When the gods dance...

Monday, August 29, 2011

A Memorable Memo



Hurricanes can’t distinguish rich people from poor people. Humans can. That’s probably why no one in the Hamptons — the Long Island refuge for the fabulously wealthy where five-bedrooms routinely run $250,000 for a summer rental — felt particularly endangered last week as Irene swirled up the East Coast.

Journalist Greg Palast, in an earlier life, helped prepare the evacuation plan that safeguards the Hamptons. The plan stretches six volumes and covers every possible eventuality. Palast thought about that plan six years ago when he covered Hurricane Katrina. He asked FEMA, the federal emergency agency, for a copy of the New Orleans evacuation plan. No one at FEMA could find it.

Just as well, Palast recounted last Friday. The plan, once unearthed “long after” Katrina left over 1,300 dead, turned out to have “no provision at all” for the 27,000 New Orleans residents without cars. The company hired to prepare that plan turned out to have “zero experience in hurricane evacuation.”

That firm's top exec, on the other hand, did have a long history of contributing to rich people-friendly national pols. When did these sorts of contributions become standard operating procedure for Corporate America? In this week's Too Much, we commemorate the 40-year-old memo that keeps the Hamptons happy.


This past June, the owners of pro basketball’s NBA franchises “locked out” their players. The owners have been pleading poverty ever since, claiming, at every opportunity, that overpaid players are bankrupting their sport. Unfortunately, no one seems able to lock out the owners — like Hank Ratner, the vice chair of Cablevision, the company behind the New York Knicks. Ratner pulled in $11.6 million last year for his Cablevision labors. He pulled in another $11.5 million as the president of Madison Square Garden, the arena where the Knicks play. Cablevision spun off MSG as a separate company a year and a half ago. Also playing the same game: James Dolan, the son of Cablevision's founder. Dolan collected $2.4 million in 2010 from MSG and another $13.4 million from Cablevision. Dolan and Ratner also get free tickets to MSG events. The company, financial analyst Sonya Hubbard notes, doesn’t count those tickets as perks . . .

No one used to question Bruce Bartlett’s conservative bona fides. This Washington insider had a senior policy role back in the Reagan years and also worked for big-time conservative lawmakers Jack Kemp and Ron Paul. But Bartlett, of late, seems to be miffing his former mates. Last week, in a new analysis, he pointed out that America’s top-earning 1 percent had an effective 33.1 percent federal income tax rate in 1986 — and an effective rate of only 23.3 percent in 2008. If the top 1 percent had kept paying at the 1986 effective rate, Bartlett calculates, “the federal debt today would be $1.7 trillion lower.”

Few political jurisdictions have courted the world’s wealthy more energetically than the island of Jersey, the British dependency off the French coast. Jersey residents pay a 20 percent tax on income under £625,000, the equivalent of just over $1 million. But all income over that bar faces just a 1 percent tax — and the rich have noticed. They’ve flocked to Jersey, and that flocking has bid up Jersey’s cost of living. One local politico, Trevor Pitman, is now pushing for a referendum on this tax tilt to the mega rich. Jersey’s regular residents, says Pittman, “should be asked if they think it is fair that millionaires are paying so little.”

A short hop from Jersey, in France, even some rich want to see millionaires pay higher taxes. A week ago Friday, former Yves Saint Laurent CEO Pierre Bergé dubbed the current French tax system “immoral” and declared “we must raise the tax rates on high incomes.” A reporter asked Bergé if a tax rate higher than France’s current top rate — 41 percent on income over $103,000 — could actually come into effect. Bergé's reply: “That depends how many of the president’s rich friends give him a call.” The next Tuesday that call came — as a public petition signed by France’s richest woman and a smattering of top CEOs. Liliane Bettencourt and her fellow deep pockets demanded “an exceptional levy that would target France's richest taxpayers.” The next day, last Wednesday, French president Nicolas Sarkozy’s government announced a new 3 percent surtax on income over $720,000 . . .

