Election 2014  
comments_image Comments

Increasing the Number of Republicans in Congress Means Billions More for the 1 Percent, Study Shows

There's a direct correlation between the composition of Congress and the richest Americans' share of pre-tax income.
 
 
Share

L-R: House Majority Leader Eric Cantor, House Minority Leader Nancy Pelosi and Speaker of the House John Boehner arrive at a remembrance ceremony for the victims of the attacks of September 11 at the US Capitol.

 

During the period between 1949 and 2008, a 1 percent increase in congressional seats held by Republicans (about five seats), has resulted in the top 1 percent of American households seeing their share of the nation's income go up by about four-fifths of a percent, regardless of which party occupied the White House. That translates into about $6.6 billion in 2008 dollars being redistributed upward to those at the top.

That's according to a new study co-authored by Thomas Volscho, a sociologist at the City University of New York, and Nathan Kelly, a political scientist at the University of Tennessee. The study appears in the October issue of American Sociological Review, which looks at the rise of the super-rich in the United States.

“The central finding of our study is that politics matters for the one percent,” Volscho told AlterNet. “That's probably not news to a lot of people, but we found that the party of the president – whether Democrat or Republican – didn't really matter as far as the one percent getting richer. But whether or not the Congress was Democrat or GOP did matter.”

The study looked only at pre-tax income, so it gauged the degree to which the rules of the “free-market” shape income inequality before any redistributive policies come into play. That's where Congress plays a dominant role, explains Volscho. “The presidency is a very powerful position,” he noted. “The president impacts legislation – he signs bills, he has input into legislation and he proposes the budget every year – but the Congress can really shape how our labor laws are being enforced, who's heading agencies, whether or not to launch investigations or hold congressional hearings into things like minimum wage laws or financial regulation, all these things that influence the market distribution of income.”

The study's findings are confirmed by a quick look at the historical composition of Congress from 1949 through the 1970s. During that period, Republicans held a majority in the Senate in just one session and held the House in one session (both in the 83rd Congress in the mid-1950s). During that period, the top 1 percent of American households grabbed an average of 10 percent of the nation's pre-tax income, and it was very consistent, regardless of who was in the White House.

Since the election of Ronald Reagan, the GOP has held majorities in the Senate in eight different congresses and in the House during six sessions. And during that period – again, regardless of which party held the White House -- the richest 1 percent have seen their share of the nation's income skyrocket. It reached 15.5 percent by the end of Reagan's presidency and would peak at 23.5 percent in 2007, before the Wall Street crash.

The scholars also found that income inequality is driven by de-unionization, trade policy and changes in the tax code. They concluded that a 1 percentage point drop in income and capital gains taxes had the same effect on equality as a similar increase in Republican representation in Congress.

Using 2008 Gross Domestic Product, the scholars found that the effect of a 1 percentage point drop in private sector union membership results in the transfer of about $33.4 billion to the top 1 percent of households. “I kind of thought that labor unions would shape the wage distribution of income and not be so important [for the investor class],” says Volscho. “But they're very important for the top 1 percent – as the private sector unions have fallen off a cliff in the United States, the top 1 percent have gotten much richer.”

"With a decrease in union membership, workers' wage bargaining power diminishes and this can increase firms' market value and their profitability,” wrote the scholars. “A higher market value often translates into higher stock prices and executive compensation, thereby shifting income toward the top."

The study flies in the face of the commonly held belief that presidents manage the economy. As people like economist Dean Baker have been saying for some time, there is no naturally occuring “free market” – the rules of the game determine who wins, who loses and by how much, and those rules are shaped first and foremost by the legislative branch.

Joshua Holland is Senior Digital Producer at BillMoyers.com, and host of Politics and Reality Radio. He's the author of The 15 Biggest Lies About the Economy. Drop him an email or follow him on Twitter

 
See more stories tagged with: