The Rise of the Liberal Rich and the Remaking of America

Guest: Dr. David Callahan
AIR DATE: 04/09/2011
VTR: 11/08/2010

I’m Richard Heffner, your host on The Open Mind.

And it’s hard for me to realize that it’s been a half dozen years since David Callahan, the brilliant young Princeton Ph.D. in politics – and the co-founder of Demos, the public policy think tank – joined me here to discuss his insightful book on what he called Our Cheating Culture: What Americans Are Doing Wrong to Get Ahead. Well, now John Wiley and Sons has published my guest’s Fortunes of Change, about the rise of America’s liberal rich and what he sees as their likely remaking of our country.

David Callahan says that though rich Liberals – and he ticks them off in this absolutely intriguing new book, fortune by fortune, political venture by political venture – that though rich Liberals remain a small minority of their class, their ranks are growing – along with their influence … and perhaps they have reached or will soon reach a critical mass in America.

An intriguing thesis, to say the least. And one that I would ask my guest to develop further, and particularly to indicate which Liberal causes will fare the best and which will fare least well as we learn even further that money is the mother’s milk of politics and that though rich and poor are all the same, rich is one heck of a lot better … and so much more powerful in the political sector. Where do you think the influence will be greatest?

CALLAHAN: Well, I think one of the biggest areas is going to be the environment. You see a lot of these wealthy people … they care about the environment, they’re worried about climate change, many have a scientific background. They know that the research about climate change is real, the earth is warming because of man made influences. And that is an area where a number of these rich Liberals have put a lot of money into trying to change the direction of American public policy.

HEFFNER: Seemingly, however, they haven’t succeeded, at least on the governmental level.

CALLAHAN: Not yet. I mean that effort to pass a cap and trade bill failed just this year. You know I wrote an article after that saying that there’s a divide in the upper class between the “clean” rich and the “dirty” rich.

And the “dirty” rich are people who make their money from heavy industry, fossil, fossil fuel based industries, natural resource extraction … you know the old capitalist model of “you get rich by raping and pillaging the environment”.

But then there’s the “clean” rich who are people who make their money in ways that don’t really have a big ecological footprint … some of them may be working in the … to develop renewable energy technologies and there’s kind of this clash going on between the “dirty” and the “clean” rich.

The “dirty” rich still have the upper hand … Exxon, Mobile, spends a lot of money lobbying as do some of these other energy companies. They’re much better organized than the “clean” rich, but I do think the tables are starting to turn in that area.

HEFFNER: Well, that’s what I want to ask you about … what indicates that the tables are turning?

CALLAHAN: Well, for one thing, the House of Representatives in 2009 passed a cap and trade bill, it’s a bill that a lot of environmentalists weren’t so happy with because it had various loopholes. But just the fact that anybody … any House of Congress was able to pass a … some kind of climate change legislation was, was … to me … big news.

And one of the reasons that happened is because the environmental groups in America have become a lot bigger and more powerful. And one place they’re getting their money from is these rich Liberals.

You know there’s this one guy who I talk about in my book, named David Gelbaum. Most people never heard of him. He’s a math whiz, who made hundreds of millions of dollars in hedge funds.

This guy, alone, has given the Sierra Club $200 million dollars. That’s big money.

You got Gordon Moore another huge environmental donor. Gordon Moore will be known to some people here … some of your viewers as the co-founder of Intel …

HEFFNER: MmmHmm.

CALLAHAN: … he’s spending hundreds of millions of dollars on environmental issues. You didn’t have that 10 or 15 years ago in America. You didn’t have that kind big money behind environmental causes.

HEFFNER: Indeed, you list so many … generally, younger people … list so many people who are putting so much money and I wrote down a whole list because I thought “My gosh, maybe one of them would contribute to to keep the Open Mind on the air”.

But, how is this going to go forward? How does it match governmental need to tax more? To raise more money? To meet our other problems? Are we just going to leave it to the “clean” rich to do this for us?

