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||October 27, 2014|
The United States currently hosts, the Census Bureau informed us last week, more detectives than dentists. In other words, we have more people searching for criminals than cavities, by a fairly significant margin.
Things really shouldn’t be this way. In a healthy society, we would have less crime and cleaner teeth. But we don’t live in a particularly healthy society. We live in a distinctly unequal one. And unequal societies have more crime and lower levels of physical and mental well-being.
Vibrant democracies discuss and debate social phenomena like these, widely and visibly, as a matter of course. But we don’t live in a particularly or even slightly vibrant democracy. We live in a plutocracy. Some topics — many topics — our political leaders tend to studiously ignore.
More on that plutocracy — and Election 2014 — in this week’s Too Much.
|GREED AT A GLANCE|
A new wave of online entrepreneurs are betting they know exactly what rich people want most: the company of other rich people. The makers of “Luxy” are offering a luxury dating app “exclusively for the top 1 percent demographic.” Announces one Luxy promotion: “With the rise of high-speed digital dating, it’s about time somebody introduced a filter to weed out low-income prospects by neighborhood.” Former Minnesota Philharmonic conductor James Touchi-Peters, meanwhile, last month launched “Netropolitan,” a Facebook-like site for “people with more money than time.” Touchi-Peters considers his site a virtual country club. Members must pay $9,000 to join and $3,000 more annually. Why would anyone cough up that cash? Observes Touchi-Peters: “It’s lonely at the top.”
Not every CEO of a major U.S. corporation has a Marxist economist for a father. Not every major American CEO has a $84.3 million pay deal for his labors either. Microsoft’s rookie CEO Satya Nadella has both. His daddy wrote about exploitation in India. The 47-year-old Nadella is now benefitting from exploitation in the United States. Microsoft rode monopolistic bullying tactics to the high-tech market summit. Now the stumbling tech giant is straining to hang on. Nadella, news reports last week revealed, will have a cushy ride however that journey goes. His $84.3 million amounts to eight times last year’s typical major CEO payout. Nadella gets to collect that windfall if Microsoft shares outperform just 60 percent of the corporations in the S&P 500 . . .
Is yacht builder Craig Timm of Florida’s Fort Lauderdale blowing smoke? Or does he really have a client who has commissioned the world’s first superyacht over 200 meters — at an estimated cost of over $1.1 billion? We’ll know come the spring of 2018, the yacht’s projected completion debate. The new yacht for Timm’s as-yet unnamed buyer will stretch 222 meters — over two football fields long — and rise seven decks high. The world’s current longest superyacht runs only 180 meters. The buyer of the new “Triple Deuce,” says Timm, wanted a yacht long enough “to make it difficult, if not impossible, to be eclipsed.”
Quote of the Week
“American politicians don’t dare say outright that only the wealthy should have political rights — at least not yet. But if you follow the currents of thought now prevalent on the political right to their logical conclusion, that’s where you end up.”
|PETULANT PLUTOCRAT OF THE WEEK|
New Jersey governor Chris Christie has had it up to here with folks who pick on his deep-pocketed pals. Earlier this month, campaigning in Arizona for a GOP candidate, Christie labeled concerns about billionaires concealing campaign contributions with shell not-for-profits “silliness” and “sophistry.” Christie appears equally fed up with issues that bore him. Last week, back in New Jersey, Christie opined he was “tired of hearing about the minimum wage.” Groused the governor: “All the Democrats and the president want to talk about is minimum wage.” Christie’s current net worth — an estimated $5 million — leaves him 65 times richer than the typical American family. In New Jersey last November, many of those typical families joined to pass a constitutional amendment raising New Jersey’s wage minimum — over Christie’s opposition.
|IMAGES OF INEQUALITY|
Vintage vehicle tinkerer Jonathan Ward likes to say he’s creating “driveable art,” motor cars that recreate the feel, sense, and touch of autos we remember only in our dreams. Customized creations from his Icon 4x4 company typically run anywhere between $200,000 and $1 million each. What attracts, an interviewer asked last week, buyers to Icon 4x4? His clients, explains Ward, “like to have something that very few others have.” Adds the vintage wiz: “Many have gone through the Ferrari, Bentley, and Maserati phase and have gotten over it.”
Beautiful Solutions/ This cutting-edge new site, an interactive partnership with author Naomi Klein, spotlights “the most promising and contagious strategies for building a just, democratic, and resilient world.” Many of these strategies directly tackle our contemporary maldistribution of income and wealth.
|antidotes to inequity|
Regulators and judges have levied over $100 billion in fines on major U.S. banks since 2008. But bank execs have paid little personally for the misbehaviors of their institutions. They continue to pocket eight-digit paychecks. New York Federal Reserve president William Dudley has a better idea. A hefty chunk of bank exec pay, Dudley last week proposed, should be “sequestered” in a “performance bond.” Execs at banks that draw major fines would forfeit that pay, in the same way negligent renters forfeit their “security deposit.” The threat of forfeiture, says Dudley, would reduce “excessive risk-taking” and “fraudulent behavior.” Regulators, adds analyst Bart Naylor, could use the 2010 Dodd-Frank Act to encourage Dudley’s proposal. A still-unenforced Dodd-Frank provision prohibits bank pay that encourages “inappropriate risks.”
