Three secrets to revitalizing liberal America

2014 was not a good year for the left. Republicans now have a stranglehold on the House, where they control the most seats they’ve had since 1948. That lead will likely last fordecades. Democrats didn’t just lose the Senate, they have significantly diminished their chance of regaining it in 2016. Republicans control 31 governorships, as well as 68 of 98 legislative chambers. And of, course, the Democratic party has shown itself to be only nominally liberal, with the current frontrunner for 2016 raising money from Wall Street financiers. The left then has two problems: how to get Democrats winning and how to get Democrats to avoid becoming a party permanently in the callous hands of capital.

Currently, much of the hope for a more liberal Democratic party rests on the shoulders of Elizabeth Warren, who is being drafted to run against Hillary Clinton. While Warren is formidable, it was only six years ago that the left laid its hopes for victory on a single individual and found itself sorely disappointed. The left must remember that leaders do not make movements; rather, movements make leaders. Instead of vacillating from one hero to another, the left must create a formidable power base from which to both defeat Republicans and shift Democrats to the left. This will require a three-pronged approach: mass mobilization of the non-voting population, a stable of progressive leaders and a reduction in the influence of money in politics.

1. Mass Mobilization



There is now a definitive literature that establishes the following facts: First, turnout in the United States is deeply skewed by income. Second, this skew leads politicians to prioritize the preferences of the rich voters of poor non-voters. Third, reducing this income skew would lead to policies that benefit the poor. We can see this within the states, where two studies find states with lower turnout inequality have lower income inequality. States with lower turnout inequality have higher minimum wages, more generous child healthcare programs, stricter and predatory lending laws and higher welfare benefits. Internationally, higher turnout inequality is correlated with lower redistribution, and the United States has the highest turnout inequality internationally.

A recent study by political scientists John Griffin and Brian Newman helps explain why. The authors examine “wins” and “losses” for various groups, that is, how often their member of Congress voted according to their preference. They find that voters win 53.1% of the time, while non-voters only win 48.8% of the time. That should be worrying for the left, since research suggests that non-voters are much more economically liberal than voters. A 2012 Pew Study finds that non-voters were far more likely to support the Affordable Care Act (49% of likely voters supporting repeal, compared to only 31% of non-voters). Non-voters were far more likely to support Obama (47% of likely voters versus 59% of non-voters) and oppose Romney (47% and 24%). Non-voters are more likely than voters to support policies to strengthen unions and to support a job guarantee.

How do we boost turnout low-income turnout? We know. Same-day registration is provento boost turnout and reduce turnout inequality. Felony disenfranchisement laws primarily affect the poor (and people of color). Our two-step elections system (which requires registration) hurts low-income people who are less likely to be registered. To combat this states should better comply with the National Voter Registration Act, which requires public assistance agencies (including the offices enforcing Obamacare) and DMVs to hand out registration forms. The left must also stop the rise of voter ID laws, which disproportionately affect voters of color and low income voters. In the long run, a mandatory voting law would be ideal.

2.     A Stable of Progress Leaders

Although voting benefits nearly all groups, Blacks do not gain as much from voting, according to a recent study (cited above) by Griffin and Newman. That is because, as Paul Frymer notes, Democrats often have an incentive to try to court white voters or high income votes to ensure re-election (under the assumption that Blacks won’t run for to the Republican Party). The best way to solve this problem is more people of color in office. Research by Eric Juenke and Robert Preuhs finds that at the state level, people of color are better represented by people of color than white Democrats. Griffin and Newman findmuch the same thing at the federal level, with some caveats (in some cases, white Democrats are equally effective). Christian Grose finds that Black dedicate more money to African-American constituents. Descriptive representation also leads to more people of color voting, which further strengthens the left.

Also lacking in office is workers. Nicholas Carnes finds that while more than half of all Americans have working class jobs, over the last century workers have never made up more than 2% of representatives at the Congressional level and they make up little moreof representatives at the state level. This is important because numerous studies show that wealthy congressmembers tend to vote more in favor of  business interests and tax cuts, while workers are much more liberal, as measured by AFL-CIO scores.

The good news is that research suggests that people of color are actually just as likely as white candidates to win: the problem is that they often don’t run. The same is true of workers. Carnes finds that training programs can help prepare workers for a campaign, and workers who completed the New Jersey ““Labor Candidate School,” had a 75% success rate. Party leaders who are crucial to the candidate election process need to cultivate workers, women and people of color to run. Finally, the left needs a stable of wonkish administrators that can offer policy recommendations.

3. Get Money Out of Politics

But candidates don’t run and politicians don’t vote in a vacuum. The last decade has seen an explosion of money in politics and it’s distorting the political process. SuperPACs are flooded the airwaves, corporations are spending nearly unprecedented amounts on lobbying and the system is awash with “dark money” that cannot be traced to a donor. Sheldon and Miriam Adelson spent $91.8 million to influence the 2012 election, more than the combined residents of 12 states. In 1980, the largest contributor, Cecil R. Haden gave only $1.72 million in inflation-adjusted dollars. The richest .01% of the populationaccount for 40% of campaign contributions.

This is worrying, because a vast literature shows that campaign contributions can influence outcomes, that lobbying tilts policy in favor of lobbyists and that individual donors can set the political agenda. The problem is that the rich have very different priorities than the middle class. A pioneering study of the policy preferences of the richfinds that the rich are, “extremely active politically and that they are much more conservative than the American public as a whole with respect to important policies concerning taxation, economic regulation, and especially social welfare programs.” Further, numerous studies find that when preferences collide, the rich win out.

Although it seems daunting, there are actually numerous policies that the left could pursue that would halt the rise of money in politics. Lobbying regulations have been shown to increase political equality. Unions, which advocate in the interests of all Americans can provide a bulwark to corporations but political spending from both are treated differently. The scatterplot below shows the five unions included in the analysis are (AFL-CIO, AFSCME, Teamster, UAW and the National Education Association). They also alignwith the middle class.

These disparities can be reconciled through a bill like the DISCLOSE Act or SEC oversight, which would bring corporate political spending out of the dark and into the public spotlight. It’s also important to lay the intellectual and legal groundwork to eventually overturn Citizens United and McCutcheon.

These policies are specifically selected because they have a track-record of success that is empirically proven. They are also policies that can be persuasively presented to voters. Politicians aim to get re-elected and they will do whatever it takes to maintain power. With these policies, politicians will have to win the votes of an increasingly economically liberal electorate. The goal of the left should be to force Democrats to adopt economically liberal policies or fear for their seat.

But a progressive America will require work. While it is easy to crown Obama or Warren savior and wait in anticipation for change, those who do so are waiting for Godot. There have been successes over the last year: the Working Families Party helped re-elect Governor Malloy, a consistent progressive (something possible partially because of public financing. Demos (my organization) has been doggedly ensuring that states comply with Motor Voter and we’ve had victories on Same-Day registration. These wins were difficult, but they compound into more victories down the road. But simply anointing another progressive to lead the movement will only lead to disappointment.

