This Week

Last Thursday, Senate Democrats faced one of the most cynical maneuvers in congressonal history. GOP leaders had coupled, in one bill, a measure they had long opposed, a hike in the federal minimum wage, with a measure they’ve been desperately trying to pass, a gutting of the federal estate tax.

A confident Senate Majority Leader Bill Frist dared the Democrats, as supporters of a higher minimum wage, to vote against the bill. They did, in high enough numbers to prevent Frist from moving the bill ahead.

In the process, Senate Democrats may have finally shed, after over 40 years, the inequality-inviting ideological baggage their party has carried ever since John F. Kennedy’s New Frontier. More below in this week's Too Much.

Greed at a Glance: One, Two, Three Ferraris

Back over a half-century ago, no acronym spooked business leaders more than “CIO,” the shorthand for the militant labor federation then leading America's charge against corporate arrogance. By contrast, mutter “CIO” today, in any lobby packed with power suits, and you'll kick off chatter about the latest in information technology. CIO these days stands for “chief information officer,” the modern CEO's indispensable executive sidekick. And CEOs pay CIOs nicely for this indispensability. In 2005, new figures released last week show, America's 10 highest-paid CIOs averaged over $5 million each. Overall, top CIOs saw their pay jump 31 percent in 2005 . . .

The CIO annual pay record, despite last year's hefty ramp-up in CIO pay, still belongs to Leslie Tortora, who raked in $11 million six years ago as the CIO of the investment bank Goldman Sachs. Last year's top-paid investment bank CIO, Jon Beyman of Lehman Brothers, collected $6.4 million. His boss, Lehman CEO Richard Fuld, took home $29.5 million. How can Wall Street investment banks afford to pay so well? The answer, from a new study by Oxera, a British consulting company: Wall Street investment banks charge their corporate clients, for the same services, twice the fees that European-based investment banks charge. To issue enough stock to raise $100 million, a fledgling company in the United States typically must pay New York-based bankers like Merrill Lynch $6.5 to $7 million in fees . . .

Charlotte, the North Carolina city currently rated the nation's second-biggest banking center, may soon be the first city in the nation to boast two luxury car clubs. Auto enthusiasts with deep pockets are now paying $65,000 upfront to join Privatus, a club just launched by former Accenture executive Tom Pollan. Privatus members, for an additional $7,500 in annual dues, get to spend 50 days a year driving the Ferrari or Aston Martin of their dreams. Pollan's Charlotte luxury car club rival, local entrepreneur Marcel Stark, plans to charge awesomely affluent motorists $125,000 to join his new fellowship of the wheel. His annual dues: a significantly higher $12,000, for just 30 days driving time. But Stark is also throwing in access to a luxury clubhouse. The market for these two new clubs? Pollan says he's aiming at people “in their 50s and 60s with a lot of discretionary income but not so much they're going to buy two, three Ferraris of their own.”

New annual home construction nationally may now be down over 5 percent, but not all homebuilders are running scared. Roy Dalene, the CEO of New York's Hamptons Luxury Homes, is assuring investors that high-end homes remain “generally immune” to economic downturns. Dalene says his clientele, “who represent the top 1 percent of the nation's wealth,” don't have to worry about mortgage rates or other factors “that might contribute to a difficult situation for other homebuilders.” Meanwhile, the luxury boom on Long Island's East End continues. Developer Linda Lambert has just turned two small Southampton apartment units, built originally as servant quarters in 1914, into condos that run up to $4.3 million each. The condos, gushes Lambert, will be perfect for couples who don't want to fret about maintenance, “especially when they're away for long stretches, vacationing in Europe or St. Barts.”

What makes a political candidacy credible? Significant popular support — in public opinion polls — used to be more than enough. Not anymore. NY1, New York's biggest all-news TV channel, has just informed Senate Democratic primary candidate Jonathan Tassini, a former National Writers Union president, that he won't be invited to debate Senate incumbent Hillary Clinton in the station's upcoming candidate “town hall.” Tasini is pulling 12 percent in the latest polls, well above the 5 percent standard NY1 has used to determine candidate credibility in the past. But the station is now insisting that candidates, to earn a debate invite, mus talso have spent $500,000 on their campaigns. Tassini hasn't. Notes best-selling author Barbara Ehrenreich, a Tassini supporter: “When you have to have half a million dollars to tell people what you stand for, then we're not talking about democracy anymore, we're talking about plutocracy.”

What's Tougher to Cut, Stone or Executive Pay?

What would happen to innovation in America — and the entrepreneurial spirit and every other value that after-dinner speakers regularly invoke at Chamber of Commerce banquets — if workers in the United States made more and executives made less?

Corporate America's movers and shakers don't want to find out. They continue to insist, at every opportunity, that enterprise in America would quickly start crumbling if top executives lost the “incentive” to achieve that only multi-million-dollar annual pay packages can provide.

In fact, of course, business innovation and excellence can thrive quite nicely in enterprises that share rewards with equity in mind. Want to see that thriving in action? Get yourself to St. Cloud, Minnesota, home of Park Industries, the biggest maker of stone-cutting equipment in North America.

