In the United States, elections hold our representatives accountable. But voters get a limited slate of options—and significant economic redistribution is usually excluded from the ballot. Meanwhile, economic inequality in the United States is growing to record levels, and many wealthy Americans are paying a lower effective tax rate than most of their fellow citizens. Jeffrey Winters joins host Alex Lovit to discuss American oligarchy, how it distorts our democracy, and what we can do about it. Jeffrey Winters is a professor of political science and director of the Equality Development and Globalization Studies program at Northwestern University. He is the author of several books about oligarchy, wealth, and democracy, most recently The Blind Spot: How Oligarchs Dominate Our Democracies. https://www.simonandschuster.com/books/The-Blind-Spot/Jeffrey-Winters/9781668221532
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JEFFREY: How is it possible that we could be a participatory democracy on the one hand that has grown more democratic over the course of the United States history, and yet we have grown more unequal economically? That is a bit of a head-scratcher.
ALEX: A few weeks ago, Elon Musk became the world's first trillionaire. To put that in perspective, he's rich enough to theoretically buy all the residential real estate, every house and apartment building, every mansion and trailer park in the entire state of Tennessee, and he's not afraid to use his money politically.
Musk spent about two hundred and ninety million dollars in the 2024 election, and he's not alone. According to the organization Open Secrets, in that same election cycle, candidates, political parties, and PACs spent fourteen point eight billion dollars on influencing federal [00:01:00] elections. That's a little under a hundred bucks for everyone who voted.
So if you voted in that election, that's how much was spent trying to sway just your vote. Except, of course, a lot of us live in uncompetitive districts. So in reality, political campaigns and advertisements ignored a lot of us and instead targeted swing states, spending many hundreds of dollars per voter.
What does it say about our economy that so many struggle to find affordable housing while one person can afford to buy the homes of seven million Tennesseans? What does it say about our democracy that in election years so much money is spent trying to influence voters rather than on solving their problems?
You're listening to The Context. It's a show from the Charles F. Kettering Foundation about how to get democracy to work for everyone and why that's so hard to do. I'm your host, Alex Leavitt. My guest today is Jeffrey Winters. Jeffrey is a political science professor at Northwestern University and the author of an excellent new book, The Blind Spot: [00:02:00] How Oligarchs Dominate Our Democracies.
Jeffrey believes in democracy, but if we want to get serious about tackling inequality in our society, he says it's going to take more than conventional politics Jeffrey Winters, welcome back to the show.
JEFFREY: Thank you, Alex. It's a pleasure
ALEX: So I thought we could start at the beginning of American history. Uh, we're releasing this shortly after July fourth, uh, two thousand and twenty-six, the two hundred and fiftieth anniversary of America's founding.
You tell a story in this book about the founding and the Constitution, uh, that I think most people aren't really aware of. And can you talk a little bit about the role of wealth and debt in the-- America's founding?
JEFFREY: Yeah. You know, we're all aware of the Constitutional Convention of seventeen eighty-seven.
And one of the questions is: why did the Constitutional Convention happen then? We know that the country was under the Articles of Confederation. There were a lot of problems with the Articles of Confederation. But I think what a lot of people don't know [00:03:00] is that there were multiple attempts to have a convention, and those attempts failed or fizzled multiple times.
In fact, there was resistance to having a convention. Six of the thirteen states had passed resolutions saying they don't want to have a convention. They had just thrown off a leader over them, a power over them, and the political leaders at the level of the states weren't eager to create a new government over them.
So the question is: why did they actually not only gather in May of seventeen eighty-seven, but they ran to Philadelphia in a panic? And it turns out we need to understand that those years, the seventeen eighties, after the war, it was a period of debt crisis. There had been an enormous amount of borrowing from creditors inside the United States, as well [00:04:00] as creditors in Europe and governments in Europe that had intervened, and there was a lot of debt to be repaid.
