I grew up in the 1950s, an era when many believed that our society would inevitably progress toward ever greater economic equality. Desperate poverty would recede, it was assumed, as new federal programs addressed the needs of those at the very bottom of the ladder and as economic growth created new jobs. The average CEO at the time earned only twenty times as much as the average worker, and during the Eisenhower administration the marginal tax rate for the highest earners was 91 percent. Today, the goal of equality appears to be receding. The top marginal tax rate is only 39 percent, far below what it was during the Eisenhower years, and most Republicans would like to lower it even more. Employers now make 271 times as much as the average worker, and half the children in American schools are officially classified by the federal government as low-income and eligible for free or reduced-price lunch. Union membership peaked in the mid-1950s and has declined ever since; the largest unions today are in the public sector and only about 7 percent of private sector workers belong to a union.
Despite these alarming developments, however, politicians who support the deregulation of business and champion pro-employer legislation—from state legislators to members of Congress—have a firm electoral foothold in most states. During the 2016 presidential campaign, candidate Trump promised to support basic government services like Medicare and pledged to bring back jobs that had been outsourced to other nations. However, once he was president, Trump endorsed health care bills that would have left millions of low- and lower-middle-income Americans without health insurance, and his insistence on reducing corporate tax rates suggests his determination to act in the interest of wealthy elites.
Two recent books—Nancy MacLean’s Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America and Gordon Lafer’s The One Percent Solution: How Corporations Are Remaking America One State at a Time—seek to explain several puzzling aspects of American politics today. Why do people of modest means who depend on government-funded health care and Social Security or other supplements to their income continue to vote for candidates who promise to privatize or get rid of those very programs? Why do people who are poor vote for politicians who promise to cut corporate taxes? (...)
At the center of Democracy in Chains is the work of the Nobel Prize–winning economist James M. Buchanan, who died in 2013. Buchanan is associated with the doctrine of economic libertarianism: he is widely credited as one of the founding fathers of the “public choice” model of economics, which argues that bureaucrats and public officials serve their own interests as much as or more than the public interest, and he was the leading figure in the Virginia School of economic thought. He trained many economists who came to share his libertarian views, and his acolytes have protested MacLean’s view that he had “a formative role” in the evolution of an antidemocratic “strand of the radical right.”(...)
In MacLean’s account, Buchanan was responding to the threats that democratic institutions posed to the preservation of wealth in America. Early American democracy had limited this threat by confining the franchise to white male property owners. But as voting rights were extended, the nation’s elites had to reckon with the growing power of formerly disenfranchised voters, who could be expected to support ever more expensive government programs to benefit themselves and ever more extensive ways to redistribute wealth. MacLean asserts that Buchanan supplied his benefactors with arguments to persuade the American public to go along with policies that protect wealth and eschew federal programs reliant on progressive taxation.
If everyone is motivated by self-interest, he argued, government can’t be trusted to do what it promises. Indeed, it cannot be trusted at all. Bureaucrats can be expected to protect their turf, not the public interest. Every politician, Buchanan wrote, “can be viewed as proposing and attempting to enact a combination of expenditure programs and financing schemes that will secure him the support of a majority of the electorate.” For Buchanan, this was reason enough to endorse economic liberty, freedom from taxes, and privatization of public services, such as schools, Social Security, and Medicare. In MacLean’s view, those proposals promised a return to
Buchanan’s challenge was to develop a strategy that would enlist the public’s support for the ideas he shared with Charles Koch. This challenge was especially daunting in the case of Social Security. Overwhelming majorities of Americans supported Social Security because it ensured that they would not be impoverished in their old age. In an influential 1983 paper, Buchanan marveled that there was “no widespread support for basic structural reform” of Social Security “among any membership group” in the American political constituency—“among the old or the young, the black, the brown, or the white, the female or the male, the rich or the poor, the Frost Belt or the Sun Belt.” Pinochet’s Chile—which Buchanan visited for a week in May 1980 to give what MacLean calls “in-person guidance” to the regime’s minister of finance, Sergio de Castro—had privatized its social security system, and libertarians hoped to do the same in the United States. We now know that the privatization of social security in Chile was a disaster for many, but the libertarians were unshakable in their enthusiasm for market solutions and ignored the risks.