This piece originally appeared on Salon

The great American rip-off: How big-money fuels racial inequality

In the wake of Citizens United, large donors dominate the political landscape, with 84 percent of the money spent in 2014 coming from contributions greater than $200. The big money explosion is complete. In 1980 the largest political donor gave $1.72 million (in 2012 dollars); in 2012, the largest donor gave $56.8 million, or 33 times as much. It’s obvious that this big money bias favors the rich over the poor, but new research suggests it may also hamper racial equity.

As money has come to play a larger role in politics, it has opened up the political system to the abuse of a few of the very wealthiest Americans, an ascendant donor class. However, due to racialized distribution of wealth and income in the United States, this “donor class” is overwhelmingly white (see chart).

This means that campaign contributions primarily come from white donors. An AP investigation of 2012 to  super PACs and presidential campaigns finds that more than 90 percent of those contributions came from white neighborhoods. Demos’ analysis of the top 10 Republican and Democratic donors finds that, “All of these donors appear to be white.”

These biases are important; gaps on issues like the budget deficits, inequality and paid sick leave break down more strongly on race lines than they do along class lines, for example. On other issues, there are salient racial divides, and political scientists find that people of color are better represented when their representative is of the same race (white legislators, even Democrats, are not as responsive). There are therefore substantial differences between white and nonwhite opinions on important issues, and it therefore is worrying that money in politics is so skewed toward white donors.

Campaign contributions matter for access and agenda-shaping. Research shows that campaign contributions from businesses can lead to lower corporate taxes. A study of the telecommunications industry finds that political spending leads to less stringent regulation. Recently, Christopher Witko finds that campaign donors are more likely to get a government contract. In a recent field experiment, donors were more likely to obtain a meeting with a Congress member. Campaign contributions and lobbying, then, not only influence whether a policy is enacted — but whether that policy is even considered.

As Adam Lioz notes in the case studies he discusses in the Demos report, “When elected officials are dependent on corporate donors to fund their campaigns, business interests enjoy disproportionate sway over the policymaking process.” One case study is the private prison industry, which has benefited enormously from the incarceration boom. Between 1990 and 2009, the number of inmates housed in private prisons increased 17-fold (the number held in government prisons doubled). Investigative reporter Lee Fang hasextensively documented how private prisons have taken over immigration detention and lobbied extensively for stricter immigration enforcement. The largest private prisons have spent millions lobbying at the federal and state level, particularly in periods during which immigration laws were under consideration. Lioz also links money in politics to predatory lending, which disproportionately impacted people of color and was left loosely regulated because of powerful monied interests.

As noted above, one way to increase the political system’s responsiveness to people of color is to get them elected into office — but money in politics hampers progress here. A 2006 study of state legislative races finds that candidates of color raise far less money than white candidates, and the problem is worse in the South, where most blacks live. This hampers turnout: Political scientists Thomas Holbrook and Aaron C. find that in mayoral elections, “the effect of the total amount of campaign spending on turnout is notable.”

Without significant reform, the rich will gain a stranglehold on our political system. Recent developments, however, suggest that America is going in the opposition direction — from adopting proposals straight from Citigroup lobbyists to the attempt to increase the cap on donations to political parties 10 times its current limit. Over the long term, Citizens United and McCutcheon need to be overturned, but with the current composition of the court this is unlikely. There are still reforms that can be made. Congress should pass the Disclose Act to stop the flood of dark money. Lobbying regulations have been shown to increase political equality. Public financing increases donor diversity and reduces the time candidates have to spend with big money donors. National parties should do more to recruit candidates of color and working-class candidates. Same-day registration would increase turnout among the poor and people of color, which research shows would combat the big money bias in our political system. The tough part about getting these reforms passed: They have to be passed by politicians who are already bought and paid for.

That doesn’t mean there is no hope. Evidence suggests that states with lower gaps in voter turnout have higher minimum wages, lower inequality and stricter lending laws. In Connecticut, the passage of public financing allowed Dannel Malloy to make paid sick days a core part of his campaign. Lindsay Farrell of Connecticut Working Families’ saidthat public financing “allowed him to be competitive in a race at that level without compromising on an issue like paid sick days.” In Minnesota, a grass-roots organizing campaign led by TakeAction Minnesota stopped an ALEC-backed photo ID law. Someday, there may well be a politician who, like FDR, says to monied interests, “We know now that Government by organized money is just as dangerous as Government by organized mob. Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred.”

This piece originally appeared on Salon.

America’s white millennial problem: Why the next great generation might not be a liberal one

Nearly anytime Democrats lose an election, there is a pervasive narrative that, just around the bend, there will be an “emerging Democratic majority.” Originally projected to occur between 2004 and 2008, it now appears further away than ever after last month’s midterm blowout. Republicans have a stranglehold on the House, where they control their largest number of seats since 1948. That lead will be incredibly tough to chip away at. Democratic chances of regaining the Senate in 2016, once considered a near certainty, are looking iffy. Republicans control 31 governorships, as well as 68 of 98 state legislative chambers. Democrats still have a strong chance of winning the Presidency, but given the importance of the states for shaping income distribution and policy, even that victory will ring hollow.

Yet again, the Democratic Party faces bleak governing prospects in the short term, with only the nebulous promise of a demographic windfall somewhere off in the future — and even that prospect should be little comfort to progressives. While the “millennial” generation has widely been seen as the key to future of Democratic successes, there are reasons to believe that the liberalism of millennials, at least on certain key issues, has been overstated.

Yes, there is a strong case that younger voters on the whole are more liberal. For instance, a study by the Center for American Progress finds that while the mean American’s ideological position is 209 (with 0 being most conservative and 400 being most progressive), those under 29 score 219.7 (Obama voters scored 244).  But while millennials are more socially liberal across the board, there are stark racial divides on economic issues. Younger voters are more likely than older voters to agree with the statement, “Labor unions are necessary to protect the working person” and “the government should be doing more to solve problems.” These questions, however, are rather vague and positively worded. And other data suggest a large gap between white millenials and millenials of color. For instance, young white men supported Romney in the 2012 election.

White millenials are also significantly less supportive of Obama (54 percent) than black millenials (95 percent) and Hispanic millenials (76 percent). The most recent poll of Obama finds that young whites and older whites have virtually identical approval ratings. A recent Pew survey of millennials finds that on economic issues, there are strong gaps between young whites and young non-white millenials (see chart).

