as James Madison predicted, business groups are usually on both sides of important issues. In almost all the 98 issues they studied, the heterogeneity of coalitions was "striking." Public-interest groups "were often part of coalitions with wealthier organizations." For example, "large corporations sometimes worked with representatives of ethnic minorities," and "pharmaceutical companies sought out patients' rights groups or others who have a more favorable public image."
Furthermore, Baumgartner and Barry's work showed that public-interest groups seeking to increase regulation of business consistently punched above their weight as measured by financial resources. Tufts political scientist Jeffrey Berry has developed this theme in several important studies, including The New Liberalism: The Rising Power of Citizen Groups(1999).
Finally, Baumgartner, Berry, et al. discover one "kind of resource that does seem to matter: support of an allied government official who is actively involved in the cause." The Environmental Protection Agency, Occupational Safety and Health Administration, National Highway Traffic Safety Administration, Equal Employment Opportunity Commission, Justice Department, Social Security Administration, Office for Civil Rights, and many, many other agencies committed to defending and expanding the government's role in regulating the economy and protecting citizens against corporate abuse, both real and imagined, neither disappeared suddenly in the late 1970s, nor acquiesced quietly to the wishes of Republican administrations. To ignore the political significance of the federal bureaucracy or assume the White House can easily dominate it, is to overlook one of the most important changes in American politics of the past half-century.
To be sure, Hacker and Pierson describe a number of instances in which lower-level administrative action was used to water down or undermine policies they consider progressive. Many important policy battles have been waged in the administrative and judicial arenas over the past 30 years, and business groups have won more than a few. But their claim that the overwhelming majority of such disputes have been won by business or conservatives flies in the face of the extensive political science research Hacker and Pierson themselves invoke.
For example, they tell the story of the Bush Administration's ultimately unsuccessful efforts to reduce demands on major sources of air pollution through the rulemaking process without mentioning that it was a response to the Clinton Administration's prior effort to increase regulation of polluters through the very same process. Nor do they point out that the Obama Administration is currently writing regulations to limit emissions of greenhouse gases, perhaps the largest regulatory initiative in American history to proceed without legislative authorization. EPA is doing this because the Supreme Court ordered it to do so. A great deal of business's political energy is devoted to playing defense—stopping initiatives of administrative agencies, courts, and state and local governments. The fact that such responses are necessary argues that business is far from the juggernaut that Hacker and Pierson portray.
Nothing infuriates them more than the Republicans' continuing advocacy of tax cuts for the wealthy in light of the phenomenal gains made by those at the top and growing budget deficits. They imply—without much supporting data—that most Americans disagree with this policy. Though I share their distaste for the Bush tax cuts, I am less inclined to assume that a majority of voters agrees with me on this. Even if we assume, for the sake of the argument, they're correct, does this prove that conservatives who willfully and successfully ignore public preferences have hijacked American government?
Consider affirmative action in this context. I don't think anyone would deny that racial preferences used by employers and college admissions offices are wildly unpopular. In writing the 1964 Civil Rights Act, Congress forbade the use of racial preferences by employers and in public school assignments. Yet use of such preferences has survived, if sometimes under a different name and under the radar screen. Why? The short answer is that well-organized constituencies within the Democratic Party are intensely committed to affirmative action. They have worked assiduously with strategically placed actors within the federal bureaucracy, the federal judiciary, and the non-profit sector first to develop affirmative action programs and then to block any retrenchment, seldom hesitating to call racist anyone who advocates a color-blind reading of the 14th Amendment or anti-discrimination laws.
Does this mean the left has hijacked American democracy, as many conservatives believe? No. But it does mean that when a crucial constituency of a major party is intensely committed to a policy, that policy can survive or even thrive despite unfavorable public opinion polls. In politics, intensity counts. As Hacker and Pierson show, the Republican base cares intensely about tax cuts, and is willing to take political risks to defend them. Democratic groups have no similarly intense desire to raise taxes-at least so long as this doesn't mean cutting benefits. This is not the end of American democracy, but the way democracy works in an era of partisan polarization.
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Winner-Take-All Politics is a sequel to Hacker and Pierson's 2005 book, Off Center: The Republican Revolution and the Erosion of American Democracy. In that work they criticized the GOP's manipulation of congressional rules to enact legislation with razor-thin legislative majorities. This was a fair criticism; but, of course, the Democrats did much the same when they came to power. Just consider the use of budget reconciliation rules to pass health care reform after opinion polls and Scott Brown's senatorial victory in Massachusetts clearly indicated the public's misgivings.
