American Politics Introduction to Kevin Phillips

Kevin Phillips is a well-known, controversial yet respected writer and political analyst, who writes about the political and social world of contemporary America with a sense of literary style and an "at the bottom of it" substance. His most recent book, American Dynasty: Aristocracy, Fortune, and the Politics of Deceit in the House of Bush, would seem to give the literary and politically uninitiated all the information needed in terms of where Phillips stands politically - his social and political/philosophical frame of reference. It would be safe to say his investigative, hard-hitting book on George W. Bush's White House would probably not get him an invitation to a Rush Limbaugh insider cocktail party, and yet, Phillips has worked as a Republican strategist, and he was a top political advisor to Richard Nixon during the presidential race in 1968.

In the book this paper reviews, Phillips puts his literary and journalistic microscope on how rich Americans get their wealth, and how they hang onto their wealth. He also brings to light the sometimes subtle and often-times blatant graft and corruption which appears to be a natural offshoot of a culture obsessed with money and with financial power - a culture which basically encourages the currying of favor through financial contributions, which, in turn, buy access to power and the perks that go with it.

In his Introduction, he notes that "Between 1979 and 1989 the portion of the nation's wealth help by the top 1% nearly doubled from 22% to 39%." He refers to a New York Times' article reporting that "within the most prosperous fifth of U.S. Households, national income growth was shared to unevenly that some 90% of that fifth's gain went to the top 1%" (italics are Phillips). This is the nuts and bolts of his argument, that money and power are in the hands of the very few.

Wealth and Democracy: A Political History of the American Rich

Phillips was interviewed on PBS by Bill Moyer this past March, 2004, and he was asked what he meant by "plutocracy" - a term used in his book Wealth and Democracy: A Political History of the American Rich - by Moyer. Phillips answered that today's "plutocracy" has "produced the fusion of money and government." What has been visible in the 1980s and 1990s, Phillips continued, is that money has "pretty much taken control of the culture, and controls the whole dynamics of politics." He went on to say that politicians are "so interested in raising money that they can't see their soul in the mirror."

In Wealth and Democracy, Phillips (358-59) writes about the plutocracy (the most recent examples which emerged from the quick and lucrative profits during the "dot com" and technology boom of the 1990s): "One observer summed up the message: In contrast to cruel mill owners and bankers in pinstripes, 'this plutocracy was cool. They were flooding into bohemian neighborhoods like San Francisco's Mission District, chatting with the guys in the band and working on their poetry at Starbucks..."

They" were the young entrepreneurs like those of today who run "Google" and are offering stock later this month at an estimated $108 per share - unheard of for an IPO. And on page 108, still on the subject of plutocracy, Phillips quotes from a Forbes Magazine 1999 editorial: "The extraordinary growth in net worth that began when the market took off in 1982 has produced opulence and ostentation on a scale that previous generations never dreamed possible..." And the plutocracy is controlled by the folks who control Wall Street and corporate goliaths.

It's this very "opulence" and "ostentation" - and arrogance that creeps into the political and social world of America - which Phillips is writing about.

Meanwhile, Phillips' book examines not just today's issues of wealth and power in a democratic society, but it also delves into the history of American wealth, from the American Revolution to what he refers to in his book as "the Second Gilded Age" - the world at the turn of the

Phillips' skilled narrative paints a vivid picture of how Alexander Hamilton, who served at the first secretary of the treasury (1789), feuded with Thomas Jefferson - a bitter fight playing out on the stage of the infant nation - over the basic structure of how government would handle money and finance. Jefferson had a fear that if there were not proper checks and balances on the money system, a financial upper class of aristocrats could seize a disproportionate share of governmental influence, and in doing so, cut the teeth out of the democratic institutions the founding fathers worked so hard to create.
And has Jefferson's worst fears come to fruition? Phillips thinks they have, and he shows how through his careful time-line tracing of the different periods of concentration of wealth and power from John Jacob Astor to Bill Gates. He shows how, for the past couple hundred years in America, the super rich have made money hand over fist, through questionable government policies such as bailing out banks and giving tax and tariff breaks that reek of patronage. In the meantime, Phillips shows in his book, the middle and lower classes, the blue collar working class people, have been left standing at the gate.

Phillips is terrific at giving succinct examples of how money is made, and what happens to it once it receives the investors or vendors. For example, he talks about the early beginnings of the so-called "new gilded age" - which Phillips alludes to often - and he is alluding to the Reagan Administration in the 1980s. At the beginning of this period, there were 10% unemployed from the workforce, farmers were struggling, the Great Lakes' industrial region was "smarting under its new, dismissive nickname: the Rust Belt" (89). But individuals within the Reagan Administration were promoting the idea that it was a good thing for Americans to all have the ability to get rich, and those same people could see that technology was gaining ground and that they might be financial stirrings in the wind.

And with that as backdrop, Phillips (91) points to "four engines" that put some power into the economy: military spending increases; increasing corporate investments, pushed in part by favorable tax legislation in 1981 (the money went into office buildings, construction and computers); as debt ballooned but corporations and the government borrowed and put that money back into the economy; and fourthly, the activities of financial institutions and individuals exploded, and stock market profits lined the pockets of those who were gaining wealth.

But what did the people who made all the money due to borrowing, do with the money? Reinvest it? Not according to Phillips (92): they "seem to have spent it on consumption; second and third houses, travel, luxury apparel, cars, jewelry, yachts and the like, rather than being saved and invested."

Moreover, Phillips continues, "Between 1979 and 1989 the portion of the nation's wealth held by the top 1% nearly doubled, skyrocketing from 22% to 39%, probably the most rapid escalation" in American history. And, Phillips writes on page 93, after all those rich folks in the top 1% of the U.S. earners had raked in those dollars, "twelve years of Republican presidents had brought little new direction in wealth save for an end to oil domination."

What insights on the American politics have I gained through Phillips' book?

It seems that Thomas Jefferson was right, and Alexander Hamilton was wrong: there has always needed to be structures in place in the United States to keep the elite and very wealthy from grabbing too much power. When one reads the paper, and learns about huge multi-million dollar scandals such as Enron, and others, it is clear that greed governs a lot of what happens in business, and that regulatory agencies do not have enough clout, or just don't do their jobs well enough.

The little guy has always had to struggle, and the powerful always have the money and influence to make legislation and regulation friendly to their interests. In 1983, according to Phillips' book (221), a presidential commission - headed by the man who is now Federal Reserve Board Chairman, Alan Greenspan - reported that yes, under Reagan tax rates for corporations and individuals were coming down, and that was a good thing. Meantime, Greenspan's commission also found that "Social Security and Medicare (payroll) taxes on lower and middle-income Americans had to be increased, and to an extent that would make them more onerous than income taxes for an ever-growing portion of the population."

Again, one reads a book like this and learns what has always been suspected, and that is, the rich get richer, and the poor get higher taxes. The Tax Reform Act in 1986, made wealthy people happy, as it dropped their rate to 28% of income. However, although it was supposed to get rid of tax preferences for "the…