Billionaires and Stealth Politics Read online

  produce more political influence, it seems reasonable to infer that those with the most money have the most influence.

  So the findings from Gilens’s data bolster the idea that billionaires

  probably wield substantial influence on policy. Moreover, Gilens’s data

  indicate that the policy preferences of individual affluent Americans have been almost entirely unrelated to (statistically uncorrelated with) the

  lineups of major corporations and business groups over a wide range of

  issues.78 Affluent Americans (including billionaires) often have personal ideologies and personal policy preferences that differ from the profit-making aims of the corporations they partly or wholly own. Affluent in-

  dividuals and organized business groups both have substantial, indepen-

  dent influence on policy making.79 So the wealthiest Americans appear to

  be major political actors— a distinct conceptual category of actor— who

  have important, independent impacts on policy making.

  In order to say more than that— to make judgments about exactly

  which public policies billionaires have or have not influenced, and to what extent they have done so— we would need to consider historical and journalistic evidence concerning specific policy decisions in which billionaires may have played a part. We make some efforts to do this in chapter 5 and

  in our concluding chapter. For now, we simply note that there exists some evidence that billionaires have played important roles in policy making

  concerning taxes and Social Security.

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  chapter two

  Despite the strong support among most Americans for protecting and

  expanding Social Security benefits, for example, the intense, decades-

  long campaign to cut or privatize Social Security that was led by billionaire Pete Peterson and his wealthy allies appears to have played a part in thwarting any possibility of expanding Social Security benefits. Instead, the United States has repeatedly come close (even under Democratic

  Presidents Clinton and Obama) to actually cutting benefits as part of a bipartisan “grand bargain” concerning the federal budget. 80

  Working through the Republican Party (in which a number of bil-

  lionaires play major roles), the wealthiest Americans also appear to

  have played a significant part in enacting tax cuts that have benefited

  the wealthy. This is most evident with the estate tax— which, as we have

  seen, is a particular obsession for a number of the wealthiest billionaires.81

  The minimum size of estates subject to the tax has gradually been raised, so that fewer and fewer estates have been subject to the tax at all. (At

  present, only about 0.2 percent of all estates— estates of $5.49 million

  and above for the unmarried and double that amount for the married—

  are subject to the tax.) And the estate tax rate on the biggest estates has been cut from 70 percent in the late 1970s, to 55 percent at the turn of

  this century, to its current level of 40 percent.82 Similarly, the wealthiest Americans very likely played an important part in the 1981, 2001, and

  2017 legislation that sharply cut marginal income tax rates on the highest-income Americans and— in effect— shifted more and more of the burden

  of federal taxes onto regressive payroll taxes.83

  The Accountability Problem

  Quite aside from the troubling question of whether people with large

  amounts of money should be permitted to have outsized political influ-

  ence, we believe that political influence without political accountability can create special problems for democratic politics.

  Billionaires’ political activity is only rarely accompanied by explicit public discussion of what sorts of policies they favor and why. This means that ordinary citizens have no way to judge whether or not the billionaires—

  extremely successful people, often very intelligent and knowledgeable—

  have something useful and convincing to say about public policy. Their silence may detract from the quality of political debates and deprive citizens of a possible source of political leadership.

  By the same token, however, if billionaires are mistaken about what

  stealth politics on taxes and social security

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  sorts of policies would best serve the public interest— or, worse, if they deliberately pursue narrowly self- interested policies that would be det-rimental to the average American— their silence may help shield them

  from political accountability. It is difficult to argue against, judge, or counteract someone whose political views and actions are concealed.

  We believe that stealth politics is not good for democracy.

  chapter three

  Four Billionaires Up Close

  Statistical patterns can be illuminated, confirmed, called into question, or elaborated upon by looking closely at specific cases. In this chapter, we grapple with what stealth politics looks like in real life by examining more closely the cases of four of our one hundred wealthiest billionaires: Warren Buffett, John Menard Jr., Carl Icahn, and David Koch.

  These case studies serve several purposes. One is simply to illustrate in concrete terms how stealth politics works. These four billionaires exem-plify different types of resources, self- interests, and political philosophies that tend to translate— as the stealth politics theory predicts— into different patterns of political speech and action.

  As we have noted, Warren Buffett is quite unusual among billionaires in

  holding centrist- to- liberal views about various economic and social welfare policies. Just as the theory predicts, Buffett— unlike the more conservative billionaires— frequently speaks out about his opinions in public. David

  Koch is much more typical of US billionaires in his libertarian views (economically very conservative, socially somewhat liberal) and— again as the theory predicts— he is generally silent about policy issues. Koch is atypical, though, in combining extreme conservatism with an extremely high

  level of wealth, and in investing enormous amounts of money in politics.

