Thinking

Going for the Jugular

The hedge fund manager reaches for his check book…

Now that we have a neoliberal dream team on the Republican ticket I thought it would interesting to follow the money. Regular readers would know that the Policy Tensor holds the investment theory of party competition to be the best first-order approximation of electoral politics in the United States. Looking at the sectoral decomposition of direct campaign contributions, the pattern that clearly jumps out is that finance has moved decisively to the Republicans, even as Silicon valley continues to bankroll Obama. Even though insignificant in comparison, we should note that the other sectors have an entirely predictable distribution. [All data is from OpenSecrets.org]

Direct Contributions (Millions) Obama Romney
Finance 11 25
Energy 1 3
Farm 1 2
Health & Pharma 7 5
Tech 10 2

Outside contributions, however, tell a completely different story. Recall the Supreme court’s reactionary verdict in the Citizens United case. That has opened up a hose gushing out hundreds of millions of dollars in political spending by corporations and financial interests. Looking at these numbers one gets a radically different picture:

Outside Spending (Millions) Total Obama Romney Percent for Romney
Finance 66 10 56 84%
Manufacturing & Retail 43 0 43 99%
Health 23 2 22 93%
Energy 13 0 13 97%
Gambling 19 0 19 99%
         
Unions 24 24 0 0%
Hollywood, Media & Legal 21 15 6 28%
   
Retired 13 6 7 51%
Nonfinancial Services 14 4 10 72%
Tech 2 1 1 65%

What is happening is stupendous. The New Deal coalition forged by FDR–the party system of 1936 that lasted until the structural crises of the 1970s–had investment banks, tobacco, oil, and high-tech manufacturers. With the collapse of that system and the falling apart of this bloc of investors, most of these firms abandoned the Dems for Reagan. Clinton’s breakthrough was based on winning back investment banks and high-tech industry, especially the then nascent new economy firms in California. Defence, oil, and the older manufacturing industries stayed put with the Republicans. This is why a slight swing in finance was sufficient to create a winning coalition for Bush. With the Bush debacle–the reaction in the population was too strong to counter after the financial crises–finance moved decisively to Obama.

Finance has moved back to the GOP with a vengeance. But that is not surprising. After all, hedge fund managers and investment moguls have been complaining about Obama’s threat to re-regulate Wall Street and increase their taxes. What is astonishing is the wipeout in manufacturers. Not all manufacturers are out to get Obama of course so this number is misleading. Looking at the breakdown, we have the following distribution:

Chemical & Related Manufacturing 22
Home Builders 12
General Contractors 4
Misc Manufacturing & Distributing 3
Automotive 1
Retail Sales 1

A remarkable feature of the above distribution is the concentration in specific industries with 80% of the moolah coming from chemicals and home builders. This phenomena is clear from the appearance of gambling interests in the second table as well. Those interests alone account for almost twenty million dollars. Although opensecrets.org does not identify the plutocrat behind this spending spree, this one is easy to guess. It is almost surely the billionaire Sheldon Adelson who has been on a rampage to prevent a second term for Obama which he views as contrary to the interests of Israel. The chemical interests are likely to be the Koch brothers, who almost single-handedly pulled off a coup in Wisconsin with the gubernatorial recall campaign of Scott Walker, the union slayer. The home builders interest is Bob J. Perry, the Houston homebuilder who was a major financier of Swift Boat Veterans for Truth in 2004. 

In any case, it’s clear that business is on a warpath. I think it would be naive to think that Obama is going to win easily this November. The electoral game is played over half a dozen swing states. Even here, only swing voters matter. If you are stupid enough to be a swing voter, you are stupid enough to be swayed by a billion dollar advertising blitzkrieg. If the economy fails to recover–something that is basically unavoidable at this point–how hard would it be for the best minds in PR to convince the gullible that Ryan is the man to tackle the economy?

The Ryan platform

In the coming months, there is a going to be a dramatic escalation in the flow of money to the Romney campaign. In fact, I would not be surprised if Romney raises twice as much as Obama in the next three months. Although he was at the center of the private equity big bang that made him hundreds of millions–which makes him attractive to financial interests a priori–he doesn’t have much of a policy platform. This has meant that most business and financial elites have been sort of lukewarm towards him. Congressmen Ryan’s insertion into the veep slot means that Romney has doubled down on the free market. What remains of the welfare state will be gutted. While this might fix the fiscal problem, it would be highly regressive, significantly decreasing effective real incomes for the mass of the American populace. Taxes on high incomes would be cut sharply to perhaps 25% making it the most regressive tax regime in post-war US history.

There will be a strong rally on the stock market when Romney wins. It would signal a renewal of the cycle of capital accumulation. With the threat of regulation gone for the foreseeable future, Wall Street will rejoice. We will probably see an asset bubble within the first two years of the administration, followed by a crash and a bailout. The masters of the universe can hardly stop salivating. 

Let us not exaggerate though. No matter who wins in November, US policy will stay within a very narrow band. Obama is not going to take on the banks or expand welfare, nor is he going to deviate from the elite consensus on foreign affairs. The drone wars will continue, as will the covert war with Iran. Bankers will keep getting giant bonuses even as they enjoy state guarantees and the Fed put (mistakenly called the Greenspan put on wikipedia). Inequity will keep growing. The economic malaise will continue till the balance sheets of consumers and firms get rebuilt. Neither Ryan, nor Obama, can do anything about it.  

So, don’t worry, things are going to be just dandy.

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