On social issues, however, these gaps are virtually non-existent. This suggests that while social liberalism will continue to be a political winner, economic liberalism may be tougher to sell to white millenials. Additionally, while white millenials say they want to live in a racially equitable society, they are no more likely than their parents to support policies to make that society come about. ”At the same time, whites primed with the reality of growing diversity become are less likely to say they support diversity and more likely to support the Republican party.”

Furthermore, even as minorities make up a larger and larger percentage of the electorate, these racial changes will not inevitably benefit Democrats. While Republicans have never won more than 40 percent of the Latino vote  – the claim that Bush won 44 percent in 2004, as widely reported, now appears to have been incorrect — they could do so in the future. Pew data, for example, show that third generation Hispanics are more socially liberal, but more economically conservative than older Hispanics.

Additionally, a recent Gallup poll shows support for Obama among younger Black Americans is modestly lower than support among their older counterparts. This actually hold strue among millenials as a whole; as there appear to be age gaps that would render the Democratic advantage ephemeral. Harvard’s Institute of Politics finds that there is a distinct difference between the way young millenials (18-to-24) and older millenials (25-to-29) view Obama. Meanwhile, a 2012 American University poll finds that college students in swing states supported Obama by 35 points, while high schoolers (13-to-17) in swing states supported Obama over Romney by only 7 points.

Discussing the future always presents challenges, particularly in the realm of politics. However, when we look at the ideologies that shape the parties, we can see a few general trends from these data. First, the economic liberalism of the millenial generation appears to be driven primarily by people of color, rather than by younger, more liberal whites. (On social issues, the generation appears to be more liberal across the board.) Second, while millenials lean Democratic, they are still effectively up for grabs. White millenials, the data show, may become suspicious of further government programs to advance racial equality, and young people of color may be open to a Republican party that eschews virulent racism. Finally, electoral structures combined with the geographic locations of Democratic voters will bias the system toward Republicans for at least another decade, and possibly longer.

It’s difficult to know what parties will do to remain viable in a shifting American political landscape. However, it’s by no means certain that a new “Democratic majority” will be an economically liberal one. It’s plausible that the new Democratic party will embrace an Andrew Cuomo-esque neoliberalism. The Democratic party that appears to be emerging will be friendlier to finance and economically conservative, but also very socially liberal, particularly on gay marriage and women’s rights. The Democratic party will be committed to reducing greenhouse gas emissions but not at a terrible price to businesses. Public goods will be sold off at bargain basement prices and the safety net will be expanded only slowly, if at all. Both parties will pretend that racial grievances are a thing of the past and present a rosy vision of color-blind America. The ideological distance of both parties on foreign policy will remain where it is today: virtually indistinguishable. This is not inevitable, but what we know about millenials, particularly white ones, suggest this is the most plausible scenario. In the battle for the soul of the Democratic party, millenials might not be on Team Elizabeth Warren.

This piece originally appeared on Salon

How America can fix the racial wealth gap

One of the most persistent but unaddressed problems in the United States is our massive racial wealth gap. Wealth provides an important cushion from the threat of unemployment, medical emergency or other unforeseen events. Wealth can also help pay for college, the start of a new business or the purchase of a first home. However, most Americans struggle with debt. A recent Federal Reserve Report finds that of Americans who had savings before 2008, 57 percent reported using up some or all of their savings in the aftermath of the recession. However, wealth and debt are not distributed equally (see chart).

The racial wealth gap is caused by the fact that wealth is passed from generation. As Gregory Clark notes in his recent book, “The Son Also Rises, the residual effects of wealth remain for 10-to-15 generations. Given that most Americans are only four generations removed from slavery and one generation away from segregated neighborhoods, restrictive covenants and all white colleges, the only truly surprising fact is that the racial wealth gap is not larger. America is also uniquely susceptible to persistent wealth gaps because of our low inheritance, estate and capital gains taxes and the fact that what minimal taxes exist our fraught with loopholes. In 2010, the richest 400 households took home 16 percent of all capital gains (a sweet $300 million each), but paid the same tax rate as a worker making $80,000. At the same time, a loophole in the tax code has allowed the wealthiest to avoid $100 billion  in estate and gift taxes since 2000. On the other side, our public school system is profoundly discriminatoryour neighborhoods deeply segregated and access to credit is racially discriminatory. As Thomas Piketty recently demonstrated, “In terms of total amounts involved, inheritance has thus nearly regained the importance it had for nineteenth century cohorts” (see chart).

The biggest myth of the racial wealth gap that must be demolished is that education or rising incomes can eradicate it. As Matt Bruenig has persuasively shown, this argument is laughably absurd.  College educated Blacks have less wealth than white college drop-outs (see chart).

Bruenig also shows that high income Blacks and Hispanics also have less wealth than whites (see chart).

Between 2007 and 2010, all racial groups lost large amounts of wealth. However, the wealth reduction fell disproportionately on Hispanics and blacks, who saw a 44 percent and 31 percent reduction in wealth (compared to an 11 percent drop for whites). This was due to blacks and Latinos disproportionately receiving subprime loans, both because of outright lending discrimination and housing segregation.A recent research brief by the Institution on Assets and Social Policy finds that the wealth gap between white families and African Americans has tripled between 1984 and 2009. They find five main factors responsible for driving the gap, which together explain 66 percent of the growth in inequality. The factors, in order of importance, are number of years of homeownership, household income, unemployment, college education and financial support or inheritance.

The most frustrating problem with the racial wealth gap is that it is not abating. While half of whites say that “a lot” of progress has been made towards Martin Luther King Jr.’s dream,  the data show that the racial wealth gap has only increasing since 1983 (see chart).

What is to be done?

There are several important public policy changes that can alleviate the racial wealth gap. The first is to prevent the further accumulation of debt. While debt is often seen as a problem attributable to individuals, the academic literature is clear that broader economic forces are at largely responsible for the run-up of debt. Credit card debt is particularly harmful for people of color who often face discriminatory lending practices. A recent study of credit card debt finds that people of color pay a far higher IPR on average than white borrowers. The CARD act has already been a boon to consumers, but underlying drivers of debt, such as rising inequalityretirement insecurity and lack of health insurance must also be addressed.

Higher education debt must also be addressed. Research from Demos finds that if “current borrowing patterns continue, student debt levels will reach $2 trillion sometime around 2022.” However, student debt is not distributed equally, but rather falling primarily on students of color and low-income students. That’s because in our age of austerity, governments are spending less money on higher education, shifting the burden of paying for college onto students. Federal and state governments need to step up and fund an investment in the next generation.

On the other side, however, we must also foster wealth-building initiatives. Historically, homeownership has been a pathway to the middle class, but deep residential segregation means that Blacks and Hispanics often own homes that are far less valuable than white homes (see Table 3). Further, in the wake of the crisis many banks are buying up foreclosed houses and renting them out. That means income for people of color is no longer becoming wealth for people of color, but rather wealth for rich bankers.  One solution would be a first-time homeowners tax credit that is weighted to benefit low and moderate income households, rather than the mortgage interest deduction, which favors the wealthy. FICO credit scores should replaced with more reliable credit measurements.  But the ideal way to reduce wealth inequality, not only between people of color and whites, but also between the richest .1 percent and the rest of us, is a baby bond.

