The Deep State (16 page)

Obama's move in late 2014 to improve relations with Cuba was a policy conspicuous by virtue of its rarity. Predictably, he was lambasted by Senator Marco Rubio, the self-appointed champion of a maximalist line against Cuba, but he also came in for heavy editorial criticism from the
Washington Post,
the bulletin board of Beltway interests, according to the curious rationale that fifty years of sanctions were not enough time for them to work.
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The president was able to lift a portion of the Cuban economic sanctions by executive order, but removing the rest will require congressional action that is by no means guaranteed. Some observers believed that the March 2015 imposition of sanctions against Venezuela was linked to the thaw in U.S.-Cuban relations, and that America needed another enemy to avert a deficit of bogeymen and placate South Florida's political concerns.
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And so Washington's sanctions policy grinds on. Cockburn sees a parallel between America's use of sanctions and our country's longtime love affair with the military doctrine of precision bombing, which began with the strategic bombing campaigns of World War II, became more firmly embedded in our thinking during the Vietnam War, and has now (post-Bosnia and -Iraq) been technologically refreshed by resort to cruise missiles and drones. Both sanctions and bombing give the illusion of precision, calibration, and the capacity to ratchet up coercion in a gradual escalation. And both have the capacity to cause tremendous suffering among innocent third parties while having far less strategic effect than
their advocates claim. “Sanctions are economic drone warfare,” Cockburn says.

Economics, as we have seen, is one of the principal weapons in America's arsenal for waging virtual wars abroad, despite its dismal record. Meanwhile, the three-decades-long war at home—the class war—has also been waged with economic weapons. It has been much more successful.

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

—Adam Smith,
The Wealth of Nations

This is an impressive crowd, the haves and the have-mores. Some people call you the elite. I call you my base.

—George W. Bush at the Al Smith Memorial Dinner in New York, October 19, 2000

Have the Superrich Seceded from America?

At some point in 1993 during congressional debate over the North American Free Trade Agreement, I had a memorable lunch in the cafeteria of the Longworth House Office Building with a staffer for one of the rare Republicans who opposed the policy of so-called free trade. To this day I remember something she said because it was the first time I'd heard someone identify a growing trend that most people as yet had not given much thought to: “The elites of this country have far more in common with their rich friends in London, Paris, and Tokyo,” she said, “than with their fellow American citizens.” This was only the beginning of the period when the consequences of outsourced manufacturing, a financialized economy, and growing income disparity seeped into the public consciousness, so at the time it seemed like a striking statement.

My dawning recognition of the real significance of free trade coincided with the end of the cold war. At that time several writers predicted
the decline of the traditional nation-state. Some looked at the demise of the Soviet Union and foresaw that other states would break up into statelets of different ethnic, religious, or economic compositions. This has happened in the Balkans, Czechoslovakia, and Sudan, and appears to be happening in Iraq and the Congo, but remarkably few state boundaries have been redrawn in the last twenty-five years. Others predicted a weakening of the state due to the rise of irregular armies and the inability of national armies to adapt to the new threat. The trajectories of Iraq and Afghanistan, Yemen, Somalia, and even Pakistan lend credence to that theory. There have been numerous books about globalization and how it would eliminate borders, but I am unaware of a well-developed theory from that time suggesting that the superrich and the corporations they ran would effectively secede from public life even as they tightened their control over the government of their respective nation-states.
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By secession, I do not mean physical withdrawal from the territory of the state, although that does happen from time to time. Erik Prince, who was born into a fortune, is related by marriage to the even bigger Amway fortune, and made yet another fortune as CEO of the mercenary-for-hire firm Blackwater, moved to the United Arab Emirates in 2011; and some Republicans, who are so quick to say “America, love it or leave it,” showed a remarkable sense of latitude when Eduardo Saverin, a Facebook cofounder, renounced his citizenship. When Democrats introduced a bill to make expatriate tax dodgers pay a 30 percent tax rate on all future U.S. investments and ban them from the country, Republican operative Grover Norquist likened the bill to the actions of Nazi Germany against Jews.
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These examples apart, what I mean by secession is a withdrawal into enclaves, an internal immigration whereby the rich disconnect
themselves from the civic life of the nation and from concern about its well-being. Our plutocracy, whether the hedge fund managers in Greenwich, Connecticut, or the Internet moguls in Palo Alto, now lives like the British did in colonial India: ruling the place but not of it. If one can afford private security, public safety is of no concern; to the person fortunate enough to own a Gulfstream jet, crumbling bridges cause less apprehension, and viable public transportation doesn't even compute. With private doctors on call and a chartered plane to get to the Mayo Clinic, why worry about Medicare?