And the debt fell on predominantly small farmers who had to pay this debt. And it turns out that many, many of them could not pay the debt. And so there were many, many bankruptcies going on. Some of the very first prisons in the United States were debtors' prisons. So you couldn't just default on your payment of taxes, uh, which were going to pay the creditors.
You couldn't just pull your pockets inside out and be done with it. And in many counties across the states, sometimes it would reach tens of thousands of people who were being put in these debtors' prisons. In some counties, as much as seventy percent of small farmers were experiencing this kind of incarceration.
So the key thing to understand then [00:05:00] is half of the states had their legislatures dominated by the many, by the small farmers. It was highly responsive in a democratic way. The other half of the states were dominated by the creditors, by the oligarchs of the day. And in the states where the small farmers had the advantage, they asked for relief from this debt crisis, and they got it in the form of printed money.
They had borrowed in gold and silver, but they were repaying in paper. And a lot of that paper depreciated. And so in effect, the oligarchs of the day were getting a haircut. They were bearing the pain and the burden of the debt crisis. Meanwhile, in the other half of the states, called the hard currency states, no relief.
And it was brutal, and more and more farmers were getting thrown into debtors' prisons and losing their [00:06:00] farms. Many of us from history are familiar with Shays' Rebellion, and there were more than five hundred Shays' Rebellions that had sprung up of various sizes. And basically, you had these indebted farmers who marched on the town square, and when they got there, they freed their fellow citizens from the debtors' prisons, and they blocked judges from being able to throw anyone else in And so basically, there were two crises that the framers were responding to.
On the one hand, half the states were producing democratic outcomes that were damaging to the wealthy. And on the other hand, where they weren't getting that relief, there was actual action from below, mass action. Well, those two things combined caused the framers to overcome their resistance and run to [00:07:00] Philadelphia.
And when they got there, the framers disagreed about many things. They had different positions on slavery. They had different positions on big and small states. But they all agreed that there was, in Hamilton's words, an excess of democracy in America. They decided to scrap the Articles of Confederation and redo it from a start.
They created a House, which was the only thing that the people were allowed to vote on. They created a Senate over that to check the House, to make sure that if any policies like we had seen coming up in some of the states, if any of those happened, they would be blocked by the Senate. And then they gave a president a veto over the House and the Senate, just in case anything got up that high.
And then they created above that a Supreme Court where just a few people could cancel the entire democratic process below them. They [00:08:00] did not want democracy to be able to threaten the very, very wealthy, and that's the design they came up with. And so what we have to understand is the combination of oligarchy and democracy that we've had in the United States over the last two hundred and fifty years is not a flaw in the democracy.
It's a feature of it.
ALEX: So you're saying their oligarchy and democracy were entwined from the beginning. So in what sense is democracy real? What can we, the people, decide?
JEFFREY: So, you know, there's some people who dismiss American democracy as being a sham. I'm not among those who do that. And so in what sense is it genuinely a democracy?
Well, think of it like this. First of all, democracy among the non-rich has actually been highly functional over the course of the US experience. So for example, groups that were excluded from [00:09:00] the outset, women, people excluded on the basis of race, other kinds of groups that have struggled to be represented, those struggles have actually paid off, and they have gotten access to participation power, voting, voice, and representation.
So that is all very, very real. And one only needs to live in an authoritarian country for a relatively short time to realize that the civil freedoms of the United States are real and important. But the key is that also built into that system, if we think of that first horizontal axis, which is highly democratic, not perfect, but responsive, the vertical dimension, which is between the non-rich and the rich, that was designed to not be responsive.
It was designed with breakers, with safeguards, with [00:10:00] blocks built into it. And so how is it possible that we could be a participatory democracy on the one hand that has grown more democratic over the course of the United States history, and yet we have grown more unequal economically? That is a bit of a head-scratcher.
