| Email not displaying correctly? Click here for the online edition | Subscribe |
|
|
August 17, 2009 |
 |
|
|
Established mainstream economists don’t have much credibility these days. They blew their cred on the housing bubble. They didn’t see the crash coming. A half-dozen years earlier, they didn’t see the dot-com bubble crash coming either. But one established, impeccably credentialed economist did get those bubbles right. That economist, Yale’s Robert Shiller, is now sounding a new warning — on inequality. Charlie Rose, public TV’s top interview host, had Shiller on the air recently to talk about the U.S. economic crisis. Shiller’s message: “The biggest problem facing this country is not this crisis. It`s the growing inequality.” The prospect of America's wealth getting even more “concentrated in a rich class,” as Shiller put it a few years ago, “ought to strike fear into our hearts.” Earlier this month, a few days after Shiller’s Charlie Rose appearance, University of California economist Emmanuel Saez gave us all some new reason to fear. He released his latest income concentration figures. This week, in Too Much, we have the story the Saez data tell. |
|
 |
|
Bankers who rake in huge bonuses ought to have those windfalls immediately — and heavily — taxed. So says an unlikely band of business-bashers: a dozen faculty from the business schools responsible for training the next generation of Britain’s business elite. Writing in a major UK daily, the twelve faculty called on “all political parties to endorse a windfall tax on bonuses to fund shortfalls in monies for public services.” The faculty blamed “reckless, bonus-fueled trading and investment” for plunging the world economy “into deep crisis” and rejected “the notion of superiority fostered by some firms, and some business schools, that providing financial services to society is worth hundreds of times more than providing services in nursing or transportation or child care.” In the United States, meanwhile, the 90 percent tax on bailed-out banker bonuses that passed the House this past March remains lost in limbo. No bonus tax bill has yet come anywhere near the Senate floor . . .
Money managers for the world’s super rich have a new label for some of their clients: the “billionaire nomads.” The growing global crackdown on offshore tax havens, the Wealth Bulletin’s David Bain reports, has some of the world’s richest “living on megayachts, apparently deciding that pirates on the high seas are less of a risk than dodging the remorseless embrace of tax authorities.” To join the nomadic set, most global glitterati need only exit their home country and take their assets with them. Things get more complicated for wealthy Americans. U.S. tax law requires citizens to file tax returns even if they’re no longer living or earning money in the United States. Some wealthy Americans have renounced their citizenship to sidestep this inconvenience. New IRS rules, in place just over a year, are trying to make this loophole less appealing . . .
Class war in the United States appears to be alive and well — and totally one-sided. The media watchdogs at FAIR have just published an analysis that explores how major media outlets are using the phrase “class war” in their news coverage and commentary. Major media, says the survey, employ “class warfare” terminology — almost exclusively — to “characterize as belligerent” policies meant to help the non-rich. “Class war” references pop up 18 times more frequently in stories about proposals and actions to benefit working people than they do in stories about proposals and actions that benefit the rich. This one-sided approach, FAIR concludes, has helped foster a “biased national discourse that portrays ‘class war’ as an ongoing persecution of the wealthy at the hands of the poor and working class and their populist leaders.” |
Quote of the Week “We need a High Pay Commission to launch a wide-ranging review of pay at the top. It should consider proposals to restrict excessive remuneration such as maximum wage ratios and bonus taxation to provide the just society and sustainable economy we all want.”
