John Arnold’s response to Pando: Being a billionaire makes me uniquely credible on cutting workers’ pensions
Last week, Pando exclusively revealed how the Brookings Institution produced propaganda packaged as news segments after receiving money from anti-pension billionaire John Arnold.
This native advertising scheme successfully laundered Arnold’s ideology through a quasi-academic brand. And sure enough, most of the media organizations that covered the Brookings study did not mention Arnold’s funding.
Following Pando’s report, however, the Brookings-Arnold connection generated national headlines and roiled politics in Rhode Island, where one of Arnold’s bankrolled candidates, pension-slasher Gina Raimondo, is seeking the Democratic nomination for governor.
Some of the reaction to our investigation was predictable — and predictably unconvincing. For example, Brookings issued the standard prepackaged response claiming that even though it took a truckload of the Enron mogul’s cash to “analyze improvements to public pension systems” and to produce an anti-pension paper that echoes Arnold’s ideology, the think tank somehow did “not sacrifice its commitment to independence.” Similarly predictable was Raimondo’s spokesperson refusing to comment on why his boss’s campaign tried to trick voters with — and raise money from — the self-serving Brookings study, while not mentioning that the study in question was paid for by Raimondo’s own financial benefactor.
That said, one particular reaction to Pando’s scoop was downright newsworthy, and that was the reaction from John Arnold himself.
Facing a similar blowback to the one he faced when Pando exposed him secretly financing anti-pension content on PBS stations, the Texas billionaire this time decided to respond directly to our investigation. As the Providence Journal reported:
(Arnold) said in an email that “organized labor spent $4.4 billion” from 2005 to 2012 to support higher benefit packages and “resist any reform efforts.”
“We are happy to provide a very small counterbalance to the well-funded advocacy operation of organized labor. We support candidates of both parties who have the conviction and the political will to address one of society’s most difficult problems.”
He added: “Unlike virtually every other actor in the debate on pension reform, we have absolutely no financial interest in the outcome.”
Let’s start first with the numbers Arnold cites. As Pando previously reported, data from the National Institute on Money in Politics shows labor spending $1.7 billion on state politics since 2000. So it’s not clear where Arnold is getting his $4.4 billion figure. Moreover, even if Arnold’s number was accurate, it is dwarfed by the $8.1 billion that corporations, many of which support Arnold’s beloved pension cuts, spent at the same time.
But, then, such facts don’t portray the Enron mogul as an underdog. So he conveniently ignored them and pretended all the cash he, Wall Street, and the larger corporate lobby have dumped into their pension slashing campaign is just “a small counterbalance.”
Even more revealing than the fuzzy math, though, is the assumption Arnold forwards about objectivity — the assumption that “unlike virtually every other actor in the debate on pension reform, we have absolutely no financial interest in the outcome.” It is an assertion belied by the facts, and rife with assumptions that imply the super rich are automatically more trustworthy than everyone else.
Yes, billionaires have a “financial interest” in cutting pension benefits for middle-class workers
The first thing to say about Arnold’s “no financial interest” claim is that as a matter of dollars and cents it is entirely false.
Remember, pension shortfalls were created by two factors: 1) pension fund losses incurred from events like the collapse of Arnold’s former employer and by the 2008 financial crisis, and 2) decisions over many years to spend public money on expensive corporate subsidies and reckless tax cuts (that disproportionately benefit rich people like Arnold) rather than using that public money to make promised payments to pension funds.
Therefore, one way to address those shortfalls is to reduce the corporate subsidies and/or reverse high-income tax cuts and raise taxes on the wealthy. That latter strategy could involve everything from higher marginal rates to higher capital gains tax rates to ending the carried interest loophole for hedge fund income.
By virtue of being a billionaire, Arnold has an obvious “financial interest” in preventing that tax policy, because that course of action could mean him paying higher taxes. He also had a “financial interest” in the aforementioned tax-cut policies that deprived governments of the public resources they needed for their pension payments. For instance, as a hedge funder, he presumably had a clear “financial interest” in that revenue-draining loophole that let him classify his income as carried interest and thus pay a lower effective tax rate than regular folks.