  The much less well- known John Menard Jr.— like Koch and many other bil-

  lionaires— is highly conservative on economic issues (he is an especially fierce opponent of labor unions) and quite active politically while keeping very quiet in public. Carl Icahn is unusual: he is something of a Donald

  Trump– style right- wing “populist,” espousing economic nationalism and

  expressing certain concerns about the well- being of American workers.

  Icahn’s case, which fits less well with the theory, has led us to reflect about how the theory could be modified to account for Icahn or any other popu-

  four billionaires up close

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  list billionaires who might emerge in the Trump or post- Trump period of

  American politics.

  Taken together, then, three of these cases (Buffett, Koch, and Menard)

  rather neatly illustrate the patterns of stealth politics. But our aim is not just to illustrate.

  Indeed, we selected and analyzed these cases largely for methodologi-

  cal purposes, in order to further test and (if necessary) to elaborate on or modify the stealth politics theory. By examining both extreme cases

  and outliers, for example, we can find indications of whether we missed

  any relevant information: whether any policy- related statements or political actions were not unearthed by our systematic web searches. We can

  judge whether and why our theory may have gone wrong. We can provide

  more fine- grained evidence of how processes work in specific billionaires’

  real lives. We can explore the origins of billionaires’ wealth and consider ways in which that may have influenced their political philosophies and

  pol
itical behavior. We can also scrutinize the causal mechanisms by which stealth politics works.

  In short, multimethod research that combines quantitative analyses

  with carefully selected and carefully conducted case studies can often illuminate political processes in ways that neither type of method can do

  alone.1

  In this chapter we provide some background material on how each bil-

  lionaire became wealthy, in order to help understand the individuals while also highlighting how their personal financial interests may relate to certain areas of public policy. We explore more closely the statements on economic policy by these billionaires that we found through our earlier web

  searches, and also examine any new statements we could unearth using

  broader search terms and watching out for less visible venues.2 In the

  new searches, we examined the contents of any major publications and

  looked for even vaguely political statements that did not show up in our

  main data collection, in order to test the assumption that our systematic searches already found virtually everything these billionaires had said

  about taxation, social programs, and economic policy more generally. Fi-

  nally, this chapter describes the precise nature of each billionaire’s political activities, so as to give qualitative substance to billionaires’ activities and illuminate some forms of political action that are less well known

  than financial contributions, bundling, or forming PACs. Our examina-

  tion of the Koch and Menard cases, in fact, revealed some novel kinds of

  political action that we had previously been unaware of.

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  chapter three

  Selecting Cases for Close Study

  Case studies can most effectively complement and strengthen quantitative

  studies if they are selected according to clear principles. The cases discussed in this chapter were systematically selected to detect measurement error in our variables or possible misspecification of our models. Warren Buffett—

  who frequently discusses politics— and John Menard Jr., who has never,

  according to our systematic searches, publicly discussed taxes or Social

  Security, were selected among extreme cases in terms of the frequency or

  infrequency with which they spoke in public about taxes or Social Security.

  While Buffett stands alone as the single most politically vocal billionaire, Menard is only one of many silent billionaires at the opposite extreme. Of the seventy- one billionaires who (according to our data) made no statements at all about economic policy, Menard was selected randomly.3 Icahn

  and Koch were selected as deviant cases because they had the biggest re-

  siduals in regression analyses predicting the directionality of policy- related actions. In our data, Icahn appeared to take much less conservative action than the model predicted— in fact we found no action at all; and Koch

  seemed to take much more conservative action than predicted.

  Examination of cases that are deviant or take extreme values on key vari-

  ables provides the best opportunity to identify sources of measurement error or omitted variables that can distort the findings from quantitative analyses. In other words, if there are distortions in our quantitative data regarding stealth politics, these four cases should be unusually likely to reveal such problems.4 That makes them a useful focus for intensive qualitative inquiry.

  Measurement errors in the context of stealth politics could take vari-

  ous forms. First, there might be simple coding errors: instances in which statements or actions by billionaires were incorrectly categorized. Second, there could be deeper problems in the measurement process. For ex-

  ample, some billionaires might have made policy- relevant public state-

  ments that were not recorded by Google or that were not detected by our

  search procedure. Errors of this sort might lead to incorrect inferences

  that a particular billionaire was engaged in stealth politics when in fact the billionaire in question had publicly discussed that issue in a venue or format that we simply missed. Or third, there may be missing information

  about contributions or fund- raising actions on the part of billionaires.