How does that happen? And we really have to understand that origin story to understand how both of those trends could develop over time
ALEX: So, you know, I'm looking at a, a Pew poll here from, uh, last year. Sixty-six percent of Americans say that the economic system needs either major changes or complete reform.
Eighty-three percent of Americans say the gap between the rich and the poor is either very big or a moderately big problem in our country. Eighty-nine percent of Americans say that rich people having too much political influence contributes to economic inequality. So what keeps us-- With those [00:11:00] large majorities, what keeps us from just voting to raise taxes on the rich and redistribute the, the wealth?
JEFFREY: Democracy in America, as it is currently structured, is not going to give us a response to the kind of problems that you were just describing. Why is it that we can't do something about wealth inequality? First of all, the system is genuinely designed to make that hard to do. But also, we've had some remarkable changes just in the last fifteen to twenty years with major decisions like Citizens United, where the Supreme Court decided that the use of wealth power, the use of money in our political system was speech.
It was the equivalent of you and me speaking. Only, obviously, it's not the same because in our system, voting and voice are distributed [00:12:00] radically equally, one person, one vote. But when it comes to voice through money and wealth, money is so concentrated in the United States in so few hands that that puts an incredible imbalance of power into place.
And that has expanded to a point where I would say the United States is now at a tipping point where oligarchic power is so dominant that many people are experiencing a crisis of confidence in the democratic system
ALEX: Well, explain to me how that works or how the influence of money works. So I, I go, you know, to the polling place, and I have the choice of Kamala Harris or Donald Trump.
My vote counts just as much as Elon Musk's. So in what sense is my options limited?
JEFFREY: A couple ways. The first one is all of us get to go to the polling place on Election Day. We also get to go to the polling place on [00:13:00] Primary Day. So we get two shots at it to try to shape the outcomes. However, there's another primary that happens before the primary that we get to vote on, and that's the wealth primary.
Anyone who wants to be viable in our democracy needs to first attract resources to be able to campaign, to run, and they do that by going to the very, very wealthy. And so there is a very dominant role that big money plays in filtering and vetting who it is that is able to go forward. And so do we get choices?
Yes, but we don't really get to choose the choices. But I mentioned there are two ways. It's not just that money power shapes the political system in the electoral process. It also shapes outcomes for the very wealthy outside of the direct political system. And what I'm referring [00:14:00] to here is what I call the wealth defense industry Armies of lawyers, accountants, wealth management professionals, lobbyists of all kinds were organized into a private sector industry whose job it is to protect the wealth of oligarchs in the system.
ALEX: There was a, a graph in your book that I found kinda shocking, and it was of the effective tax rate for the bottom half of the country, so people earning median or below income on the one hand, and on the other hand, the effective tax rate for the wealthiest five hundred people in the United States. So just the five hundred individuals in the United States.
We're not talking about the one percent, we're talking about, like, the point zero zero zero one percent. Right. And recently, uh, according to this graph, for the first time, I think since the advent of progressive taxation, you know, a little over a century ago, recently the tax rate for the five hundred richest people is below the [00:15:00] effective tax rate for the poorest half of the country.
So that's pretty crazy. And you've already started to outline it a little bit. Can you say a little bit more about, like, what are the mechanisms that rich people use to avoid paying taxes?
JEFFREY: First of all, let's think about progressive taxation as a democratic outcome. It's an expression of the power of the many to try to place higher burdens on those dramatically more capable of paying and putting lower burdens on those below.
And also, with those resources, trying to create either a cushion, a safety net, or opportunities for people to be able to prosper. Oligarchs haven't always won every battle. In fact, during things like the sequence of World War I, followed by the Great Depression, followed by World War II, these deep ruptures actually diminished the power of oligarchs.
[00:16:00] So coming out of the Second World War, the tax rate, the highest tax bracket in the fifties and sixties for oligarchs was ninety-one percent. There were twenty-seven tax brackets in those decades. Today, here we are a little over half a century later, and there are only seven tax brackets, and the highest tax bracket has been reduced down to thirty-seven percent, while the corporate tax has also been reduced dramatically.
