February 5, 2007
Hell has frozen over. Last week, 2,201 days into his Presidency, George W. Bush acknowledged that “income inequality is real” and scolded Corporate America for enabling excessive executive pay.
Do we finally have a President who stands ready to lead a charge against excess at the top? Dream on. The White House offensive against inequality barely lasted 24 hours. In Too Much this week, we have the story on what happened the day after the President's totally out-of-character inequality declaration.
Also in this issue: the hard times for high-rollers — in Afghanistan.
American basketball coaches, a just-published study in Annals of Human Biology suggests, might want to expand their recruiting in the Netherlands. The Dutch have become the world’s tallest people. Americans, meanwhile, have slumped sharply in global height rankings. Non-Hispanic American whites and blacks, the world’s tallest population after World War II, now look up to people in most western and northern European countries, with the Dutch, on average, up to 2.24 inches taller. What explains the U.S. stature slowdown? The two authors of the new study, John Komlos of the University of Munich and Princeton’s Benjamin Lauderdale, point to diet — and inequality. Note the authors: “Socio-economic inequality in America is much greater than in western Europe, and inequality has a negative effect on mean height.”
In Phoenix, the desert sun shines hot, but high-end home sales, these days, are sizzling even hotter. Over 2,400 homes sold for at least $1 million in 2006, up from just 687 in 2003, and last month saw over 20 homes on the market for $10 million or more. Real estate agents who handle sales in this high end, the Arizona Republic reports, can pull in $5 million a year in commissions. But high-end realtors do have their expenses. To gain a listing for a $5 million home, says Nick Antonicello of Unique Homes, a luxury magazine, a realtor needs to step out of a Mercedes sporting a Chanel suit and a $200 haircut, with “a $10,000 diamond ring on her hand and a Rolex and a $2,000 Gucci bag.” Only about a dozen of the over 95,000 licensed real estate agents in the Phoenix area currently fit the high-end realtor bill . . .
In London, where fog not sun defines the weather, the Evening Standard last week set about solving the mystery of why so many of the city’s newly built — and purchased — luxury homes are sitting 
unoccupied. The paper’s conclusion: London is witnessing “the arrival of a new breed of super-rich property speculators” who can afford to let their properties “stand empty while they wait for the values to rise.” These speculators don’t rent out their empty mansions or even use them for overnight stays when they visit London. They “mostly prefer,” says local realtor Richard Cotton, “to rent a hotel suite,” since a never-inhabited home can command a higher eventual selling price. Russian billionaire Roman Abramovich started the empty-home trend seven years ago. He now owns six flats in the Knightsbridge district, each empty and worth over $10 million . . .
Eighteen months ago, opening a luxury mall smack dab in the middle of Kabul didn’t seem like such a bad idea. At the time, Afghanistan appeared to be growing a booming market for Hugo Boss suits and Ecco shoes that go for $200 a pair. Sure, 70 percent of Afghans live on less than $2 a day, but the country boasted a sizeable cohort of affluent expats who had returned from overseas after the 2001 inflation — and plenty of politicos and warlords who had grown rich off the lush Afghan opium trade. Alas, things haven’t worked out for the Kabul City Centre mall. Fewer visitors are making their way through the mall’s metal detectors. A $90,000 Lexus, notes the owner of the Omer Farooq car dealership, used to fly out the showroom in a week. These days, he adds, a sale “could take one month or two months or three.”
Over recent years, analysts have been generating gobs of data that document the striking 
inequalities now about in the world. But scholars at the Social and Spatial Inequalities Research Group at the UK’s University of Sheffield don’t just want to document inequality. They want to show it. Last week, to do just that, they unveiled the Worldmapper. This joint initiative with the Center for the Study of Complex Systems at the University of Michigan turns data tables into striking global maps that rescale nation-states by an assortment of inequality measures. You can even use Worldmapper to compare today’s global distribution of wealth to the world’s wealth distribution 2,000 years ago.
“Bill Gates, Paul Allen, Steve Ballmer, and the other millionaires and billionaires of Microsoft are brilliant, hardworking, entrepreneurial, and justly wealthy. But only the first 5 percent of their wealth can be justified as an economic incentive to encourage entrepreneurship and enterprise. The next 95 percent would create much more happiness and opportunity if it were divided evenly among U.S. citizens or others than if they were to consume any portion of it.”
J. Bradford DeLong, former U.S. assistant treasury secretary, Rich get richer, that's not good, Miami Herald, January 31, 2007
New Wisdom
on Wealth
A Maximum Wage?: The Current, the Canadian national public radio daily news show, explores the pros and cons of capping CEO pay. January 29, 2007
Class and Sports, a special issue of Class Action eNews on inequality and athletics, February 1, 2007
Back in the glory days of the American middle class — the mid 20th century — two institutional realities served to keep the gap between the nation’s rich and everybody else relatively modest.
The first of these, the progressive income tax, lowered high incomes. The second — a widespread union presence in America’s workplaces — took average incomes higher.
These two realities no longer define the American scene. America’s very richest, in the I950s, paid half their incomes in federal taxes, even after exploiting loopholes. Their counterparts today, after exploiting loopholes, pay less than 20 percent of their income dollars in tax.
Their counterparts today also don’t have to stare across bargaining tables at unions. A half-century ago, about 35 percent of workers in the private sector belonged to unions. Last year, the U.S. Bureau of Labor Statistics reported late last month, only 7.4 percent of private sector workers held union cards.
In the 1950s, union contracts set standards that helped all workers, even workers who didn’t belong to unions. Retail giant Sears Roebuck, for instance, operated nonunion but offered union-level wages and benefits. For Sears, that approach made business sense. In a United States where unions stood tall, companies that conspicuously short-changed workers simply could not prosper.
In today’s “union-free” America, by contrast, major corporations — Wal-Mart, most notably — short-change workers to prosper.
The new Congress could change this dynamic. The Employee Free Choice Act, legislation advanced by Rep. George Miller (D-Calif.), would, as labor lawyer Thomas Geoghegan notes, “let employees get unions just by signing cards — without having to run what can be a four- to five-year gauntlet of lawsuits, firings, intimidation, and all the bells and whistles of union-busting campaigns.”
Geoghegan, one of America's top commentators on the labor movement, last week called the Miller bill America’s “last chance to rein in the plutocracy and curb inequality.” But the bill faces tough sledding in Congress — and a sure veto from President Bush.
Still, Geoghegan remains hopeful. We have more on why.
The scene: Wall Street’s historic Federal Hall, right across from the New York Stock Exchange. The audience: the CEO of the Bank of New York and a couple hundred of his power-suited business leader friends and flunkies. The speaker: the President of the United States, on hand last Wednesday to deliver a “state of the economy” address.
The shock: President George W. Bush didn’t just address the assembled corporate leaders. He dressed them down, in a speech that would earn “Bush takes aim at executive salaries” headlines the next day in papers all across the United States.
“America’s corporate boardrooms must step up to their responsibilities,” the President proclaimed. “You need to pay attention to the executive compensation packages that you approve.”
The President’s stunned business listeners greeted this executive pay admonition with “complete silence.” Nor did they applaud when the President noted that income inequality “has been rising for more than 25 years,” creating an earnings gap “twice as wide as it was in 1980.”
Was George W. Bush, the President on whose watch the nation’s richest 1 percent have grabbed their largest share of the nation’s income since 1929, finally speaking truth to power?
Hardly. George W. Bush was speaking carefully crafted sound-bites to an American people increasingly angry about CEO pay and America's top-heavy distribution of income and wealth. But just to make sure Wall Street had no hard feelings, the White House, the very next day, resumed cherish-our-CEOs business as usual.
Here’s what happened: On Thursday, the day after the President’s hit on executive excess, the Senate of the United States actually passed a tax code change that discourages that excess. The measure, part of the Senate’s minimum wage increase compromise package, sets a $1 million cap on the amount of annual compensation corporate executives can have “deferred” and shielded from income tax.
Business groups have been blasting this deferral cap ever since it first surfaced in the Senate Finance Committee last month. Last Wednesday, the same day as the President’s Wall Street speech, the Wall Street Journal denounced the cap as pure “tax folly.”
Why all this business angst? Deferred compensation has emerged, over recent years, as what may be the single most important perk in CEO pay land. In fact. notes pay expert Patrick McGurn of Institutional Shareholder Services, many top execs are now having “the lion’s share of their compensation” deferred.
These pools of cash grow, tax-free, in special accounts that can routinely grow into the hundreds of millions of dollars.
The Senate minimum wage compromise adopted Thursday goes after these pools. The Senate package combines tax breaks intended to benefit small businesses with tax revenue provisions, like the pay deferral cap, meant to offset the cost of the tax breaks.
Last month, after the committee vote that sent this package to the Senate floor, the White House dubbed the revenue provisions of the tax-relief package unnecessary.
Last Thursday, the day after the President acknowledged that “income inequality is real” in his Wall Street speech, the White House had a chance to rethink this opposition to the pay-deferral cap.
The White House, predictably enough, did not take this opportunity. Instead, the White House released a statement on the Senate vote that urged the House only to pass the Senate-passed “minimum wage increase and small business tax relief” provisions.
For George W. Bush, inequality may now be “real.” Apparently, it’s still not wrong.
In 2005, the Washington, D.C.-based Tax Policy Institute reports, Bush administration tax cuts added an average $185,533 to the after-tax incomes of taxpayers in America's richest one-tenth of 1 percent — and $18 to the after-tax incomes of taxpayers in the poorest 20 percent.
Too Much is published by the Council on International and Public Affairs, a nonprofit research and education group founded in 1954.
Office: Suite 3C, 777 United Nations Plaza, New York, NY 10017.
E-mail: editor@toomuchonline.org.
to Too Much