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The Faltering “Veil of Legitimacy” in the United States

By Marvin Zonis

The belief systems that justify the ways things are and the way they ought to be – the “Veil of Legitimacy” – are increasingly failing to convince more and more Americans and are more and more under attack. The result is the possibility of an opening to substantial change in this country. This is a “pre-revolutionary” moment.

My thinking about this moment in American history has been heavily influenced by my living through the 1970s when I was focused on Iran.

I witnessed the gradual decrease in support for the Pahlavi regime, accelerating as the decade progressed until the demands for the overthrow of the monarchy became a full-fledged revolution.

I do not see contemporary America on the verge of such a revolution.

But I believe this country has arrived at a “pre-revolutionary” moment.

The central fact of this moment, I believe, is the extraordinary unwillingness of more and more Americans to accept that the way things are is the way they ought to be. More formally, the American system is facing a crisis of legitimacy.

The U.S., as is true of every society, is characterized by a series of beliefs about politics and government, about  the economy, and about the nature of society and its organization. These beliefs explain the way things are and also justify – make legitimate – the way things are. The way things are then appear natural – “of course” is their proper appreciation.

I grew up in the 1940s and 1950s, decades when the legitimating beliefs were especially powerful. The U.S. had, so those beliefs went, won the War. (Of course victory against Nazi Germany happened only because of the extraordinary sacrifices of the Soviet Union. Victory against the Japanese required the nuclear bombing of two defenseless Japanese cities.)

There was a post-war economic boom as the U.S. returned to civilian production and mass consumerism. The rising tide was lifting all boats. A family with children, a house in the suburbs and a car became a realizable dream for every American – or at least so it seemed.

The Korean War was another “just” struggle – not against the Nazis but against what appeared to be the global tide of communism. That the war ended inconclusively did not detract from a general feeling of righteousness.

Largely absent from this picture, of course, was the reality that it generally applied exclusively to Whites and not Blacks. Besides, the Brown v. Board of Education ruling of the Supreme Court in 1954 seemed to suggest that all was working well even for the Blacks.

I bought in.  “. . . And Crown Thy Good with Brotherhood from Sea to Shining Sea” seemed just right to me and I think to most Americans.

Things have dramatically fallen apart since then. The political system, the “free market” and the society are all now seen by very many as betrayals of the so-called American dream.

Trust in American institutions has largely collapsed.

Percent of Americans Who Have a “Great Deal” or a “Lot” of Confidence In . . .[i]

Overall, the percent of Americans who trust the federal government has fallen steadily and relentlessly from 80 percent during the Presidency of John F. Kennedy to 20 percent under President Trump.[ii]

Many streams have fed this collapse.

Certainly the failure of the government to win the disastrous wars the U.S. has fought in Vietnam, Afghanistan, and Iraq has been a factor. The scandal of Watergate was another factor. The politics of the impeach-ment proceedings against Presidents Clinton and Trump added to the mix. The politicization of the federal court system has been yet another factor.

But I believe the central factor in the growing lack of trust and confidence in our institutions has been the realization that our American democracy does not function commensurately with the ideals of the founders or the Constitution. Money has become the key to American political life.

My late friend Howard Wolpe exemplifies how our system actually works. Howard served for seven terms in the Congress where he was Chair of the House Subcommittee on Africa.

In 1981, he called me to ask how he should vote on a proposal by President Reagan to sell AWACS to Saudi Arabia. The Kingdom was anxious about the success of the Iranian revolution and feared a possible Iranian attack. I too was concerned and urged him to vote “yes.”

When the vote was taken in the fall of 1981, however, Wolpe voted “no.” I called to berate him for his vote. He explained why he decided to vote against the sale.

“Look,” he said. “I represent a district in southwestern Michigan. Few voters there care about the Middle East and either Iran or Saudi Arabia. Moreover, I don’t care about the Middle East in any significant sense. But I do care about getting re-elected. If I don’t get re-elected I won’t be able to do anything about Africa, which is what I care intensely about. I am running for reelection – I am always running for re-election – against an heir of the Kellogg cereal family. I have no personal funds; he has funds in abundance.

“As soon as the vote was announced, I began receiving calls from all over the United State from pro-Israel PACs. It turns out that Israel was fearful that if the Saudis were able to buy the planes, they would lend them to their frontline Arab neighbors to be used in a war against Israel. So each PAC promised to send me $5,000 if I promised to vote “no.”

“What was I supposed to do? The right thing or the thing that might make it possible for me to be reelected.”

