Sam Pizzigati: The return on those bad bets
Our billionaires suddenly appear bumbling after their Election Day losses.
We’ll never know exactly how much America’s rich pumped into the 2012 campaigns. Hundreds of millions in “dark money” – contributions laundered through groups like the U.S. Chamber of Commerce – will forever remain untraceable.
Even so, we do know that our billionaires spent at incredibly extravagant levels. But little of this largesse seems to have paid off. In race after race, candidates that super-rich conservatives spent lavishly to defeat swept to victory.
The election results, The New York Times declared, amounted to “a landslide loss for big money.”
In the wake of this “landslide,” our rich and failure-prone kingmakers are coming across as a cast of rather pathetic characters. Some look like egotistical dilettantes and others appear to be rigid ideologues unable to make rational calculations. Who ever thought, marveled Washington Post analyst Steven Pearlstein, that businessmen would be “even worse at making political investments than politicians are in making business investments”?
This bumbling image can be comforting. Our democracy has triumphed, our pundits trumpet. Even billionaires can’t buy ballots!
But our super-rich didn’t really bumble anything in 2012. They behaved rationally. Their investments made eminent sense.
All investments, let’s remember, involve some risks. Wise investors balance risk and reward. What risk did billionaires take in the 2012 elections? Not much.
Consider the political calculus for a deep pocket with $100 million in annual income. In 2012, this billionaire could have spent $10 million on political contributions over the first 10 months of the year and still have a higher personal net worth today than he had in January.
In other words, a billionaire who invests $10 million in politics “risks” virtually nothing at all.
And the potential reward from this investment? That could be a massive windfall in tax savings alone.
Mitt Romney pledged that he would repeal the Obama health reform legislation, the Affordable Care Act. Funding for this landmark legislation comes largely from new taxes on the rich, a 0.9 percent payroll tax on income that couples pull in over $250,000 and a 3.8 percent tax on capital gains, dividend, and interest income over that same threshold.
President Obama campaigned on a pledge to let the Bush tax cuts for wealthy households expire. That move would hike the top marginal income tax rate from 35 to 39.6 percent and the core tax on capital gains from 15 to 20 percent. A Romney victory would have prevented these increases.
The bottom line: The tax savings from a Romney victory would have saved our billionaire, in just one year, his entire $10 million in 2012 political contributions.
Does Romney’s loss make our billionaire’s $10 million investment to elect him a total waste? Absolutely not. Our billionaire’s investment will still pay dividends for years to come.
Here’s why: All those millions that affluent right-wingers pour into politics force the candidates they target, if they want to remain competitive, to go out and cultivate their own deep-pocket sources of campaign cash.
The more cash these targeted candidates need to raise, the greater the pressure on them to push a political agenda that an appreciable number of affluent deep pockets will find appealing.
This dynamic may help explain why Obama is only asking the rich to pay what he calls a “little more” in taxes. How little? If he wins, all the tax hikes on the rich he has proposed – and the Affordable Care Act’s new taxes stay in place – the richest Americans will still pay taxes at less than half the rate that their wealthy predecessors faced in the 1950s, under Republican President Dwight Eisenhower.
So billionaires can win politically even when they lose on Election Day. Their millions in campaign contributions are distorting our nation’s political discourse – and keeping real change off the table.
The rich aren’t squandering their fortunes. They’re destroying our democracy.
SAM PIZZIGATI edits “Too Much,” the Institute for Policy Studies’ weekly newsletter on excess and inequality. .