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Members of Congress annually spend more of their time on the federal budget than any other piece of legislative business. And that creates problems — outside the Beltway — because the complexity of the budget process keeps citizens on the sidelines.

Authorizations. Appropriations. Continuing resolutions. Budget debates involve an endless stream of jargon. In this week's Too Much, we aim to simplify the annual budget process that President Bush began last Monday.

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Dentists in the United States average $180,000 a year, but two out of three dentists, says a new national survey, don’t consider themselves wealthy. The CEO of the nation’s biggest private equity partnership, the Blackstone group, doesn’t consider himself wealthy either. That CEO, Stephen Schwarzman, pocketed $684 million last year when Blackstone sold a chunk of its shares to the general public. He currently owns a $37-million triplex in Manhattan, a $20.5-million estate in Florida, and a $34-million beach place in the Hamptons. Plus another $35-million worth of seaside property on the French Riviera and in Jamaica. Still, deep down, this Blackstone billionaire remains down-home. As he explains in a just-published — and fascinating — profile in the New Yorker: “I don’t feel like a wealthy person. Other people think of me as a wealthy person, but I don’t.”

What makes private equity firms — and similar investment vehicles like hedge funds — so fantastically lucrative? The U.S. tax code certainly helps. Private equity and hedge fund managers pay taxes on most of their millions at just a 15 percent rate, thanks to a loophole that lets them claim the bulk of their income as capital gains. Congress last year failed to pass a reform that would have upped that rate to 35 percent, the same rate that applies to ordinary millionaire income. Last month the hedge fund industry's trade association moved to make sure Congress doesn’t have second thoughts — by hiring a senior GOP congressman as the group’s next CEO. Rep. Richard Baker of Louisiana, who has been making $169,300 a year as a lawmaker, will now collect $1 million a year as the hedge fund industry’s top lobbyist. Baker, the Center for Responsible Politics notes, has been serving on the House Financial Services committee, the legislative panel that “oversees the industry he will soon represent.”

Wealth attracts wealth, and nowhere more rapidly these days than in London, the global super-rich capital city that now boasts 30,000 residents who pocket at least $1 million a year, up from just 19,000 four years ago. Wealthy newcomers, reports the Financial Times, typically “buy a period central London home and gut it.” The multi-million “revamps” build in all of today’s mega-millionaire basics — “panic rooms” for safe refuge should burglars somehow make their way past security, walk-in “cold rooms” to keep food fresh for those last-minute banquets — and some new touches so far seldom scene outside London. Among these cutting-edge features: retractable roofs that “cover garden space in cold weather” and ever-deeper basements. Notes architect Sandie Altman: “Most clients whenever they buy a property now think ‘I must go down.’”

The world’s wealthy may be setting down roots in London, but New York has emerged as “the world's favorite luxury bargain mecca.” Gucci last week opened a new four-floor flagship store on Fifth Avenue with a party that drew a list of swells that included Madonna and Martha Stewart. The dollar’s plunge on world currency markets has made shopping sprees in Manhattan a no-brainer for foreigners with fortunes. And they have plenty of wares to choose from in New York. The Daily News has just helpfully published a short list. One must-have on it, from Mrs. John L. Strong, a 79-year-old Madison Avenue boutique: a stationery set “embossed with an image of your Aspen winter home in a unique antique box” — for just $8,000. . .

Speaking of Aspen, the rich Russians are coming — in numbers that are delighting this Colorado ski resort’s poshest lodges. Three years ago, Aspen’s St. Regis, where “butlered” suites run $3,000 a night, hosted 150 Russian guests. This year’s total will push past 500. Most will spend $100,000 for a week on Colorado’s slopes, the Denver Post reports, not counting “the chartered jets from Moscow — or the shopping.” Bob Stinchcomb, a Colorado tourist executive, expects the Russian invasion to continue: “The super rich like Aspen because they can walk around anonymously unlike in Moscow, where everything is done with a security car service. Aspen is such a great match for Moscow and all that wealth.”

Inequality
by the numbers

CEO pay:
the scorecard

Good reads
for your bookshelf

Quote of the Week

“Writing before the 1980s, an economist noted that the distribution of income in the U.S. changed so little that studying it was like watching the grass grow. In contrast, the post-1980 experience might be characterized as a time-elapsed film showing grass spurting up by leaps and bounds within a few seconds.”
Arthur Sakamoto and ChangHwan Kim, American Sociological Review, February 2008

New Wisdom
on Wealth

Stewart Acuff and Sheldon Friedman, Union Choice Would Help A Faltering Economy. February 5, 2008. Looks at the roots of America's “worsening maldistribution of income and wealth” and suggests a key first step toward a solution.

Chris Fitzsimon, The real class warfare continues, Carboro Citizen, February 6, 2008. The executive director of North Carolina Policy Watch explores the claim that John Edwards fell short in his Presidential bid because he focused too much on America's “staggering and growing economic inequality.”

Nat Crowley, Where will the money come from? Bangor Daily News, February 8, 2008. A retired Maine state lawmaker compares today's inequality to the inequality that led to his Depression youth.

Here's a nutty idea. Let's start by cutting back on what the federal government spends on education — and the environment and health research, too.

And let's not forget to trim back federal aid for firefighters and first responders. Or federal help for seniors facing huge spikes in home heating bills. Let's cut all this federal spending — by $15 billion or so.