Buchanan laid out the strategy needed to divide the political coalition that supported Social Security. The first step was to insist that Social Security was not viable, that it was a “Ponzi scheme.” If “people can be led to think that they personally have no legitimate claim against the system on retirement,” he wrote in a paper for the Cato Institute, it will “make abandonment of the system look more attractive.” Then those currently receiving benefits must be reassured that nothing will change for them. “Their benefits,” as MacLean puts it, “would not be cut.” Taxpayers, in turn, would have to be promised, as Buchanan says, “that the burden of bailing out would not be allowed to fall disproportionately on the particular generation that would pay taxes immediately after the institutional reform takes place.” Cultivating these expectations would not only make taxpayers more ready to abandon the system; it would also build resentment among those who expect never to get payments comparable to those receiving the initial bailout.
After they announce the insolvency of Social Security, Buchanan argued, the system’s critics should “propose increases in the retirement age and increases in payroll taxes,” which would, MacLean writes, “irritate recipients at all income levels, but particularly those who are just on the wrong side of the cutoff and now would have to pay more and work longer.” Calls for protecting Social Security with progressive taxation formulas would emphasize the redistributive character of the program and isolate progressives. “To the extent that participants come to perceive the system as a complex transfer scheme between current income classes instead of strictly between generations,” Buchanan predicted, “the ‘insurance contract’ image will become tarnished” and its public support will be compromised.
Critics of MacLean claim she overstates her case because Buchanan was merely presenting both sides of the issue. But it is indisputable that Cato and other Koch-funded policy centers favor privatization of government programs like Social Security and public education. The genius of their strategy was in describing their efforts to change government programs as “reforms,” when in fact they were intended from the outset to result in their destruction. This rebranding depended on think tanks amply funded by Charles Koch, his like-minded brother David, and other ideologically friendly sponsors. Charles Koch funded the James Buchanan Center at GMU with a gift of $10 million. The libertarian philosophy funded by Koch and developed by Buchanan has close affinities with the Tea Party and Freedom Caucus of the Republican Party, which oppose federal spending on almost anything other than the military and has placed its members at the highest levels of the Trump administration, including Vice President Mike Pence and Mick Mulvaney, the director of the Office of Management and Budget.
MacLean’s argument that Buchanan knowingly engineered a strategy for the wealthy to preserve their hold on American democracy has prompted intense resistance. She has been repeatedly attacked on libertarian blogs, historical websites, and even in The Washington Post. The attacks are sometimes personal: Steve Horwitz, a libertarian economist who called MacLean’s book “a travesty of historical scholarship,” earned his degrees at GMU, where Buchanan was one of his professors. Most of her prominent critics—Michael Munger, David Bernstein, Steven Hayward, David Boaz—are libertarians; some receive funding from the Koch brothers. They accuse her of unjustly berating a legitimate area of economic inquiry and overstating the evidence against Buchanan in support of her position. Other critics have come from the political center. The political scientists Henry Farrell and Steven Teles, for instance, have argued that MacLean overstates the extent to which Buchanan and his supporters were “implementing a single master plan with fiendish efficiency.” MacLean has replied to her critics that her book demonstrates that Buchanan was part of a much larger movement.
MacLean’s reputation will no doubt survive. She has written a carefully documented book about issues that matter to the future of our democracy and established the close and sympathetic connections between Buchanan and his far-right financial patrons. However fierce they might be, her critics have been unable to refute the central message of her important book: that the ongoing abandonment of progressive taxation and the social benefits it gives most people is undergirded by a libertarian economic movement funded by wealthy corporate benefactors. The dismantling of basic government functions by the Trump administration, such as Betsy DeVos’s efforts to privatize public education, shows the continuing influence of Buchanan’s libertarian ideas.
