The Big Con: The True Story of How Washington Got Hoodwinked and Hijacked by Crackpot Economics by Jonathan Chait Houghton Mifflin.

Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill) by David Cay Johnston Portfolio. 352 pages. $24.95.

As I write this review, the front page of the April 16 New York Times carries two headlines that say it all: "Big Tax Breaks for Business in Housing Bill" and "Wall Street Winners Hit a New Jackpot: Billion-Dollar Paydays." The first tells the story of how our duly elected representatives in Congress, faced by a national calamity of home foreclosures and mass bankruptcies, have managed to craft a piece of legislation that will turn that disaster into a boondoggle of tax breaks for automakers, airlines, and energy producers. The second shows how top hedge fund managers pull down bounties "unimaginable, even in Wall Street's rarefied realms." The Big Con and Free Lunch join a vast armada of literature chronicling the astonishing inequalities of wealth and income that have earned our own era the dubious sobriquet "second Gilded Age." Indeed, at no time since the late 1920s has the gap between the haves and the have-nots been so gigantic.

New York Times Pulitzer-winning reporter David Cay Johnston's Free Lunch amounts to a rap sheet itemizing with one appalling story after another how the big business community has managed to turn all levels of government into a gigantic slush fund--behavior that ought to be considered criminal and sometimes has amounted to murder. Johnston sometimes calls this "corporate socialism," by which he means a system in which the American taxpayer is assiduously fleeced to subsidize the exorbitant profits or the equally exorbitant losses of corporate America.

Johnston is a great admirer of Adam Smith and often makes use of pointed remarks by the eighteenth century avatar of the free market to skewer our contemporary tycoons who pretend to be Smith's disciples but in real life stay as far away from the competitive marketplace as their tax shelters, government subsidies, lobbying machines, and legal sleights-of-hand will allow them. Thus Johnston quotes Smith: "This disposition to admire, and almost to worship, the rich and the powerful ... is, at the same time, the greatest and most universal cause of the corruption of our moral sentiments."

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Who has been more admired--worshipped even--over the past quarter century than Warren Buffett, the "Oracle of Omaha"? Buffett, legend would have it, is a plain-spoken, down-home billionaire who stands up for those hoary traditions of hard work, long-term productive investment, and self-reliance. Well, not quite. Buffett's company, Berkshire Hathaway, benefited to the tune of two-thirds of a billion dollars in interest-free government loans to float a call center manned by sweated labor in deindustrialized Buffalo. Buffett is also a champion tax-farmer. His Mid-America Energy Company, which owns utilities all over the place, paid just 4 percent of its profits in taxes in 2006, deferring the rest, so that by 2035 it will have paid only half, effectively pocketing an interest-free loan from you and me.

Or take John W. Snow, who became Treasury Secretary during the Bush Administration. He was first a professor professing the virtues of small government, but then became head of the huge freight-hauling railroad CSX. There, according to Johnston, he built a career "cultivating government, leaving behind a trail of deaths and costs that were shifted onto the taxpayers." Specifically, he presided over a corporate regime that cut safety and maintenance expenses down to the bone, which in turn led to a fatal crash of an Amtrak passenger train. The neglect was so flagrant that a court issued a $50 million judgment against CSX, but Snow and his legal team cleverly managed to force Amtrak--that is, the public--to pick up the bill. For all of this, for his heroic cost-cutting, for his skillful gaming of the system, John W. Snow was much admired, almost worshipped, as Smith might say, and rewarded with the post of Secretary of the Treasury.

There's no end to these stories. Here's Donald Trump manipulating tax provisions designed to aid the elderly and the poor, to benefit his casinos. And here's Sam Walton, another hero of plain folks capitalism from the Ozarks, who actually created the Wal-Mart empire by doing deals with governments across the country to pocket sales taxes, acquire free land, negotiate long-term leases, and borrow at subsidized interest rates to build his supercenters. It is indeed Sam's World!

And what about those billionaire owners of sports teams and stadiums who make their money raking in taxpayer subsidies and not on the playing fields of America? Which brings us to the nation's CEO himself, who never tires of using his bully pulpit to sing hosannas to the free market. George W. Bush might have failed in the highly competitive Texas oil business during the rocky 1980s, but he got rich by abusing the government's powers of eminent domain to secure government subsidies to build the Texas Rangers' new stadium: a colossal transfer of wealth from the many to the few.

Johnston tells these tales with great wit and vigor. We all know the main outlines of the Enron story, but Johnston reveals that while Enron scammed the public by claiming the deregulation of electricity generation and distribution would lower costs to consumers, as a matter of fact electricity rates in states that adopted Enron-style deregulation cost $48 billion more each year than the average costs in states that stuck with traditional regulatory rules.

That raises the question of government regulation and Johnston's apparent ambivalence about whether or not we need more. Sometimes, he seems to clearly favor reimposing the more rigorous regulatory regime characteristic of the New Deal and the postwar era. At other times, he is so furious about the way the new tycoonery has manipulated the state, the way it either guts regulatory oversight or, on the contrary, makes perverse use of those regulations to line its own pockets, that he seems to favor some truly competitive free market where no one could rely on friends in high places; hence his fondness for Adam Smith. In the end, Johnston would weigh in on the side of public oversight, but he offers no clear remedy for the characteristic greed of our second Gilded Age beyond some faint hope for moral reclamation. Nor does he present much of an explanation of how we got into this mess. But, after all, as a reporter, and an exceptionally good one, he doesn't really pretend to.

Matters are different with New Republic Senior Editor Jonathan Chair, who thinks of himself as a political analyst.

He takes up the question of why inequality is growing, even though most citizens favor progressive taxation rather than tax cuts, more rather than fewer government social services, more rather than less regulation of big business. Yet public policy since the Reagan years has consistently reflected the opposite view--that is, the viewpoint of the country's corporate and financial elite. Somehow, plutocracy has furtively triumphed over democracy. Chait's explanation for this "hijacking and hoodwinking" turns out to be more a circular restatement of that perplexing reality than a deeper probing of its origins.

But his restatements are well done. Chait does a good job of describing how supply-side economic thinking--the zany idea that tax cuts for the well-off and corporate America would generate greater tax revenues thanks to the incentives it would offer to savings and new investment--captured the Republican Party. The empirical record has again and again demonstrated the bankruptcy of this idea, beginning with the enormous budget deficits generated by the Reagan Administration when supply-side theory got its first practical application.

No matter! This zealotry, Chait observes, found its natural constituency among the rich and the business classes, and seduced Republicans into abandoning the faith of their ancestors who believed in budget-balancing and fiscal restraint. He quotes George Gilder, free market utopian wingnut, to good effect: "To help the poor and middle classes, one must cut the taxes of the rich." By now this has become an idee fixe in a party that will tolerate no dissent. Chait is again spot-on when he describes how renegades like John McCain learned to toe the line if they wanted to get anywhere. In McCain's case, the road to the White House had to first pass through Grover Norquist (founder of Americans for Tax Reform), the party's self-described "Market-Leninist." McCain was compelled to disavow his earlier objection to Bush's monomaniacal tax-cutting agenda even as the whole economy was descending into recession.

Chait is particularly useful in describing the way the K Street Project--the vast lobbying apparatus that conjoins Republican Party apparatchiks with their corporate equivalents--functions as a parallel government. The K Street Project exercises an extraordinary discipline over the legislative process, punishing members of Congress who veer too far from the party line, rewarding loyal legislators with plumb jobs in the private sector, often taking over the responsibilities of lawmakers by actually writing legislation germane to the business community, staffing key regulatory agencies with people they've vetted and can rely on to ignore or wipe out inconvenient restraints on moneymaking, and so on.

The sophistication and single-mindedness of this Republican Party-corporate machine is unprecedented. It signals a level of involvement in the day-to-day workings of political democracy that would have astonished the robber barons and financial tycoons of the first Gilded Age.

Democracy, however, is supposed to register, albeit imperfectly, the views and sentiments of ordinary people. Here's where Chait's analysis explains too little. He records how the media have become prisoners of this same pro-business zealotry, observing, as many have before him, that the whole spectrum of political debate has moved steadily to the right over the last quarter century.

But where does that get us? In effect, he's saying the country is run by, and in the interests of, a tightly organized upper class because their ideas about how to run the country are the predominant ones despite the fact that they are demonstrably irrational and are not shared by most people. We're back where we started. The country got "hijacked" and "hoodwinked" because it did.

Chait's analytic shallowness and circular reasoning is ironically a function of his own political and intellectual captivity by an extremely narrow version of acceptable liberalism.

If the spectrum of political debate has moved rightward, as Chait correctly notes, so too has Chait's brand of liberal reform. Once upon a time, New Deal liberalism welcomed ideas about deficit spending, planning, income redistribution, vigorous antitrust prosecution, public investment, and a more candid class analysis of the country's political chemistry.

For Chait, however, most of that is beyond the pale of tolerable political discourse. He's far friendlier to neoliberalism, which itself cozies up to the supremacy of the market. He wants debate to occur as it once did, say, in the heyday of the Eisenhower-Kennedy consensus years when both parties were committed to the bare essentials of the New Deal dispensation: fiscal and monetary fine-tuning of the economy, mild regulation of business, and the basics of the welfare state--the corporate commonwealth.

To that, he would add the Clintonian commitment to budget-balancing, which brought the Democratic Party closer to that traditional Rockefeller Republicanism whose passing from the scene at the hands of the Republican Right Chait laments. He is as intolerant and sectarian in ruling out of bounds anything that strays beyond what he considers rational liberalism as he accuses his rightwing nemeses of being.

Chait's moderation is studied and crippling. Once, there were reasonable people in charge who might differ about this and that, but not about the fundamentals. Then an evil cabal did its hijacking and hoodwinking, purged its own party, and cowed the opposition by somehow redefining the country's zeitgeist. Liberalism was overthrown in the process. There is only one villain in this drama. What Chait can't countenance is the harsher reality that New Deal liberalism helped overthrow itself.

What happened to it was more than Barry Goldwater plus Ronald Reagan and supply-side economics. For years, it failed to address the country's racial dilemma, and when it did, it was too little and too late, especially when it came to the mass marginalization of urban African Americans. Liberalism failed to address the conundrum of the military-industrial complex; indeed, it created it. To this day, it shies away from any such serious confrontation. Liberalism's abandonment of a more robust role for government in controlling the operations of the free market and its currying favor with the business community began long before Ronald Reagan brought back morning to America. When the commercial Keynesianism that had replaced the more social democratic-minded New Deal Keynesianism in the post-war years came apart in the late '60s and early '70s, the already domesticated Democratic Party had no answers. It was wide open to the rightwing assault that followed.

What's left is a timorous liberalism. It may be well mannered, moderate, and market friendly, as Chait wants it to be. But that's its problem.

Steve Fraser is a writer, editor, and historian. His most recent book is "Wall Street: America's Dream Palace," just published by Yale University Press.