Being in the country but not of it is what gives many contemporary American superrich their quality of cluelessness. Perhaps this helps explain why, during the 2012 presidential campaign, Mitt Romney's regular-guy anecdotes always seemed a bit strained, even if he did follow his handlers' advice and wear jeans and an open collar on the hustings. His idea of connecting with the common man was to say that his wife drove “a couple of Cadillacs.”

I once discussed this syndrome with a radio host who recounted a story about Robert Rubin, the former treasury secretary. He recalled that Rubin was being chauffeured through Manhattan to reach some event whose attendees consisted of the Great and the Good such as himself. Along the way his limousine encountered a traffic jam, and on arriving late to the event, he complained to a city functionary with the power to look into it. “Where was the jam?” asked the functionary. Rubin, who had lived most of his life in Manhattan, a place predominantly of east-west numbered streets and north-south avenues, couldn't tell him.

To some degree the rich have always secluded themselves from the gaze of the common herd; their habit for centuries has been to send their offspring to private schools, but lately this custom has been exacerbated by the plutocracy's animosity toward public education and public educators.
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Public education reform is popular among right-wing billionaires such as the DeVos family, the Waltons, Netflix CEO Reed Hastings, and their tax-exempt foundations like the American Federation for Children, many of which hope to divert some of the more than one-half trillion
dollars in annual federal, state, and local education funding into private hands. What Halliburton did for U.S. Army logistics, school privatizers may end up doing for public education. A century ago, at least we got some attractive public libraries out of Andrew Carnegie, but the spirit of noblesse oblige is sorely lacking among most of our new plutocrats.

If You're Not Rich, It's Your Fault

In both world wars, even a Harvard man or a New York socialite might know the weight of an army pack. Now the military is for suckers from the laboring classes whose subprime mortgages you just sliced into collateralized debt obligations and sold to gullible investors in order to buy your second Bentley or rustle up the cash to employ Rod Stewart to perform at your birthday party. The sentiment among the superrich toward the rest of America is often one of contempt. To quote Bernard Marcus, cofounder of Home Depot, “Who gives a crap about some imbecile?”
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One recovering former hedge fund trader acknowledged the syndrome: in his last year on Wall Street he made a bonus of $3.6 million and was angry that he hadn't made more until he slowly began to recognize that he and many of his colleagues were suffering from a money addiction that had warped their moral judgment.
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Stephen Schwarzman, the billionaire CEO of the Blackstone Group who famously threw himself a $5 million birthday party, believes it is the riffraff that is socially irresponsible. Speaking about low-income citizens who pay no income tax, he says: “You have to have skin in the game. I'm not saying how much people should do. But we should all be part of the system.”
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And yet this often-voiced view ignores the fact that millions of Americans who do not pay federal income taxes
do
pay federal payroll taxes. These taxes are regressive, and the dirty little secret is that over the last several decades they have made up a greater and greater share of federal revenues. In 1950, payroll and other federal retirement contributions constituted 10.9 percent of all federal revenues; by 2007, the last “normal” economic year before federal revenues began falling, they made up
33.9 percent. By contrast, corporate income taxes, which were 26.4 percent of federal revenues in 1950, had fallen to 14.4 percent by 2007, and since then they have fallen further, to barely 10 percent.
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Who has skin in the game now?

Trends in personal income show the same picture. As University of California economics professor Emmanuel Saez has demonstrated, from 2002 until the last precrash year of 2007, 60 percent of all income growth went to the wealthiest 1 percent of Americans. Since the recovery began in 2009, that figure increased to 95 percent.
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As stark as those statistics sound, even that level of income inequality may be understated, as some of the richest Americans keep a portion of their assets in foreign tax havens. Gabriel Zucman, an assistant professor of economics at the London School of Economics and a visiting scholar at the University of California, believes that government statistics understate the large amount of offshore wealth belonging to U.S. citizens, which he pegs at roughly $1.2 trillion.
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The Historical Roots of Wealth Worship

That wealth worship and a consequent special status for the wealthy should have arisen in the United States is unsurprising in view of the peculiar sort of Protestantism transplanted here from the British Isles: a Christianity that regarded wealth in a different way from older Christian traditions. Starting with the Puritanism of New England, there has been a long and intimate connection between the sanctification of wealth and America's political structure.