Despite these alarming developments, however, politicians who support the deregulation of business and champion pro-employer legislation—from state legislators to members of Congress—have a firm electoral foothold in most states. During the 2016 presidential campaign, candidate Trump promised to support basic government services like Medicare and pledged to bring back jobs that had been outsourced to other nations. However, once he was president, Trump endorsed health care bills that would have left millions of low- and lower-middle-income Americans without health insurance, and his insistence on reducing corporate tax rates suggests his determination to act in the interest of wealthy elites.Two recent books—Nancy MacLean’s Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America and Gordon Lafer’s The One Percent Solution: How Corporations Are Remaking America One State at a Time—seek to explain several puzzling aspects of American politics today. Why do people of modest means who depend on government-funded health care and Social Security or other supplements to their income continue to vote for candidates who promise to privatize or get rid of those very programs? Why do people who are poor vote for politicians who promise to cut corporate taxes? (...)
At the center of Democracy in Chains is the work of the Nobel Prize–winning economist James M. Buchanan, who died in 2013. Buchanan is associated with the doctrine of economic libertarianism: he is widely credited as one of the founding fathers of the “public choice” model of economics, which argues that bureaucrats and public officials serve their own interests as much as or more than the public interest, and he was the leading figure in the Virginia School of economic thought. He trained many economists who came to share his libertarian views, and his acolytes have protested MacLean’s view that he had “a formative role” in the evolution of an antidemocratic “strand of the radical right.”(...)
In MacLean’s account, Buchanan was responding to the threats that democratic institutions posed to the preservation of wealth in America. Early American democracy had limited this threat by confining the franchise to white male property owners. But as voting rights were extended, the nation’s elites had to reckon with the growing power of formerly disenfranchised voters, who could be expected to support ever more expensive government programs to benefit themselves and ever more extensive ways to redistribute wealth. MacLean asserts that Buchanan supplied his benefactors with arguments to persuade the American public to go along with policies that protect wealth and eschew federal programs reliant on progressive taxation.
If everyone is motivated by self-interest, he argued, government can’t be trusted to do what it promises. Indeed, it cannot be trusted at all. Bureaucrats can be expected to protect their turf, not the public interest. Every politician, Buchanan wrote, “can be viewed as proposing and attempting to enact a combination of expenditure programs and financing schemes that will secure him the support of a majority of the electorate.” For Buchanan, this was reason enough to endorse economic liberty, freedom from taxes, and privatization of public services, such as schools, Social Security, and Medicare. In MacLean’s view, those proposals promised a return to
the kind of political economy that prevailed in America at the opening of the twentieth century, when the mass disenfranchisement of voters and the legal treatment of labor unions as illegitimate enabled large corporations and wealthy individuals to dominate Congress and most state governments alike, and to feel secure that the nation’s courts would not interfere with their reign.Charles Koch well understood the power of academic experts, and he directed millions of dollars toward developing what are now called “thought leaders” to defend his self-interested political and economic vision. Buchanan was one of those academics. Koch bypassed Milton Friedman and his “Chicago boys,” MacLean writes, because “they sought ‘to make government work more efficiently when the true libertarian should be tearing it out at the root.’” Instead, in the early 1970s, he funded the Libertarian Party and the Cato Institute, designed to advocate for what MacLean summarizes as “the end of public education, Social Security, Medicare, the U.S. Postal Service, minimum wage laws, prohibitions against child labor, foreign aid, the Environmental Protection Agency, prosecution for drug use or voluntary prostitution—and, in time, the end of taxes and government regulations of any kind.” Koch also funded the libertarian Reason Foundation, which advocated for privatizing all government functions. Another Koch-backed organization, the Liberty Fund, hired Buchanan to run summer conferences for young social scientists.
Buchanan’s challenge was to develop a strategy that would enlist the public’s support for the ideas he shared with Charles Koch. This challenge was especially daunting in the case of Social Security. Overwhelming majorities of Americans supported Social Security because it ensured that they would not be impoverished in their old age. In an influential 1983 paper, Buchanan marveled that there was “no widespread support for basic structural reform” of Social Security “among any membership group” in the American political constituency—“among the old or the young, the black, the brown, or the white, the female or the male, the rich or the poor, the Frost Belt or the Sun Belt.” Pinochet’s Chile—which Buchanan visited for a week in May 1980 to give what MacLean calls “in-person guidance” to the regime’s minister of finance, Sergio de Castro—had privatized its social security system, and libertarians hoped to do the same in the United States. We now know that the privatization of social security in Chile was a disaster for many, but the libertarians were unshakable in their enthusiasm for market solutions and ignored the risks.
