How a 74-year-old Jewish Grandpa Will Change the American Order

Poor people have iPhones too? Sanders was ignored, then mocked, but if anybody can change the trajectory of increasingly mucky American politics, maybe it's him.

Bernie Sanders at Franklin Pierce University in Rindge, New Hampshire, Feb. 6, 2016.

At first they ignored him, then they laughed. Later they shrugged that he didn’t stand a chance. Now their grins have been erased. The American establishment is starting to grasp that Bernie Sanders, the 74-year-old Jewish grandfather from Vermont, could be the biggest threat it faces. And they’re scared.

Last week the usually pro-business, conservative paper Financial Times published an op-ed arguing that the economic and political elites of the West have grown detached from the disaffected people. “One cause of disquiet is the sense that those at the top are corrupt, complacent and incompetent,” wrote Martin Wolf. Is that just the way people feel, or are there empirical proofs of corruption in the higher realms of politicians and big business?

The astonishment of the political and economic establishment, and the press, at Sanders’ popularity – and that of Donald Trump – reflects that detachment. Hedge fund manager Steve Schwarzman, a Jewish billionaire who once compared the plan to raise tax on hedge funds to Hitler’s invasion of Poland, no less, said last month at Davos that he found the American public’s anger, as expressed in Sanders’ rise, bewildering.

“I find the whole thing astonishing and what’s remarkable is the amount of anger,” he said, and called Sanders’ rise “stunning.”

Jamie Dimon, CEO of JP Morgan, recently remarked on declining median income that people are better off – 20 years ago the air was worse and they didn’t have iPhones.

On Monday, Sanders lost the Iowa caucus to Hillary, but barely. If anything, compared with his political status a few months ago, arguably he scored a stunning success. Hillary and Bill Clinton’s rich, well-oiled war machine, which has been rooted deep in the American establishment, on Wall Street, and in the world press and entertainment for the last 30 years, was as astonished as Schwarzman.

Indeed, the Clintons have become American plutocrats. Bill flies with oligarchs on private planes. Hillary delivers lectures to investment bankers for hundreds of thousands of dollars. Neither noticed a change in American society in the last five years: anger, frustration and the realization that the market and free choice are empty words behind which lie, all too often, crony capitalism.

When the liberal, left-wing, Democratic establishment realized that Sanders wasn’t some anecdote, the strategy changed. From ignoring and dismissing him, the Clinton machine and its supporters in the press and business went on the attack. The New York Times was first, running an editorial last weekend espousing Clinton in Iowa and explaining that Sanders’ ideas were impractical.

“Bernie is a prophet,” Randi Weingarten, president of the American Federation of Teachers, told me some months ago – not a person who can be elected or lead change.

Sanders and the sick healthcare system

The press describes Sanders as socialist or social-democrat, which leads many Americans to assume his ideas are utopian, fantastical and impractical. But when you actually read his proposals, it’s hard to see what is socialist or impractical.

Almost everything he suggests is an integral part of the centrist agenda, and sometimes that of the right too, in Israel and Europe: federal education and healthcare and a higher minimum wage. Sanders wants to strengthen public services. He does not espouse socialist ideas like nationalizing businesses or impairing property rights. In Sweden or Denmark, with his ideas he could run with the conservative parties.

The New York Times and Clinton declared this week that Sanders’ main proposal for public healthcare is impractical. The conservative op-eds page of the Wall Street Journal said his healthcare reform plan would cost taxpayers trillions. But economic logic is closer to the “socialist” Sanders than to them. The American healthcare system is apparently the most expensive and corrupt in the West. It gobbles 17 percent of American GDP, almost double the share of healthcare systems in every other developing nation. Much of that money goes to Medicare and Medicaid, and en route, a great many companies and interest groups cut their coupons, inflating the costs even more.

The difference comes to some $1.5 trillion a year, yet the outcome is not wonderful. Most of that money is spent on the gargantuan bureaucracy, superfluous procedures, fraud and terrific monopolistic rents charged by the interest groups, from the hospitals to the insurance companies to the doctors unions to the drug companies to the healthcare service providers to the lawyers.

In recent decades these interest groups have been undergoing consolidation, strengthening their market force even more and raising prices. Together with the government they encouraged heavy, complicated and expensive legislation designed mainly to serve their interests, not that of the patients.

The medical insurance companies in touch with the consumer, who serve him the bill, are usually perceived as the root of evil in the industry. But they’re surrounded by the interest groups that support this expensive, rotten system.

Reforming the American healthcare system does look like a Herculean task, almost impossible. But not for the reasons the Clintons and NYT list.