New Wisdom Jonathan Chait, Mind the Gap: What the right wing really thinks about inequality, New Republic, August 12, 2009. A dissection of the conservative case that inequality doesn't matter. John Kampfner, A safe haven for the super-rich, Guardian (UK), August 12, 2009. On the question “that all main political parties are too frightened” to ask: “At what point does one become excessively rich?” Chuck Collins, Taxing Wealth for the Common Good, YES! Magazine, August 14, 2009. Why affluent Americans are backing a new campaign to raise taxes on high incomes. |
 |
|
|
A Profile of America's 'Top-Heaviest' Year Emmanuel Saez, the Berkeley economist who many now consider the world’s top authority on the incomes of the super rich, has never been one for sweeping statements. He tends to let his data do the talking. But his latest data — from the crunching of just-released IRS tax records for 2007 — have wowed even Saez. America’s most affluent, those data show, have never grabbed a greater share of the nation’s income than they did in 2007. The nation’s top .01 percent of income-earners in 2007 — taxpayers who made over $11.5 million — pulled in 6.04 percent of all income, the highest top .01 percent share of the nation’s income since the IRS started keeping records back in 1913. The year 2007, a rather awestruck Saez noted earlier this month, “was an incredibly good year for the super rich.” The 14,588 families who made up 2007’s top .01 percent averaged $35,042,705 in income, 1,080 times the $32,421 average income of America’s bottom 90 percent. The gap between the top .01 percent and the bottom 90 percent, before 2007, had never stretched over 1,000 times. Was 2007 the most unequal, top-heavy year in American history? That depends on how you define the top. If you’re looking at only the tippy-top of the income distribution — families in the richest tenth or hundredth of 1 percent — 2007 “wins” the inequality honors hands down. But if you define rich a bit more broadly, as the top 1 percent, the rich of 2007 don’t quite match the sticky fingers of their awesomely affluent counterparts back in the late 1920s. In 1928, the last full year before the Great Depression, America’s most affluent 1 percent took in 23.94 percent of the nation’s income. The comparable figure for 2007's top 1 percent: 23.5 percent. Those 1928 wealthy would see their share of the nation’s income drop sharply as the Depression deepened. Economic shocks to the system, as Berkeley's Emmanuel Saez notes, almost always cost the rich income share, since profits from businesses and stock market wheeling and dealing tend to “fall faster than average income” during economic downturns. But what happens next can vary enormously. After the Great Depression, the super rich share of America’s income stayed down — for over a generation. The quarter of the nation’s income that the top 1 percent collected in 1928 actually shrank all the way down to 10 percent in the early 1950s and didn’t start rising appreciably again until after Ronald Reagan’s 1980 election. After the recession early in the 1990s and the downturn in the early 2000s, a totally different story. The super rich income share did dip after each of these recessions, but only momentarily. Why did the super rich share of the nation's income go down and stay down after the Great Depression and come right back up after the recessions of recent years? No mystery here. During the 1930s and early 1940s, as Saez points out, the New Deal put in place financial regulations and progressive tax rates that prevented “income concentration from bouncing back.” In the 1990s, by contrast, Congress and the White House deregulated financial markets. In the 2000s, the two joined to cut taxes on the rich. So what will happen after our current Great Recession ends? That remains the $64,000 question of our time. In the 1980s, we let market fundamentalists dismantle a huge chunk of the New Deal legacy. The institutions that had kept America's super rich less than super — most notably, progressive taxation and strong trade unions — begin to go by the wayside. In their place came the record inequality that the new Saez figures so dramatically document — and, over the last year, the worst economic times that Americans under 70 have ever seen. “We need to decide as a society whether this increase in income inequality is efficient and acceptable,” says Emmanuel Saez, reverting back to his customary eminently sober academic tone, “and, if not, what mix of institutional reforms should be developed to counter it.” The rest of us can’t afford to be so understated. Those reforms, starting with higher progressive tax rates on high incomes, can’t begin too soon. |
|
 |
|
|
Toward an American Egalitarian Samizdat A century ago, amid inequality as deep and repelling as today’s, a rich literature of grassroots citizen protest thrived and inspired. Americans, pen in hand, challenged the pieties of plutocrats and envisioned the more equal — and far more liveable — society that could be. That more equal society, by the mid 20th century, would come to be. Now here early in the 21st century, with plutocrats back on top, citizens are once again circulating books of protest that fly largely under the mainstream publishing radar. We survey below an assortment of these recent titles. Charles Kelly, Farewell Fantasyland: Time for Economic and Political Reality. Charlotte, North Carolina. 