Billionaires and Stealth Politics
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Billionaires and Stealth Politics

Benjamin I. Page, Jason Seawright, Matthew J. Lacombe

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Billionaires and Stealth Politics

Benjamin I. Page, Jason Seawright, Matthew J. Lacombe

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About This Book

In 2016, when millions of Americans voted for Donald Trump, many believed his claims that personal wealth would free him from wealthy donors and allow him to "drain the swamp." But then Trump appointed several billionaires and multimillionaires to high-level positions and pursued billionaire-friendly policies, such as cutting corporate income taxes. Why the change from his fiery campaign rhetoric and promises to the working class? This should not be surprising, argue Benjamin I. Page, Jason Seawright, and Matthew J. Lacombe: As the gap between the wealthiest and the rest of us has widened, the few who hold one billion dollars or more in net worth have begun to play a more and more active part in politics—with serious consequences for democracy in the United States.Page, Seawright, and Lacombe argue that while political contributions offer a window onto billionaires' influence, especially on economic policy, they do not present a full picture of policy preferences and political actions. That is because on some of the most important issues, including taxation, immigration, and Social Security, billionaires have chosen to engage in "stealth politics." They try hard to influence public policy, making large contributions to political parties and policy-focused causes, leading policy-advocacy organizations, holding political fundraisers, and bundling others' contributions—all while rarely talking about public policy to the media. This means that their influence is not only unequal but also largely unaccountable to and unchallengeable by the American people. Stealth politics makes it difficult for ordinary citizens to know what billionaires are doing or mobilize against it. The book closes with remedies citizens can pursue if they wish to make wealthy Americans more politically accountable, such as public financing of political campaigns and easier voting procedures, and notes the broader types of reforms, such as a more progressive income tax system, that would be needed to increase political equality and reinvigorate majoritarian democracy in the United States.

