America’s Democracy Deficit: A Democratic Party Reset

The future is bleak for our two-party system, for the DP and for the state of American democracy.

America’s institutions are under more strain than at any time since the Civil War. One new reason for despair is the floundering opposition—the Democratic Party (DP). The DP has lost its focus and its message, and it has become a shadow of its former self.

Yes, the Republicans won the Presidency, control both houses of Congress and over 60 percent of governorships and state legislatures, are poised to confirm their candidate to the Supreme Court and will be in a position to appoint a number of federal judges and possibly one or more supreme court justices over the next four years. The future is bleak for our two-party system, for the DP and for the state of American democracy.

To resurrect itself, the DP must develop backbone, sharpen its message, stand up for what is just and serve the American people. This runs across the whole spectrum of issues facing the US today: fairness (upward mobility), tax reform, Social Security, money in politics (campaign finance), political corruption, access to education (including student loans) and healthcare (including Medicare and Medicaid), immigration, planned parenthood, gun control, public safety (including terrorism), racism, religious freedom, climate change and international respect and support for US foreign policy. To address even a few of these issues in detail would take a book, so here we stick to a few dimensions of fairness in our economic system to shed a little light on the DP’s malaise.

Let’s set the stage. Since 1975, the real income of most American families has not increased; while the real income of the top 10 percent has gone up significantly; that of the top 1 percent has increased dramatically; and that of the top 0.1 percent has exploded. The reasons for this growing disparity are many and are the subject of much debate, but the financial crisis (and the attendant bailouts) and our tax system have been at least two factors. Has the DP consistently been on the side of the average American? No! The American people applaud economic success as long as the system is not rigged to benefit a few. Let’s start with the financial crisis.

Has the DP consistently been on the side of the average American? No! The American people applaud economic success as long as the system is not rigged to benefit a few.

The burden of the crisis fell largely on average families. They lost their jobs and became unemployed. Families were ruined and broken up. The government bailed out the financial institutions such as Goldman Sachs, JPMorgan Chase, Bank of America and the big insurance company AIG. This was done on the premise that the failure of the financial sector would plunge the country into a depression. While this is probably true, the way it was done rewarded the bankers at the expense of the average American.

The crisis was in part brought on by the excessive risk taking (greed) of financiers and bankers. While the average American suffered, fewer than five bankers went to jail. Senior bankers did not lose their jobs and in less than five years they were making more than they had before the crisis! All the while, the average American continued to suffer. Was this fair? No! Where was the DP and what could they have done? If the DP was on the side of the people, they could have insisted that wrongdoers be prosecuted. That could have been the most important deterrent to a repetition. Moreover, why didn’t the DP insist on a clause that extracted a percentage of the profit and all bonuses of the wrongdoers for a number of years? Goldman Sachs was on the brink of collapse and the people got nothing for bailing them out. The average person may think that these guys are whiz kids. This they are not. If they were, we would not have recurring financial crises, unless they are gaming the system! Why this ‘special’ treatment?

In May 2010, the US Senate passed the bank reform bill, titled “Restoring American Financial Stability,” designed to strengthen the regulation of banks and non-bank financial institutions, protect consumers, rein in Wall Street, and ultimately prevent another financial crisis. The bill also introduced the Volcker Rule, which would force deposit-taking banks to spin off their proprietary trading arms (trading on their own account) and sell ownership interests in hedge funds and private equity firms. On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act. The major provisions of the Act were: a new consumer watchdog, a financial early warning system, breakup authority of financial institutions, tighter leash on banks to limit their excessive risk-taking activities (such as trading of financial derivatives), and mortgage reform.

However, in December of 2014, the provision that prohibited banks from trading derivatives (possibly their most risky activity but one with high-profit potential) was eliminated from the bill. But this was not all. The 114th Congress that opened for business in January of 2015 immediately started to consider further revisions to the Dodd-Frank Act. This chipping away at this legislation is likely to continue until every tooth has been pulled from what was already a highly compromised attempt at reform.