105 pp. Back in the 1960s, business management expert Charles Kelly remembers, scientists were excitedly predicting a computer-driven productivity explosion that would have Americans, by 2000, working four-day, 32-hour weeks. Back then, the now 77-year-old Kelly recalls, that prediction didn’t seem particularly outlandish. Older Americans, over the course of their lifetimes, had already watched the standard workweek drop from six days and 60 hours to five days and 40. Why wouldn’t that progress continue? Some progress, as things turned out, did continue. The “productivity explosion,” as Kelly notes, “happened right on schedule.” But that productivity never did translate into progress for average Americans. The reason: The rewards from that increased productivity all concentrated at the top. This big-type, large-format paperback patiently explains how this concentration has trapped average Americans on an ever-faster treadmill going nowhere fast. What to do now? Author Kelly makes a convincing case for re-enacting the stiff tax rates on high incomes in place from the 1940s into the late 1970s. Over those years, the top tax rate on income over $400,000 never dipped below 70 percent. These same years, Kelly asks us to keep in mind, saw “probably the most prosperous period in our nation's history.” Alanna Hartzok, The Earth Belongs to Everyone. The Institute for Economic Democracy Press. Radford, Virginia, 360 pp. In the late 19th century, the original Gilded Age, few Americans spoke out more stirringly against inequality than the self-taught economist Henry George. “No person, I think, ever saw a herd of buffalo, of which a few were fat and the great majority lean,” George noted in one address. “No person ever saw a flock of birds, of which two or three were swimming in grease, and the others all skin and bone.” “There are in the United States,” he noted in another, “some few people richer than it is wholesome for people to be.” Activist Alanna Hartzok works in the Georgist tradition, and that means she considers equal access to natural resources a fundamental human right. Our modern societies typically don’t. In most nations, as Hartzok observes, just 5 percent of the people own at least 90 percent of all privately owned land. Hartzok’s activism against this intense maldistribution of wealth has taken her to four continents and innumerable global forums. But the most fascinating of the pieces in this new collection zero in on her successful efforts to bring Henry George-inspired property tax reform to the rural Pennsylvania she calls home. By taxing land at a higher rate than whatever buildings may sit upon it, Hartzog shows, localities can discourage speculation and encourage a “broadly shared” development that impacts “as lightly as possible on existing ecosystems.” Our journey to a more equal tomorrow, her work reminds us, can travel any number of roads. Edward Phillips, The New American Challenge: Discover How We Can Eliminate Poverty and Create Trillions of Dollars in New Wealth by Making Wiser Economic Choices. Bloomington, Indiana. 246 pp. Has somebody slipped an irrationality pill into America’s water supply? How else to explain the “birther movement” or the widespread willingness to swallow claims that President Obama wants to impose “death panels” on us? Such stunning irrationality does not surprise Dr. Edward Phillips. He sees irrationality throughout American society — and not just from “yokels.” After all, what could be more irrational than a corporate board believing that a CEO somehow merits a thousand times more pay than an average worker? Phillips, now 71, has seen plenty of irrationality over his many years spent in corporate decision-making circles. Plenty of ordinariness, too. Spend time around “a few persons of great wealth,” he suggests, “and you will quickly discover this commonality: they are pretty much like everyone else.” Some will be bright and articulate, others dull and “border on incoherency.” If we all learned to think critically and stopped “allowing ourselves to be manipulated,” Phillips believes, such ordinariness would “not command $100 million dollar salaries.” Phillips has academic credentials to go with his business background, and he knows his way around economic theory. But he comes across, in these pages, as a “regular guy,” the sort of fellow who'd be great to have around the next time a loudmouth in-law starts channeling Rush Limbaugh. These loudmouths seem to be everywhere today. But far more thoughtful souls like Edward Phillips, Alanna Hartzok, and Charles Kelly may be just as bountiful, if not as loud. Their day will come. |
Stat of the Week Five oil chief execs, the Corporate Library reported last week, cleared at least $100 million in compensation in 2008. In the middle of the oil pack: Ultra Petroleum’s Michael Watford. Stock option profits helped Watford to a $116.9 million payday. And his good times are still rolling. Ultra has been showering Watford with hefty annual option grants for close to a decade now. The option grant set to expire next spring entitles him to buy 500,000 Ultra shares at 25 cents each. If the 55-year-old Watford were to exercise those options right now, he’d clear over $47 in personal profit on every share.
|
 |
|
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. |
Subscribe
to Too Much |
The rich, our sages have from time to time noted, can have a hard time understanding how ordinary people live. The super rich like Loews top exec Jonathan Tisch, reckons the New York Observer’s Dana Rubinstein, “must have quite a hard time understanding how the merely rich live.” Tisch can jaunt the six blocks between his $48 million, 14-room Manhattan co-op and his place of business in New York’s “most exclusive office building,” Rubinstein 