When Representative Wolpe put it so bluntly, I admitted that I would have voted in exactly the same way. Money was the key issue.

That was then. This is now. In January 10, 2010, the Supreme Court overthrew a provision in the McCain-Feingold law barring corporations and unions from paying for political ads.

Money has become the most powerful factor in the outcome of U.S. elections.[iii] Money has become more significant than political commitment, more significant than ideology.

Costs of U.S. Elections

As the late Senator Dirksen is said to have remarked, “A billion here, a billion there, and pretty soon you’re talking real money.”

The contributors of those many billions expect a return on their investments – and they usually get it. Congressional action on gun legislation, sugar subsidies, policies towards Israel, drug pricing, and countless other issues is best explained by the financing of political campaigns and not by the political preferences of ordinary voters, or even of members of Congress.

The vast funds spent to elect politicians are abetted by spending on lobbyists. In 2019, more than 11,800 registered lobbyists spent some $3.5 billion on their legal lobbying efforts.[iv]

Lobbyists represent every conceivable cause likely to be affected by legislation – from individual foreign governments to U.S. and foreign corporations, to arts and scientific organizations, to hedge funds and asset managers.

And, of course, lobbyists are the product of monies spent to affect legislation in the interest of their sponsors. For example, these are the top six spenders on lobbying so far in 2020:

  • the U.S. Chamber of Commerce has spent more than $230 million;
  • the National Association of Realtors, $13 million;
  • the Pharmaceutical Manufacturers, $9 million;
  • the American Hospital Association, $7 million;
  • the American Medical Association, $6 million;
  • Blue Cross/Blue Shield, more than 5.6 million.[v]

The list goes on and on.[vi]

And lobbying pays off in legislation.

That four of the top six spenders on lobbying are major forces in health care helps explain why our medical system is as it is.

Or consider “carried interest.” Partners in private equity firms and hedge funds pay only capital gains taxes rather than income taxes on their share of the firm’s profits. That’s enshrined in legislation produced after expensive lobbying.[vii]

More generally, income tax rates in the U.S. have plummeted as has the progressivity of the U.S. tax system.

Combined Federal, State, and Local Taxes For The Bottom 50% of Income Earners[viii]

Combined Federal, State, and Local Taxes for the Remaining Income Earners[ix]

The average total tax rate for the bottom 50 percent of income earners averages 24.2 percent. The average for the top 1 percent is 30.8 percent while the top 400 have a rate of 23.0 percent – less than that of the bottom 50 percent. (I am reminded of Warren Buffett’s famous quip that he pays less of his income in taxes – 17.7 percent of his total income -- than his secretary.[x])

The total tax system is somewhat progressive but far less so than in past years.[xi]

The most recent reduction in the progressivity of the tax system occurred with President Trump’s “Tax Cuts and Job Act of 2017.” Corporate tax rates were cut from 35% to 21% and corporate tax collections plummeted from $264 billion in the fourth quarter of 2017 to $149 billion in the next quarter as the cuts took effect.

But the largest effect was on individual tax payers. “As a result of both the business and personal income tax cuts, households making between $500,000 and $1 million will see their after-tax income rise by an average of 5.2%. Households making less than $50,000 (the median income is $61,372 in the US) see only a 0.6% increase.”[xii]

While the income tax cuts have reduced the progressivity of the tax system, so have cuts in the federal estate tax.

Top Federal Estate Tax Rate, 1914-2018[xiii]

The various cuts in federal taxes have differentially benefitted the rich and have been a principle contributor to the startling increase in income and wealth inequality in the United States.

 

The legitimating idea has been that the increasing wealth of the rich was not a problem. It was believed by many to be a solution. Because the wealth of the rich would pass down to the less wealthy. This concept came to be known as “trickle-down economics”

The problem was, it never really did trickle down.

 

 

Median Annual Earnings for Employed Full Time Workers, Ages 25-37, in 2017 Dollars[xiv]

As a result, income inequality has grown steadily.[xv]

“In the United States. . . an average member of the richest 1 percent now receives more than eighty times as much income, and owns 950 times as much wealth, as an average member of the bottom 50 percent.”[xvi]

Or as Ray Dalio, the legendary founder of the Bridgewater hedge fund puts it:

There has been “little or no real income growth for most people for decades. … Prime-age workers in the bottom 60 percent have had no real (i.e., inflation-adjusted) income growth since 1980.” In that same time frame, the “incomes for the top 10 percent have doubled and those of the top 1 percent have tripled. The percentage of children who grow up to earn more than their parents has fallen from 90 percent in 1970 to 50 percent today. That’s for the population as a whole. For most of those in the lower 60 percent, the prospects are worse.”[xvii]

Wealth inequality has also increased over time.