Then let's take this $15 billion and give every dollar to taxpayers who make over $1 million a year. Wait, that's not nutty enough. Let's take that $15 billion, triple it, and only then give it to millionaires.

We clearly have the makings here for a truly great comedy sketch on Saturday Night Live.

But the SNL crew, to really maximize the guffaws, might want to make all this even more ridiculous — by choosing, for instance, to keep those giveaways to millionaires going for the next ten years, with each year's giveaway larger than the year before's.

Now that would be nutty.

That would also be exactly what President George W. Bush proposed last week in his latest — and last — federal budget submission to Congress.

“It's a good budget,” the President told the nation last week.

It's actually insane. This new Bush budget, to keep tax cuts flowing to America's wealthy, rips into federal programs that average Americans support — and need.

America's wealthy certainly don't need any more help. But they get plenty of it in the President's new budget.

In the 2009 federal fiscal year, taxpayers who make over $1 million will save a whopping $51 billion, thanks to the Bush tax cuts originally enacted in 2001 and 2003.

These over-$1 million households, notes the Center for Budget and Policy Priorities in a new analysis, make up just 0.3 percent of the U.S. population. In 2009, under current tax law, these deep pockets will see more in Bush tax cut savings — $12 billion more — than the entire bottom 60 percent of the U.S. income distribution, those households that make $50,000 a year or less.

All the Bush tax cuts for the financially fortunate will fade out completely after 2010, unless Congress consciously chooses to extend them.

President Bush, not surprisingly, is pressing to win this legislative imprimatur on his “legacy.” If he gets it, notes Center for Budget and Policy Priorities analyst Aviva Aron-Dine, the payoff for America's richest will be staggering.

The nation's most affluent 1 percent — households currently making over $450,000 a year -- would realize $1.1 trillion in tax savings over the next decade, if the Bush tax rates remain in effect, over $180 billion more in tax savings than the savings that would go to America's entire bottom 80 percent combined.

The ultimate insanity? This $1.1 trillion would come on top of the near $500 billion the Bush tax cuts have, over the last seven years, already saved the nation's top 1 percent.

Lawrence Mitchell, The Speculation Economy: How Finance Triumphed Over Industry. Berrett-Koehler Publishers, Inc. 395 pp.

Build a better mouse-trap, Ralph Waldo Emerson is supposed to have said, and the world will beat a path to your door. This hoary aphorism still captures — for the vast majority of Americans — the essence of how our economy operates.

This economy, we believe, revolves around making and selling goods and services. Bring a better product to market, our folklore assures us, and the world will indeed come running your way.

In reality, our U.S. economy doesn’t revolve around buying and selling products. Our economy revolves around the buying and selling of companies, or pieces of them, through the stock market.

Companies today dance to the stock market’s tune. To keep the music playing — and the market happy — the CEOs of these companies will do almost anything. They’ll downsize. They’ll outsource. They’ll slash research and development. They’ll rush into mergers that leave their enterprises ludicrously dysfunctional.

And if none of that does enough to jolt their share price upward, corporate execs simply shift to Plan B. They cook the books.

Why do executives dance so doggedly — and dangerously? Why do they engage in behaviors that so obviously undermine the capacity of their companies to build better mouse-traps? They do so, of course, for the money. Dancing to the market’s tune is stuffing executive pockets with paychecks of ungodly magnitude.

But why do we, as a society, let stocks call our economy’s tune?

We seldom ask this question. We assume the economic dominance of stock market speculation as simply the way things are — and the way things must be.

Lawrence Mitchell does not make that assumption. His absorbing new book, The Speculation Economy, vividly explains why.

Mitchell, a former corporate lawyer who now teaches at George Washington University, takes us back to the early years of the 20th century, to the merger wave that created the modern giant American corporation — and the modern stock market.

That wave began in 1897, the year after the first great American popular upsurge against plutocracy climaxed and collapsed in the landmark 1896 election. By 1903, Corporate America had been transformed. U.S. industrial corporations had “become the raw materials of a new kind of business, a business created for finance rather than for production.”

Andrew Carnegie typified the old business order. He made his fortune manufacturing steel. The modern new corporation, Mitchell relates, would be “created for a new purpose, to sell stock, stock that would make its promoters and financiers rich.”

The dancing for short-term profits that CEOs do today, Mitchell's history goes on to help us see, simply exaggerates “a quality that was embedded in the American economy a hundred years ago.”

In today’s global economy, notes Mitchell, a founder of the progressive corporate law movement, that quality only dominates in the United States and the UK, the developed world’s two most unequal nations. Our current “stock market capitalism,” in other words, stands as neither “necessary nor inevitable.”

The U.S. economy, Mitchell adds, could have gone down different roads — to a capitalism, for instance, where “publicly held investments like bonds characterize the principal source of corporate finance, even a heavily regulated state-guided capitalism.” Other roads like these, he stresses, remain open to us.

“The history of American corporate capitalism is living history,” Mitchell sums up, “and the course of living history can be changed.”

Stat of the Week

America’s corporate CEOs are sharing the wealth — but only with fellow corporate officers. At Fortune 500 companies, researchers at Equilar report, typical corporate chief financial officers, or CFOs, pulled in pay packages worth $2.8 million over the last corporate fiscal year.

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.