So all of that is a series of decade after decade of victories on the part of oligarchs to defeat progressive taxation. But then after the victories happen in the halls of Congress, the wealth defense industry, the lawyers, the accountants, and the lobbyists and others insert text into the tax code that is favorable to them, so that when it comes to forming tax [00:17:00] shelters and other kinds of tax avoidance and tax evasion schemes in the now eighty thousand pages of tax code, there is so much complexity that this industry is able effectively to come up with ways to not pay the taxes almost at all You know, we tax income, and one of the things that oligarchs realized very early on is, well, if income is taxed, take no income.
Salary is for suckers. So if you have hundreds of millions or billions of dollars in assets, you can borrow against them, and you can borrow at incredibly favorable rates because banks view you as a very, very low risk. So you might have to pay two, three, four percent on this borrowing, which is dramatically below what you would pay if it was taxed away.
And in some cases, on [00:18:00] the borrowing, you can even take tax deductions depending on how it's structured. So all of these are options that are available to oligarchs. Also, the wealth defense industry moves resources offshore into secrecy jurisdictions, and it hides the money. There's billions of dollars in offshore secrecy accounts.
Another thing that the wealth defense industry has helped do is lobby and pressure to undermine the capacities of the IRS so that the IRS is not able to track and trace the money. And then finally, another thing that the wealth defense industry does on behalf of oligarchs is come up with creations like large partnerships.
Most corporations in the past were what, were what were called C corporations, and think of it as Ford Motor [00:19:00] Company, and it might have multiple subsidiaries. It's got a lot of components to it, but it was basically one entity. Well, there are now large, complex partnerships that exist in the United States and elsewhere that have up to five hundred thousand partners in them.
Sometimes the partners are people, sometimes the partners are shell corporations, sometimes the partner is a trust. What's the purpose of creating a partnership like that? The IRS and the GAO have determined that the key reason is to evade and avoid taxes, and it's so complex that the IRS is not able actually to audit and even understand these partnerships.
Meanwhile Those of us who are paid ordinary compensation, W-2, where third-party entities, our employer, not only [00:20:00] reports our income, but collects the taxes from us even before we get our paycheck, and it's paid to the IRS. We all are paying our full tax bracket, essentially. And in fact, tax cheating on the basis of average citizens is incredibly low because it's incredibly hard.
So the tax gap in the United States today, which is the difference calculated by the IRS between how much they should be able to collect according to their calculations and how much they do, is now a trillion dollars a year. And the vast majority of that is from oligarchs, because they, unlike us, make money from money, and it is very hard to trace and track for all of these reasons I've just given.
And so annually, hundreds of billions of dollars are not being paid in progressive taxation, not going into the system. [00:21:00] Programs are being slashed and cut in education, healthcare, housing, infrastructure, you name it. And the result is we are now in an epic moment of inequality in the United States. In fact, we have never had this much inequality as we currently have now in all of human history, and our liberal democracies are among the most unequal societies ever to have existed We are participating in our democracies, and yet we have exploding inequality.
ALEX: Well, so you know, that's all kind of a bummer, uh, you know, that the United States was founded on, uh, protecting wealth and, and here we are 250 years later and, uh, the oligarchs have a, a lot of resources, a lot of ability to evade taxation. Let's talk about what we can do about this situation. One thing you're trying to do is raise awareness, is draw attention to this as a problem.
And I [00:22:00] guess in this moment, there's so much attention being placed on violations of democracy happening in Washington right now, u- use of federal power to intimidate critics, you know, sort of violations of the checks and balances. Are you finding it more difficult now to draw attention to this problem than you did the last time you were on sh- this show a couple of years ago?
JEFFREY: No, actually quite the opposite. So there's been a big change between a couple of years ago on the show and now. One is that at that time, it was still relatively rare to hear words like oligarch and oligarchy. And so those words are in play in the United States in a way that in the last five years there's been a dramatic change.