Buchanan laid out the strategy needed to divide the political coalition that supported Social Security. The first step was to insist that Social Security was not viable, that it was a “Ponzi scheme.” If “people can be led to think that they personally have no legitimate claim against the system on retirement,” he wrote in a paper for the Cato Institute, it will “make abandonment of the system look more attractive.” Then those currently receiving benefits must be reassured that nothing will change for them. “Their benefits,” as MacLean puts it, “would not be cut.” Taxpayers, in turn, would have to be promised, as Buchanan says, “that the burden of bailing out would not be allowed to fall disproportionately on the particular generation that would pay taxes immediately after the institutional reform takes place.” Cultivating these expectations would not only make taxpayers more ready to abandon the system; it would also build resentment among those who expect never to get payments comparable to those receiving the initial bailout.
After they announce the insolvency of Social Security, Buchanan argued, the system’s critics should “propose increases in the retirement age and increases in payroll taxes,” which would, MacLean writes, “irritate recipients at all income levels, but particularly those who are just on the wrong side of the cutoff and now would have to pay more and work longer.” Calls for protecting Social Security with progressive taxation formulas would emphasize the redistributive character of the program and isolate progressives. “To the extent that participants come to perceive the system as a complex transfer scheme between current income classes instead of strictly between generations,” Buchanan predicted, “the ‘insurance contract’ image will become tarnished” and its public support will be compromised.
Critics of MacLean claim she overstates her case because Buchanan was merely presenting both sides of the issue. But it is indisputable that Cato and other Koch-funded policy centers favor privatization of government programs like Social Security and public education. The genius of their strategy was in describing their efforts to change government programs as “reforms,” when in fact they were intended from the outset to result in their destruction. This rebranding depended on think tanks amply funded by Charles Koch, his like-minded brother David, and other ideologically friendly sponsors. Charles Koch funded the James Buchanan Center at GMU with a gift of $10 million. The libertarian philosophy funded by Koch and developed by Buchanan has close affinities with the Tea Party and Freedom Caucus of the Republican Party, which oppose federal spending on almost anything other than the military and has placed its members at the highest levels of the Trump administration, including Vice President Mike Pence and Mick Mulvaney, the director of the Office of Management and Budget.
MacLean’s argument that Buchanan knowingly engineered a strategy for the wealthy to preserve their hold on American democracy has prompted intense resistance. She has been repeatedly attacked on libertarian blogs, historical websites, and even in The Washington Post. The attacks are sometimes personal: Steve Horwitz, a libertarian economist who called MacLean’s book “a travesty of historical scholarship,” earned his degrees at GMU, where Buchanan was one of his professors. Most of her prominent critics—Michael Munger, David Bernstein, Steven Hayward, David Boaz—are libertarians; some receive funding from the Koch brothers. They accuse her of unjustly berating a legitimate area of economic inquiry and overstating the evidence against Buchanan in support of her position. Other critics have come from the political center. The political scientists Henry Farrell and Steven Teles, for instance, have argued that MacLean overstates the extent to which Buchanan and his supporters were “implementing a single master plan with fiendish efficiency.” MacLean has replied to her critics that her book demonstrates that Buchanan was part of a much larger movement.
MacLean’s reputation will no doubt survive. She has written a carefully documented book about issues that matter to the future of our democracy and established the close and sympathetic connections between Buchanan and his far-right financial patrons. However fierce they might be, her critics have been unable to refute the central message of her important book: that the ongoing abandonment of progressive taxation and the social benefits it gives most people is undergirded by a libertarian economic movement funded by wealthy corporate benefactors. The dismantling of basic government functions by the Trump administration, such as Betsy DeVos’s efforts to privatize public education, shows the continuing influence of Buchanan’s libertarian ideas.
by Diane Ravitch, NYRB | Read more:
Image: Jill Freedman/Steven Kasher Gallery