So the notion that Arnold has — and had — no “financial interest” in pension policy is absurd. Indeed, it is almost as absurd him portraying himself as genuinely wanting to strengthen public pensions after he spent years making millions at Enron, a company that eviscerated public pensions.
Don’t trust if you can’t verify
On top of this, how do we actually know Arnold has “absolutely no financial interest in the outcome” of the public pension debate?
Arnold has billions of dollars that are presumably parked somewhere other than under his mattress. Is any of that money invested in any of the financial firms that would benefit from converting defined-benefit pension plans into 401(k)-style accounts? Is any of that money invested in hedge funds that tend to get more capital under pension “reform” proposals? Is any of that money invested in companies that get the huge taxpayer subsidies that are financed by raided pension money?
Pando asked both the Arnold Foundation and John Arnold himself to back up the assertion with details of Arnold’s investments and holdings. Neither responded to requests for comment.
Are billionaires inherently more credible than everyone else?
But let’s say for argument’s sake you take Arnold at his word. Let’s pretend that he has “no financial interest” in a pension/budget debate that could significantly raise his taxes. Let’s also stipulate that he somehow has no investments that would be affected by changes in the multi-trillion-dollar public pension debate. And let’s even for argument’s sake simply ignore that he made millions at a company that famously destroyed public pensions. Fine. But would stipulating all that really make him uniquely credible in the debate over pension policy?
In his response to Pando’s investigative reporting, Arnold is asserting that his status as a billionaire with “no financial interest” in the debate should make him more credible and beyond reproach. But would it?
One school of thought says yes it would, because he would have nothing personally to gain or lose in the debate. The idea is that the concerns and arguments of public-sector workers and retirees should be dismissed, or downplayed, because their economic survival depends on the public pension debate’s outcome. At the same time, the idea is that the oligarch is uniquely able to be objective because his wealth means he doesn’t really have a personal stake in whether to fulfill pension obligations or to renege on those obligations and throw untold numbers of retirees into poverty.
This is the self-serving notion typically forwarded by plutocrats to try to appropriate even more privilege than their billions afford them — and there is at least some logic undergirding it.
Yes, it is true: John Arnold got so amazingly rich by speculating in the energy markets, and his riches were so expanded by preferential tax treatment for the speculator class, that he doesn’t have to worry about losing a $19,000-a-year subsistence pension. Yes, it is also true: Arnold doesn’t have to worry about preserving solid retirement benefits that help attract good job applicants to become police officers, firefighters and public school teachers. Why doesn’t he have to worry about these things? Because he has enough money to hire his own personal full-time police force and firefighting team, and to send whole future generations of his entire family to elite private schools.
Where the logic goes wrong is its assumption that this plutocratic status makes a billionaire uniquely or more credible than those for whom budget debates do actually have personal consequences.
Such an assumption seems backwards. Precisely because a billionaire like Arnold doesn’t have to worry about subsistence income and access to basic police, firefighting and educational services, he doesn’t have to care about the real-world consequences of his pension-slashing ideology. That doesn’t make him more or uniquely credible in assessing pension policy; it probably makes him the opposite.
In being more insulated from the life-and-death ramifications of his ideology than almost everyone else, he is far less inclined to seriously weigh those ramifications. If anything, that should make him less credible in such a debate, especially considering his history at a company that famously destroyed pensions.
Of course, Arnold has every right to demand pension cuts for public workers and thanks to lax campaign finance laws, he has a right to buy politicians to assist him in punishing those workers. Additionally, as evidenced by his PBS, Brookings and Pew scandals, he has a right to deviously buy anti-pension propaganda from institutions willing to rent their brands to him in exchange for a handsome payout — unless they are publicly shamed into giving back their ill gotten gains.
He also has a right to claim his billionaire status means he has no financial stake in a pension debate that inherently involves tax policies. And, no doubt, he has a right to alternately imply that his wealth makes him more credible than the workers who are subsisting on the retirement benefits he aims to slash.
This is America, after all. Here, fat cats like John Arnold have the right to say to the proles: “Let them eat cake.” And we have the right to challenge such self-serving declarations and confront these billionaires with inconvenient facts.