Celebrate National Co-op Month by sharing the new Democracy Collaborative video on the Cleveland Model, an ongoing initiative that's supporting worker cooperatives and building community wealth.
|inequality by the numbers|
Stat of the Week
In 1989, the bottom half of American households held 3 percent of America’s wealth. In 2013, the latest Federal Reserve figures show, the bottom half held just 1 percent of that wealth.
Democracy Lite: All Form and No Substance
America’s most powerful economic policy maker dramatically charges that inequality is choking off opportunity for average families. Political candidates across the nation pay absolutely no attention.
The most revealing moment of our ongoing 2014 election season? That may have come last week in a Florida gubernatorial debate when former governor Charlie Crist, now a Democrat, and current governor Rick Scott, a Republican, went mano a mano over who “has led a more privileged life.”
Crist — net worth, $1.2 million — pronounced that Scott’s lavish “oceanfront mansion” lifestyle had him out of touch with average Floridians. Scott — net worth, over $132 million — countered that he had grown up in much more hardscrabble home than Crist.
“You grew up with money,” Scott fumed.
“You can’t tell my story,” Crist retorted.
Great theater, observers agreed. In fact, the exchange amounted to much more than theater. Crist and Scott had stumbled into what should be the central issue of this year’s elections: America’s great divide. The U.S. economy, as Businessweek put it last week, has become “lousy” at helping struggling families gain basic economic security, but “great at making a very few very rich.”
Why should that be? Scott and Crist never debated that question. Neither have all but a handful of this fall’s candidates. The 2014 races are turning instead, as America’s elections typically do, on marginal concerns and claims that everyone involved, voters included, will promptly forget the morning after Election Day.
We are witnessing, in short, still another campaign season that sheds no light whatsoever on the staggering concentration of wealth at America’s summit, the inequality that President Obama three years ago — in a fleeting moment of political clarity — called “the defining issue of our time.”
These days, almost everybody with a finger on America’s pulse — except those running for public office — seems to recognize the threat this inequality poses. The latest to enunciate this angst: Federal Reserve Board chair Janet Yellen.
“The extent of and continuing increase in inequality in the United States,” Yellen told an October 17 Fed conference in Boston, “greatly concern me.”
Societies grow more unequal, the Fed chief went on, when incomes for the rich rise faster than the incomes of everyone else. Societies grow unequal even faster when incomes for the rich rise and incomes for everyone else stagnate.
“Unfortunately,” Yellen points out, this latter situation essentially defines the United States over “the past several decades.”
The 62 million households in America’s least affluent half, new Fed stats show, averaged only $11,000 in net worth last year, 50 percent less than bottom-half families averaged after inflation in 1989. Over those same years, top 5 percent household average net worth nearly doubled — to $6.8 million.
Tax cuts for the rich and other public policies that speed wealth’s concentration, apologists for our unequal economic order like to claim, encourage “entrepreneurship” and “job creation.” The opportunity to build a business, Yellen acknowledges, “has long been an important part of the American dream.”
But America’s “pace of new business creation,” the Fed chair details, “has gradually declined” as inequality in the United States has increased. This “slowdown in business formation” may be jeopardizing “a significant source of economic opportunity” for families “below the very top in income and wealth.”
Yellen finds the same dynamic operating within education. Wealthy families shower their children with ever more advantages at the same time poorer families have a “harder time affording college.”
Our “inequality of outcomes,” Yellen concludes, seems to be nurturing a profound “inequality of opportunity.”
In a real democracy, Yellen’s basic charge — that the rising wealth of America’s rich appears to be choking off opportunity for America’s hard-pressed — would be setting off political fireworks.
In that real democracy, incumbents would now be squirming to explain why they’ve allowed the gap between the rich and the rest of us to widen on their watch. Challengers would be proudly presenting five-point plans for ending America’s ridiculously top-heavy distribution of income and wealth.
None of this has taken place. Yellen’s challenge to the nation’s political order sank out of sight in a single news cycle, buried under relentless barrages of brain-numbing 30-second campaign ads that keep potential voters alternatingly confused, angry, and uninterested.
This campaign advertising has clearly been election 2014’s biggest story. Campaign spending on current congressional races, the Center for Responsive Politics estimated last week, will total $4 billion, over double the 1998 total.
The bulk of these billions are coming from America’s wealthy. In 1982, the top 0.01 percent of the voting age population accounted for less than 10 percent of all federal political contributions. In the 2012 elections, political scientists calculated last year, top 0.01 percenters contributed over 40 percent.
Court decisions over the past four years have essentially eliminated the few remaining political campaign contribution restrictions put in place after the Watergate scandal 40 years ago.
Restrictions still formally on the books do limit how much wealthy donors can give directly to a single candidate to $5,200 per election cycle. But donors in 2014 are “double dipping,” the Brennan Center for Social Justice reported last week, via a new twist on super PACs called a “buddy group.”
“Buddy” groups devote all their resources to the election of a specific candidate. They can accept unlimited donations from individuals and corporations.
The biggest double dipper so far in 2014: Robert Mercer, the co-CEO of a $15 billion New York hedge fund. Mercer gave Iowa Republican Senate hopeful Joni Ernst $5,200, the legal limit, the Brennan Center notes, then pumped another $350,000 into a new buddy group dedicated to Ernst’s election.
Two other Ernst buddies, hedge fund billionaires Paul Singer and Julian Robertson, ponied up about another $500,000.
To remain “competitive” in today’s political environment, candidates today need plenty of buddies like Mercer, Singer, and Robertson. They court these fantastically rich obsessively. They dare not give them cause for irritation.
So don’t expect our billionaire-bankrolled candidates to target — or even discuss — the ongoing concentration of America’s wealth. And don’t expect America’s voters, in turn, to concentrate on these candidates.
Only 15 percent of voters, note Pew Research pollsters, are paying any serious attention to this fall’s campaigning.
Ben Walsh, Economists Say We Should Tax The Rich At 90 Percent, Huffington Post, October 22, 2014. All Americans, says a new study, would be better off if tax rates went back to Eisenhower-era levels.
William Cohan, How Quantitative Easing Contributed to the Nation’s Inequality Problem, DealBook, October 22, 2014. The Fed bears a share of the responsibility for America's great divide.
Rick Bookstaber, Ex Ante versus Ex Post Social Policy, October 23, 2014. Thoughtful musings from a former banker on whether we ought to address inequality by “creating more equal opportunities” or “by trying to reduce disparities of outcomes.”
Linda Beale, Both the rich and ordinary Americans misunderstand their economic interests, A Taxing Matter, October 23, 2014. On the complex politics of inequality.
Sean McElwee, The 1% are more likely to vote than the poor or the middle class, and it matters — a lot, Vox, October 24, 2014. A solid review of the political science research.
Michael Hiltzik, U.S. income inequality is bad, but wealth inequality is a bigger problem, Los Angeles Times, October 24, 2014. What would Thomas Jefferson say?
John Freeman and Tim Freeman, A tale of two New York Cities: I was rich, my brother was down and out, Guardian, October 24, 2014. A city of dreams and cinema cliches, of soaring rents and inequality.
Vatican to UN: To combat extreme poverty we must eradicate inequality, Vatican Radio, October 24, 2014. An archbishop blasts economic models that trigger “an exponentially growing gap between the haves and the have-nots.”
Tony Burman, Why the establishment is worried about inequality, Toronto Star, October 25, 2014. Warnings from central bankers signal that world leaders are recognizing the economic dangers of our growing income gap.
Katie Johnston, Efforts to regulate CEO pay gain traction, Boston Globe, October 26, 2014. A survey of promising recent initiatives.
America’s rich today seem politically impregnable. They also seemed impregnable a century ago. But then America’s fortress of fortune fell. How did that happen? Too Much editor Sam Pizzigati’s explains in his gripping history of the battle against America’s first plutocracy. Read the intro, then get the book at a publisher discount.
Our Executive Pay Problem: a New Must-Read
Susan Holmberg and Michael Umbrecht, Understanding the CEO Pay Debate: A Primer on America’s Ongoing C-Suite Conversation, Roosevelt Institute, October 23, 2014. 38 pp.
For many — if not most — Americans, the multiple millions that corporate CEOs pocket serve as an incredibly vivid symbol of modern American inequality, a telling expression of our economic moral breakdown.
This widespread attitude tends to frustrate Roosevelt Institute analysts Susan Holmberg and Michael Umbrecht. A great deal. Over-the-top corporate executive compensation, they understand, doesn’t just symbolize inequality in America today. Over-the-top executive compensation is driving that inequality.
A more equal America? We need to limit executive compensation to get one. If we don’t, then CEOs chasing after ever higher rewards will continue to generate greater gaps in income and wealth. They’ll jeopardize jobs with risky decisions, defraud consumers, shortchange workers, underfund research, and shove the nation’s tax burden off of corporations and onto working families.
The games corporate CEOs play, Holmberg and Umbrecht help us see, are undermining both our national “economic progress” and the individual well-being of most everyone our corporations encounter.
Their new primer packs into just a few dozen pages much more as well. Holmberg and Umbrecht trace the evolution of CEO pay theory. They walk us through the make-up of the modern executive paycheck and 80 years of federal CEO pay policy making. Most importantly, they offer real solutions — like making corporations with wide CEO-worker pay divides pay taxes at higher rates.
Understanding the CEO Pay Debate, Holmberg and Umbrecht note almost apologetically, doesn’t rate as “exhaustive.” No problem. This primer deserves a much better label: excellent!
|About Too Much|
Too Much, an online weekly publication of the Institute for Policy Studies | 1112 16th Street NW, Suite 600, Washington, DC 20036 | (202) 234-9382 | Editor: Sam Pizzigati. | E-mail: email@example.com | Unsubscribe.