By Ernest A. Canning on 1/29/2012, 3:40pm PT  

Guest editorial by Ernest A. Canning

The title of historian Kevin Phillips' otherwise excellent work, Wealth and Democracy: A Political History of the American Rich, is somewhat misleading. With the exception of constitutional monarchies, which preclude royalty from all but figurehead status, democracy and the concentration of great wealth cannot co-exist in the same society.

If citizens can see past the corporate media-erected contest of personalities so as to examine how it reflects the undemocratic structure of our society, the 2012 Presidential election can provide us with a teachable moment of great value. This is true whether we examine the flood of SuperPAC monies, courtesy of the now infamous Citizens United decision, the striking similarities in their methodology of wealth acquisition depicted both in the 1987 movie Wall Street through its fictional Gordon Gekko and in real life by Bain Capital and Mitt Romney, the ridiculously low 13.9% federal taxes on Romney's $21.7 million income in 2010, his extensive Goldman Sachs holdings and as much as $32 million maintained in off-shore accounts, or the fact that only one, essentially marginalized Presidential candidate in either of the two major political parties --- Ron Paul --- is willing to discuss an end to perpetual war and our global military presence.

Here, Mitt "Gordon Gekko" Romney provides the principle focus, not because of personality, or "envy", but because his candidacy affords an opportunity to explore the inconsistency between wealth and democracy...

Penthouse window

Certain events afford a window through which the oligarchic machinations of the "one percent" are publicly exposed.

Last year, the opportunity came when Brad Friedman published his two-part exclusive series on the Koch Summer Seminars, at Mother Jones (here and here) and at The BRAD BLOG (here and here).

This year, the opportunity comes via the decision by a member of the American aristocracy, Mitt Romney, to run for President --- a decision that facilitates widespread public deconstruction of many of the ideological myths that obscure the parasitic nature of accumulated wealth.

One of those myths is the idea that it is necessary to provide financial incentives, such as tax breaks, to American corporations in order to create jobs. The myth was demolished by Greg LeRoy in The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation. LeRoy documented how, over the past 60 years, corporate America extracted billions of dollars from our public coffers in the form of tax breaks, subsidies and outright gifts of land and property from local, state and regional governments, as they are induced to bid against one another for the "privilege" of private-sector employment in their jurisdictions. No new jobs are created in the process. They are simply shifted from one region to another --- at least until they are sent overseas to sweatshops and $2/day wages.

Romney's method of wealth accumulation so effectively mirrors that of the fictional Gordon Gekko that it led to the creation of the labor-supported website,, as well as "When Mitt Romney Came to Town", a 30 minute "corporate raider" documentary (see teaser video below) produced by GOP opponent Newt Gingrich's "independent" SuperPAC.

Setting aside the usual Gingrich hypocrisy --- here displayed both by the fact Gingrich is a paid consultant for such oligarchic institutions as the U.S. Chamber of Commerce and by reason of the fact that Gingrich, who pays homage to laissez fair myth in his video, has no intention of changing the skewed rules that encourage such abuse --- his "King of Bain" video does expose the job destroying reality of predatory capitalist, leveraged buy-out firms like Bain Capital (now operating under the Orwellian "private equity firm" label).

As Robert Reich, former Secretary of Labor in the Clinton administration, explained:

Leveraged buyouts became part of traditional capitalism in the 1980s when enterprising financiers began borrowing piles of money, often at high interest rates, to buy up the stock of ongoing companies they believe undervalued. They’d back the loans with the company assets, then typically sell off divisions and slim payrolls, and resell the company to the public at a higher share price --- pocketing the gains.

Reich, citing the Washington Post, notes that during "an eight year period starting in 1987, Romney’s Bain invested 22 percent of the money it raised in five businesses that ended up filing for bankruptcy and walked away with $578 million in profit."

Reich's description leaves out the extent to which these corporate raiders simultaneously avail themselves of public monies under the "jobs scam" corporate welfare scheme to realize a greater return --- a point underscored by Los Angeles Times when it revealed how Bain realized an $85 million return on an $18.2 million investment in an Indiana steel company:

As Bain made its investment, the state and county pledged $37 million in subsidies and grants for the $385-million plant project. The county also levied a new income tax to finance infrastructure improvements to benefit the steel mill over the heated objections of some county residents.

Just as Brad Friedman exposed an open declaration of war on democracy when Charles Koch's "mother of all wars" statements were captured on tape and broadcast, so also Romney's candidacy exposed the inequity of tax laws when Romney reluctantly released his tax returns for 2010 and estimates for 2011.

