Every year, on Kentucky Derby day, the movers and shakers of the “sport of kings” have a chance to thrill the American people — and recapture horse racing’s once-vaunted glory. This year, they fell a bit short. They didn’t dazzle Americans with the 2008 Kentucky Derby. They appalled them.

The top headlines, after this year’s “run for the roses,” went to the horse that finished second — and then promptly collapsed with two horrific broken ankles. Moments later, veterinarians euthanized the badly injured thoroughbred, the star filly Eight Belles.

Newspaper columnists have spent a good part of the past week decrying this latest in a long series of horse-racing fatalities. They've been fiercely debating who exactly deserves the blame. In this week’s Too Much, we join the debate.

Why would we ever want to do that? Here's why: Today's thoroughbred scene offers us up an unsettling object lesson on the heavy price we pay when we let staggering quantities of wealth accumulate in the pockets of a few.

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T. Boone Pickens, the swashbuckling corporate raider of the Reagan years, now makes his money running a hedge fund. Last year, these hedge fund labors added $370 million to the Pickens fortune. Pickens, who turns 80 next week, now appears more determined than ever to put that fortune to good use. What’s good use to T. Boone? He’s currently bankrolling a $316 million sports “village” on the campus of Oklahoma State University that will house, once complete, 400 athletes. To make room for this lush new complex, university officials invoked eminent domain to buy up and raze the houses of local residents, many of them elderly, who didn’t want to sell . . .

Another dispatch from the make-them-an-offer-they-can’t-refuse news desk: Private equity real estate kings, the New York Times reported last week, are buying up rent-controlled apartments in New York and systematically harassing low-income tenants until they vacate the premises. The private equity owners then rent out the vacated apartments at New York’s sky-high market rates. One key player in this ongoing apartment grab: Apollo Management, a private equity giant created by Leon D. Black, the billionaire who currently ranks 82nd on the Forbes list of America’s 400 richest. Apollo last year returned investors 40 percent on their money. That return doesn’t impress Robert McCreanor, the director of legal services at a local Catholic Church tenant advocacy project. Private equity wheeler-dealers, McCreanor charges, are generating “above-average profits by displacing poor people.”

“Subprime” has become so yesterday. In London these days, they’re gushing over the red-hot real estate market for “super-primes,” those urban habitations that start at £30 million, the equivalent of nearly $60 million in dollars. On London’s Eaton Square, one such super-prime features glass stairs and an excavated basement living area with bedrooms for three servants and a live-in security guard. Over in Knightsbridge, the Candy brothers Nick and Christian — Britain’s youngest real estate superstars — have reportedly sold one flat for just shy of $200 million. The Candy boys don’t care for the all-glass look. Their latest design innovation: $8,000-per-roll silk wallpaper . . .

Do all rich people spend small fortunes to buy luxury trifles? No. Some rich people, a new survey from Prince & Associates shows, spend small fortunes renting luxury trifles. A quarter of America’s households worth over $10 million plan to rent a luxury item this year, says the survey. Among the somewhat less rich, those households worth only between $1 and $10 million, half plan to rent a luxury item. The luxury rental these households yearn for most: luxury handbags! Not a bad idea. Judith Leiber bags can run nearly $5,000 retail. Low-end Leibers rent for just $229 a month . . .

A quirky loophole in the U.S. tax code, Senator Carl Levin from Michigan charged last month, is encouraging CEO stock option windfalls — and costing the federal treasury billions a year in uncollected revenues. The quirk in a nutshell: Corporations can legally claim tax deductions for executive stock options that run up to 10 times higher than the cost for these options that corporations record in their annual financial statements. In 2005, just-released IRS figures show, the gap between what executive options cost corporations and what corporations deducted off their taxes for these options hit $61 billion. Levin last year introduced legislation that would limit corporate tax deductions for executive options to the actual option cost that corporations record in their annual financial filings. Says Levin: “It makes no sense for taxpayers to be subsidizing stock option pay for corporate executives.”