A baby bond is an endowment given to Americans at birth and maintained by the federal government until they are 18. The bond functions in a similar way to Social Security and can be sued to pay for college, buy a house or start a business. Hillary Clinton, in fact,briefly floated the possibility of a baby bond during her 2008 campaign, although the modest $5,000 sum she proposed is certainly smaller than ideal. Britain brieflyexperimented with a baby bond proposal, although it later became the victim of Tory Austerity.  Dr. Darrick Hamilton and William Darity Jr., leading proponents of  a baby bond, propose a progressive bond that caps at $50,000 for the lowest wealth quartile bond could close the racial wealth gap in three generations.  Their proposal would be given to three-quarters of Americans (based on wealth eligibility). They estimate that such a program would cost $60 billion a year, about one-tenth of the 2014 defense budget.

The baby bond need not increase the deficit. A recent CBO report finds that right now, tax credits primarily benefit the wealthiest, at a cost of nearly $1 trillion a year. This money could easily fund an extensive baby bond program that would, over time, eliminate the racial wealth gap. Another option would be to restore progressivity to our tax system. Because the baby bond program would not be explicitly targeted at people of color but rather would benefit most Americans, it could easily win broad support (much as Social Security is currently untouchable). Any presidential candidate should make the baby bond a central plank of their 2016 if they want to seriously address the problem of wealth inequality. Without such a proposal, wealth, and therefore political power will become increasingly concentrated in the hands of a small elite. It may already be too late.

This piece originally appeared on Salon

Why Washington’s gridlock won’t go away

Pundits have suggested that the Republican control of U.S. Senate will lead to a new era of bipartisanship, which will offer new solutions on immigration, the environment and tax reform. These arguments are extremely myopic. A critical look at the recent structural shifts in the American political system shows that the gridlock in Washington is caused by increasing inequality and benefits the rich.

To be sure, Congress is facing an almost unparalleled level of gridlock. Since President Barack Obama took office in 2009, we have seen an unprecedented use of the filibustervery little major legislationlong delays in mundane appointments, government shutdowns and highly partisan attacks on a progressive legislative agenda.

To understand the current congressional gridlock, it’s important to look at who is benefiting from the stalemate. A recent report published by the University of Tennessee at Knoxville found (PDF) that gridlock in the U.S. political system benefits the rich and has significantly contributed to rising inequality. The findings have been confirmed by Alfred Stepan and Juan Linz, who conclude that the structure of the Senate, the majority-constraining capacity of veto players and the filibuster all contribute to rising inequality.

The question then becomes, Why have we not seen the same level of gridlock in our lifetimes?

The growing economic power of U.S. elites coincides with increasing political dominance. Numerous studies have shown that the U.S. political system is no longer responsive to the electorate. In part this is because the United States’ political system is designed to be slow moving, with multiple checks and balances. In addition, as with other developed countries, the United States has incredibly low voter turnout. The 2014 midterm elections saw the worst voter turnout in 72 years (a dismal 36.3 percent of eligible voters). Higher voter turnout is positively correlated internationally with higher income redistribution (PDF, see chart on page 27). A vast body of literature shows that low-income voter turnout leads to more-left-leaning governments. The U.S. political system has had persistent class bias, but in the past these factors did not prevent stymie important legislation that benefits the poor.

AJAM Figure1

The dramatic reduction in top tax rates and the deregulation of finance in the 1980s opened the door for mass inequality. Rising inequality had three important effects on U.S. politics. First, it allowed the rich to take over the political system. Research shows (PDF) that the richest 0.01 percent of Americans now provide 40 percent of political contributions — up from 10 percent in 1982.

AJAM Figure2

By nearly every measure, the rich are far more likely to participate in the political process, and the superrich make up most of the donors. A 2013 study in The Journal of Economic Perspectives found (PDF):

In 1980, the top contributor … gave $1.72 million (in 2012) dollars, nearly six times the amount given by the next largest contributor. In 2012, the two largest donors were Sheldon and Miriam Adelson, who gave $56.8 million and $46.6 million, respectively. Other members of the Forbes 400 accompany the Adelsons; 388 current members are on record as having made political contributions. They account for 40 of the 155 individuals who contributed $1 million or more to state and federal elections during the 2012 election cycle.

At a time when Congress increasingly dominated by superrich (and white) politicians, these contributions buy enormous political influence. A similar study by Jesse H. Rhodes and Brian F. Schaffner found (PDF) that “millionaires receive about twice as much representation when they comprise just 5 percent of the district’s population than the poorest wealth group does when it makes up 50 percent of the district.” As Duke University professor Nicholas Carnes has demonstrated (PDF), “representatives from working-class occupations exhibit more liberal economic preferences than other legislators, especially those from profit-oriented industries.” But those measures often die or are shelved in deeply gridlocked Congress.

Second, rising inequality has created ideological structures. As the rich grow richer, they justify their wealth by inflating their sense of intelligence and superiority. The poor and middle class begin to accept this narrative,forgoing their desire for redistribution. Since individuals understand inequity by relating it to their circumstances, higher inequality leads to its growing acceptance. Given the United States’ racist history, whites try to avoid feeling being in the last place by punitively harming blacks. In turn, the rising inequality erodes the social trust necessary to reduce inequality.

“The best policy response to growing inequality is to enact universalistic social welfare programs,” Bo Rothstein and Eric Uslaner, wrote in a 2005 study (PDF) published by World Politics. “However, the social strains stemming from increased inequality make it almost impossible to enact such policies.” Because the rich views the poor as personally responsible for their failings, they see no reason to help them up the ladder. A recent Gallup poll found that fewer Americans than ever believe that hard work can help one get ahead in life. Data from the American National Election Survey shows the percentage of people who say the government is run “by a few big interests looking out for themselves” has grown dramatically. (See chart below.)

 TheWeekFig3

Finally, amid rising inequality, both Republicans and Democrats have moved to the right, rejecting liberal economic policies to woo wealthy donors. Democrats have struggled to maintain their coalition of single women, people of color and educated progressives. In fact, as Benjamin Page, Larry Bartels and Jason Seawright noted in the journal Perspectives on Politics last year (PDF), “on economic issues wealthy Democratic respondents tended to be more conservative than Democrats in the general population.”

Studies show that the strength of unions is a far more important bulwark against inequality than the number of Democrats in Congress. “The effect of the Democratic Party [on the rate of financial deregulation] is not very large, but rather varies along with the strength of unions,” writes Christopher Witko in an upcoming paper on the rise of finance. He argues the Democratic Party has been attempting to win the votes of professionals (that is, rich people), pulling them to the right. Other studies confirm that the decline of unions has led to steep rise in inequality.

