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January 14, 2008 |
| This Week | |
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Last Monday, a bipartisan band of nationally prominent former lawmakers — mostly former U.S. senators along the lines of Sam Nunn and David Boren — gathered at a The nation’s two parties, the group avowed, have lost the capacity to solve problems. Hogwash. Lawmakers in Washington solve problems all the time. Rich people’s problems. In a plutocracy, that’s what lawmakers do. In this week’s Too Much, we have the latest evidence of how thoroughly plutocratic the United States has become. The source: the first official analysis, released last Tuesday, of the Medicare prescription drug benefit enacted, with grand fanfare, in 2003. |
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| Greed at a Glance: Don't Forget Phuket | |
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Donald Trump, the billionaire developer turned insufferable TV star, isn’t buying all the current chatter about a collapse in the real estate market. In fact, he’s betting his house — make that one of his houses — against a real estate downturn. That one house sits on Palm Beach island in Florida. Trump put this oceanfront property up for sale last year — at $125 million. Stephen Schwarzman, the billionaire who runs the Blackstone private equity group, offered Trump $90 million. Trump, the Palm Beach Post reported last week, has rejected the offer. Jeanine Recckio, the owner of a trendy Palm Beach boutique, thinks Trump is making the right bet by holding out. Notes the fashionista: “There’s more billionaires than ever before. I mean, we’re running out of places to park the yachts.” No one works harder to stay on top of changing public perceptions and attitudes than executives in the advertising industry. And what those executives are perceiving these days, says a new Adweek survey of national opinion polling, appears to be “broad enthusiasm” for more evenly distributing America’s wealth. Notes Adweek analyst Mark Dolliver: “Amid a crescendo of data about how much richer the rich are compared to everyone else, concern over inequality has escaped the confines of public-policy debate to become a broader cultural phenomenon.” Among the most striking numbers in the Adweek survey: 49 percent of the U.S. public feels the government should redistribute wealth via “heavy taxes on the rich” (Gallup), 86 percent of Americans making between $60,000 and $100,000 consider CEOs overpaid (Los Angeles Times/Bloomberg), and only 11 percent of Americans “admire the people who run the country's largest companies” either “a great deal” or “quite a bit” (Financial Times/Harris) . . . You can see mausoleums, room-size structures that hold cremated remains, in just about any cemetery. But you’ll have to look long and hard to find a “columbarium,” a The top executives at 56 of New Zealand’s biggest companies are now averaging over $1 million, says the New Zealand Herald. That’s not much, in the global business scheme of things. Top execs in the United States currently average around $10 million. But critics of Corporate New Zealand see no cause for celebration. Some New Zealand CEOs, they note, are making over 100 times the pay of average workers. Good bosses, New Zealand Shareholders Association spokesperson Des Hunt observed earlier this month, share the wealth. Added Hunt, a veteran business leader himself: “If the average wage at a medium-to-large company is $40,000, I would have difficulty if the CEO's base salary was much more than 30 to 40 times that. Anyone who thinks otherwise is being greedy.” |
Quote of the Week “Plutocracy and oligarchy mix well; democracy and plutocracy do not. It is possible we are in the process of changing the fundamental structure of American society and government without realizing it.”
New Wisdom Mark Pinsky, The gospel of money, USA Today, January 7, 2008. A religion writer explores whether “multiple, multimillion dollar estates, luxury cars, vacation homes, exotic trips, and private jets” are making megachurch pastors “pimps in the pulpit.” Dugald Jellie, Road to riches, Sydney Morning Herald, January 10, 2008. A walk along the “most expensive street in the most expensive suburb in Australia,“ where homes come with boatsheds, tennis courts, and other “rich-kid playthings big enough to be seen on Google Earth” — and neighbors never talk. |
| In Focus: A Prescription for Plutocracy | |
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Imagine yourself the CEO in an industry that has been registering record profits year after year — mainly by overcharging consumers for products they feel they literally can’t live without. But suddenly you find yourself with a problem: Your products have simply become too costly for consumers to afford. So what do you do? You convince lawmakers to plow billions of taxpayer dollars into a program that will help consumers pay for your overpriced products. Problem solved. You can now, as a certified CEO genius, look forward to years of windfall rewards. This scenario sound far-fetched? You haven’t been paying attention. This scenario has just unfolded — in the pharmaceutical industry. Big Pharma, as the industry has become less than affectionately known, entered the 21st century the most profitable industry in the world. In 2002, notes Harvard Medical School analyst Marcia Angell, the top 10 drug companies in the United States netted more earnings than all the rest of the companies in the Fortune 500 taken together. Big profits like these translated into hefty paydays for top Big Pharma executives. In 2001, the five most lavishly paid drug company execs averaged over $30 million each. The fuel for these big earnings: revenues from outpatient prescriptions that were rising at a remarkable 15 percent annual rate. But no industry can sustain, over the long haul, such lofty annual revenue increases. For Big Pharma, the first big sign of trouble would come