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CHAPTER ONE

Who the Billionaires Are

We began our study of the one hundred wealthiest US billionaires in 2013. In that year, the total net worth of the Forbes 400 wealthiest Americans was $2.2 trillion—$2,200,000,000,000. As Forbes noted at the time, this was equal to the annual output of the entire economy of Russia.1
Topping the Forbes list was Bill Gates, with a net worth of $72 billion. Gates made his fortune by building the Microsoft software firm—which he founded in 1975, together with Paul Allen—and then diversifying his investments into such firms as tractor maker Deere & Co., Canadian National Railway, and Mexican Coke bottler Femsa. (By 2013, Microsoft stock represented less than one-fifth of Gates’s fortune.) Despite giving away a lot of money to philanthropy—chiefly through the Bill & Melinda Gates Foundation—Gates had occupied the top perch among the wealthiest Americans continuously since 1994. In fact, Gates had led the list of wealthiest Americans during more than half of the thirty years that Forbes had been keeping track.2
Second on the 400-wealthiest list in 2013 came Gates’s friend Warren Buffett, with $58.5 billion in net worth. The modest-living “sage of Omaha”—like Gates, a major philanthropist—acquired his fortune mainly by means of shrewd, highly diverse investments through holding company Berkshire Hathaway, which in 2013 had just acquired ketchup maker H. J. Heinz for $23.2 billion and Nevada’s NV Energy firm for $5.6 billion in cash.3
In third place was Larry Ellison ($41 billion), founder of high-tech firm Oracle, which offers businesses and organizations a wide variety of hardware and software products, perhaps most notably for database management. Ellison built the company from an early relational database that he developed for the CIA. Although he had worked as an employee of Ampex Corporation while carrying out that project, he subsequently purchased the rights to it and became an entrepreneur.4 Having started in 1977 with assets limited to $2,000 and database source code, Oracle is now the second-largest software company in the world in terms of revenue and is a foundational brand for internet and internal business operations worldwide.5
Ellison, an acerbic critic of Apple and Google, has lived more opulently than Gates or Buffett. In 2013 he owned several houses on Malibu’s Carbon Beach, plus 98 percent of Hawaii’s Lanai island, and had competed in the America’s Cup sailing competition.6 Ellison made headlines in 2008 when he challenged San Mateo County’s tax assessment on his Woodside, California, estate—a replica of a sixteenth-century Japanese palace that cost Ellison $200 million to build. Despite that price tag, Ellison successfully contended that the property was worth only $64 million—$99 million less than the county’s $163 million appraisal—due to the small market for sixteenth-century Japanese architecture and a lack of luxury amenities in the home. The break on property taxes Ellison received as a result of the adjusted appraisal cost local public schools alone an estimated $1.4 million.7
The brothers Charles and David Koch—highly active in libertarian and conservative Republican politics—came next on the 400-wealthiest list, with a net worth of $36 billion each. Their fortunes—which had enjoyed a big head start, thanks to their father, Fred Koch—were derived from the oil, natural gas, and chemical firm Koch Industries, which they rapidly expanded by reinvesting 90 percent of earnings and acquiring all or part of such diverse firms as electronics-component maker Molex, cellulose fiber producer Buckeye Technologies, and glassmaker Guardian Industries.8
Ranking sixth, seventh, eighth, and ninth on the 2013 Forbes 400-wealthiest list were four members of the Walton family—Christy, Jim, Alice, and S. Robson—with $33.3 to $35.4 billion each. Most of their money had been inherited from the Walmart fortune built by their father Sam Walton and their uncle James. Walmart, which started out in Bentonville, Arkansas, in 1962, grew into a huge retailing empire that (as of 2013) employed 2.2 million people in 11,000 stores worldwide.9
Tenth on the 400-wealthiest list in 2013 was Michael Bloomberg, whose fortune consisted mainly of his 88-percent ownership of the financial services firm Bloomberg LP, which he founded in 1982. By 2012, Bloomberg LP was producing annual revenue of $7.9 billion. Bloomberg—like the Koch brothers—has been very active politically; he served for twelve years as mayor of New York. In contrast to the Kochs, however, Bloomberg’s policy views have been centrist to liberal, including strong advocacy of gun control.10