New Zealand’s most famous activist, John Minto, would like to see tax rates on the rich considerably higher than the new 44 percent top rate in France. Minto first won public acclaim for his leadership role in the global struggle against South African apartheid, and a TV special six years ago named him one of the 100 most influential individuals in New Zealand history. Minto is currently running for New Zealand’s parliament, and last week, in an interview on a leading national public affairs TV program, he decried his nation’s “massive redistribution of wealth from the poor to the rich” over the past quarter-century. His party’s draft platform is proposing the equivalent of a “maximum wage,” a 100 percent tax on all income over ten times the New Zealand minimum wage. That benchmark, if put into effect tomorrow, would trigger a 100 percent tax rate at $210,000 in U.S. dollars.



Remembering the Moment Our CEOs Dug In

Forty years ago, U.S. corporate honchos saw their power ebbing away — to a ragtag mob of long-hairs and loony social reformers. So they did what corporate honchos always do. They asked for a memo.

A landmark historical anniversary passed by almost totally unnoticed last week. No front-page retrospective in a major daily newspaper. No ceremony in the White House Rose Garden. Not even a new postage stamp.

A postage stamp, to be sure, might have been a bit of a stretch. You can’t, after all, put a memo on a postage stamp. Not even a memo that helped change, 40 years ago this month, the course of modern U.S. history.

The writer of this memorable memo, Richmond attorney Lewis Powell, would later go on to national prominence as a U.S. Supreme Court justice. But Lewis Powell, back in August 1971, had no national general public presence.

Powell did have widespread respect within elite corporate circles. A former American Bar Association president, he served on top corporate boards — and had friends in pivotal places, like Eugene Sydnor, a mover and shaker at the U.S. Chamber of Commerce.

Powell and Sydnornotes corporate watchdog Charlie Cray, shared a sense of impending doom. The American “free enterprise system,” they feared, faced an existential crisis. The enemies of that system would surely triumph — unless business mobilized, as never before, to meet the threat.

The Chamber’s Sydnor asked Powell for a memo that outlined what the Chamber could do to jumpstart a crusade to save free enterprise. Powell's confidential August 23, 1971 response did just that.

Powell’s memo, reread today, can come across as wildly overheated and even, at times, laugh-out-loud paranoid.

Business confronts, Powell contends in the memo, critics “seeking insidiously” to “sabotage” free enterprise. “Extremists on the left,” he declares, have become “far more numerous, better financed, and increasingly are more welcomed and encouraged by other elements of society, than ever before in our history.”

With “extremists” and “social reformers” working ever more closely in concert,Powell's memo laments, “individual freedom” itself may stand at risk.

In truth, “free enterprise” in America had faced significantly more threatening — and better organized — challenges before World War I and then again during the Great Depression. In 1971, those Powell labeled “extremists” had no significant political parties, as they had in earlier eras. And the social reformers of 1971, unlike their predecessors, rarely questioned any “free enterprise” basics.

But corporate leaders, Powell correctly understood, did face a hostile political environment in 1971. Progressives were making headway against tax breaks that benefit “only the rich, the owners of big companies,” as one Washington Postcolumnist put it. “Populist” tracts in mainstream magazines like New York were arguing that “the root need in our country is ‘to redistribute wealth.’”  

“This setting of the ‘rich’ against the ‘poor,’ of business against the people,” Powell’s memo seethes, “is the cheapest and most dangerous kind of politics.”

Corporate America, Powell goes on to exhort, must respond with more than “appeasement, ineptitude, and ignoring the problem.” Business leaders must show more “stomach for hard-nose contest with their critics.” CEOs need to consider counterattacking “a primary responsibility of corporate management.”

Yet individual corporate leaders, Powell would acknowledge, can only do so much. An individual corporation, he understood, might be reluctant “to get too far out in front and to make itself too visible a target.” The answer?

“Strength lies in organization,” Powell's would explain, “in careful long-range planning and implementation, in consistency of action over an indefinite period of years, in the scale of financing available only through joint effort, and in the political power available only through united action and national organizations.”

The rest of Powell’s memo would detail the sorts of steps Corporate America could take — on campuses, with the media, in politics — to sweep away what Powell considered “inequitable” taxes on men of means and tame regulatory agencies “with large authority over the business system they do not believe in.”