Meanwhile, the wealthiest Americans have increasingly favored one party. In a 2003 paper, Nolan McCarty, Keith T. Poole and Howard Rosenthal examined 40 years of data and found that “partisanship has become more stratified by income.” In a later study, the researchers show how tight polarization tracks with inequality (PDF, see chart on page 108) and wages in the financial sector. American National Election data also confirm the rising class polarization of the electorate, particularly at the 68th to 95th income percentile range, which went from a nearly 40 point margin preference for Democrats in 1952 (58 percent Democratic, 20 percent of Republican) to a 5 point margin for Republicans (43 percent Democrat, 48 percent Republican) in 2008. In the 2008 elections, the poorest Americans (below the 16th income percentile) preferred Democrats by 42 points, while the richest (above the 96th income percentile) preferred Republicans by 40 points.

AJAM Figure4

Widening class divide

The increasing class divide within the two parties has made gridlock inevitable. But Republicans automatically win from gridlock. The asymmetric partisanship of the last six years is driven by a simple dynamic: Government inaction benefits the wealthy and harms the working class. When Republicans are in the majority, they hollow the government out from the inside with tax cuts, deregulation and austerity. When they are not in power, the easiest way to benefit the rich is to dither. In essence, the GOP serves a 1 percent agenda, based entirely on making government fail. “We should not be judged on how many new laws we create. We ought to be judged on how many laws we repeal,” House Speaker John Boehner said in a moment of honesty earlier this summer.

Rising economic and political inequality have coincided over the past three decades. As the rich have grown richer, they have been able to exercise more political power. Their aim is to allow laissez-faire to do its dirty deeds by preventing the government from working for the poor and middle class. As a result, conservative-leaning rich Americans oppose reducing economic inequality. (See chart below.) Politics is nothing more than a class war by other means. The problem is that the poor are losing. Nothing that happened in this year’s midterm elections will change that.

AJAM Figure5

This article originally appeared on Al Jazeera

Why is Cuomo Leaving Wall Street Cash on the Table?

Co-Written with Lenore Palladino.

Governor Andrew Cuomo has claimed that he’s “a progressive Democrat who’s broke.” But in his most recent executive budget, he proposes ending a little-known tax that could make all the difference. For the last century, New York State has had a stock-transfer tax, which taxes nearly every stock trade. Since 1981, it’s been instantly rebated—no money is actually collected—leaving potential revenue on the table even as financial profits skyrocket. Cuomo suggests ending the tax, citing “unnecessary administrative work.” But New York’s stock-transfer tax can be easily re-implemented, instead putting that administrative work to good use.

Cuomo should work to end or reduce the tax rebate, rather than take the tax off the books. New York isn’t broke so much as unequal: one in every twenty-two people in New York City is a millionaire, while 56,987 New Yorkers live in homeless shelters. A tax like this could raise hundreds of millions of dollars.

The financial sector grew as a share of the economy by 175 percent from 1947 to 2013. This rapid growth has led many to observe that the financial sector increasingly relies on rent-seeking: making money from moving money around only to make more money. Financiers no longer need bother with productive investments.

Wall Street is flush with cash, but the state’s coffers continue to struggle. Public employment in New York dropped by 4.2 percent between December 2007 and June 2014. A modest 0.02 percent tax on stock transactions would raise hundreds of millions of dollars annually. New York City faces incredible risks from climate change. A recent report estimates that, without adaptation, the annual costs of climate change will be between $3.8 billion and $7.5 billion per year at mid-century. The stock-transfer tax could provide, on its own, a major head start toward protecting New York City from devastation.

Opponents of a tax on stock transactions claim that it would reduce trading and jobs and harm the economy, and it would certainly slow down short-term, highly speculative trading to some extent. The real question is: What are the costs that New Yorkers face right now from runaway speculation and insufficient public investment? Our research finds that New York would gain more from the revenue raised, which could be funneled toward job creation, even though falling trade may cause some job loss in the financial sector. Of course, some of those astronomical profits that Wall Street banks keep reporting could be put toward the tax as well.

Finance has increased inequality, pulled money out of the job-creating economy and largely sustained itself on grift. To reduce these negative effects, we should tax financial transactions as well. In the wake of the recent financial crisis, a tax could be a way to reduce systemic risk. Although the New York stock-transfer tax would cover only stock trades, it could provide a model for a more comprehensive national tax on a broader range of financial transactions, like derivatives.

Such a tax isn’t unprecedented. After all, New York had one in place from 1905 to 1981. From 1914 to 1966, the United States levied a modest tax on sales and transfers of stock. House Speaker Jim Wright pushed for a renewed federal tax in 1987, proposing a fee of 0.25 to 0.50 percent on the buyer and seller in each securities transaction, highlighting the tax’s progressive aspects. More recently, Senator Tom Harkin and Representative Peter DeFazio proposed the Wall Street Trading and Speculators Tax Act, which would assess a tax of 0.03 percent on trades of stocks, bonds, futures, options, swaps and credit-default swaps and would generate some $350 billion over nine years. Representative Keith Ellison proposed the Inclusive Prosperity Act, which would entail a 0.5 percent tax on stocks, a 0.1 percent tax on bond trades and 0.005 percent tax on derivatives; that bill was projected to raise similar amounts.

On May 6, 2014, ten European nations issued a joint statement that a financial tax would commence in 2016 as a means to reduce speculation and raise revenue. The initial tax will focus on the trading of stocks and some derivatives. The European Commission estimates that a broad tax could raise 31 billion euros ($39 billion) in annual revenue.

In New York, revenue is desperately needed. Governor Cuomo should support Assemblyman Phil Steck’s bill, which would begin collection for 40 percent of the tax and was supported by economist Jeffrey Sachs. Sachs has said that the “financial transactions tax is a solid idea that has been resisted by Wall Street for years.” Instead of repealing the tax, New York should restart collection and use the revenues to stimulate equitable economic growth.

This article originally appeared in the print version of The Nation and online.

Big Box Retailers Own The Political Process On Black Friday

Co-Written with Catherine Ruetschlin.

Big retail has dramatically increased the amount of money it spends influencing the political system. Back in 2000, all the big retailers together (Walmart, Costco, Home Depot, Target, Lowe’s and Best Buy) spent a meagre $5 million (in 2013 dollars) buying influence. In 2014, a relatively unimportant midterm election, that number increased six-fold.