CALLAHAN: Yeah. One thing that should be clear is that there’s no way that private charity can ever match government action. Right. I mean all the private charities in America can’t come close to, to government in, in terms of their power to solve social problems.

So, in no way to I say in my book that “Oh, you know, these, these rich philanthropists are going to come in and solve problems like, you know, poverty or illiteracy or, or what have you.”

I do say, though, that when you have rich people who are lining up behind some of these long term liberal causes, it can change what government is capable of doing.

HEFFNER: What do you mean?

CALLAHAN: Well, if you have, you know, let’s just take the example of tax policy. I, I devote a whole chapter in my book to tax policy. Government can’t really do much if it can’t raise money in the form of taxes to do things.

And historically, you know, the rich have been … sort of … quite opposed to taxes on them to, to raise more government money.

But, as I describe in my book, there, there has been a shift there … that you see more wealthy people who are ready to pay higher taxes to make investments, public investments in the kinds of things we … they think this country needs.

You know, wealthy people who think that we need more investments in clean energy, more investments in infrastructure, more investments in education if this country’s going to reach its potential and also be globally competitive.

And they’re willing to pay higher taxes to make those investments. So there was a … just this … in, in this election … there was a ballot initiative in the State of Washington to raise taxes on the richest citizens of that state a surtax on millionaires, in order to invest in education in the State of Washington. That ballot initiative was backed by Bill Gates, Bill Gates, Senior … Bill Gates’ father … put in a half a million dollars to try to, to pass that ballot initiative. It didn’t succeed, but there’s one in Oregon like it that did succeed.

So, I mean that’s just an example of how some of the, the political winds can shift when you have a shift in the upper class.

HEFFNER: Does this mean that they’re so rich that there’s too much money at home already to be worried about taxes that go up now?

CALLAHAN: Well, you know, if you’re, if you’re a multi-millionaire or a billionaire … you don’t necessarily worry about your tax rate going up a couple percentage points because you’ve got plenty of money where that came from.

But I think what it is, is that these people have … you know … I’m often asked … well, when the rich support Democrats who want to raise their taxes … “Aren’t they voting against their own self-interest?”.

But in fact these wealthy people who are willing to see taxes go up take a different view of their self interest.

Their view is that they’ll get richer in the long run in a society that has a strong educational sector, invests in scientific research, invests in infrastructure … you know, is laying the foundations for prosperity. They’d rather pay a higher tax rate in an America that is richer than a lower tax rate in an America that is poor.

HEFFNER: That’s because of the nature of the sources of their wealth, as you said to begin with.

CALLAHAN: Right. And, and that’s really a key point in the book. What I suggest that the, that the upper class has turned more Liberal not because a bunch of rich people woke up one day and decided that they wanted to become Democrats, but rather because the people in the upper class changed. You’ve seen more people coming in who made their money in the knowledge economy. Who made their money in fields like technology or some of the more complex parts of finance or in healthcare or in the legal profession … in entertainment.

People who understand that we live in a complex world, that wealth is created not because somebody is like, you know, Horatio Alger … you know, some heroic individual model of wealth creation, which is what Libertarians believe. But rather wealth is created because we live in a complex society that supports wealth creation … with universities, with infrastructure, with scientific investments.

And that if you, if you want the knowledge economy to grow, you need to invest in the foundations of that economy.

HEFFNER: You sound as though we’re on the cusp of a grand new world.

CALLAHAN: Well, I wouldn’t go that far. I mean we just had a … we just had an election in which some rather reactionary voices prevailed.

You know the history of this country tends to be two steps forward, one step back. I think we just took a step back.

But I do think that, you know, the, the, the view among people on the Left has historically been that the, that the wealthy class is allied with the reactionary interests, that there are always these kind of, you know, narrow minded, oligarchs who just want to feather their own nests and who are always against workers or environmental protection or, you know, other kinds of things.

