Special to Southside Pride

A deficit of democracy

BY RICHARD TAYLOR

Students are taught to revere the Constitution for advancing the cause of democracy, but the most prominent author of the Constitution, James Madison, viewed the matter quite differently. In 1787, during the debates over the Constitution, taking note of England and being aware that greater voting rights would lead to an agrarian law harmful to the interests of wealthy landowners, Madison sought to structure the U.S. Constitution’s checks and balances in such a way that “our government ought to secure the permanent interests of the country against innovation” so as “to protect the minority of the opulent against the majority.”

More than two centuries later, Madison’s checks and balances still serve to thwart popular aspirations for reform of health care, extension of union rights, financial regulation, reduction of military expenditures, and other pressing goals. Today, perhaps the most important barrier to the will of the majority is the ability of today’s opulent minority—concentrated corporate power—to dominate Congress through its campaign contributions. This can be illustrated nicely by observing the fate of financial reform legislation in the House of Representatives.

Not surprisingly, the reckless lending, overt criminality and secret dealings of the financial services industry within a context of serious recession, led to a firestorm of popular indignation and legislative initiatives for reform of these practices.

At the onset of the Obama administration it might have been expected that the timing for reform would have been most favorable. Riding a wave of discontent over various Republican transgressions, the Democrats won substantial majorities in 2006 and 2008.

However, for nearly 20 years, a faction of Democrats, now called the New Democrat Coalition, has wielded significant power within Congress. As Business Week recently pointed out, “In the House of Representatives, where the debate on regulatory reform started, the New Democrat Coalition has 68 fiscally conservative, pro-business members who fill 15 of the party’s 42 seats on the House Financial Services Committee.”

Three key provisions of the reform bill were placing derivatives trading onto regulated trading platforms, a new Consumer Protection Agency, and “cram-down” provisions which would have given federal judges the authority to extend loan terms, lower interest rates and cut principal for bankrupt homeowners. All three went down to defeat at the hands not only of Republicans but leading Democrats.

Derivatives trading carried out in the shrouded world of over-the-counter-deals had contributed mightily to the economic crisis. Aboveboard regulation was the order of the day, but Wall Street pulled out all the stops to block it. In the first half of 2009, while millions of workers were losing their jobs and millions of others underemployed and despairing, the top five U.S. banks, which include J. P. Morgan, Goldman Sachs and Bank of America, “earned” more than $35 billion from derivatives trading.

The New Democrat Coalition mobilized to serve Wall Street and block new regulations. This was another return on investment for the financial industry given that it had donated nearly $25 million to members of the NDC since the start of the 2008 election cycle. Leading the charge of obstruction was Representative Melissa Bean of Illinois, who accepted $1.4 million, more than any other member of the coalition.

The defeat of the Consumer Protection Agency was no mere trifle either. As other investments soured, banks have increased their income by a web of fees imposed on consumers. The CPA might have served as a forum for challenging the banks’ latitude on these fees.

Compounding the defeat over financial regulation is the blocking of a national health plan similar to those long embraced by other industrial countries. Meantime, Democrat leaders of Congress have shelved legislation that would ease union organization.

This state of affairs has not been lost on the American people. The wave of optimism about the Democrats has vanished. A recent Wall Street Journal/NBC News poll reveals that only 35 percent of voters feel positively about the Democrats. Having a good memory, this discontent is not benefiting the Republicans, as only 28 percent of voters have positive feelings about them.
The growing disdain for both parties carries an ominous message: The parties are losing legitimacy in the eyes of the citizenry, and for good reason—they’re both serving the interests of a profligately wealthy minority, as the income, job security, benefits and general welfare of the majority of people continue to wither away.
At this watershed moment, the answer is not to call once again for campaign finance reform because that will only end in a search for new loopholes. Rather, it is now time for progressively minded citizens to pool their own resources and devise political means that will advance the “innovations” now stifled by the main parties’ collusion.