Joe Biden infamously promised his big donors that if elected, “nothing would fundamentally change” for them. The news that Biden is being advised by Larry Summers suggests the presumptive Democratic nominee is dead serious about fulfilling that campaign promise — which is very bad news.
Summers was the architect of major corporate trade policies that ended up offshoring America’s manufacturing capacity -- a development that left the United States in the unenviable position of begging China’s authoritarian regime to help produce the basic goods we need during the coronavirus emergency. Summers also sculpted Wall Street deregulation and was billed as one of three members of a “committee to save the world” -- a committee that ended up destroying the world when its bank-coddling policies culminated in the financial crisis.
That didn’t stop Summers -- he took a lucrative trip through the revolving door into a reportedly part-time job at a hedge fund that netted him $5 million. After that, he went back into government and fought against proposals to protect homeowners and crack down on the financial industry that had destroyed the global economy. He was also terrible on climate change.
If Walter Sobchack was around, he’d angrily ask: do you see what happens, Larry? Do you see what happens when you screw over millions of people?
And Summers’ answer would likely be no -- he doesn’t see. He doesn’t see because no matter how many things he ruins, no matter how much pain his policies inflict, he continues to be rewarded -- this time by the Democratic nominee for president. He hasn’t renounced any of his past mistakes. In fact, during a recent speech attacking proponents of a wealth tax, Summers showed he is still the same power-worshiping ideologue -- and willfully ignorant of the oligarchic forces that own American politics.
And apparently, that’s somehow all fine and good at the highest reaches of the Democratic Party.
Summers Pretends He Has Never Heard of The Kochs
Following the Bush and Trump tax cuts, America recently hit a milestone in our ongoing journey from capitalism to feudalism: for the first time in history, billionaires are now paying a lower tax rate than ordinary workers.
To start dealing with this -- and to generate new revenues and combat economic inequality -- lawmakers such as Bernie Sanders and Elizabeth Warren have proposed following European countries and instituting a wealth tax on billionaires.
Polls show this idea is wildly popular among Americans -- but it is not popular among one Democratic Party constituency: Summers.
In an October 2019 speech to the Peterson Institute, Summers predicated his opposition to the initiative, in part, on his belief that reducing the overall wealth of billionaires would not reduce their political influence.
“The arguments around political power have almost no validity,” Summers declared. “The truth is you can become one of the most powerful money people around the democratic party or the Republican party for $4 or $5 million a year. Nothing in this world is going to stop the wealthiest people in America from being able to come up with a vast multiple of $4 or $5 million a year.”
He later added: “I'm just looking for some actual credible story of a moment when taking wealth down by 20 percent, say, credibly would produce better balanced political decisions or policy decisions or cultural decisions or anything that you're saying. I'm just looking for one example.”
If campaign contributions were the only form of political influence, then Summers' argument might make at least a little sense -- because, yes, very rich people will always have a few million dollars lying around to bankroll candidates.
However, we know that political influence goes way beyond elections -- and we know it from one of many examples that Summers somehow pretends to be unaware of: the Koch Brothers.
The oil barons and their network of billionaires have spent billions of dollars on an entire architecture of political influence -- and they’ve done that year after year, resulting in legislative changes at every level of government.
A wealth tax certainly wouldn’t solve the problem of billionaires having such massive resources to totally and completely dominate our politics. But yeah — the Kochs and other billionaires having 20 percent less money to rig our democracy might be slightly better than things now. Oh, and it would also raise much needed revenue for stuff like health care and education and every other priority that’s been underfunded for decades.
Summers at one point insisted that a wealth tax would prompt billionaires to shelter even more of their money in nonprofits where the cash can be used for billionaires’ political ends. However, that’s a bullshit argument against ever taxing billionaires -- if they can just funnel their money into tax shelters and tax-exempt foundations, why even make them pay taxes? Hell, why have a tax code at all?
We already have a problem of political spending being laundered through charitable organizations, and we should fix that with tougher IRS rules. We shouldn’t let the Larry Summerses of the world use it as an argument against a common-sense wealth tax proposal.
Summers Insinuates That Rich People Are Smarter Than Everyone Else
Inequality is fueled by many factors -- like rapacious monopolies and regulatory capture, as well as deunionization and the attendant loss of worker bargaining power.