A crucial political debate of the young republic was what to do about the rising financial power in the country. Andrew Jackson defined the populist nature of his presidency by his relentless opposition to the wealthy elites who controlled the Second Bank of the United States. But in the long run Jackson's efforts did not succeed. At the beginning of the Civil War, financier Jay Cooke wangled the franchise to sell war bonds for the U.S. Treasury and made a fortune on the commissions, vindicating Cicero's quip that the sinews of war are infinite money.

Wall Street's first period of real ascendancy began just after the Civil War. Most present-day Americans, if they think about the historical roots of our wealth worship at all, will say something about free markets, rugged individualism, and the Horatio Alger myth—a literary construct of the post–Civil War era. But perhaps the most notable nineteenth-century exponent of wealth as virtue and poverty as the mark of Cain was Russell Herman Conwell, a canny Baptist minister, founder of the first tabernacle large enough that it could be called a megachurch, and author of the immensely famous “acres of diamonds” speech of 1890 that would make him a rich man. This is what he said:

I say that you ought to get rich, and it is your duty to get rich. . . . The men who get rich may be the most honest men you find in the community. Let me say here clearly . . . ninety-eight out of one hundred of the rich men of America are honest. That is why they are rich. That is why they are trusted with money. . . . I sympathize with the poor, but the number of poor who are to be sympathized with is very small. To sympathize with a man whom God has punished for his sins . . . is to do wrong . . . let us remember there is not a poor person in the United States who was not made poor by his own shortcomings.
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Spoken like a real Fox News commentator! Evidently, Conwell knew better than to engage in the sob-sister moralizing that we read in the Sermon on the Mount. Somewhat discordantly, he had been drummed out of the military during the Civil War for deserting his post: for Conwell, just as for the modern tax-avoiding expat billionaire, the dollar sign tended to trump Old Glory. Back then our great-grandparents referred to Wall Street as “the money power” or “the money trust.” Successive panics, as financial crashes were then called, occurred in 1873, 1884, 1893, and 1907. They always led to mass unemployment and bankrupted farmers, but somehow, the bankers on Wall Street dusted themselves off each time and soon began engineering the next financial time bomb.

The money power's influence on government policy began to be felt internationally just before the beginning of the twentieth century. Grover Cleveland's 1895 “Venezuela message” served notice that henceforth, the United States would invoke the Monroe Doctrine to keep the European great powers out of the Western Hemisphere—meaning that Latin America was to become America's playground for lucrative investment. The United States abandoned its traditional policy of isolationism and noninterventionism and embarked on a string of military interventions in Latin America: the Spanish-American War (1898), the forcible separation of Panama from Columbia (1903), the occupation of Nicaragua (1912–1933), intervention in Mexico (1914–1917), and the occupations of Haiti (1915–1934) and of the Dominican Republic (1916–1924). In every case, banks and the protection of U.S. private investments were at the heart of the decisions to act. As General Smedley Butler, a participant in many of these interventions and two-time winner of the Congressional Medal of Honor, later admitted, he was protecting big business interests, not the U.S. national interest:

I spent 33 years and four months in active military service and during that period I spent most of my time as a high class muscle man for Big Business, for Wall Street and the bankers. In short, I was a racketeer, a gangster for capitalism. I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. I helped purify Nicaragua for the International Banking House of Brown Brothers in 1902–1912. I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went on its way unmolested. Looking back on it, I might have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents.
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At the beginning of World War I, Woodrow Wilson adopted a policy of neutrality, but it was not to last. Several factors impelled the United States into the war in 1917, but the fact that the Morgan Bank, which was then the most powerful financial institution in the country, participated in underwriting three-quarters of the external financing of the Allies had something to do with Wilson's decision to save the world for democracy. Once it had extended the loans, Morgan had a compelling interest in seeking an Allied victory: defeat and potential occupation of France by Germany would have meant the repudiation of those loans. At the end of the conflict, Thomas W. Lamont, a Morgan partner and private citizen, accompanied Wilson to Versailles, where he (rather than a government official such as the secretary of the treasury) represented the U.S. position in negotiations over German reparations. During the 1920s, Lamont described himself as “something like a missionary” for Italian Fascism and expressed his admiration for Benito Mussolini, “a very upstanding chap.”
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Later, in the mid-1930s, a congressional investigating committee chaired by Senator Gerald Nye (R-ND) found that bankers, along with the munitions industry, had pressured Wilson to intervene in the war.