Park's top executive, president Tom Schlough, annually takes home less than ten times the average salary of the company's 300 employees. That attention to equity, Schlough believes, helps nurture a workplace full of people who really care about the quality of their work.

“Nobody ever got excited,” he likes to note, “about making the boss rich.”

Nobody's getting exceedingly rich at Park Industries. Everyone, instead, is getting comfortable. Park has in place what the Minneapolis Star Tribune last month called “an unusually rich profit-sharing plan.” In five of the last six years, the Park gain-sharing plan has handed employees an annual bonus that equals over 20 percent of their regular annual pay.

What could lawmakers do to encourage more of this Park Industries can-do and can-share spirit? For starters, they could stop funneling tax dollars to companies that tilt rewards to the top.

Last year, for instance, Minnesota's Department of Employment and Economic Development granted enterprises in the state $4.4 million in tax dollars for job training, just a small fraction of the billions in federal, state, and local tax dollars that go to businesses every year.

Park Industries last year took in one of those Minnesota job-training grants, but so did companies that will funnel the profits made possible by that training overwhelmingly to their top executives.

What if Minnesota's Economic Development Department — and every other local, state, and federal government dispenser of tax dollars to corporate enterprises — denied grants to companies whose top execs make over 10 or 25 times what their workers make?

Park Industries could flourish in that environment. Every other business ought to be able to flourish as well.

The Estate Tax: A Rising Tide Finally Ebbs

We remember John F. Kennedy today for his inspirational rhetoric, his bold commitment to put a man on the moon. But few Americans remember what, closer to Earth, may have been JFK's boldest move.

Until JFK’s time, American progressives worried about how the United States went about distributing wealth and income. They worried that some Americans had too little and others significantly too much.

The battle for economic justice, progressives believed, demanded an offensive — in the words a century ago of crusading publisher Joseph Pulitzer — against both “predatory poverty” and “predatory plutocracy.”

John F. Kennedy, as President, would openly challenge this consensus. Issues around income and wealth distribution, the New Frontier contended, didn’t particularly matter much any more.

What did matter? Economic growth. The high tax rates on high incomes that progressives had won over the first half of the 20th century, the Kennedy White House maintained, were stifling investment. To grow the economy, those high rates had to come down. If they did, everyone would benefit.

A rising tide, as President Kennedy famously argued, lifts all boats.

The New Frontier would eventually cut the top tax rate on millionaire income from 91 to 70 percent. That cut, by itself, didn't turbocharge any rebirth of plutocracy. But Kennedy’s “rising tide” rhetoric did ideologically reframe the nation’s economic debate. The way would be clear for a full-scale assault on any government policy that limited the accumulation of grand fortune.

If only economic growth matters, after all, then anything that corporate leaders can define as an obstacle to growth – from high taxes on the rich to government regulations on business – becomes suspect.

Ronald Reagan, in the 1980s, would go on to exploit these suspicions. Democrats, still carrying New Frontier “rising tide” baggage, would have no coherent response. They watched, sometimes even helped, Republicans march from one comfort-the-comfortable tax cut victory to another, straight through George W. Bush's first term.

And that brings us to last week. Majority Leader Bill Frist felt sure he had Senate Democrats trapped. They could help the poor, but only if they agreed to give plutocracy a free pass to prosper.

Senate Democrats refused to take Frist's bait. Their decision to stand by the estate tax relinked, at least symbolically, poverty and plutocracy. We will not ever, their votes in effect announced, help the bottom of our economic ladder so long as we let wealth and power concentrate at the top.

The Senate’s Democrats, to be sure, didn’t exactly sing out this message loud and clear. They spoke in more prosaic terms. Some noted that the GOP’s minimum wage hike would actually cut wages for many workers who depend on tips. Others stressed that the GOP estate tax cut would deny needed dollars to programs that aid the poor.

Still, in the end, the votes of Senate Democrats spoke louder than their words. They could have caved and voted for the Frist package, to insulate themselves from GOP charges that they really don’t care about the poor. But they didn’t. JFK’s “rising tide” may finally be receding.

We have more on the Senate vote.

Stat of the Week: Which Americans Matter?

In 2009, under current law, the estates left behind by only three of every 1,000 people who die will owe any estate tax. The other 997 estates, notes the Center on Budget and Policy Priorities, will face no estate tax liability whatsoever.

The dollar value of estates exempt from estate tax has been raised six times since 1996. Over that same period, the federal minimum wage has not been raised at all.

Quote of the Week: The Source of All Wealth

“Paying an estate tax is one of the ways that those of us who have accumulated wealth in our society re-fertilize the garden of opportunity that we have benefited from. As an individual and former executive at Starbucks, I know the hundreds of ways our society's investments have helped my company and me. None of us exists on an island — and no wealth can be created without a society that provides a fertile ground of opportunity.”

Howard Behar, former president, Starbucks International, August 3, 2006

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