The next ten wealthiest Americans in 2013 included Sheldon Adelson, with $28.5 billion from resorts and casinos in Nevada, Macau, and Singapore—another very conservative political activist and donor—and Jeff Bezos ($27.2 billion), the founder and CEO of Amazon.com, who later (in 2017) added Whole Foods Markets to his portfolio. Then came Larry Page ($24.9 billion), cofounder and CEO of Google, an enthusiast of clean energy; Sergey Brin ($24.4 billion), cofounder of Google; and Forrest Jr., Jacqueline, and John Mars ($20.5 billion each), third-generation heirs to Mars, the world’s largest candy maker—which then had some $33 billion in annual sales of such brands as 3 Musketeers, Juicy Fruit and Wrigley’s gum, Twix, Skittles, Milky Way, Snickers, and M&M’s. Next on the list were Carl Icahn ($20.3 billion), an activist investor and takeover artist; and George Soros ($20 billion from investments and currency speculation through his hedge fund firm), a major philanthropist in human rights, democratization, and education around the world, especially in his native Hungary—and one of the most politically active billionaires, donating to Democratic candidates. Number twenty on the list was Mark Zuckerberg ($19 billion), the then-twenty-nine-year-old founder of Facebook, whose stock had doubled in value in the past year. Zuckerberg was active in lobbying for immigration reform and technology education.11
The top wealth holders on the 2013 Forbes list continued with twenty billionaires who held between $10 billion and $18 billion each. In descending order: Steve Ballmer (Microsoft), Len Blavatnik (diverse investments in Russia and elsewhere), Abigail Johnson (third-generation executive at Fidelity Investments, the second-largest US mutual fund firm), Phil Knight (Nike athletic apparel and shoes), Michael Dell (Dell computers), Paul Allen (Microsoft and investments), Donald Bren (Irvine Co. real estate), Ronald Perelman (private equity investing), Anne Cox Chambers (inheritor of media conglomerate Cox Enterprises), Rupert Murdoch (21st Century Fox and News Corp media), Ray Dalio (Bridgewater Associates, the world’s biggest hedge fund firm), Charles Ergen (Dish Network and EchoStar), Harold Hamm (Continental Oil), James Simons (Renaissance Technologies hedge fund, a wizard at mathematical models for trading), Laurene Powell Jobs and family (inheritors of stakes in Apple and Disney), John Paulson (Paulson & Co. hedge fund), Jack Taylor and family (Enterprise, Alamo, and National rental cars), Philip Anschutz (investments in oil, railroads, telecom, and sports), Richard Kinder (Kinder Morgan Energy Partners), George Kaiser (oil, banking), and Harold Simmons (buyout investor).12
The remaining sixty of our top one hundred billionaires from the 2013 Forbes list ran from Andrew Beal ($9.8 billion, banks and real estate) down to three brothers tied at #98: Daniel, Dirk, and Robert Ziff, each with $4.6 billion derived from their father’s Ziff-Davis magazine empire plus subsequent investments.13
Conspicuously absent from our set of the one hundred wealthiest billionaires is Donald Trump, whose fortune in 2013 was estimated by Forbes at $3.5 billion. That fell below the cutoff for the top one hundred: only enough for Trump to make #134 on the list.14 As a result, Trump has not been included in our systematic web scraping or statistical analyses. But we will have a word or two to say—here and in later chapters—about the United States’ first billionaire president.
During the 2016 presidential election campaign, Trump claimed to have a net worth of $10 billion. Trump has notoriously offered highly divergent estimates of his net worth, however. During the mid-2000s, he mentioned figures that ranged from $1.7 billion to $9.5 billion. In a deposition for a lawsuit in which the billionaire alleged that a journalist had slandered him by publishing a low estimate of his net worth, Trump explained the variation: “My net worth fluctuates, and it goes up and down with markets and with attitudes and with feelings, even my own feelings. . . . Yes, even my own feelings, as to where the world is, where the world is going, and that can change rapidly from day to day. Then you have a September 11th, and you don’t feel so good about yourself and you don’t feel so good about the world and you don’t feel so good about New York City. Then you have a year later, and the city is as hot as a pistol. Even months after that it was a different feeling. So yeah, even my own feelings affect my value to myself.”15 Still, even late in 2017, four years after Trump failed to make our top-100 cut, Forbes magazine—perhaps not privy to Trump’s mood changes—estimated the value of his fortune to be just $3.1 billion, lower than it had been in 2013. That caused him to drop to #248 on the 2017 list.16
A complete list of our one hundred wealthiest billionaires—ranked in descending order of net worth as of 2013, and (for comparison purposes) including figures on their net worth in 2016 as well—is given in appendix 1. In 2016, most of the dollar figures were bigger—some much bigger—than three years before. Some reshuffling among the rankings is also evident. Most dramatic was the rapid rise of several computer- and internet-related fortunes. Amazon’s Jeff Bezos leapt from #12 on the list (with $27.2 billion) in 2013 to #2 on the list (with $67 billion) in 2016. Facebook’s Mark Zuckerberg jumped from #20 ($19 billion) in 2013 to #4 ($55.5 billion) in 2016. Google’s founders also rose significantly: Larry Page from #13 to #9, and Sergey Brin from #14 to #10. (But Oracle’s Larry Ellison slipped from #3 in 2013 to #5 in 2016.)17 And, of course, a few of 2013’s wealthiest billionaires dropped out of the top one hundred group or dropped off the Forbes 400 list altogether.18 But most of the names stayed the same in both years, with all but nine of 2013’s top one hundred remaining among the 400 wealthiest Americans three years later.