Among the big box retailers we examined, the biggest were Walmart and Home Depot, followed by Target and Best Buy. Walmart’s political activities are unsurprising — politicians have richly rewarded the company. A recent study by Americans for Tax Fairness finds that Walmart saves $1 billion a year in tax breaks and avoids taxes on $21.4 billion it holds offshore. Added to that are the $6.2 billion Americans taxpayers subsidize Walmart’s employees with food stamps and other public aid, because Walmart doesn’t pay its workers enough to live. In a recent annual report, Walmart openly admitted that changes to government food stamp programs may hurt its financial performance.

Walmart’s spending on the political system has increased dramatically, with total spending topping $10 million in the last four elections. It’s clear why, the AFT estimates that Walmart could save $7 billion more over the next decade if the corporate tax rate falls to 25 percent.

In addition to Walmart’s spending, the Walton family spends millions on the political system. They’ve also hired a private lobbyist to lobby for changes to the estate tax that now benefit them to the tune of hundreds of millions. In addition the Walton Family Foundation is one of the biggest education funders in the country, and is one of the biggest supporters of the privatization agenda. As the chart below shows, Democrats rarely benefit from the Walton family’s largess.

In fact, Democrats rarely benefit from any of the big retailers. Over the period studied, Republicans got $2 for every $1 given to Democrats for the major retailers. Among the big retailers, only Costco showed a preference for Democrats, while Lowe’s had the largest disparity, favoring Republicans 3.5 to 1.

It’s important to note that these numbers massively understate the influence of big box retailers. Because of bad disclosure laws, we just don’t know that much about corporate spending. We don’t have the foggiest idea what big box retailers are spending on state and local elections. We don’t know how much they pay to be members of organizations like ALEC. We don’t know how much they give to 501(c)6 organizations like the Chamber of Commerce. Walmart, for instance, is a member of the the RATE Coalition, Alliance for Competitive Taxation (ACT) and the Business Roundtable (BRT).

All of this money brings rewards for companies. Retailers lobby on a variety of issues, including tax policy, labor issues, and the terms of international trade. A vast literature shows that these efforts produce returns, often at the expense of other democratic interests. The research firm Strategas maintains an index of the fifty firms that lobbying most intensely. The index hasoutperformed the S&P 500 every year since 1998. In a comprehensive study of conflicts between lobbying groups and other coalitions, researchers found that business interests prevailed in 9 out of 11 issues in which businesses and labor were opposed. In the 16 cases that pitted business groups against citizen group coalitions, businesses won 9.

Although the vast amounts of money went to lobbying, campaign contributions also produce benefits There is strong evidence that the most important impact of campaign contributions is to increase access to politicians with the intent of setting the political agenda. A study of the telecommunications industry finds that regulators respond to private political spending with regulations that favor the donors. Companies that bid for federal contracts across industries are more likely to be granted those contracts if the bids are complemented by campaign contributions. Big retail normally backs winners: a Demos analysis finds that 81 percent of the 291 candidates that received money from Walmart in 2014 won their election.

What can be done to stop the spread of big money in politics? Over the long-run we need to overturn laws like Citizen’s United that opened the floodgates of money into Congress. But there are also short-term solutions. The Supreme Court explicitly endorsed disclosure as the alternative to campaign contribution limits. On the heels of Citizens United, Congress came within one vote of overcoming a party-line filibuster to pass the DISCLOSE Act. In the absence of Congress, shareholders should demand that corporations either get out of politics, or disclose their donations to organizations like ALEC that they might not approve of. SEC should require this disclosure if Congress won’t.

Publicly financed elections can help candidates not in the pockets of big money get into office, and more states should consider the system. To slow the rise of lobbying states and the federal government should regulate it more strictly. Patrick Flavin finds that states with stricter regulations on lobbying are more politically equal — that is, responsive to voters of all income groups. Policies that help people vote, instead of disenfranchising them, would also go a long way to making the political system more responsive. Americans need to tell Congress that even on Black Friday, government isn’t up for sale.

This article originally appeared on Talking Points Memo

New York already has a financial transaction tax on the books — it’s time to start collecting it

Co-Written with Lenore Palladino.

Recently re-elected Governor Andrew Cuomo likes to complain that he’s “a progressive Democrat who’s broke.” Here’s a simple way to raise millions of dollars and make the economy safer at the same time: a small tax on financial transactions. Politically impossible? Not in New York, where Governor Cuomo could lead the way to reinstate New York’s Stock Transfer Tax, which remains on the books but currently is not collected.

A modest tax on financial transactions would raise revenue while slowing down the frenetic short-term trading that could drive us straight into another financial crisis. Gridlock at the federal level will make congressional action tricky. New York State has had a financial transaction tax-specifically a stock transfer tax– on the books since 1906, but since 1981 has instantly rebates all of the money.  It’s time to start collecting.

The case for a Financial Transaction Tax

The idea for a financial transaction tax has been around for since John Maynard Keynes’sGeneral Theory. The basic argument is that a small fee would be trivial for long-term investors, and only deter the activities of socially useless high-turnover speculators. The idea began to gain traction in the late 70s and 80s with the rapid growth of the financial sector. In 1989, Lawrence Summers and Victoria Summers proposed a U.S. Securities Transfer Excise Tax, arguing that it could raise some $10 billion annually. Recently, the International Monetary Fund (IMF) has supported a financial transaction tax as well. A metastudy by Neil McCulloch and Grazia Pacillo finds that a Tobin Tax (a type of FTT) would be “feasible and, if appropriately designed, could make a significant contribution to revenue without causing major distortions.”

From 1914 to 1966, the United States levied a 0.02 percent tax on sales and transfers of stock. Federally, Speaker Jim Wright pushed for a renewed tax in 1987, proposing a fee of 0.25 percent to 0.5 percent on the buyer and seller of each securities transaction, highlighting the tax’s progressive aspects. More recently, the “Wall Street Trading and Speculators Tax Act” was proposed by Senators Harkin and DeFazio, which would assess a tax of 0.03 percent on trades of stocks, bonds, futures, options, swaps, and credit-default swaps, and would generate $352 billion over 10 years.

Such a tax would not be unprecedented. On May 6th, 2014, ten European nations issued a joint statement that a financial tax will begin in 2016 as a means to reduce speculation and raise revenue. The initial tax will focus on the trading of stocks and some derivatives, even though the initial proposal included taxing most financial products. The European Commissionestimates that a broad tax could raise $39 billion (31 billion EUR) in annual revenues.

New York’s Stock Transfer Tax

Capital intermetiation is an important and integral part of the modern economy. However, rapid deregulation has allowed it to become poisoned by rent-seeking and hyperactive trading while exacerbating rising inequality. A modest tax on financial transactions could reduce the propensity for systemic risk, while providing much-needed money to revenue-starved governments. However, it’s unlikely that such a tax can be passed at the federal level, given the partisan climate.  That’s why New York’s Stock Transfer Tax is such an important opportunity.

