This Week

“Mounting a campaign against plutocracy,” the perceptive social critic Thomas Frank noted earlier this month in the New York Times, “makes as much sense to the typical Washington liberal as would circulating a petition against gravity.”

Maybe that's why hardly anyone in Washington raised a ruckus last week when Senate GOP leaders began laying the groundwork for the repeal of a 13-year-old law that actually set a limit of sorts on excessive CEO pay.

We have more on this story in this week's Too Much — and, on top of that, even a few words about gravity!

Greed at a Glance: What's Really Hot in Phoenix

No Washington, D.C. sightseeing buses currently take tourists across the Potomac into the exclusive Virginia suburb of McLean. Maybe they should. The area, the New Republic noted last week, has become a living monument to plutocracy, “a testament to the rewards awaiting ambitious conservatives in modern Washington, where unprecedented wealth is being made from the business of politics.” McLean's mansions house political operatives who range from former congressional staffers, who start at $300,000 a year in K Street lobbying firms, to former lawmakers like Don Nickles, the ex-senator from Oklahoma who now runs his own lobbying company and lives in a seven-bathroom McLean colonial. McLean's ultimate residence, the “Surry Hill” estate, boasts eight bathrooms and two waterfalls. Owners Edwina Rogers, a former Bush White House aide, and her husband Edward, a GOP superlobbyist, can host as many as 400 guests for fundraisers . . .

Is sunny Phoenix becoming the nation's latest luxury “hotspot”? These days, the Arizona Republic reported last week, sharp-eyed Phoenicians can find “evidence of an emerging excess economy” all around the metro area. At the upper-crust watering hole known as Pink Taco in Scottsdale, patrons are paying $200 a shot for the house's finest tequila, and one visitor “took home a whole bottle for $4,600.” One boutique with two area stores, Electric Ladyland, is selling $500 T-shirts. And where can you catch a glimpse of people in T-shirted sartorial splendor? Try the Parallel, a Paradise Valley vacation club “that costs $635,000 just to join.”

America's most selective colleges and universities, charges a new book by Wall Street Journal reporter Daniel Golden, are shamelessly admitting students with mediocre high school records and second-rate SAT scores. What's earning these students their preferential treatment? The money and celebrity of their wealthy parents. Golden's just-published book, The Price of Admission: How America's Ruling Class Buys Its Way into Elite Colleges — And Who Gets Left Outside the Gates, is bursting with examples. Among them: Lauren Bush, the President's niece, won admission to Princeton despite applying a month after the admission deadline and sporting SATs “considerably below” Princeton normal. Golden's reporting, says a Providence Journal editorial, offers just one more sign “that America is turning into a winner-take-all society in which much of the winning depends on choosing rich parents.”

About a quarter of the savings from the tax cuts enacted since George W. Bush became President, notes the Massachusetts-based National Priorities Project, will this year go to America's wealthiest 1 percent. This $56.5 billion for the awesomely affluent, if spent instead on federal college aid, could fund tuition and fees at state universities for over 10 million college students. Want to see what else the federal government could do with this year's billions in tax cuts for the deep-pocket set? The Priorities Project has placed online a calculator that lets browsers check out, state by state, how many teachers or units of affordable housing or any number of other initiatives of redeeming social value could be funded if the White House had chosen to be somewhat less generous to the nation's richest 1 percent.

The life expectancy gap between people living in America's poorest tenth and richest tenth increased 60 percent between 1980 and 2000, suggests new research published last month by the International Journal of Epidemiology. That increase, notes an accompanying commentary on the research by British epidemiologist Daniel Dorling, once again demonstrates “that where there is higher inequality, especially income inequality, there is higher inequality in health.” The United States, he observes, has become “a natural experiment for studying the effects of exposing millions of human beings to relatively high levels of the various insults of inequality.” One sign of the toll these insults take: Americans now average 12.1 percent of their lives in poor health, the highest such percentage in the developed world.

The Post-9/11 World's Forgotten Debts

America, White House officials have been noting throughout this 9/11 anniversary week, owes an enormous debt to those men and women of the armed forces now serving in harm's way.

Servicemen and women, a new Pentagon study makes clear, owe enormous debts, too — to the predatory “payday” lenders that have set up shop all around the nation's biggest military bases. Military personnel are now frequenting payday lenders three times more often than civilians.

Servicemen and women unable to pay back payday loans by their next payday typically end up facing penalty fees that run at “an annual percentage rate of 400 to 700 percent.”

Predatory lending practices like these make up the extreme end of what banking experts call “subprime lending,” the fastest-growing segment of the amazingly profitable financial services industry.

Over recent years, shareholder activists have mounted campaigns against Citigroup, Household International, Wells Fargo, and other financial services corporate giants that have expanded into subprime lending markets.

Debt, overall, has become super big business. In 2004, the latest year with numbers available, debt service payments made up 19.4 percent of American middle class household incomes.

The only big winners in America's debt explosion: the top execs at the nation's biggest financial services corporations. Richard Fairbank, the CEO of credit card giant Capital One Financial, cashed out $56 million in stock option gains in 2004 and nearly $250 million more last year.

In the Senate, Shielding an Option to Steal?

In a plutocracy, a society where the rich rule, the wealthy don’t always win. But they hardly ever lose. The latest case in point: the furor over backdated stock options.

Earlier this year, news reports revealed that many of America’s biggest corporations were playing games with the options to buy company stock they were granting top executives. Corporate boards were, in effect, handing their CEOs lottery tickets they already knew to be winners.

Last week, the backdating scandal finally hit Capitol Hill. Two different U.S. Senate committees held hearings on the ins and outs of backdating and various other related schemes that artificially — and even illegally — pump up executive pay.

And what did the hearings produce? A Senate consensus on legislative proposals that could deflate overstuffed executive pockets? Not exactly.

A new consensus, to be sure, does seem to be emerging on Capitol Hill. But that consensus has CEOs grinning. The public clamor to “do something” about backdating options is morphing into legislative maneuvering that will likely cut taxes on companies that overpay their execs. We have the details.

Stat of the Week: Home Builders Defying Gravity

What goes up must come down. That law of physics certainly applies to home prices, now that the housing boom has gone into reverse. Does this same principle also apply, wonders compensation expert Graef Crystal, to CEO earnings in the home-building industry? The top 11 home-builder CEOs last year averaged $24.2 million in take-home, up 16 percent from the year before.

The year's biggest home-building rewards — $43.8 million worth — went to KB Home CEO Bruce Karatz.

Quote of the Week: A Graveyard Self-Delusion

“Voters should put those seeking office on notice that workers can not continue to underwrite huge profits and inflated CEO salaries while watching their own standards of living erode.

“We can keep telling ourselves we're the richest nation on the planet, but until those riches are better distributed, that mantra sounds more like a song you whistle walking past the graveyard.”

Philadelphia Daily News, editorial, September 5, 2006

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