There is an awareness of this concentrated wealth power. We are actually in a moment of what I call in the book, in your face [00:23:00] oligarchy. That is, the sheer visibility of this power is now so high it's impossible to ignore, and people are really seeing the distorting influence that it's having on American politics.
We've seen things like the Fight Oligarchy tour that Bernie and AOC are going on all over the country, rallies that sometimes are drawing twenty, twenty-five thousand people at a time. In fact, if you watch videos of, or if you attend those rallies, you will see that when someone like Bernie Sanders says, "Individuals at the top are using their wealth power to distort your democracy," the crowd really, really reacts because Americans- are remarkably tolerant of inequality of wealth.
You know, someone's got a yacht, someone's got a rowboat. Well, okay, maybe they earned it, is [00:24:00] the thinking. But when it comes to converting that wealth into something that tramples on one person, one vote, that is seen as deeply illegitimate and unacceptable. Also, another indicator of change that's happening, especially in the last two or three years, is that we're now having a national discussion about serious proposals of wealth taxes being put in place.
It was voted on in California. There are national proposals for wealth taxes. There are international proposals for wealth taxes, and some countries are even putting exit taxes in place. That is, if you are threatened with a wealth tax and you move your money offshore, you have to pay a forty percent exit tax just to be able to move your money out.
All of these kinds of policies are indicative of [00:25:00] an awareness and what I would argue is the first steps toward a backlash
ALEX: Well, so you mentioned earlier that during the Great Depression and, and the World Wars, there was a substantial amount of redistribution in this country, and we can get into that, the, the ways that crisis could provide opportunities.
I am hoping there may be opportunities for reform that do not require a depression and a world war. So you're saying there, there's rising awareness now. What can be done in the short term? What might be possible, uh, in this political moment?
JEFFREY: Yeah. In the last chapter of "The Blind Spot," it lays out two kinds of strategies.
One is preparation for cataclysm. It's not just sitting around waiting for a deep rupture or crisis, but actually preparing for a crisis so that that opportunity is not squandered. But there's another part I put forward in that chapter, [00:26:00] and I call it strategic incrementalism. That is the policies that are possible now under current constraints, under current politics.
I'm guessing most people have never heard of something called the Corporate Transparency Act, CTA. This is a law that was passed as part of a defense authorization bill in twenty-twenty-one. Activists and others who were trying to put constraints in place on oligarchs in the United States to try to make them less secret, more transparent, have been pushing for decades for something like the Corporate Transparency Act.
But in twenty-twenty-one, it actually passed the House and the Senate and was approved. It basically says there are thirty-three million corporations in the United States. Some of them obviously are publicly traded, [00:27:00] and we know who the beneficial owners are of those corporations. But there's a lot of those thirty-three million corporations which are secretive shell corporations.
The Corporate Transparency Act created a national registry that all the companies basically had to go to and reveal who owns these entities. And so this act, which passed and is actually currently law Was a major setback to oligarchs and clearly doable now. But what happened? Well, by twenty twenty-four the Treasury Department had set up this registry.
But suddenly, with the new election in twenty twenty-four, by March of twenty twenty-five, Secretary Bessent announced that the regulations around this law suddenly [00:28:00] exempted ninety-nine point nine percent of all corporations. It's still law, but it's been gutted by the Treasury Department currently. The law when it was passed got no headlines.
The gutting of it got no headlines. But I can assure you, in the world of the wealth defense industry and for oligarchs, this was seen as a horrible setback in the first place and a major victory. Those kinds of policies are doable, winnable, and can be re-won. Let me name another policy that is very doable.
It's called the Enablers Act, and the Enablers Act is something which continues a policy which was adopted right after nine eleven in the Patriot Act. One of the things that the United States security apparatus discovered is that it was too [00:29:00] easy in the banking system to move money around by terrorists and people who were going to harm the United States.