And what I suggest is that that … that that equation has changed. That, that, that the people in the upper class are different than they were 20 or 30 years ago. I mean if you go back to the 1980’s and look at the Forbes 400 list of the richest 400 Americans. When that list was first published it was filled with kind of old economy millionaires; people who made their money in oil or manufacturing or heavy industry or, or heirs to … with, with names like DuPont and, and Rockefeller.

You look at the Forbes 400 list today and, you know, the Google guys who, who both are computer scientists by training, who grew up with academic parents, who made their money in technology, who are Democrats … are high up on that list.

You know, Mark Zuckerberg of Facebook is now number nine on the list with a $7 billion dollar fortune. The oil men who, you know, used to dominate the list have sort of … are disappearing. They’re, they’re dying off. There’s definitely some of those still there, but it’s a real changing of the guard in the upper class.

HEFFNER: Of course, what interest me is that at the end of your book, at the very, very end of the book you indicate little uneasiness …

CALLAHAN: (Sigh)

HEFFNER: … about all that. You say since, “Since America’s founding, it’s most exciting, most radical ideal has been the presumption that all people are equal and that no one because of birth or wealth is intrinsically superior to anyone else. Although that ideal has continually evolved to include more groups … to the point where we now have an African American President, it is deeply threatened by the rise of a large class of affluent super-citizens”, the very people you’re talking about.

CALLAHAN: And, and this is where we get into the, the, the fact that this is a double-edged sword. Right. And which I discuss throughout my book. Which is, you know, if you’re a Democrat or a Liberal you look at somebody like George Soros who has given millions of dollars to Democratic causes and you say, “Thank God for George Soros. Thank God he’s come to rescue us from those Republicans. How great it is that George Soros has spent all this money to build Liberal think tanks and advocacy groups.”

On the other hand you got to be troubled … whatever your politics …by that kind of money in our electoral system, backing advocacy organizations and, you know, I think it’s very … it’s still money in politics, no matter what side it’s on and, you know, I think that we saw in this most recent election, the pendulum sort of swing and a lot of new Conservative money appeared on the scene to help oust the Democratic majority of the House. And, you know, there’s a lot of, of real unease about that.

Well, you know, and that money, as big as it was, was really nothing compared to the money that Liberals spent … Liberal billionaires spent in 2004 to oust George Bush or, you know, significant spending in 2006. So, it’s scary.

I mean there’s a huge flood of money into our politics and there’s more money coming to Democrats and, and if you’re a Democrat that can seem to be a good thing. But overall, I think that we should all be quite concerned about this.

HEFFNER: Okay, what do you do with that concern?

CALLAHAN: Well …

HEFFNER: You as a scholar?

CALLAHAN: Yeah. Well, there needs to be a, you know, the, the issue of campaign finance has kind of fallen off the agenda. And, and one of the reasons that issue fell off the agenda, I think is because there’s a lot of money coming to Democrats and Democrats historically have been the people who are concerned about campaign finance.

That campaign finance issue needs to move back to the, to the top of the agenda, especially after that Supreme Court decision in Citizens United, which allows corporations to, you know basically give as much money as they want in our, in our campaign system.

So I suggest in the book that we really need to think … at, at the most radical level … we need to be thinking about a Constitutional amendment to amend the Constitution so that free speech is … political speech is not protected under the First Amendment.

I mean this is the reason why it’s so difficult to put any limits on campaign spending in this country is because it is defined as “speech” and the courts have ruled that, you know, under the First Amendment you can’t do that.

Well, I think that we need to deal with that through Constitutional Amendment … the people say, “Well, that’s, you know, we can never amend the Constitution.” But in fact during the Progressive Era of a hundred years ago we amended the Constitution three times to make possible big progressive reforms.

So that can’t be off the table. Ah, and then there’s more moderate things we can do. I think that more free television and radio time for candidates.

