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||October 5, 2009|
Kentucky’s “Bluegrass Country,” in the early fall, offers some of the finest scenery you’ll ever see. But the world’s rich don’t jog on down to old Kentucky every fall for scenery. They mosey on by for the annual thoroughbred auctions at the classic Keeneland horse racing complex.
This year’s auctions, just completed, brought lots of smiles — to buyer faces. You could actually pick up a yearling fast enough to win the next Kentucky Derby at a whopping 40 percent off, on average, prices back in 2007. Two years ago, Keeneland’s top yearling sold for $11.7 million. This year’s most expensive horse only ran a itty-bit over $2 million.
This week, in Too Much, we take a look at some of the other fabulous buys out there — in deep-pocket land — and the brand-new list of the 400 awesomely affluent Americans best able to snare them.
The business lobbyists who’ve spent years and millions trying to repeal the estate tax — the only federal levy on inherited wealth — have thrown in the towel. Last week, the U.S. Chamber of Commerce and assorted other corporate groups announced they’ll no longer seek to kill the estate tax. Now they just want to gut it. Under current law, the estate tax will vanish in 2010, then come back at the rates in effect before Congress enacted the George W. Bush tax cut package in 2001. The White House wants the current estate tax — 45 percent on estate value over $7 million, for couples — extended. Business interests want that rate cut to 35 percent, with a $10 million exemption, a move that would dump an extra $100 billion in mega millionaire pockets over the next 10 years. That move could well pass. The “same wobbly Democrats” who oppose a health care reform public option, notes Chuck Collins of Wealth for the Common Good, appear to be “likely votes for a bad estate tax bill.”
The predecessor of Bank of America CEO Ken Lewis, a former Marine by the name of Hugh McColl, used to hand out “crystal hand grenades as keepsakes.” Lewis will get a bit more valuable a keepsake when he starts his retirement next January: a pension that will bring him $3.5 million a year for the rest of his life. Lewis, 62, announced his retirement last week. On top of his pension, he’s exiting with $10 million in deferred comp and another $8 million in stock and stock option awards. What he won’t have: the undying thanks of Bank of America shareholders. Company shares, even after jumping 563 percent since their low this past March, are still trading below the share price in 2001, the year Lewis took over as CEO. Lewis collected a paycheck just under $10 million last year, after five straight years at over $20 million . . .
Back in July, halfway through the Goldman Sachs fiscal year, analysts reported that the bank’s profits were running so high that year-end cash bonuses figured to almost match the pre-bailout record high set in 2007. Goldman CEO Lloyd Blankfein, the New York Post related, promptly warned bank execs to avoid the “big-ticket, high-profile purchases” that could rile a restive pitchfork public. Blankfein’s public relations problems have now escalated. The third quarter that ended last week saw still another big profit surge. The Goldman bonus pool, analysts estimate, now stands at $16 billion, and the bank seems certain, by year’s end, to blast past the 2007 $18.8 billion bonus pool record. But Blankfein, insiders speculate, has a plan to neutralize public outrage over excessive cash bonuses. Instead of paying execs in all cash, the bank may dish out year-end awards in shares of Goldman stock, then use the remaining cash in the bonus pool to buy back stock and raise the share price . . .
Earlier this year, with Congress mulling over legislation that might limit CEO pay, a high-powered New York business group convened a “Task Force on Executive Compensation” to show that corporations could clean up their own act. Two weeks ago, the final report from this task force asked companies to commit themselves to executive pay that's “fair” and “clearly aligned with actual performance.” Among the first half-dozen companies to agree: Cisco, the Internet networking giant. Just days later, a federal filing revealed that Cisco is awarding “discretionary bonuses” to its five top executives for the fiscal year that ended this past July. Why “discretionary”? The company couldn’t give the execs regular bonuses since all five missed their “performance” targets. Cisco says the five execs delivered “solid financial performance” while facing “tough economic challenges.” Not that solid. Cisco has laid off over 1,500 workers since the economy turned challenging. Cisco CEO John Chambers, for his part, has pocketed $232.7 million over the last five years . . .
Brazil has won the Olympics — and lost a distinction most Brazilians welcome losing. A week before the Olympic victory, University of Cape Town economist Haroon Bhorat reported that South Africa, not Brazil, now ranks as “the most consistently unequal society in the world.” This stark inequality, he added, represents “a threat to social stability and to growth itself.” South Africa, the COSATU labor federation charged after Bhorat’s report, has “relied far too much on market forces to deliver growth.” The nation, says the federation, “needs a fundamental transformation in the way that wealth is distributed.”
Quote of the Week
“CEOs certainly don’t have much personal incentive to exercise caution. Most of them receive compensation packages loaded with stock options, which reward them for delivering extraordinary growth rather than for maintaining product quality and protecting their firm’s reputation.”