And so in the Patriot Act was placed a new law that said banks had to not only know their customers, but had to report suspicious activity. And if they didn't, they could actually be criminally liable for allowing transactions to occur that were illegal under their noses. Well, the Enablers Act was a continuation of that.
It passed the House, and when it got to the Senate, a single senator, Senator Toomey, blocked it and had it removed from the defense authorization bill. It would have required law firms, real estate transactions, other kinds of professionals and accountants to do the same things banks had to do, which was to [00:30:00] report suspicious, secret, illegal activity.
That was blocked. That can be put back in place again
ALEX: Yeah, so these are, are doable things, and to make them happen, it helps for people to have awareness and be able to put pressure. So thank you for spreading the word on those. So that's strategic incrementalism, the first strategy you lay out. The other strategy which you, you just, uh, described earlier as, uh, preparing for cataclysm.
You know, I have some mixed feelings about that 'cause I'm, I'm not so hot on cataclysm, but you know, if some kind of major disaster were to occur, what ideas do we need to have in place?
JEFFREY: Well, so first of all, I have to say I'm not pro cataclysm. People get hurt. I'm not interested in people getting hurt.
But history shows that crises happen. War, pandemics, economic collapse, these things happen. And so the question is, how do we fortify democracy in those moments? How do we make sure that the balance [00:31:00] shifts back in a fundamental structural way in favor of the average citizen? Well In a deep crisis, here are a few things that we should, I think, move on.
Number one, I think it's absolutely important that oligarchs pay wealth taxes because we ordinary citizens are already paying wealth taxes. What is the primary store of wealth for the average citizen, for the non-rich? And the answer is your home. And everybody is paying an annual marked up, adjusted wealth tax on their home every single year.
It's called a property tax. That property is where the most of us have our wealth. Now, do oligarchs also pay taxes on their homes and their property? Yes, but it happens to not be the core store [00:32:00] of their wealth, and that core store of their wealth is not taxed. So major policy to push through under the opportunity of crisis would be something like that.
But there are other debates and discussions in play. The idea of checks and balances that we normally think about in our Constitution is to make sure that a monarch or an authoritarian is not able to take over. But what I described earlier are the vertical checks and balances which were designed deliberately to check the people below.
And so I would, and not, not just me, but others believe that we should eliminate the Senate.
ALEX: That's a pretty big thing.
JEFFREY: That's a very big thing. But what is the Senate there for? The Senate is there to block the House. I would also eliminate presidential vetoes. We now, when we have a veto, it takes a [00:33:00] super majority to overcome that veto.
That is an oligarch protecting policy, and we shouldn't have that. Again, we've got the politics of the ordinary where changes like CTA and the Enablers Act are very much within the realm of the possible. But why is it important to talk about deep structural changes? Because oligarchic power in the United States is deeply structured, and if we wanna do something about invigorating our democracy, we have to think in terms of very, very major people empowering changes.
ALEX: Well, Jeffrey Winters, thank you for this book, which I very much enjoyed, and thank you for drawing attention to a problem that I am convinced is a major problem in our democracy. And thanks for joining me on the context.
JEFFREY: It's been a pleasure. Thank you very much, Alex, for inviting me.
ALEX: The Context [00:34:00] is a production of the Charles F. Kettering Foundation. Our producers are George Drake Jr. and Emily Vaughn. Melinda Gilmore is our director of communications. The rest of our team includes Jamal Bell, Tao Cliburn, Jasmine Olari, and Darla Minnick. We'll be back in two weeks with another conversation about democracy.
In the meantime, visit our website, kettering.org, to learn more about the foundation or to sign up for our newsletter. If you have comments for the show, you can reach us at thecontext@kettering.org. If you like the show, leave us a rating or a review wherever you get your podcasts, or just tell a friend about us.
I'm Alex Levitt. I'm a senior program officer and historian here at Kettering. Thanks for listening
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