Inequality
by the numbers

CEO pay:
the scorecard

Good reads
for your bookshelf

Quote of the Week

“If CEOs weren't allowed to make more than 20 times what their employees made, then any time the top management got a raise, so would the workers, which seems fair since management couldn't do it without their workers.”
Pat Robertson, Put a cap on greed, Jackson Citizen Patriot, May 9, 2008

New Wisdom
on Wealth

Brave New Films, Larry The Loophole. This latest video from Robert Greenwald's War on Greed series offers the pithiest — and funniest — explanation yet of how the private equity world works.

Crawford Kilian, Dying for the Rich, The Tyee, May 6, 2008. A look at the evidence that links income inequality to poor health for low- and middle-income people.

Just a few generations ago, back in the 1930s, Americans followed thoroughbred racing more fervently than any other sport outside of baseball and boxing. Racing’s most famous horses routinely packed racetracks with 60,000 fans and more at a time. The legendary Seabiscuit could draw 40,000 fans just to a workout.

These glory days today seem medieval history. Most Americans these days only notice racing at Kentucky Derby time. The rest of the year, racetracks limp from day to day with a few thousand aging aficionados bouncing around in largely empty grandstands.

Horse racing’s top players have tried just about everything to bring fans back. They’ve bankrolled marketing campaigns, hosted concerts, installed slot machines. Most of all, they’ve prayed for another great horse, another Seabiscuit, that could thrill casual fans and thrust racing back into the limelight.

Their prayers have gone unanswered. No great new horse has captured the public imagination. And no great horse ever again will, suggest analysts like racing writer Andrew Beyer, because the really big money in thoroughbreds, ever since the 1980s, has come from breeding horses, not racing them.

Horses retired to stud can command, year in and year out, five- and six-figure fees for every breeding encounter. In 2006, one top sire, Storm Cat, had 111 such encounters — at $500,000 each. A single sire, in other words, can bring in tens of millions of dollars a year in breeding income, far more than the risky business of running races could ever deliver.

A victory in the Kentucky Derby, or any of the other legs of the “Triple Crown” series that horses run as three-year-olds, used to launch the nation’s best horses into long racing careers. Now these victories launch the winning horses into lucrative breeding deals. Smarty Jones, the 2004 Kentucky Derby winner, retired right after the Triple Crown, after a career that lasted all of nine races.

This new career track for successful horses — win quick, then retire — has, in turn, changed how horse people think about breeding. Years ago, people in the racing industry valued the “soundness” of horses as much as their speed. They bred for both traits. Horses with speed but no durability made no sense to owners who wanted horses strong enough to race year after year.

But today no one needs horses to be particularly durable. They just need them to be fast, speedy enough to do well quickly as a three-year-old.

“Because buyers want horses with speed,” notes analyst Beyer, “breeders have filled the thoroughbred species with the genes of fast but unsound horses.”

The euthanized Eight Belles had just those genes. Her Kentucky Derby-winning grandsire, journalist Edward McClelland pointed out last week, “has a record of fathering flash-in-the pan horses who run blazing times as three-year-olds, then are never seen on the track again.”

To win with fast but fragile horses, trainers have to take short-cuts. Most typically, Andrew Beyer observes, trainers pump their flawed horses with “pain-killers and other medications that are forbidden in most other countries.” These drugs “allow infirm horses to achieve success, go to stud and pass on their infirmities to the next generation.”

Racehorses, as a direct result, have become more susceptible to injury. On the same racing day that left Eight Belles dead, observes Washington Post writer Sally Jenkins, “15 other horses were injured at 39 North American tracks, nine of them so seriously they had to be carried from tracks in ambulances.”

“The soundness of the horses has completely gone out the window,” sums up veterinarian Larry Bramlage, “ because we don't reward it anymore.”

The rewards, instead, flow from stud fees, and these fees have been flowing ever faster — as wealth, in society at large, has concentrated.

Racing, to be sure, has always been the “sport of kings.” But the ranks of “kings” — of super-rich investors — have expanded appreciably since the early 1980s, and many of these fabulously wealthy new “kings” have wanted in on the excitement of thoroughbred action. Their dollars have bid up prices at racehorse auctions — and turbocharged the breed-and-profit cycle.

