7 March 2016

War of the plutocrats


Think the real story of the political-economic moment is the populist uprising powering Bernie Sanders and Donald Trump against the power centers of Wall Street and Washington?

Perhaps. But the even more compelling drama may be what might be called the plutocrat’s paradox: how the super-rich are turning against each other.

The latest salvo comes in the New Yorker magazine, owned by the Newhouse family; the Bloomberg billionaires’ index puts Si Newhouse’s net worth at $10.3 billion. Mr. Newhouse’s magazine’s newest issue carries a 7,000-word article denouncing businessman and philanthropist David Rubenstein for what the paper absurdly describes as an outsized role in halting one of President Obama’s many proposed tax increases.

This line of attack is so ridiculous it’s hard to know where to start, but a good place to begin is probably the ad hominem nature of the assault on Mr. Rubenstein.

The New Yorker faults Mr. Rubenstein for his failure to live as ascetically as, say David Remnick, or Bill McKibben. Mr. Rubenstein, the magazine reports, “prides himself on driving a 15-year-old Mercedes station wagon, but he does not quite follow Carnegie’s call for unostentatious living. In addition to his Nantucket compound, where 30 people can comfortably stay, he has a vacation home in Colorado, and travels in a $65 million Gulfstream. His main residence, which sprawls over 7,000 square feet, sits in suburban Bethesda.”

Well, since the New Yorker started with residences, let’s talk residences. Mr. Newhouse himself reportedly grew up splitting his time between a 14-room duplex at 730 Park Avenue in Manhattan and a 143-acre estate near Princeton, N.J. with “his-and-hers swimming pools… a tennis court, a riding stable, a five-car garage, and a full complement of servants.” As an adult, Mr. Newhouse’s residences have reportedly included an 11,000-square-foot mansion in Palm Beach, a place in Bellport, Long Island, and a $36 million Manhattan townhouse with a two-story bulletproof glass atrium. And Mr. Rubenstein is the ostentatious one?

The New Yorker article makes the absurd case that somehow it was Mr. Rubenstein’s intervention in 2010 that more or less singlehandledly prevented Congress from raising taxes in June of 2010 on private equity, venture capital, energy and real estate partnership “carried interest.” Mr. Rubenstein — rather than, say Republicans, who by that time, with the election of Scott Brown in a Massachusetts special election, already had enough Senate seats to filibuster, and, in case the New Yorker hadn’t noticed, tend to vote against tax increases, especially in election years.

The New Yorker also makes the basically communist argument that government, rather than individuals, should allocate capital. The article quotes a Morris Pearl saying, “We need to make collective decisions by our elected representatives on how to spend our money…It’s not up to each individual person to decide how to spend the money.” This use of “our money” to describe what is, in reality, Mr. Rubenstein’s money is an amazing sleight of hand. If Mr. Newhouse doesn’t comprehend it, he might imagine how he might feel if the government seized the New Yorker and let a congressional committee edit it on the theory that “collective decisions” are better than those of any “individual person.”

The New Yorker article claims, “Many of today’s Wall Street philanthropists win the public’s esteem by giving away money that, without the loophole they’ve fought to protect, would not all have been theirs to donate.” It’s quite hypocritical of Mr. Newhouse’s publication to attack Mr. Rubenstein on this front. Carol Felsenthal’s book on Mr. Newhouse quoted a visitor recalling that the New Jersey farm where Mr. Newhouse grew up was “an actual working farm because that was a tax deduction.” Mr. Newhouse’s Conde Nast magazine chain, which includes the New Yorker, won $10.8 million in special tax breaks in connection with its 1996 move into a Times Square office building, and its recent move to the World Trade Center site included millions of dollars more in taxpayer subsidies.

There’s plenty of precedent for all this. The New Yorker’s attack on Mr. Rubenstein — “co-published” by ProPublica, a tax-exempt non-profit that wouldn’t exist without the same tax breaks for philanthropy that the organization seems to find so objectionable when they are used by Mr. Rubenstein — comes on the heels of not one, not two, but three separate attacks that the magazine has published on the Koch brothers. Those pieces were written by Jane Mayer, who it turns out, the Weekly Standard reports, is a descendant of the Lehman Brothers fortune.

Donald Trump, Jeb Bush, and Arthur Brooks of the American Enterprise Institute have all come out for raising taxes on carried interest. Opposing the tax increase is unpopular but heroic work, and if David Rubenstein played even a tenth of the role that the New Yorker credits him for, he deserves not the nastiness that Newhouse dumped on him, but rather a thank you.

Ira Stoll is editor of FutureOfCapitalism.com and author of JFK, Conservative.