Is the System Rigged as Candidates Assert?

A common assertion this election season is that the system is “rigged” in favor of the rich. Upon review, however, it appears that the system is rigged not just in favor of the rich, but in favor of any interest group with influence. Let’s try to be fact-based and rational and share what we found.

The following is a quick survey of a few special interest benefits that have become staples of American life as well as some of the groups that support them. There is no value judgment being expressed here about whether these are good things or bad things, just a simple observation that they exist.

Farmers: Farmers receive over $20 billion annually in financial support. Despite the perennial nostalgia for the “family farm,” agriculture is increasingly dominated by large agricultural companies. Since 1990, small and medium-sized farm production has declined from nearly half of all agricultural production to less than a quarter. Nonetheless, in 2016, family farm households had income 42% higher than the national average. Through the Senate, sparsely populated agricultural states have considerable influence.

Military spending: Despite well documented efforts by the military to close antiquated bases and weapons programs, powerful congressmen still stand in the way in order to protect their constituents.

Teachers: The National Education Association (NEA) is the largest labor union in the country, with three million members. Since the publishing of A Nation at Risk in 1982, it has been clear that American education needs an overhaul. And yet, the NEA frequently impedes reform ideas not deemed to be in its interest.

Seniors: Social Security benefits are the true third rail of politics. Those who suggest reductions in benefits as part of a long-term solvency proposal do so at their own peril. The AARP represents 40 million members and is a vigorous defender of social security benefits.

Big Pharma and the AMA: Since the Truman administration, these special interests have impeded the discussion of universal healthcare proposals, most recently the effort to negotiate drug prices, in order to preserve the most expensive system in the world. Big Pharma alone deploys 1,275 registered lobbyists in Washington to protect its interests.

Subsidized home ownership: While deductible mortgage interest is akin to a right in America, it is nonetheless a government benefit. When added to the sponsorship of Fannie Mae and Freddie Mac, it means those who borrow benefit over those who don’t. The National Association of Realtors was the second largest lobbyist in 2018, spending $72 million to support its interests, including the tax-deductible mortgage.

Subsidized savings: A company 401k and match is a government subsidy of savings and income. The same can be said for defined benefit programs where employer contributions are non-taxable and grow tax free until retirement.

Tax-free healthcare: Like savings, healthcare benefits are not taxable and the employee premium is pretax. None of this is available to employees of companies that don’t provide health benefits, or to the unemployed or retired.

National Flood Insurance Program (NFIP): This government program provides flood insurance where the private market will not at a price property owners want to pay. The NFIP insures $1.4 trillion in property value via five million individual policies, at a loss.

Municipal unions: The influence of municipal unions is considerable, which may explain why so many municipal employees still benefit from defined benefit retirement plans and retirement eligibility starting at age 55.

Even this limited inventory yields a complicated picture. It seems clear, however, that the benefits of influence go far beyond the rich and beg the question of why any program that benefits one segment of the population over another is fair. Perhaps it isn’t the principle of such benefits that critics object to, but rather who gets them. If a program benefits you, it’s “rigged.” If it benefits me, it is justified, maybe even a right.

Take for example two proposals of candidate Warren, a frequent critic of the “rigged” system. In her MFA proposal, she provides a special provision to protect the health benefits of union members subject to collective bargaining. The same could be said for her proposal to eliminate student loan debt, which benefits those who borrowed versus those who didn’t. And with respect to trade, rather than eliminate the influence of special interests, she proposes to shift their influence from “giant corporations” to “workers and consumers.” No matter who benefits, a special interest is still a special interest.

What can we conclude? Since it is unlikely that those with influence will ever self-regulate, maybe the answer is to reduce the opportunity for influence. There are many familiar formulas for doing so, including restrictions on lobbying, campaign finance reform, an element of public financing, and the shortening of the election cycle.