But in his speech, Summers let slip that he believes rich people became rich, in part, because they are simply smarter than everyone else.
“I don't think wealth is a particularly sensible way for judging or assigning taxes on an ability to pay,” he said. “There's the further point that what do we want to encourage or discourage the wealthy from doing? Activity A -- investing the money in the way they think are most productive based on the fact that they were smart enough to accumulate it in the first place. That's what we punish hardest with the wealth tax activity day.”
That phrase -- “smart enough to accumulate it” -- is the tell here.
Now sure, there are some geniuses who get rich because they had a brilliant idea. But there are also some failsons who get rich just because they happen to be born into a wealthy family (and I’m not just talking about Donald Trump and his kids). Indeed, one recent report found that about a quarter of people who have more than $30 million had some kind of inheritance. A separate report found that one third of the Forbes 400 were recipients of an inheritance.
And yet, Summers’ effectively insinuates that a wealth tax is a reckless effort to “punish” intelligence. That’s no accident -- since the founding of the country, that whole trope has been used by American aristocrats to depict populism as the ideology of anti-intellectual know-nothings.
Summers Is Openly Hostile to Worker Power
Compared to many other countries -- and even compared to eras in its own past -- America is not a place where workers have a lot of power. The conservative crusade against unions and for policies that empower employers has resulted in workers’ productivity gains becoming outsized profits for corporate executives and shareholders, rather than pay increases for employees.
Of late, this trend has gone medieval on our collective asses. We see corporations pocket small business loans, lay off workers and pay CEOs millions. We see a company like Disney lay off 100,000 workers while paying out $1.5 billion of shareholder dividends. We see Amazon CEO Jeff Bezos raking in $24 billion of new personal wealth during the coronavirus emergency, while Amazon warehouse workers get sick and the company makes it difficult for them to get adequate paid sick leave.
One thing that could combat these trends is employee ownership of companies, or at least passing Democratic legislation emulating the German model of requiring employee representation on the boards that run corporations.
But Summers smears employee-led companies, arguing that they are a bad idea because that model might end up allowing workers to get paid well.
“When you put workers in charge of firms and you give them substantial control over the firms -- see Israeli kibbutzes, see Yugoslav cooperatives, see universities where faculty have a powerful voice -- one thing you do not get is expansion,” he said. “You get more for the people who are already there. That does not seem to me to be an attractive position for progressives to be taking.”
First of all, Yugoslav cooperatives? Really? Really?
Setting aside that old-school 1980s red baiting, Summers -- the guy billed as a dispassionate empiricist -- is also just totally wrong, according to Loren Rodgers of the National Center for Employee Ownership.
“With all due respect to Larry Summers, in this case he is letting theory obscure his view of the facts,” Rodgers told me, citing extensive data about employee-owned companies, and firms with employee stock ownership (ESOP) structures. “The 6,000 privately owned ESOP companies in the U.S. have over 2.7 million employee-owners, and we have over 45 years of data and research on ESOPs. In fact, Dr. Summers' claim about worker owned businesses not expanding is simply not reflected in that research. It's quite the opposite: ESOP companies grow faster in both sales and employment and they lay people off at dramatically lower rates. They also generate much greater wealth for employees than traditional businesses, and they can do that because they have greater productivity.”
It’s worth reiterating: these declarations from Summers aren’t ancient history from some distant era. Summers said all these things barely six months ago.
The fact that this guy could have the past policy record he has, and then double down and wage a public campaign against a wealth tax, pretend oligarchs have no power, depict billionaires as a superhuman species of higher intelligence, rabbit punch the effort to give workers more power -- and then nonetheless still be rewarded by the Democratic Party...it is...breathtaking.
It perfectly illustrates how the laws of gravity do not apply to Democratic elites, as long as they show continued fealty to the neoliberal project that has ravaged the economy.
As George Carlin once said, it’s a big club and you ain’t in it. But Larry Summers sure is -- and membership has its lifetime privileges.
Rock the boat,
P.S. I’ve repeatedly said that we must defeat Trump and that I will vote for the Democratic nominee. We need to be pushing Biden to be better, because that is the only way he will be as strong a general election candidate as possible. Not pushing Biden to be better only helps Donald Trump — and that’s unacceptable.