U.S. Households Equity Ownership[xviii]

In 1990, the top 1% owned 46% of equities. At the end of 2019 – 56%.

As of September 2019, the bottom 90 percent of the population owned 12% of the equities.

This astounding growth in inequality – both in terms of income and wealth – has contributed to the growing sense that, in fact, the legitimations that have explained and justified the way things are no longer seem sensible.[xix]

A mighty contributor to the growth on inequality has been facilitated by the decline of the “free market.” 

In recent decades, the leading champion of the idea of the “free market” was Professor Milton Freidman of The University of Chicago along with his colleague George Stigler. Freidman wrote a regular column for Newsweek and produced a PBS series, “Free To Choose,” celebrating the virtues of a free market with minimal government intervention.

The fundamental idea of such a market is that all transactions are voluntary with prices determined by supply and demand.

As the decades have passed, it has become increasingly clear that the “free market” has become ever less free. In reality, there can be no free market without government guard rails that foster competition and prevent monopolies or oligopolies which result in prices set by corporations rather than by supply and demand.

Ronald Reagan began the process that reduced the guard rails – the scope of government regulation of the market.

“Ronald Reagan made his economic goals very clear: lowering the rate of inflation, reducing the government’s share of gross domestic product (GDP) while increasing defense spending, lowering tax rates, and reducing government regulation. Although he left it to others to work out the details, he made these things happen because of his skills in speaking to the American public and his ability to compromise in working with the Congress. He succeeded in achieving his goals, although never to the extent that he wanted. Government spending fell from 21.6 percent of GDP in 1981 to 20.5 percent in 1989, while the defense share rose from 5.0 percent to 5.5 percent, taxes fell from 19.1 percent of GDP to 17.8 percent, and the fiscal deficit excluding interest on the national debt (the primary balance) fell from 0.3 percent to minus 0.3 percent.”[xx]

In fact, President Reagan managed to reduce the number of pages in The Federal Register, the repository of executive department regulations,  from 75,000 pages per year to 45,000 pages over the  course of his presidency.[xxi] While the number of pages climbed back up under his successors, the administration of anti-trust legislation never reached previous levels.

The result was an economy in which more and more sectors were dominated, if not by actual monopolies, then by oligopolies. In short, the pricing power switched from being determined by supply and demand to being determined by the firms in more and more of the economy’s sectors.[xxii]

The results were increased profits for firms and decreased payments for workers.[xxiii]

Two other recent factors have further diminished Americans’ faith in the legitimations that have served to justify the way things are.

The complete bungling of the Covid-19 crisis by the federal government has been a shock to many Americans; a shock that has further diminished their willingness to accept the existing legitimations.

As of June 24, 2020, the CDC reported a total of 2,336,615 cases in the United States and 121,117 deaths.[xxiv]

Percent of U.S. Adults Who say (as of April 2020)[xxv]

And, of course, the very recent stripping away of the veil of legitimations to reveal the depths of institutional racism in the United States has been another factor in diminishing the power of our legitimations.

“Race, to the extent that it represents anything coherent in the United States, is shorthand for a specific set of life probabilities. The inequalities between Black and White Americans are documented in rates of morbidity and infant mortality, wealth, and unemployment, which attest that although race may be a biological fiction, it reality is seen in what is likely to happen in our lives.”[xxvi]

The killings of African Americans by the police and by others, the widespread efforts to reduce the ability of African Americans to vote, the pervasive differences in income and wealth between Whites and Blacks and the differential death rates through the pandemic have all contributed.

Ratio of Covid-19 Death Rates by  Race and Age (As of June 6, 2020)[xxvii]

Conclusion

Many factors have generated the now diminished willingness to accept the legitimation systems that have characterized the United States:

  • the failures of the wars in Vietnam, Afghanistan, and Iraq with their astounding costs in lives killed or wounded and in material treasure;
  • the depreciation of the integrity and dignity of the office of the President by Presidents Nixon, Clinton, and Trump;
  • the capture of the Congress and the Senate by monied interests;
  • the persistent legislation favoring the wealthy;
  • the massive increase in income and wealth inequality; and the decreasing competition in the economy with the increased pricing power of corporations at the expense of consumers.
  • the failure of the federal government to deal effectively with the Covid-19 pandemic;
  • and the growing realization of the depths of institutional racism in the U.S.

