The Cost Disease of the Populist Sector

A few thoughts on a lot of scandals.

May 5, 2023

brown wooden smoking pipe on white surface — Photo by Tingey Injury Law Firm on Unsplash

The story of Clarence Thomas and his super-wealthy and super-generous friends is a parable of political hypocrisy. But it is also about much more than that. It is also about what happens when holier-than-thou political elites mix with richer-than-thou benefactors.

But let’s start with the hypocrisy! It is worth remembering that the populist surge in 2016 was driven in no small part by the perception that the governing elites of this country were playing by a different set of rules than everyone else. For example, politicians on both the right and the left made a lot of hay about how the Clinton Foundation received a lot of funding from dubious sources at the same time that Hillary Clinton was Secretary of State. Add in Clinton’s unwillingness to adhere to email protocols, and one can understand how a narrative quickly took hold in 2016 that the country needed to check its corrupt governing elites.

This is the essence of the populist political style: “Populists articulate their agenda as one that is opposed to corrupt elites trying to frustrate the wants of the common man. They therefore oppose any checks and balances on the ability of a populist leader to govern, characterizing such constraints as elite manipulation of the system.”

This raises an excellent question: what happens when populist elites, after acquiring political power, start playing by their own set of very different rules?

That question has to be asked now, because hoo boy, some of these folks are stepping in it. Herschel Walker appears to have engaged in campaign finance violations of the first order. According to the Daily Beast’s Roger Sollenberger, “it was something campaign finance experts are calling ‘unprecedented,’ ‘stunning,’ and ‘jaw-dropping.’ Walker wasn’t just asking for donations to his campaign; he was soliciting hundreds of thousands of dollars for his own personal company—a company that he never disclosed on his financial statements.

Speaking of murky campaign finance, The GOP-controlled Florida legislature seems very interested in covering for Governor Ron DeSantis, proposing legislation that would make it harder to detect who is paying for his fancy-pants book travel and overseas jaunts.

And then there is the Supreme Court. A raft of stories have come out in 2023 — one on Neil Gorsuch, one on John Roberts, one on the Federalist Society’s Leonard Leo. one on the entire SCOTUS — that may or may not have crossed an ethical line but are certainly will within the territory of “raises questions.” To put it another way: take whoever is being accused of something naughty, replace that person’s name with “Hillary Clinton,” and then imagine just how much populists would be ranting and raving about corrupt elites.

One can argue that this is just hypocrisy run amok. Surveying the series of ProPublica stories about Clarence Thomas’ super-close friendship with billionaire Harlan Crow,

however, methinks there is an even deeper problem at work.

What do the ProPublica stories show? Let’s just excerpt the latest one by Joshua Kaplan, Justin Elliott and Alex Mierjeski:

In 2008, Supreme Court Justice Clarence Thomas decided to send his teenage grandnephew to Hidden Lake Academy, a private boarding school in the foothills of northern Georgia. The boy, Mark Martin, was far from home. For the previous decade, he had lived with the justice and his wife in the suburbs of Washington, D.C. Thomas had taken legal custody of Martin when he was 6 years old and had recently told an interviewer he was “raising him as a son.”
Tuition at the boarding school ran more than $6,000 a month. But Thomas did not cover the bill. A bank statement for the school from July 2009, buried in unrelated court filings, shows the source of Martin’s tuition payment for that month: the company of billionaire real estate magnate Harlan Crow.
The payments extended beyond that month, according to Christopher Grimwood, a former administrator at the school. Crow paid Martin’s tuition the entire time he was a student there, which was about a year, Grimwood told ProPublica….
Last month, ProPublica reported that Thomas accepted luxury travel from Crow virtually every year for decades, including international superyacht cruises and private jet flights around the world. Crow also paid money to Thomas and his relatives in an undisclosed real estate deal, ProPublica found. After he purchased the house where Thomas’ mother lives, Crow poured tens of thousands of dollars into improving the property. And roughly 15 years ago, Crow donated much of the budget of a political group founded by Thomas’ wife, which paid her a $120,000 salary.

So this seems pretty bad. Even if Crow had no business before the Supreme Court, all of these this gifts sure seem like they should have been reported.

The GOP defense of Thomas has been legitimately fascinating to watch. For example, Leonard Leo, the guy accused of his own ethically murky activities, seemed outraged at the Washington Post’s queries about his funding of Ginni Thomas, Clarence Thomas’ husband: “I have known Clarence and Ginni Thomas since 1990. They are dear friends and are people of tremendous good will and integrity. Anybody who thinks that Justice Thomas is influenced in his work by what others say or do, including his wife Ginni, is completely ignorant of who this man is and what he stands for.”

Similarly, in response to the latest ProPublica story, “friend of Clarence Thomas” Mark Paoletta issued a statement that included: “Justice Thomas and his wife made immeasurable personal and financial sacrifices and poured every ounce of their lives and hearts into giving their great nephew a chance to succeed…. Harlan had financially supported Randolph Macon since the 1980s, and funded scholarships for students from disadvantaged backgrounds…. This malicious story shows nothing except for the fact that the Thomases and the Crows are kind, generous, and loving people who tried to help this young man.”

I don’t doubt that Thomas and his friends believe that everyone acted in good conscience. But if a political party has staked their entire political platform on “do not trust the elites,” a political response of “just trust us” to a possible ethics violation is not going to play outside of the base. Let’s just say it: this looks bad. It looks very, very bad. Not disclosing this stuff makes it all look worse. There are now enough of these stories for Thomas to be the object of ridicule and contempt for the rest of his career.

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Furthermore, Thomas’ problem is just a harbinger of other ethical problems to come. This part of the latest ProPublica story stood out to me:

Thomas has long been one of the less wealthy members of the Supreme Court. Still, when Martin was in high school, he and Ginni Thomas had income that put them comfortably in the top echelon of Americans.
In 2006 for example, the Thomases brought in more than $500,000 in income. The following year, they made more than $850,000 from Clarence Thomas’ salary from the court, Ginni Thomas’ pay from the Heritage Foundation and book payments for the justice’s memoir.
It appears that at some point in Martin’s childhood, Thomas was paying for private school himself. Martin told ProPublica that Thomas sold his Corvette — “his most prized car” — to pay for a year of tuition, although he didn’t remember when that occurred.

The commingling of the rich and the powerful is a story as old as civilization, but in the current era of capitalism the dynamic has become even more problematic. David Brooks warned about “status-income disequilibrium” in Bobos in Paradise: those who possess status but not wealth live first-class lives during the day but middle-class lives in the evening. Over time, these folks start to resent the middle-class aspects of their existence.

It might seem absurd that Thomas would feel middle-class in any way. But compared to the likes of a Harlan Crow, it’s true. And this is where we run into the second part of the problem. Brooks identified status-income disequilibrium at the turn of the century. The rich have gotten richer since then, which means that even folks who earn $850,000 will feel comparatively poor compared to their plutocratic friends. And the cost of the markers of elite social status — like fancy private schools and fancy trips and fancy boats — is only increasing.

The economist William Baumol wrote at length about the cost disease of the service sector. As the productivity of the manufacturing sector increased, and wages in that sector rose, the inevitable result was an increase in wages across the board, including sectors that had not become any more productive. For populists entering the political class, there’s a similar problem. They rode into Washington by decrying special interests and backroom deals. Then they get exposed to a lifestyle that seems both delightful and expensive. And the only way that they can partake is through the largesse of others. Which means they morph into the very kind of people they ostensibly went to Washington to replace.

Eventually, those outside the Beltway will look from populist to elitist, and from elitist to populist, and from populist to elitist again; and it will be impossible to say which is which.