Although Romney, in anticipation of his candidacy, was not working, his joint return reflects $21.7 million income in 2010, all in return on investments, taxed as capital gains at an effective tax rate of only 13.9%.

The 13.9% may not tell the full story of the Romneys' "legal" tax evasion, which also entails their having squirreled away as much as $32 million in off-shore accounts and the question, implicit in Friedman's recent piece pertaining to possible Romney voter fraud in the MA 2010 special election, as to whether the ability to purchase homes in multiple states permitted the Romneys to evade paying state income taxes in MA by using their income-tax-free NH home as their residence for tax purposes --- but perhaps not for voting purposes.

A class perspective

It is a mistake of major proportions to point to the similarities between Romney and Gordon Gekko or issues of "legal" tax evasion as if they simply touch upon some personal moral deficiency.

While there are exceptions, billionaires like Warren Buffett, for example, who displayed a modicum of public responsibility by openly pointing to the inequities in the tax code --- enlightened monarchs, if you will --- it is critical to understand that the Romneys and the Kochs engage in behaviors that one can anticipate from their class. Only the methodology of that behavior --- outsourcing, manipulations of the financial markets, of government, media and our laws --- varies.

Democracy or farce?

The 2012 Presidential election demonstrates that Justice Brandeis was correct when he concluded that we cannot have both democracy and great wealth concentrated in the hands of the privileged few.

As is reflected by our recent articles on the exclusion of Gov. Buddy Roemer from the GOP debates and on the silence which greeted the Darcy Richardson candidacy on the Democratic side in NH, oligarchic control of the corporate-owned media insures limitation of democratic choice to a narrow range of candidates whose range of policies are acceptable to the elites. So long as the acquisition of money sufficient to feed the corporate media spin cycle via the purchase of increasingly expensive 30-second propaganda slots (aka political ads) remains the primary source for "coverage," as well as debate inclusion, elections will exclude bottom-up democratic choice or a meaningful discussion of fundamental substantive issues, such as a single-payer healthcare system, an end not only to perpetual war, but our global military presence and a dismantling of the Military-Industrial Complex.

The flood of SuperPAC monies and the scope of oligarchic manipulation, including voter suppression and the use of unverifiable e-voting systems, does a great deal more than, as suggested by Elizabeth Drew, threaten "the democratic process for picking a president." It has turned the process into a farce.

The 2012 Presidential election entails not a bottom-up selection of the individual who best "represents" the interests of the 99% but an oligarchic-dictated choice between a Republican, who is either, himself, part of the 1% or a pompous, faux populist hypocrite who is a paid consultant for the 1% and a Democratic centrist whose somewhat less harsh policies give some recognition to the 99% while leaving the 1% firmly in control.

Solutions require systemic frame

One has to cringe upon hearing progressive commentators initiate a discussion of wealth disparity by stating that they do not "begrudge" anyone their wealth. During his recent State of Union Address, President Obama found it necessary to begin by explaining that the issue arising from a tax code that permits a billionaire to pay a lower tax rate than his secretary involves not "envy" but "fairness."

Both entail the mistake of approaching wealth disparity on a personal or individual level, as opposed to a societal perspective.

The real question is: can we permit such an obscene wealth disparity and simultaneously maintain a democracy? If, as Justice Brandeis astutely observed, we cannot, then the issue becomes not whether Warren Buffet should be taxed at the same tax rate as his secretary, but whether, at least for annual incomes in excess of $1 million, we should return to the top tax bracket that existed during the Republican Eisenhower administration --- 91%.

Indeed, if it is a democracy we seek, then the real issues we should be exploring are what steps we can take, consistent with the 5th & 14th Amendment proscriptions against the taking of property without due process of law, to, over time, eliminate our currently dangerous level of wealth disparity? What means, consistent with the 1st Amendment, are available to end the corporate media's ability to police the range of political discourse and the candidate selection process? What barriers can we erect to separate candidates, elected officials and the legislative process from the corrupting influence of corporate wealth?

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Teaser for the Gingrich SuperPAC's video challenging Romney's predatory capitalism follows...

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Ernest A. Canning has been an active member of the California state bar since 1977. Mr. Canning has received both undergraduate and graduate degrees in political science as well as a juris doctor. He is also a Vietnam vet (4th Infantry, Central Highlands 1968). Follow him on Twitter: @Cann4ing.