I mean one of the biggest areas of spending in campaigns is on television. And I think it’s quite reasonable for the … for us to ask, “Hey, if you’re going to have a broadcast license and use the public airwaves, which are controlled by all Americans, you should be willing to pony-up free time at election … during election season.

HEFFNER: You know, back in 1968 what was then the 20th Century Fund … now the 21st Century Fund … put together a, a commission on campaign costs. And it was on money, television and politics. And I happened to be the Executive Director of, of the Commission and Newt Minow was the Chairman of the Board … excellent board … and came up with very much the suggestion that you’re making.

And Tommy Corcoran, FDR’s old advisor came up to me afterwards and he said, “Young man” (and I was young then … younger, by far) … “you’re going to be disappointed if this isn’t accomplished in the next decade”.

He said, “Don’t be, it won’t be. Not even 15 years. Maybe around 20 years, that’s what I anticipate”. But that was 1968. And I think we’ll all be talking about pie in the sky if we think there’s going to be that kind of change.

CALLAHAN: I’m not suggesting this is an easy one. Ahh, but there have been a couple of states which have passed public financing …

HEFFNER: Mmmhmm.

CALLAHAN: … laws. You know, public financing of elections so that candidates without much money can compete. That’s a step in the right direction.

We need, we need more of that. I mean the issue’s been dormant. I think the issue can come back and it will come back and we can see some more progress there.

HEFFNER: What are some of the other areas in which you find the young Liberal rich functioning?

CALLAHAN: Well, I have a whole book on … a whole chapter in my book on wealth and the culture war in which I look at donors who have been working for gay rights.

And this is an area where some really big money has helped push an agenda for rights for gays and lesbians. A couple donors in particular have been really instrumental … Tim Gill who is a guy who made a fortune from Quark, which is a software … made $400 million dollars and has so far spent $150 million of that promoting gay rights.

David Bohnett who is somebody who … one of the lucky people who had an Internet company in the nineties and got out before the crash … with a couple hundred million dollars. He has spent millions of dollars on, on promoting gay rights issues.

John Striker who’s the heir to a, a medical technology fortune and a billionaire … he is another one of these big gay rights donors.

And these guys together have spent ah, tens of millions of dollars backing national gay rights organizations and going after Conservative politicians who are … who, who are against gay rights.

And, and they’ve knocked off these various right wingers at the state level and they’ve been, they’ve been pushing hard for marriage equality at the state level. You know there’s been a, sort of steady progress in terms of winning gay marriage at the state level and one reason that’s happened is because these philanthropists have been operating behind the scenes to, to push this agenda through their political donations and through their advocacy. So that’s an area where it’s … ahem, you know there’s been a big impact.

HEFFNER: And the harder issue of civil rights?

CALLAHAN: The harder … the harder … civil rights is the harder issue, you know. As I, as I say in my book, the traditional civil rights issue has not been high on the agenda of a lot of these new Liberal rich people.

HEFFNER: How do you explain that?

CALLAHAN: I explain it … I mean, it, it’s interesting because on the one hand, these are people who take multi-culturalism for granted, as a kind of …”just the way the world is”. These are people who, if you look at the tech industry, it is filled with, with non-Whites in very high positions. You know if you look at finance, a lot of the … the so-called “quants” are, you know, people from, from … who are kids of immigrants, who are people from foreign countries.

You know if you took away the, the non-White people from the tech and finance sectors, they would … those sectors would collapse pretty much over night. And the people who lead those sectors understand that. And, and I think also see, you know, that, that they should be looking for talent regardless of, of what color it comes in or what sort of nationality it represents.

I mean, you know, these are people who believe in meritocracy. On the other hand, you know, the, the traditional civil rights agenda is something that has not really captured their attention and I think it’s that, that, you know, a lot of them grew up in the post-Civil Rights era …

HEFFNER: You mean the battle has been fought.