As faith in the formerly widely accepted “veil of legitimations” has faltered, the U.S. is increasingly in a pre-revolutionary moment -- open to substantial change. Whether that change will occur and the extent to which it will be meaningful is not yet clear.


[iv] https://www.opensecrets.org/federal-lobbying/summary?inflate=N. Also see https://www.statista.com/chart/18978/lobby-spending-number-of-lobby-organizations-us/

[v] https://www.opensecrets.org/federal-lobbying/top-spenders. Different sources give different data for the number of registered lobbyists – up to 14,000 – and the amount spent on lobbying – up to $3billion per year.

[vi] Lobbyists face regulations that limit their gifts to individual members of the Senate and Congress to less than $100 per year. They can make gifts to “personal friends” in Congress up to $250 per year and campaign contributions of $2,000 per election. They can, however, control PACs to contribute funds for elections.

[vii] An example of the ways in which the carried interest tax system works can be found in Robert Mercer, the head of Renaissance Capital who helped make it one of the most successful hedge funds in the world. In 2016, Mercer spent $49 million to elect Donald Trump. https://www.washingtonpost.com/news/politics/wp/2018/04/05/the-amount-robert-mercer-spent-on-politics-in-2016-likely-topped-30-million/. In the 2018 election cycle, Mercer spent $12 million. https://www.cnbc.com/2019/12/02/mercer-spent-millions-on-conservative-causes-as-they-distanced-from-trump.html. He has begun the 2020 election campaign to reelect the President with a check for $355,200. https://www.cnbc.com/2020/04/15/robert-mercer-starts-big-money-effort-for-trump-campaign.html

[viii] https://www.nytimes.com/2019/10/11/opinion/sunday/wealth-income-tax-rate.html?searchResultPosition=6

[xiii] https://en.wikipedia.org/wiki/Estate_tax_in_the_United_States

[xiv] https://www.pewsocialtrends.org/essay/the-growing-partisan-divide-in-views-of-higher-education/psdt_08-19-19_highered-00-08/

[xv] https://www.pewresearch.org/fact-tank/2020/02/07/6-facts-about-economic-inequality-in-the-u-s/

[xvi] Geoff Mann, London Review of Books, June 4, 2020, p. 25.

[xvii] https://www.nytimes.com/2019/07/02/opinion/america-threat.html?action=click&module=Opinion&pgtype=Homepage

[xviii] Goldman Sachs; https://digital.olivesoftware.com/Olive/ODN/FTUK/Default.aspx

[xix] The consequences of the growth in inequality extend far beyond its effects on the acceptability of our current legitimation. For example, writing in the Financial Times of June20-21, 2020, Martin Wolf suggests “The imbalances that caused the eurozone crisis, the debt explosions in the US and peripheral Europe, and again in post-financial-crisis China go back to two fundamental failures: the distribution of income away from the bulk of the population towards wealthy elites and the unique global role of the dollar.” https://digital.olivesoftware.com/Olive/ODN/FTUK/Default.aspx.

[xx] Martin Feldstein, member of the Council of Economic advisors, https://obamawhitehouse.archives.gov/sites/default/files/docs/ERP_2016_Book_Complete%20JA.pdf

[xxi] https://www.federalregister.gov/uploads/2015/05/Federal-Register-Pages-Published-1936-2014.pdf

[xxii] Of course, no sector of American life is closer to a monopoly than the American political system – a duopoly at best. For a scathing indictment of the way the “political-industrial” complex works and sensible steps to increase competition, see Katherine M. Gehl and Michael E. Porter, The Politics Industry: How Political; Innovation Can Break Partisan Gridlock and Save Our Democracy,  Boston: Harvard Business Review Press, 2020.

[xxiii] Labor Share in the

 

[xxiv] https://www.cdc.gov/coronavirus/2019-ncov/cases-updates/cases-in-us.html. On June 25, Dr. Robert Redfield reported that the Centers for Disease Control and Prevention believed that the number of Covid-19b cases in the U.S. is most likely ten times higher than the 2.3 million reported cases. https://www.nytimes.com/2020/06/25/world/coronavirus-updates.html#link-35c482f3

[vii] Pew Research Center, Weekly Roundup, April 18, 2020

[xxvi] Jalani Cobb writing in The New Yorker, June 22, 2020, p. 15

[xxvii] Adapted from the Brookings Institution, Axios AM, June 17

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