Bruce Judson, U.S. Income Inequality Is Frightening — and Much Worse Than We Thought, Business Insider, September 30, 2009. Contrary to mainstream assumptions, “economic inequality most likely did not decrease in 2008.”
Keren Blankfeld, How Billionaires Control Our Lives, Forbes, September 30, 2009. A typical day in an economy that generates billionaires.
David Michael Green, If the Russians Did This to Us, We’d Kill ‘Em, October 2, 2009. A Hofstra University political scientist examines what our plutocracy has done to us.
Sarah Anderson and Sam Pizzigati, Getting past the smoke and mirrors, Providence Journal, October 3, 2009. How CEOs have become the alchemists of the 21st century.
George Monbiot, A Millionaire with a Super Yacht Is a Larger Strain on Resources Than Hundreds of Peasant Families, Alternet, October 2, 2009. A skeptical look at the case for population growth as the problem that should have us worried.
The Forbes 400: The What-Me-Worry Gang
Tsunamis, we learned this past week, amount to equal-opportunity destroyers. Against a surging 20-foot wave, an opulent beachfront manse offers no more security than a cottage. But a recession, even a Great Recession, doesn’t work that way.
In a recession, as Forbes documents in its just-published latest report on America's 400 richest, most super rich do see a dip in that financial abstraction known as “net worth.” But, otherwise, life goes on, as comfortably as ever. The rich emerge unscratched out of whatever wreckage a recession may bring.
By contrast, as economist John Irons reminded us last week in a powerful new report on America's lean-pocket majority, recessionary tsunamis can leave average working families permanently scarred.
Let’s put some faces on that contrast. Start with Steve Wynn, the gaming industry “king of Las Vegas.” Wynn, along with 314 other billionaires on the list of America’s 400 richest that Forbes released this past Wednesday, has certainly lost “net worth” over the past 12 months.
In fact, Wynn has lost quite a bit of net worth since the financial industry meltdown one year ago. His fortune totaled $3.4 billion then and adds up to just $2.3 billion now, a $900 million fade. That’s a tidy sum. A typical American family, according to new Census Bureau figures, would have to work nearly 18,000 years to make $900 million.
But Wynn, despite that rather sizeable loss, hasn’t had to crimp his style over the last 12 months. He “rang in the New Year” skimming the Caribbean on a 183-foot megayacht he bought last summer, then went on to spend lovely winter days dodging gossip columnists on the Riviera and in the Alps.
Wynn has, to be sure, done some crimping over the last year, namely on wages and benefits for workers in his corporate empire. He slashed paychecks at Wynn Resorts by 10 percent last winter and, among other cutbacks, suspended matches to employee 401(k)s.
Overall, the total wealth of Steve Wynn and his fellow Forbes 400 ultra rich dropped $300 billion, or 19 percent, between September 2008 and September 2009, the fifth time the top 400’s net worth has registered an annual slide since Forbes started keeping count in 1982.
After all four previous slides, the top 400 quickly regained the lost ground and resumed their march to ever greater concentrations of personal wealth. In 1982, the top 400 together held only $91.8 billion. The Forbes 400 combined net worth today stands at $1.27 trillion.
Since 1982, the wealth of the top 400 has soared 12 times faster than inflation.
Some of America’s super rich are still soaring, even amid our current economic unpleasantness. The Great Recession has been, for them, an opportunity to scoop up some can’t-miss business opportunities.
Dallas banker Andrew Beal, for instance, has tripled his personal fortune, to $4.5 billion, since last September's meltdown. He gobbled up “loans and assets on the cheap last fall.”
Other billionaires, patiently waiting for their personal net worth bounce-back, are gobbling up great luxury deals. Natural sable furs, Forbes notes, are selling at 30 percent off their price last fall. Custom-made black calf wing-tip men’s shoes from London, $5,075 a year ago, can now be had for a mere $4,686.
The wealthy of the Forbes 400, in short, are making do quite nicely.
“Somehow,” quipped Wall Street Journal wealth analyst Robert Frank last week, “I think they will be fine.”
Most of America’s chattering class believes average Americans will be just fine, too, just as soon as the recession ends and jobless Americans go back to work.
Don’t bet on that, says the Economic Policy Institute’s John Irons. EPI last week published his sobering new report, Economic Scarring: The long-term impacts of the recession.
Pundits and politicos, Irons notes, often portray recessions “as short-term events.” But in real economic life, his new study shows, “high unemployment, falling incomes, and reduced economic activity can have lasting consequences.”