The memo would remain confidential until syndicated national columnist Jack Anderson did an exposé in 1973. That publicity only served to whet corporate interest in Powell’s exhortations. By year’s end, a Chamber of Commerce task force — with executives from corporate giants ranging from G.E. to General Motors — had translated the Powell memo into action plan specifics.

Powell’s 1971 musings,historian Kim Phillips-Fein reflects, “crystallized a set of concerns shared by business conservatives in the early 1970s” — and gave “inspiration” to corporate leaders who would later become familiar names and powerful forces, men like arch Colorado right-winger Joseph Coors.

Together, these newly energized corporate leaders would unleash upon America what political scientists Jacob Hacker and Paul Pierson have called “a domestic version of Shock and Awe.”

The number of corporate public affairs offices in Washington, D.C. would quintuple between 1968 and 1978, from 100 to over 500. In 1971, Hacker and Piersonrelate, only 175 U.S. corporations had registered lobbyists in Washington. The 1982 total: almost 2,500.

Corporate leaders also joined together in new national organizations, most notably with the 1972 founding of the Business Roundtable, and bankrolled a series of new militantly “free market” think tanks and action centers: the Heritage Foundation and American Legislative Exchange Council in 1973, the Cato Institute in 1977, the Manhattan Institute in 1978, among many others.

Between the late 1970s and late 1980s, add analysts Hacker and Pierson, corporate PACs increased their outlays for congressional races “nearly fivefold.” The U.S. Chamber of Commerce, for its part, would double its membership between 1974 and 1980 and triple its budget.

The end result of this all this political activity? Four decades of corporate pressure have transformed America. Tax rates on corporations and the wealthy have nosedived. Lawmakers have “deregulated” corporations in one sector after another. Unions, across wide swatches of the private sector, have disappeared.

The United States has become, with all these changes, a far more unequal place. In 1971, the year Powell penned his influential memo, America’s most affluent 0.1 percent reported average incomes — in 2008 dollars — of $1,263,485, and America’s bottom 90 percent averaged, again in 2008 dollars, $31,324.

By 2008, America's top tenth of 1 percent was averaging over four times as much, $5,648,768, and the average income of America’s bottom 90 percent had actually dropped, to $31,324.

The irony here? These numbers would likely trouble Lewis Powell, who died in 1998. Powell saw business as a champion for prosperity for all. He considered unions and collective bargaining “essential” to the freedom Americans enjoy.

Today’s U.S. Chamber of Commerce, by contrast, acts as the lobbying ringleader against any and all legislation that seeks to help workers organize and bargain.

Who knows? Lewis Powell might have come to feel, if he had lived a little longer, that his memo really needed a rewrite.


Understanding Our 'Dreadful Misfortunes'

Arthur MacEwan and John Miller, Economic Collapse, Economic Change: Getting to the Roots of the Crisis, M. E. Sharpe, 2011. 248 pp.

Back in the early 1980s, British prime minister Margaret Thatcher — the political ringleader of the world's ascendant conservative free-marketeers — used to be a big fan of TINA. Not Tina Turner, the indefatigable R&B diva, but TINA as in “there is no alternative” to letting markets go “free.”

Thatcher celebrated TINA. She considered unregulated “free markets” both inevitable and remarkable. Let markets rule, Thatcher promised, and marvelously good times would surely follow.

TINA, three decades later, is still going strong. But the context has changed. Conservative politicos and pundits can no longer claim, with straight faces, that unregulated free markets inevitably bring good times. They urge us, instead, to accept the inevitability of hard times.

We can do nothing, the new line goes, but ride our current storm out. Accept austerity, don't fight it. Our globalized world economy has no alternative. Or, to use a seldom heralded phrase from free-marketeer patron saint Adam Smith, the “dreadful misfortunes” we're now experiencing had to happen.

Know someone who swallows this grin-and-bear-it tripe? Give that sad someone a copy of this highly readable new book by two of America's most experienced “popular educators” on matters economic.