However, discussion of how to reform American healthcare is premature, since almost none of the candidates want to do that, or can, because the political system at all levels is almost entirely captive to Big Money. The healthcare system and big pharma have spent some $3 billion in the last decade on lobbying.

In the last year Clinton raised tens of millions of dollars from billionaires, Wall Street, healthcare interest groups and public-sector unions, and she’s likely to raise more as Sanders starts to pose a threat.

She’s not as bad as the Republican candidates regarding captivity by interest groups, but she’s not much better. About a third of the $155 million she raised for her campaign so far came from people donating more than $100,000, compared with 57 percent in the case of Jeb Bush, 47 percent for Marco Rubio, and 45 percent for Ted Cruz. The only politicians who haven’t tapped big donors are Sanders, who relies on 3 million small donors and received less than 1 percent of his money from big boys, and Donald Trump, who’s paying for his campaign mostly by himself.

Americans like to talk about the Founding Fathers and Rule of Law, but the ones writing many of the laws are the interest groups. Jimmy Carter even said that American politics has been corrupted by billions in campaign financing after a Supreme Court “Citizens United” ruling that, the former president said, legalized “bribery.” That was a 2010 case that legitimized unlimited infusions to politicians through somewhat fictitious bodies called Super PACs. Some claim the transparency of these entities makes the whole issue less problematic. Or maybe, once it’s legal and transparent, maybe there’s no shame.

The American political system, democracy itself, seemed broken; without big money, you can’t be elected, not for the presidency or Congress or the legal system, because in America judges and district attorneys have to run for office. So Sanders isn’t overdoing it when he describes himself not as running for president but for political revolution.

In the last year, Sanders raised almost $100 million, but 99 percent came from small donors that are increasingly unrepresented in America, especially when it comes to decisions about the financial system, the healthcare system, energy or defense. Americans felt the result of deregulating the financial system when it collapsed in 2008; they feel the results of the healthcare system every time they get sick. And there’s that quiet economic cancer of America’s defense spending.

Republicans like to say the government is always growing and squeezing the taxpayer for more and more. This rhetoric rings hollow when defense is allocated a trillion dollars a year. Rubio even said he wants to spend more, which naturally made the weapons companies very happy.

At best, the American taxpayer is helpless before the defense companies as they shove unneeded systems down its throat. At worst, the taxpayer has to wonder whether the American penchant for going to war has to do with the millions of Americans who work in the defense industry, and the thousands of corporate managers and politicians who get rich from selling weapons.

Sanders the “socialist” turns out to be the true conservative on defense spending. He is the only politician in America who, for decades, has called for defense budget cuts and giving the money to social security networks. When it comes to the Pentagon squandering money, Sanders likes small government.

Free market aficionados might take fright at Sanders and his belief in government’s ability to supply services efficiently. But they’re missing the historic perspective. Discussion on these things was legitimate decades ago, as Washington built the welfare state. Today the clear and present danger to democracy is its oligarchization. American capitalism is ruining itself and its legitimacy at an ever-faster rate in the last decade.

Sometimes even its greatest supporters have to admit it. Bloomberg laid its hands on a report by a Goldman Sachs analyst about the record profits of American companies. (Goldman Sachs and Washington probably have the biggest revolving door of them all; dozens of ex-Goldmanites go back and forth between the treasury and bank.)

Meanwhile, the 500 biggest companies on Wall Street have been posting record profits for five years now, dramatically above their historic averages, says analyst Sumana Manohar.

Capitalism is based on the idea of competition pushing the economy to efficiency, meritocracy and general social welfare. High profit rates are supposed to attract new competitors into an industry, which lowers profitability rates. How could profitability continue to break records just as demand is slumping and the middle class’s purchasing power is weakening?

Manohar answered that one: If we’re wrong and these high profitability rates are sustained over time, it raises broader questions about the ability of the capitalist system to achieve the results expected of it, he says.

Maybe Manohar shouldn’t hasten to ask whether capitalism is broke. Maybe he should revisit the eight-and-a-half-hour speech “socialist” Sanders delivered to Congress five years ago, offering an explanation for the corporate riches.

In many industries – not only finance, in fact in most – there is growing concentration and complex, heavy regulation. The result is that the big companies have vast power and small competitors get squashed like bugs, while consumers are held captive.

The big money fueling American politics is the money perpetuating these structures. So Sanders’ political revolution, a politics relying solely on small donations by millions of citizens, could be the harbinger of a real economic revolution. Even if the “liberal” oligarchy manages to trip him up on the way to the White House, his ideas are going to be harder to block.