The Irons study summaries the vast economic research that details these varied consequences: the college students who have to drop out when a parent gets laid off, the workers whose wages never regain pre-layoff levels, the young children who do poorly in school because a fall into poverty has left them undernourished and bouncing from one community to another.
For average families, sums up Irons, recessions can wreak havoc “for years to come.” But some observers see havoc up and down our economic ladder.
“The 400 richest Americans, just like the rest of us, have lost a lot of money in the past 12 months,” as Duncan Greenberg, the Forbes 400 list co-editor, pronounced last week.
“Just like the rest of us”? Not quite.
Dick Cheney, Meet Jean-Charles Sismondi
David Swanson, Daybreak: Undoing the Imperial Presidency and Forming a More Perfect Union. Seven Stories Press, 363 pp.
Paul Theobald, Education Now: How Rethinking America's Past Can Change Its Future. Paradigm Publishers, 220 pp. pp.
These two new books, at any first glance, don’t have much in common. The first, Daybreak, comes from David Swanson, a journalist turned activist who spent the Bush years mobilizing Americans against unchecked executive branch power. He writes to help fashion — and inspire — real “citizen power.”
Paul Theobald, the author of the second, teaches at Buffalo State. In Education Now, this scholar takes us back to the 17th and 18th centuries and helps us understand how the ideas that took root in those years have evolved — for better and worse — to shape our democracy, our workplaces, and our schools.
Both these books, as intriguing as their subjects may be, wouldn’t normally be topics for Too Much review. But both authors come to a conclusion that, in the end, makes them absolutely appropriate candidates for Too Much attention.
The United States, both authors contend, will never move significantly beyond our various social, political, and economic imperfections so long as Americans let unlimited wealth and income concentrate in the hands of a precious few.
Swanson, in his pages, makes the case for a society where people tolerate differences and dare to “disagree, debate, and demand explanation, treating all assertions on their own merit, not the status of those asserting them.”
Great wealth confers that status — and suffocates the democratic dialogue we so desperately need, a prime reason why the agenda Swanson proposes, for a “more perfect union,” incorporates the heretical notion of limiting income.
“I favor a maximum wage,” he notes, “for the simple reason that a democratic republic cannot survive with an aristocracy.”
Paul Theobald favors a “maximum wage,” too, but he comes at income limits from an entirely different angle.
David Swanson walks us through the predations of Bush and Cheney and their various Republican and Democratic Party enablers. Theobald walks us much further back in time, to the political and economic theorists who mightily influenced our modern world — and those, in retrospect, who should have.
Theobald sees, in centuries past, ideas “at the margins waiting for a rediscovery on the part of modern civilized society.” A maximum wage, for this educator, rates as one of these ideas.
In Education Now, Theobald finds support for the importance of limiting concentrations of income and wealth in thinkers long forgotten. He introduces us, for instance, to the French economist Jean-Charles Sismondi whose 1819 magnum opus went untranslated into English until 1991.
Sismondi, writing in a still overwhelmingly agrarian time, saw the earth as “a common treasury.” Having individuals own chunks of this common treasury can bring benefits, Sismondi recognized. But to tap these benefits, a smart society will limit the land any one individual can own, “lest the landowner lose the ability to adequately care for it.”
Theobald also finds considerable support for limiting income in the thought of thinkers we today have never forgotten. And this long historical tradition makes our current refusal to seriously consider limits all the more dispiriting.
“The idea of a maximum wage seems as unlikely to American citizens as space travel to Mars,” as Theobald notes. “We no longer possess any memory of when it was a well-considered and often-debated policy option.”
Indeed, Theobald adds, the idea of limiting wealth circulated as “a decidedly American value” at our nation’s founding, “a piece of wisdom garnered from civic republican theorists from Cicero to Montesquieu.” The founders we honor held that “extremes in wealth and poverty were to be avoided at all costs.”
Theobald, like the thinkers he honors, sees us all as “social beings who thrive in community and take fulfillment from leading lives in the service of others.”
We can, Theobald believes “build a culture on that assumption.” He even suggests, in our daily lives, some steps we can take to help do that building. Volunteer, he advises, invest in enterprises that share your values, get to know how the products you buy were produced. Above all, talk “about the possibility of a maximum wage law whenever the opportunity presents itself.”
These two books take that advice to heart — and move us closer toward a conversation long-overdue.
Stat of the Week
How much has the federal bailout of the financial sector actually cost? Former Goldman Sachs executive Nomi Prins estimates that taxpayers have so far extended $17.5 trillion, through everything from “capital injections” and direct loans to loan guarantees and subsidies. The federal government notes economist Les Leopold, currently only spends about $350 billion on means-tested programs for low-income Americans. Washington, in effect, is spending 50 times more on welfare for Wall Street than welfare for the poor.
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: firstname.lastname@example.org.
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