Consistency matters! Standing up for the rights of the average American matters! A political party loses the moral high ground when it acts like a chameleon.

So when President Trump decides by Executive Action to repeal elements in the law that helped the average American, such as the “Consumer Financial Protection Bureau,” the DP has little to stand on. Its crocodile tears are just that, crocodile tears. Where were they when the financial sector lobbyists descended on Congress to begin pulling each and every tooth? Consistency matters! Standing up for the rights of the average American matters! A political party loses the moral high ground when it acts like a chameleon.

There is popular belief that members of Congress take care of themselves in their salaries, healthcare and retirement benefits. While senators and congressmen receive only somewhat better benefits than senior federal civil servants, this is not the real problem. Members of Congress and senior government officials are increasingly using “public service” as a path to wealth. Members of Congress pass legislation and senior members of the Executive Branch adopt policy positions that help a particular industry or company, with the implicit understanding that they become “advisors” or “consultants” to corporations or foreign governments when they leave office. Others, such as past presidents, peddle influence as speakers at $250,000 and more a pop. Just look at the Clintons or at most secretaries and deputy secretaries of Defense or Treasury after leaving office. They have turned the meaning of public service on its head! They have given greed a bad name. Conditions will not improve until our “public servants” change their behavior from serving companies and foreign governments to serving the American people.

The DP could resurrect itself if it would just take a strong and unwavering stand on this one issue. For instance, the DP could propose that after public service, any salary that is say 25% above the person’s final public service salary would to be returned to the US Treasury (or to charity), and thereafter there would be similar restrictions on annual increases of at most 10% per year, with no lobbying of any kind with the Congress or any member of the Executive Branch for life. Some will say that this would dissuade talented individuals from public service. Our answer: anyone who wants to get rich through public service is not wanted! There are plenty of talented people who want to serve the public and who are not greedy.

We live in at a time of turmoil, great change and popular outrage. For decades most Americans have been forgotten. Confidence in our government is arguably at historic lows.

There is little disagreement that taxation should be progressive. Today, CEOs of hedge funds who earn hundreds of millions of dollars are in a lower marginal tax bracket than someone earning $100,000 a year! Some billionaires dodge almost all inheritance taxes while millionaires don’t. The DP has had many chances to address these issues but has not. Why? They, like the Republicans, do not want to upset their friendly financial lobbyists. President Obama did not want to push for the elimination of the inheritance tax dodge referred to as the Pritzker Trust. Why? Because his Secretary of Commerce and possibly his biggest campaign contributor (Penny Pritzker) was a beneficiary. Consistency!

We live in at a time of turmoil, great change and popular outrage. For decades most Americans have been forgotten. Confidence in our government is arguably at historic lows. The Republicans are talking of tax reform that may include the elimination of all inheritance taxes—something that the richest Americans, Bill Gates and Warren Buffet—see as destructive for our democratic system. We must restore balance—a level playing field where everyone has an equal chance to succeed if they work and persevere. Adam Smith, the great author of the Theory of Moral Sentiments, and the father of modern economics saw all of humanity as the same but with one difference: some have more opportunities to succeed than others. For flourishing societies, he advised giving everyone equal opportunities. If he were alive, he would not recognize and might even be horrified by the capitalist system that we so nonchalantly attribute to him.

A reason why Trump may have won is that on nearly all issues he took an extreme position and doubled down through thick and thin. How did this help him win? The electorate did not focus on all the issues that he threw out there but only on the handful that mattered to each person. If on these he gave the voter what she wanted to hear, she went with him regardless of his stand on the other twenty or more issues. As an aside, and a direct implication of this, President Trump may not have even 20 percent popular support for most, if any, of his initiatives, because his supporters did not vote for him because of all of his proposals, but because of a few and the few were different for different groups of voters. So clear-cut, consistent and sharp positions on a lot of issues may be the way to go.

We need to breathe new life into our institutional scaffolding. This may the best time and opportunity for the DP to rise from the dead and restore confidence, not only in the DP itself, but also in our flailing two-party democratic system.

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