There was a Stock Transfer Tax in place in New York from 1905-1981. Revenue from the tax was split between the city and state (in the 1960s the full revenue reverted entirely to New York City). Beginning October 1, 1979, 30% of the tax was rebated to the investor, which was increased to 60% in 1980 and then the full value of the tax in 1981 Because of this quirk in its phase-out, the STT was never repealed. Instead, 100 percent of the revenue is rebated to the trader. Because the tax remains on the books, politically putting the tax in place would not require passage by the legislature of a new tax, but instead the reduction of the rebate, whether by 100% or some smaller percentile.

Governor Cuomo included a repeal of the tax in his Executive Budget (S. 6359), by calling for a full repeal of the tax due to its “unnecessary administrative work for the financial services industry as well as for the Department of Taxation and Finance,” (along with a separate proposal by the Governor to repeal the bank tax). This followed a recommendation by his Solomon/ McCall Commission to repeal ‘nuisance taxes’ like the STT. Assemblyman Phil Steck proposed a bill (A. 8410) to reduce the rebate and re-start collection of 40% of the nominally-collected tax. The threat of a final repeal of the tax prompted action from a variety of stakeholders, including a call by Jeffrey Sachs for a reinstatement of collection. The final enacted budget bill (S. 6359) did not include a repeal of the tax; it remains on the books as a fully-rebated tax.

New York could serve as a pilot program for an eventual national tax. A modest tax on stock transactions would raise millions annually, which could be used to offset any minimal job loss. If the revenue was directed toward creating public jobs and infrastructure, New York could reduce the twin risks of climate change and rampant economic inequality at the same time.

Instead of repealing the tax, Governor Cuomo should re-start collection and use the revenues to stimulate equitable economic growth.

This piece originally appeared on Vox.

The Case for a Financial Transaction Tax

The financial industry is a behemoth. Over the past 150 years, it has grown dramatically as a share of GDP. And entrance into its ranks has become a great way to enter into the top 1 percent of earners. (According to recent data, financial professionals have nearly doubled as a share of Americans in the top 1 percent.) At the same time, Wall Street is one of the most reviled institutions in the United States, with a recent study finding the lowest trust in finance recorded over 40 years.

Here are three good reasons to be distrustful of Wall Street, followed by one policy that would address all of them.

1. The Financial Industry Engages in Rent-Seeking

In economics, rent-seeking is the practice of making money simply by moving money around and collecting the resulting fees, rather than by facilitating profitable investment. The latter role is necessary for functioning markets; rent-seeking, however, is not.

There is now a strong literature suggesting that at some point, finance largely becomes extractive, while remaining at the same efficiency level. Thomas Philippon finds that the cost of financial intermediation has not fallen in 30 years. As Gautam Mukunda writes in a recent Harvard Business Review article, “Creative work increases a society’s wealth. Distributive work just moves wealth from one hand to another. Every industry contains both. But activity in the financial sector is primarily distributive.” Other studies come to the same conclusion:

  • Ozgur Orhangazi finds a negative relationship between real investment and financialization. The author proposes two channels to explain the relationship: “First, increased financial investment and increased financial profit opportunities may have crowded out real investment by changing the incentives of firm managers and directing funds away from real investment.”
  • Stephen Cecchetti and Enisse Kharroubi examine a sample of developed and emerging economies and find that financial development is good for emerging economies, but is detrimental to productivity growth for advanced economies.
  • Jean-Louis Arcand, Enrico Berkes and Ugo Panizza find that when private sector credit exceeds 110 percent of GDP finance begins to become a drag on growth, a situation the U.S. is currently in.

This rent-seeking has increasingly starved the public sector across the nation. The Financial Times reports that “public investment in the U.S. has hit its lowest level since demobilization” after World War II.

2. The Financial Industry Makes Inequality Worse

The International Labor Organization’s (ILO) Global Wage Report finds that the financialization of the economy has been the most important factor in the decline of income share accruing to labor in developed countries. This is because the financial industry primarily distributes wealth upward.

A 2011 study examining the U.S. finds that, “financialization accounts for more than half of the decline in labor’s share of income, 10 percent of the growth in officers’ share of compensation, and 15 percent of the growth in earnings dispersion between 1970 and 2008.” In a paper published this year in the British Journal of Political Science, Christopher Witko finds, “financial deregulation was one policy translating the political power of these actors into economic outcomes.” That is, the rise of finance was a money grab by the 1 percent.

Because relatively few low-income and middle-income families own financial assets, they largely haven’t benefited from the rise of finance. Instead, it’s enriched the wealthy while saddling the middle class with debt. A recent study by Emmanuel Saez and Gabriel Zucman finds,

The key driver of the declining bottom 90%  share is the fall of middle-class saving, a fall which itself may partly owe to the low growth of middle-class income, to financial deregulation leading to some forms of predatory lending, or to growing behavioral biases in the saving decisions of middle-class households.

The charts below show how finance has enriched the top, whose wealth came from equities, while sucking money from the middle, whose wealth consisted of housing and pensions:

 

Those who had no assets at all saw their incomes shrink while wages remained stagnant for decades. As Matt Yglesias notes, in 2013, 25 hedge fund managers took home more twice as much as every kindergarten teacher in the country combined. This while hedge funds have failed to perform better than the market.

3. The Financial Sector Is Increasingly Engaged on High-Frequency Trading

One particularly negative form of trading that the STT could reduce is High-Frequency Trading (HFT). HFT is a useless and distortionary practice that allows investors to make money off of millisecond-quick trades. (HFT recently attracted attention in Michael Lewis’ book “Flash Boys.”) The practice has been derided by Nobel laureate Joseph Stiglitz as a sophisticated version of front-running (buying a stock shortly before a pending order to take advantage of the price increase).

The problem is that instead of channeling money toward profitable investment, HFT is a prime example of making money off of moving money around. A recent study finds that a one millisecond advantage can increase a firm’s earnings by $100 million a year. Ironically, while bridges are vulnerable to collapse across the country and infrastructure in general is sorely undercapitalized, high-speed traders spent $2 billion on infrastructure in 2010 — for high-speed cables to NYSE. HFT does nothing to benefit markets, but instead makes them more volatile. 

The solution: A Financial Transaction Tax

When an industry has negative impacts on the broader public, economists call these effects “externalities.” It doesn’t mean we should destroy the industry, but rather, limit the harmful behavior. In much the same way that we should tax carbon dioxide — and do tax cigarettes and alcohol — we should also tax financial transactions.

The idea for a financial transaction tax has been around since John Maynard Keynes’ “General Theory.“ However, the idea began to gain traction in the late ’70s and ’80s with the rapid growth of the financial sector. In 1989, Lawrence Summers and Victoria Summers proposed a U.S. Securities Transfer Excise Tax, arguing that it could raise some $10 billion annually. Recently, the International Monetary Fund (IMF) hassupported a financial transaction tax as well. A metastudy by Neil McCulloch and Grazia Pacillo finds that a Tobin Tax (a type of FTT) would be “feasible and, if appropriately designed, could make a significant contribution to revenue without causing major distortions.”