Outstanding horses now win a few races, then get sold for megabucks to deep-pocket syndicates for breeding. To casual racing fans, horse racing has become a blur. Few horses get to stick around long enough to build an appreciable fan following.

In years past, great horses like Seabiscuit did stick around. They built their legends — and enormous public interest — over the course of dramatic careers. Seabiscuit himself raced 89 times over six years.

This year’s Kentucky Derby winner, Big Brown, faces a far different future. Big Brown’s entire career, Andrew Beyer forecasts, will last “no more than nine races.” The fast but fragile Eight Belles didn’t even make it that long.

The racing industry can limit future Eight Belles tragedies, some reformers believe, by replacing dirt racetracks with synthetic surfaces far gentler on the stressed-out ankles of 1,500-pound thoroughbreds. Other reformers are trying to save horse racing by turning tracks into full-fledged gambling casinos.

Could solutions like these save horse racing? Synthetic surfaces do limit the frequency of horse fatalities. But they don’t eliminate them. Casino games at tracks, the evidence shows, don’t create any new fan interest in racing. They operate instead as a de facto tax on low-income families that enriches “gaming” corporations and increases the incidence of gambling addiction.

Inequality, in short, is driving what ails thoroughbred racing. More inequality won’t fix it.

Steven Bank,  Kirk Stark, and Joseph Thorndike, War and Taxes. Washington, D.C.: Urban Institute Press, 2008. 224 pp.

Over the past half-dozen years, over 4,000 Americans have lost their lives in a foreign war that has cost at least a half-trillion dollars. Over that same span of time, President George W. Bush has engineered a series of tax cuts that have sharply reduced federal revenues.

This wartime tax cutting, declares this new survey of U.S. wartime tax policy, “has no precedent in American history.”

Most Americans today probably don’t know that. They don’t know that America’s wealthy, in every major American conflict from the Revolutionary War through Vietnam, have had to sacrifice at least a portion of their hefty incomes or wealth to help finance the war effort.

In War and Taxes, unfortunately, co-authors Joseph Thorndike from the University of Virginia and Steven Bank and Kirk Stark from UCLA focus much more on “wartime opposition to increased taxes” than the struggles past generations have waged to make sure, as President Franklin Roosevelt put it, that “the few do not gain from the sacrifices of the many.”

One example: War and Taxes details business opposition to excess profits taxation during World War I but makes no mention of the “American Committee on War Finance,” a grassroots campaign that spent 1917 mobilizing support for a 100 percent tax on all individual income over $100,000.

Campaigns like this effort paved the way for the “soak the rich” tax policies put in place during World Wars I and II. During World War I, the federal tax rate on income in the highest tax bracket soared to 77 percent tax. In World War II, the top-bracket rate reached 94 percent. Our current top rate: 35 percent.

What explains this enormous sacrifice gap? War and Taxes never adequately confronts this basic question. George Bush could get away with cutting taxes in wartime, the authors suggest, because “historically low inflation rates, a political environment that has marginalized deficit concerns, and the elimination of the draft” have more or less “transformed the politics of wartime taxation.”

But none of these factors speak to a much more compelling difference between the first half of the 20th century and our contemporary politics: the presence then — and the absence now — of strong progressive movements that explicitly challenged plutocratic power.

These movements didn’t have, right before World Wars I and II, enough strength to “soak the rich.” But wars throw the wealthy off stride. They create new political possibilities. Well-organized progressives in World War I and World War II were able to seize those opportunities.

Just how did they do that? That history remains to be written.

Stat of the Week

Over the past 20 years, no American state has seen the gap between rich and poor widen faster than Connecticut. From 1987 through 2006, the top fifth of the state’s households saw their incomes increase by 44.8 percent, after inflation. Incomes for the bottom fifth fell 17.4 percent. One consequence: Connecticut now sports the widest educational performance gap in the nation between high-income students and low- and middle-income students.

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.