Six years ago Hacker and Pierson argued that Republicans had so cleverly designed their programs to disguise their detrimental effects that the GOP would never be punished for their unpopular and unwise policies. They coined the term "backlash insurance" to describe "an assortment of strategies and procedures that party leaders use to keep quavering moderates in line and shield party loyalists against political retaliation by moderate voters." As a result, they declared, the GOP could lurch to the right to please its base without being punished for its refusal to move to the center, where the famous median voter resides.
Off Center came out just in time for its central argument to be refuted by the 2006 and 2008 elections. Voters punished the Republican Party for abandoning the center and for mismanaging the economy, two wars, and the federal response to Katrina. By 2009 liberal Democrats had captured the presidency and large majorities in the House and Senate—despite the fact that significantly more Americans consider themselves conservatives than liberals. Apparently the Republicans purchased their "backlash insurance" from AIG.
The 2010 election was no kinder to Winner-Take-All Politics than the 2006 and 2008 elections were to Off Center. Published before the Democrats' 2010 "shellacking," Winner-Take-All Politics argues for an aggressive government attack on the sources of inequality. They praise President Obama's "genuinely impressive record" on healthcare, the stimulus, financial regulation, and education. They call for the type of grassroots mobilization that the Obama campaign achieved in 2008. They wish to change the terms of debate within American politics, and in President Obama they found one of the most eloquent leaders in American history. Unfortunately, the 2010 election was a national referendum on the Obama Administration's record, and the result was an overwhelming rejection of the policy positions that Hacker and Pierson claim represent the political center.
Does this mean, as Republicans are now wont to believe, that those independents and swing voters who decide elections agree with them? They shouldn't put their money on it, and in light of the debacle of 1995 probably won't. It is all too likely that these crucial voters want to have it both ways—more government protections, more government benefits, more public action to stimulate the economy, but less taxation and regulation. Maybe we are currently getting what Jimmy Carter promised: a government as good—and inconsistent—as its people.
What would Hacker and Pierson have us do to "reclaim democratic governance"? Their book, they argue in the conclusion, "reveals where in our politics the central problems lie: in the fierce realities of organized combat." Therefore, "the foremost obstacle to sustainable reform is the enormous imbalance in organizational resources." Thus, progressives must "encourage the development of groups that can provide a continuing, organized capacity to mobilize middle-class voters and monitor government and politics on their behalf."
A central paradox of the book is that the Democratic Party does have powerful organizational allies, but the authors view this part of the party's base with considerable suspicion:
As organized labor declined in clout, the growing bevy of advocacy groups formed a powerful new liberal force—for a certain kind of liberalism. These groups proved skilled lobbyists on the issues they cared about, such as environmentalism, women's rights, and civil liberties. And yet, they almost never focused their attention on the economic issues that most powerfully affected the working and middle classes. The result was a boon for the postmaterialist causes of more affluent liberals, but it left traditional material causes with only a handful of energetic backers.
They want to shift the balance of power within the party back to those organizations that focus on bread-and-butter issues, namely unions. At the same time, they recognize the difficulty of doing this, noting that "desperate to regain its membership," the labor movement "increasingly focused on the one place it continued to have strong success—the public sector." As a result, "the labor movement came to look more and more like just another interest group," rather than like "champions of the broad middle class."
Their argument that unions suffer from a public relations problem hardly does justice to the enormity of the Democrats' challenge. Democrats have become increasingly beholden to public-sector unions that have reliably opposed educational reforms that promise to increase social mobility, while saddling state and local governments with unfunded pension liabilities that threaten to drive them into bankruptcy. Strengthening those constituency groups promises not to revive the party, but to send it over the cliff. Bill Clinton recognized this and made an effort to distance himself from the party's organizational base. This is how he managed to become the only two-term Democratic president since FDR. Yet Hacker and Pierson reject such centrism and triangulation. No Sister Souljah moment for them.
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In the end, the authors face the same problem that bedevils almost all political coalition-builders in democratic countries: the need to appease their base while reaching out to unattached, usually centrist voters. They might think that "post-material" organizations put the wrong items on the party's agenda and that public service unions besmirch its reputation. But they can't do without them, any more than Republicans can do without unyielding anti-abortion and anti-gay marriage groups that frequently cause them problems on the two coasts, or the Tea Party zealots who want to abolish the Federal Reserve Board and Social Security, or the hard-core tax cutters who reject making increases on the wealthy part of the discussion on how to reduce dangerous trillion-dollar deficits.
In recent decades the base of both parties has become stronger, which helps explain our rapid political oscillations: as soon as one of the parties gains control it institutes policies that contribute to its rejection in the next election cycle. That's life in a democracy with polarized parties. Those of us who still consider ourselves Democrats must hope that President Obama, like President Clinton before him, understands his predicament and will unambiguously reject the strategy Winner-Take-All Politics endorses.