  This category of error could lead to underestimates of the proportion of

  billionaires who engage in stealth politics.

  four billionaires up close

  57

  Case studies cannot definitively rule out any of these three types of

  measurement error, but they do provide a way to test for their prevalence.

  In the following cases, we search for these types of error by comparing the data collected via our web- scraping procedures with the results of additional open- ended web inquiries and of other forms of research. Beyond

  carrying out this correspondence test between the systematic, quantita-

  tive indicators and a broader but less systematic pool of qualitative evidence, we believe that our case studies help shed substantive light on why billionaires do what they do and on precisely how American billionaires

  attempt to exercise political power.

  Warren Buffett

  Modest- living Warren Buffett, known as the “Oracle of Omaha” for his

  successful investments and his insightful utterances, was— at the time our study began— the second- wealthiest among all Americans, with a fortune of $58,500,000,000. This despite giving away $2 billion in the previous year to the Gates Foundation, which brought his total philanthropic contributions close to $20 billion. Even after that hefty gift, Buffett’s fortune had risen by $12.5 billion in the course of the previous year, largely because of a 34 percent rise in the value of his stock in Berkshire Hathaway after Buffett engineered Berkshire’s acquisition of iconic ketchup maker

  and food giant H. J. Heinz.5 By autumn 2016 Buffett had dropped to #3

  among wealthiest Americans, behind fast- rising Jeff Bezos of Amazon,

  but Buffett was still worth a respectable $65,500,000,000.6

  Warren Buffett was born in 1930 to a solidly middle- class Omaha fam-

  ily. His father worked first as a journalist and then as a stockbroker and found success even through the depths of the Great Depression. Buffett

  began his involvement with investments as a young child, reading about

  them and involving himself in his father’s brokerage business. He began

  investing for himself and his sister, Doris, by the time he was twelve years old— purchasing three shares of one of his father’s favorite stocks, Cities Service preferred, which he sold (much too soon) for a small profit.

  Between such investments and a series of small- time jobs, Buffett accu-

  mulated personal wealth of a then- remarkable $1,000 by the age of 14.7

  As Buffett worked his way through college and young adulthood, he

  was employed in a series of jobs related to newspaper circulation and sales.

  He also pursued stock investments. In the process, Buffett accumulated

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  chapter three

  personal savings of nearly $20,000 by the age of twenty- one. At that point he moved into investing and stockbroking as a full- time career, taking out a $5,000 bank loan to help fund his personal investments and signing on

  to work for his father’s brokerage firm. Later, Buffett went to work for the Graham- Newman firm. At the age of twenty- six he left Graham- Newman

  with savings of $174,000 and formed his own hedge fund, with family and

  friends as the only partners in the enterprise.8 From that point forward, Buffett’s investing success gradually and consistently snowballed to his

  present level of extraordinary wealth.9

  Buffett is now the chairman and CEO of Berkshire Hathaway, a mul-

  tinational conglomerate that holds stakes in a wide range
of industries

  including energy, manufacturing, retail, transportation, and financial services. The company is the sole proprietor of many large and well- known

  companies, including GEICO (one of Buffett’s earliest favorites), Fruit

  of the Loom, and BNSF Railway.10 Berkshire Hathaway is also the larg-

  est current shareholder in United Airlines and Delta, and holds major

  positions in Kraft Heinz Company, American Express, the Coca Cola

  Company, Southwest and American Airlines, and many more.11 Buffett’s

  wealth thus entails a measure of control over a significant portion of the American economy.

  We selected Buffett for study as the single billionaire who scored highest on our speech variable. As we saw in the previous chapter, Buffett has been one of the most talkative billionaires when it comes to taxation and Social Security. The same applies to government economic policy in general.

  Buffett has spoken to numerous media outlets about politics, and has

  even penned his own political op- eds. In particular, Buffett has been a

  very vocal supporter of redistributive economic policies. He is one of the most visible advocates of progressive taxation (tax rates that increase substantially as a function of income) in contemporary American discourse.

  In the 1993 Berkshire Hathaway letter to shareholders, captured both

  in our original systematic search and in the case- study process, Buffett wrote, “Charlie [Munger, Buffett’s business partner] and I have absolutely no complaints about these taxes. We work in a market- based economy

  that rewards our efforts far more bountifully than it does the efforts of others whose output is of equal or greater benefit to society. Taxation should, and does, partially redress this inequality.”12

  Buffett has frequently advocated higher taxes on the wealthy. For years

  he has highlighted the ways by which wealthy Americans manage to mini-

  mize their tax bills. In an October 30, 2007, interview with NBC Nightly

  four billionaires up close

  59

  News, Buffett said, “I’ll bet a million dollars against any member of the Forbes 400 who challenges me that the average [tax rate] for the Forbes 400