in 2003. In that year, after over two decades as Corporate America’s most profitable sector, the pharmaceutical industry lost its number one profitability ranking, dropping to third place. The industry would waste no time crying in its chemicals. In that same 2003, Big Pharma would team with the Bush White House to push through Congress legislation that added a prescription drug benefit to the Medicare program. This new Medicare legislation guaranteed all seniors eligibility for some form of drug benefit by January 2006. But the legislation didn’t guarantee any decrease in prescription drug prices. Indeed, the new law specifically prohibited any federal government action to negotiate for lower prices directly with the drug companies. “The key goal,” notes Ron Pollack of the health care watchdog Families USA, “was to make sure there'd be no interference in the drug companies' abilities to charge high prices and to continue to increase those prices.” To safeguard this price-inflating provision, Big Pharma would spend the next three years overrunning Capitol Hill with lobbyists and cash. Through 2005 and the first six months of 2006 alone, the Center for Public Integrity reported last April, drug companies and their trade groups spent $155 million on lobbying Congress. Those dollars unleashed an army of 1,100 paid lobbyists — over two lobbyists for every Capitol Hill lawmaker. Big Pharma spent millions more ushering members of Congress into America’s economic elite. In 2005, for instance, the industry’s top trade association named former Rep. Billy Tauzin its new CEO. His pay package: $2 million, over 15 times his lawmaker take-home. These Big Pharma investments all paid off. Attempts to amend the 2003 drug “benefit” legislation went nowhere. The legislation went into full effect exactly as the drug industry wanted. The results would be predictable. In 2006, overall outlays for prescription drugs “accelerated for the first time in six years,” soaring 8.5 percent. An analysis of that increase, published last week by the U.S. Centers for Medicare and Medicaid Services, hands the credit to the new federal Medicare benefit. In 2006, $41 billion taxpayer dollars went toward underwriting the drug benefit. Over the course of the year, the share of the nation’s total prescription drug costs paid by Medicare leaped from 2 percent to 18 percent. In short, an unalloyed victory for the drug companies. They can now continue to overcharge with impunity. America’s taxpayers have come to their rescue. For our plutocrats, plutocracy has worked once again. |
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| In Review: Retelling a Classic Tale of Avarice | |
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There Will Be Blood, a Paramount Vantage and Miramax Films motion picture release directed by Paul Thomas Anderson. Based on Oil!, the 1927 novel by Upton Sinclair. . Back in the 1920s, the great “oilmen” of Texas and California multiplied their millions in much the same way as their predecessors, over a generation earlier, had forged their fortunes in Appalachia, the site of North America’s first major oil strikes.
How powerful would these new oilmen become? In 1926, they shoved into law the most notorious tax loophole in American history, the “oil-depletion allowance,” a piece of tax code magic that exempted 27.5 percent of oilmen earnings from income tax. One year later, the famed muckraker Upton Sinclair would set out to sound an alarm over America’s latest Big Oil onslaught. In a novel entitled Oil!, he painted a vivid picture of “an evil Power” that “roams the earth, crippling the bodies of men and women,” luring “nations to destruction.” Sinclair’s novel, some 80 years later, has now made it to a cineplex near you, as There Will Be Blood, a just-released film from hot young director Paul Thomas Anderson. The film has already won best picture of the year honors — from the National Society of Film Critics — and appears poised to do well at next month’s Oscars. Director Anderson has pared Sinclair’s sprawling epic considerably. But he seems to have kept the novel’s core intact, with an unrelenting focus on the greed grab of a single California oilman. As the Boston Globe capsulizes the plot: “The oil made him wealthy. The wealth made him powerful. The power made him crazy.” Maybe we’re the crazy ones. Four score years after Upton Sinclair’s novel, we still let oilmen distort our economic landscape. |
Stat of the Week Two members of Congress are calling on the chief executive of Countrywide Financial, the giant mortgage lender just bought out by Bank of America, to donate part of his upcoming severance to families victimized by the subprime mortgage meltdown. CEO Angelo Mozilo can certainly afford to make a hefty donation. His severance, the Los Angeles Times reported last week, will total $115 million. Mozilo has already pocketed, over the last decade, $650 million from his Countrywide labors.
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| About Too Much | |
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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. |
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The “tribe” of the world’s “intelligent, smart, and very wealthy,” the Bangkok Post 
massive edifice that cemetery folk consider “the champagne of interment options.” The nation’s newest columbarium — one of the largest ever built — now sits near Boston. The owner: 41-year-old Boston hedge fund king Thomas Hudson, Jr., who has just had 450,000 pounds of Vermont granite turned into a final resting place that features 17-foot high cathedral ceilings and hand-carved stone lions. Hudson’s new columbarium can comfortably host as many as 88 urns, and Hudson family members, one 
Those early oilmen strong-armed, cheated, and bribed. They did everything to the Pennsylvania legislature, one historian has quipped, except refine it. Their oilmen brethren, in the Roaring Twenties, would follow suit.