Rich, Old, White, Anglo Men

US billionaires as a group are much older (mostly in their sixties and seventies), much more often male, and much more frequently white and of Anglo-Saxon or other Western European origin than the very diverse American population as a whole. The average age of the one hundred wealthiest billionaires who were studied for this book is seventy years old, with sixty-nine individuals aged sixty-five or older. Of the one hundred, ninety-eight (a whopping 98 percent) are white, eighty-six are men, and eighty-five are white men.19 Compare this to the general US population, which is approximately 77 percent white, half female, and only about 15 percent sixty-five years of age or older.20 And of course, unlike the vast majority of Americans, all billionaires are—by almost anyone’s definition—rich.
This need not mean that billionaires are generally prejudiced against—or insensitive to—women, minorities, the young, or the poor (although the possibility of such prejudices cannot be ruled out). But the billionaires’ life experiences and their values and beliefs are often quite different from those of less-affluent Americans, most of whom are female, comparatively young, and/or members of minority groups. It may well be difficult for billionaires to understand or empathize with exactly what their fellow Americans are thinking, feeling, or needing—for example, what they want the government to do.
The largest and most self-evident gaps between billionaires and their fellow citizens involve money itself and related aspects of social and economic class. For most of their lives, most very wealthy Americans (even some we think of as having worked their way up from the bottom) have enjoyed good nutrition, comfortable housing, nurturing parents, stimulating and helpful friends, and safe, pleasant neighborhoods to live in. Their work has mostly focused on building up a business and accumulating capital, and their periods of economic hardship have mostly involved entrepreneurial risk taking rather than a continuing day-to-day struggle to pay rent and put food on the table. Once people attain great wealth, their lives tend to be spent in well-protected bubbles—dwelling in expensive, well-guarded apartments or gated communities; working in comfortable top-floor offices; interacting chiefly with fellow elites rather than with working-class or middle-class Americans.21
As a result, billionaires can easily lose touch with what most Americans are doing and thinking. Moreover, most billionaires have unique economic interests—in advancing their own particular businesses and in protecting wealth itself—that can conflict with the interests of most of their fellow Americans.
If billionaires wield outsized political power, therefore, there is a danger that they may exercise that power in ways that (deliberately or not) harm rather than help their fellow citizens. Billionaires’ political actions may fail to further the public good. They may become a serious threat to democracy.

Age

It takes time to build a great fortune. Even just waiting to receive an inheritance can take up many years of a person’s life. (Ask Prince Charles of England.) Those who eventually become billionaires—who generally enjoy supportive environments and top-notch medical care—tend to live longer than most people do, so they usually stay on the most-wealthy lists for quite a while. (David Rockefeller Sr. died at 101 years old in 2017.) For all these reasons, billionaires tend to be much older than the rest of us.
Most billionaires are in their sixties or seventies, with quite a few in the eighties or nineties. This is particularly true among the very wealthiest. Among the top one hundred wealthiest Americans we identified in 2013, for example, Bill Gates was a relatively youthful fifty-seven years old, but Warren Buffett was eighty-three; Larry Ellison was sixty-nine; Charles Koch seventy-seven; David Koch seventy-three; the four Waltons fifty-eight, sixty-three, sixty-five, and sixty-nine; Michael Bloomberg seventy-one; and Sheldon Adelson eighty. You had to reach down to #12, #13, and #14 on the list to encounter Jeff Bezos (forty-nine years old), Larry Page (forty) and Sergey Brin (forty). More seniors followed: the three Mars heirs (seventy-three, seventy-seven, and eighty-two); Carl Icahn (seventy-seven); and George Soros (eighty-three).22
Despite the recent rapid growth of young entrepreneurs’ high-tech fortunes, under-forties are still relatively rare among US billionaires. In 2016, thirty-two-year-old Mark Zuckerberg, whose Facebook fortune had just leapt up to $55.5 billion, stood nearly alone as a relative youngster near the top, at #4 on the Forbes list. Only thirty-year-old heir Lukas Walton (#37 in 2016, with $11.2 billion) and Facebook’s thirty-two-year-old Dustin Moskovitz (#44 in 2016, with $10.4 billion) came anywhere close. Just fourteen under-forties made the richest-400 list that year; they constituted only 3.5 percent of the list. Most of them were founders or own...

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