CALLAHAN: The battle has been fought. They’re, they’re just not that attuned to it. That said, you know, one of the largest philanthropic gifts in, in American history in recent times has been Bill Gates who gave $1.7 billion dollars to the United Negro College Fund. So, clearly Gates, you know, is somewhat attuned to, to those civil rights issues. Although, again, not in a kind of combative … not in a way that sort of acknowledges the, the traditional Civil Rights agenda of fighting discrimination as unfinished.

HEFFNER: That’s very interesting, that you put it that way. Not in terms of acknowledging that the traditional battle, the usual … the old battle is not over.

CALLAHAN: And I would say that that’s characteristic of these crew, which is that they don’t tend to think in the sort of terms of, of social justice. Right. They’re not very enamored of labor unions, they’re not so … they’re multi-cultural and one more … and support more immigration, but they’re not out there fighting for the rights of the immigrants who are being denied healthcare or kicked off of Medicaid, or deported or, or what-have-you. It’s not a social justice kind of Liberalism and I think that’s one of the shortcomings of it. You know …

HEFFNER: Is that what concerns you as they set the agenda more or less?

CALLAHAN: Well, I do think it’s concerning because it’s a kind of … it’s a, it’s a progressivism, but it’s sort of a technocratic bloodless progressivism that, that takes for granted the, the, the notion that, you know, we can all get ahead if we just have equal opportunity. If we all have … education is one of the huge causes of the Liberal rich.

And I write quite a bit about that in my book. As you have a lot of these, these super wealthy people who have made a, a … the education of kids of color in inner city schools a top issue for them. Which I think is, is laudable. On the other hand …

HEFFNER: Well, you’re not protesting against any of the issues they embrace.

CALLAHAN: I, I think it’s laudable to make education … inner city … of inner city kids a top issue. The problem is, is that they’re … they seem not so concerned about some of the, the structural forces that, that are producing so much poverty in our cities and keeping people poor and …

HEFFNER: Do you … do you think we can make it without the latter kind of understanding? The hard-hitting economic understanding?

CALLAHAN: I think it’s a pretty limited vision if you believe that more education is going solve everything. Which seems to be the faith of a lot of these people, you know. If we just got these kids a proper education and they wouldn’t be poor.

You know Mark Zuckerberg, the founder of Facebook, just made his first big philanthropic gift … a hundred million dollars … at least. Maybe two hundred million to the New York public school system, which is the school system that serves exclusively … almost exclusive kids of color. And is in a very, very poor community.

Well, my guess is that even if you did fix that school system, and did give those kids a real educational opportunity, they would still find their, their prosperity wanting in a, in a society where there’s so many people already who are educated and who can’t find good jobs.

HEFFNER: And I gather, as we just have a minute or so left, that your main concern is that these are the people who are setting our reform agenda in very large part.

CALLAHAN: These are people who have tremendous influence in the Democratic Party, they are, you know, very deep pocketed donors and they have a tremendous influence in philanthropy and civil society. I mean Bill Gates is one of the most influential people in terms of the education reform battles going on.

Well, Bill Gates is … made a lot of money writing software, but I’m not sure that gives him the right to be in charge of our education system.

HEFFNER: It’s interesting you say “gives him the right”, that’s a subject I think we’ll pursue more as time goes on. But thank you so much for joining me today on The Open Mind, because David Callahan your Fortunes of Change is such an intriguing book on the rise of the Liberal rich and the remaking or one could say, perhaps, their remaking of America. Thanks again.

CALLAHAN: Great to be here. Thank you.

HEFFNER: And thanks, too, to you in the audience. I hope you join us again next time. Meanwhile, as an old friend used to say, “Good night and good luck.”

And do visit the Open Mind website at www.theopenmind.tv

N.B. Every effort has been made to ensure the accuracy of this transcript. It may not, however, be a verbatim copy of the program.

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