In Economic Collapse, Economic Change, University of Massachusetts professor emeritus Arthur MacEwan and Wheaton College activist scholar John Miller escort us through all the major economic trends and events of recent years — everything from China's rise to the popping of the housing bubble — and show how these developments have ushered in our current “dreadful misfortunes.”

At every step of the way, MacEwan and Miller relate, things could have turned out differently. But they didn't — because our ever-greater economic inequality had fostered both an “extreme concentration of power in the hands of large corporations and the very wealthy” and “a perverse ideology” that linked “unregulated markets” to inevitable trickle-down good times for one and all.

Other recent books have traced many of the stories Economic Collapse, Economic Change has to tell. But few other works have woven all the story strands together as well — and as accessibly — as MacEwan and Miller.

The two authors do something else as well. They help us understand how we can unleash chains of events that gnaw away at “the inequality, power, and ideology that have dominated life in the United in recent decades.” Their prime example: the struggle for social programs that offer “universal” benefits.

In the United States today, we already do have some of these “universal” programs in place. Medicare, for instance, offers benefits to all senior citizens, low- and high-income alike. Public schools offer education to all children.

Universal programs like these create what MacEwan and Miller call a “social wage,” a “share of people's income that comes to them as members of society.” The larger this social wage, income that's “the same for everyone,” the greater the economic equality in society.

But universal programs enable an even more profound dynamic. They give people options and, in the process, redistribute power.

If we had, for instance, “Medicare for all” — that is, publicly financed health insurance for every American, no matter the age — no Americans would have to stick with otherwise undesirable jobs because they feared losing the health insurance the jobs provided.

“Greater options mean greater power,” MacEwan and Miller note. “And power at the workplace is often a foundation for wider power in society.”

Universal social programs, the authors add, also tend “to generate solidarity.” Programs that target benefits solely to low-income people, on the other hand, tend to divide. Demagogues typically fan the resentment of people who make too much to qualify for these programs. Universal programs, MacEwan and Miller note. shove the “material basis” for this resentment off the political table.

“We do not hear,” they explain, “expressions of resentment toward low-income families because their children receive education in the public schools.”

In short, the struggle for greater equality has many fronts. Fight to tax the rich? Most certainly. And fight just as hard to extend comprehensive security beyond the aged, to everything from child care to health insurance. And apply these benefits universally to all households, affluent ones included.

We do have alternatives. So let Tina keep rocking. But let's put TINA to rest.

Quote of the Week

“Twenty-eight million people are unemployed, underemployed, or out of the workforce. Policy debates should be focused on getting these people back to work. Unfortunately, the people who control the national agenda care little about the devastation they have wreaked with their greed and incompetence. Their philosophy of government is that a dollar that goes to the middle class and poor is a dollar that should be going to the wealthy.”
Dean Baker, Why We Aren't Like Greece, The Nation, August 29, 2011

Stat of the Week

Who says Corporate America isn’t hiring? General Electric, Reuters tax analyst David Cay Johnston noted last week, now has nearly 1,000 staffers in its tax department — and spent another $39.3 million last year on lobbyists. Thanks to all their labor, G.E. over the last ten years has only paid, on average, 9.4 percent of its profits in federal income tax. G.E. CEO Jeff Immelt last year took home $15.2 million.


 New Wisdom

on Wealth

Jakob Augstein, Why Germany's Rich Must Pay Higher TaxesSpiegel, August 26, 2011. Public debt amounts to “the price paid by countries to allow the rich to grow richer while the poor grow poorer.”

New In Time trailer shows why it’s the year’s most political movie, i09, August 26, 2011. A peak at a new "futuristic thriller," from Andrew Niccol, where the gap between rich and poordrives the narrative.

John Kampfner, The wealthy should pay more tax. Why has it taken so long? Independent, August 26, 2011. The growing global call for higher taxes on the rich is challenging three myths “propagated for years by politicians and financiers alike.”

Inequality Links


The Equality Trust

Wealth for the 
Common Good

New Economy 
Working Group

Class Action

Mind the Gap

Tax Justice 

High Pay

Us Against 

Make Wall
Street Pay

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