From 1914 to 1966, the United States levied a 0.02 percent tax on sales and transfers of stock. Federally, Speaker Jim Wright pushed for a renewed tax in 1987, proposing a fee of 0.25 percent to 0.5 percent on the buyer and seller of each securities transaction, highlighting the tax’s progressive aspects. More recently, the “Wall Street Trading and Speculators Tax Act” was proposed by Sens. Harkin and DeFazio, which would assess a tax of 0.03 percent on trades of stocks, bonds, futures, options, swaps and credit-default swaps, and would generate $352 billion over 10 years.

Such a tax would not be unprecedented. On May 6, 2014, 10 European nations issued ajoint statement that a financial tax will begin in 2016 as a means to reduce speculation and raise revenue. The initial tax will focus on the trading of stocks and some derivatives, even though the initial proposal included taxing most financial products. The European Commission estimates that a broad tax could raise $39 billion (31 billion EUR) in annual revenues.

Further, there was a Stock Transfer Tax (a type of FTT) in place in New York from 1905 to 1981; revenue from the tax was split between the city and state (in the 1960s the full revenue reverted entirely to New York City). Because of a quirk in its phase-out, the STT remains technically legal in New York, though it is automatically rebated to the trader at a rate of 100 percent. Reducing this rebate would be a great way to boost revenues for New York and show the viability of a more expansive tax.

Finance is an important part of any economy. But the unprecedented rise of finance has harmed the real economy, propelled inequality and created opportunities for rent-seeking. To rein in Wall Street and prevent another financial crisis, and to give governments much needed money to invest, we should levy a modest tax on financial transactions. Right now, the financial industry subsists on monetizing privilege. It needs to shrink so we can grow.

This article originally appeared on Salon

Mr. Walton Goes to Washington

When retail workers want something, they ask their employers, get denied, get bullied and sometimes fired. Sometimes, they take to the streets, as they have for the last three years on Black Friday. By contrast, when retailers want something, they scurry to the halls of Congress, where they purchase influence with their exorbitant profits.

The largest big-box retailers have spent a total of $111 million since the 2000 election cycle on lobbying and campaign contributions. During the 2014 election cycle, big-box retailers spent $30 million on federal campaign contributions and lobbying, which is almost six times what they spent in 2000 (after an inflation adjustment).

Wal-Mart in particular is known for its status as a corporate-welfare queen; one studyestimates that one 300-person Supercenter costs taxpayers $904,542 to $1,744,590. Another estimates that Wal-Mart and the Walton family pull in $7.8 billion a year in tax breaks and subsidies. Meanwhile, a brand-new report from Americans for Tax Fairness finds that Wal-Mart also avoids taxes on more than $21 billion in offshore profits. In its most recent annual report, Wal-Mart openly admits that changes to government food stamp programs may hurt its financial performance. Hundreds of thousands of Wal-Mart workers make near-poverty wages.

Wal-Mart certainly benefits from other favorable government actions. Changes to labor laws allow it to abuse worker schedules, although sometimes it ignores them completely and just refuses to pay workers, flat out. Since Wal-Mart is a serial polluter, lax environmental standards are beneficial. It’s also very concerned about taxes, trade and intellectual property. To advance these interests, Wal-Mart spent $2.4 million on campaign donations and $12.5 million in lobbying in 2014 alone.

As the data below show, the last four election cycles have seen an explosion of big-box money in politics.

Of all spenders, Wal-Mart was by far the largest, followed by Home Depot. Both companies are considered “heavy hitters” by the Center for Responsive Politics, meaning they are among the top 100 political donors over the period for which data is available.

Even still, these numbers vastly understate political spending. For one, there is not yet a comprehensive database on state and local political spending. Further, many of these retailers are members of 501(c)6 groups like the American Legislative Exchange Council (ALEC) and the Chamber of Commerce; money paid to these groups is not reported. Also unreported are donations to 501(c)3 groups. As Demos has noted before, there is a clear need for stronger disclosure requirements, so that the full political influence of companies can be made available to the public. What we do know tells us that Republicans live up to their reputation as the “party of big business” and pull in more than $2 from retail for every $1 that goes to Democrats. With the exception of Costco, every big-box retailer heavily favors Republicans.

Numerous studies find that this money buys influence. Retailers lobby on a variety of issues, including tax policy, labor issues and the terms of international trade. A vast literature shows that these efforts produce returns, often at the expense of other democratic interests. In a comprehensive study of such conflicts, researchers found that business interests prevailed in 9 out of 11 issues in which businesses and labor were opposed. In the 16 cases that pitted business groups against citizen group coalitions, businesses won nine.

Taxes were the most frequently lobbied issue by large retailers in 2014, and by a wide margin. This legislative area has proven lucrative for business in the past; a 1 percent increase in businesses lobbying expenditures yields a lower effective tax rate of between 0.5 and 1.6 percent for the firm that lobbies. One study on the subject finds that the market value of an additional dollar spent on lobbying could be as high as $200. In 2014, the largest big-box retailers reported lobbying on a total of 37 incidences of specific taxation issues, including corporate tax reform, Internet sales tax and the extension of temporary tax breaks. The next most common issues of lobbying were health care reform, labor, antitrust and workplace regulations. As one example of the power of lobbying, the research firm Strategas maintains an index of the 50 firms that lobbying most intensely. The index has outperformed the S&P 500 every year since 1998.

Campaign contributions also produce benefits. There is strong evidence that the most important impact of campaign contributions is to increase access to politicians with theintent of setting the political agenda. A study of the telecommunications industry finds that regulators respond to private political spending with regulations that favor the donors. Companies that bid for federal contracts across industries are more likely to be granted those contracts if the bids are complemented by campaign contributions.

What can be done to stop the spread of big money in politics? Over the long run it will be necessary to overturn laws like Citizens United that opened the floodgates of money into Congress. But there are also short-term solutions. The Supreme Court explicitly endorsed disclosure as the alternative to campaign contributions. On the heels of Citizens United, Congress came within one vote of overcoming a party-line filibuster to pass the DISCLOSE Act. In the absence of Congress, shareholders should demand that corporations either get out of politics, or disclose their donations to organizations like ALEC that they might not approve of. The SEC should require this disclosure if Congress won’t.

Publicly financed elections can help candidates not in the pockets of big money get into office, and more states should consider the system. To slow the rise of lobbying, states and the federal government should regulate it more strictly. Patrick Flavin finds that states with stricter regulations on lobbying are more politically equal — that is, responsive to voters of all income groups. Politicians need to tell Congress that even on Black Friday, government isn’t up for sale.

This article originally appeared on Salon