When the gods dance...

Monday, September 26, 2011

The New Forbes 400



“Class war”! So went the Capitol Hill cry, all last week, as members of Congress sparred over a White House call to raise taxes on America’s most wealthy. In Pennsylvania’s Lehigh Valley, meanwhile, a local daily was giving readers a window into real class war — at a new shipping hub for Amazon, the online giant.

Amazon's Lehigh Valley warehouse workers, Allentown's Morning Call related, work in temperatures so high that paramedics sometimes sit in ambulances parked outside, waiting for casualties who come out on stretchers. The workers, mostly temps, keep Amazon “fully staffed without the expense of a permanent workforce that expects raises and good benefits.”

The temps also keep Amazon’s share price soaring. For this soaring performance, Amazon CEO Jeff Bezos took another round of bows last week. The latest Forbeslist of America’s 400 richest, just released, has Bezos in 13th place. His total personal fortune: a cool $19.1 billion.   

In this week’s Too Much, we have more on the new Forbes 400 — and the latest round of “class war” in the corridors of Congress.


Some major companies have CEO transitions down to a fine art. Others regularly suffer rocky shake-ups. Either way, CEOs never lose. Exhibit A for fine art: Boston Scientific. The medical device giant now sports a newly hired CEO-in-waiting, Michael Mahoney. He'll move into Boston Scientific’s chief exec suite in November 2012. In the meantime, he'll pocket $20 million cooling his heels as company president. Boston Scientific's current CEO, Ray Elliott, retires next month. In 2009, his first year as CEO, Elliott pulled in $33 million. Once retired, he'll “advise” for $856,000 a year, bonus cash, and free rides on the corporate jet. And the year between Elliott’s retirement and Mahoney’s ascension? William Kucheman will fill that hole, as interim CEO, for $4 million. This past July, Boston Scientific announced plans to ax 1,400 jobs . . .

Exhibit B for the rocky corporate road? That has to be Hewlett-Packard, the Silicon Valley powerhouse that last week gave the heave-ho to Leo Apotheker, the company’s third fired CEO in the last six years. Poor Leo lasted only 11 months. Maybe not so poor Leo. His exit package totals $25 million. His fired predecessor, Mark Hurd, left with $12 million in cash severance after grabbing $134.2 millionhis first four years on the job. Hurd followed the fired Carly Fiorina, who arrived in 1999 with a pay deal worth $90 million and exited in 2005 with another $42.5 million in severance and stock. And let’s not forget Mike Capellas, the Compaq computer CEO. Fiorina engineered a 2002 merger with Compaq, and Capellas stuck around HP for half a year. He left with $16 mil in severance . . .  

What would you spend for a car tooled to run 268 miles per hour? Shelby SuperCars, a Washington State company, is expecting auto aficionados to shell out $1.1 million for the firm’s latest high-speed model. But SSC has some stiff competition. Italy's Pagani is readying a $1.3 million sports supercar, Jaguar has a new $1.1 million “turbocharged hybrid two-seater” coming, and Bugatti is pushing a $2.1 million sport convertible. John Hill, the Bugatti sales director for the Americas, isn’t worrying about finding buyers. His customers, says Hill, “were wealthy five years ago” and still stand “wealthy now.” Adds the luxury auto exec: ““They’re tired of waiting. They don’t want things to pass them by.”

What does the world need even less than another million-dollar sports car? How about another cable TV channel devoted to the angst of the aspirational super wealthy? The cable spectrum already hosts WealthTV, a seven-year-old channel devoted to high-end toys and lifestyles. Now Discovery Communications is launching “Velocity,” a new cable offering that’s targeting “the successful, college-educated man who earns $150,000 or more a year.” Velocity will debut October 4. Robert Scanlon, the exec in charge of this new “Rich Man” channel, isn’t worried about finding advertisers. Explains Scanlon: “If you’re selling something in a recession, who’s more likely to buy, a guy with money or a guy without?”

Tahrir Square started small. Has an “American spring” now started? A week ago, activist young Americans began an “occupation of Wall Street” that the international press is so far covering much more seriously than media in the United States. The occupiers have established a base in a Wall Street park and are fanning out daily for protests at other Manhattan landmarks of over-the-top affluence. On Friday, for instance, occupiers staged a demo at a luxury Sotheby’s art auction. Inequality has become the occupation’s central theme. As one occupier, 24-year-old Becky Wartell of Maine, puts it: “What everybody's here protesting is that fact that 1 percent of the population controls so much wealth. We are the rest of society. We are the 99 percent.”



The Obama Tax Plan: A Test for America

Can democracy, one top political scientist asked last week, 'function effectively in a society marked by vast economic inequality'? The fate of the modest new White House bid to tax our rich may tell the tale.

Most Presidents of the United States end up with a catchphrase attached to their tenure, a memorable line that defines them. The buck stops here. Ask not what your country can do for you. Tear down this wall! President Obama last week may have muttered his.

“This is not class warfare,” the President declared last Monday as he unveiled a new set of proposals for hiking taxes on wealthy taxpayers. “It’s math.”

GOP leaders on Capitol Hill appear to have done the math — on what the White House proposals would mean for them personally — and they don’t much like what they see.

Millionaire members of Congress spent last week blasting away at the White House tax plan, an assault that prompted one group of affluent Americans who support higher taxes on America’s wealthiest to circulate a clever video that blasted away at the congressional millionaires. The video, in turn, infuriated wealthy congressional defenders of tax breaks for the rich even more.

“I’m not looking to raise taxes on me, no, but I am also not looking to raise taxes or anyone with incomes higher than me or incomes lower than me,” Rep. John Campbell from California fumed to Fox News, “because that’s not what got us into this problem and that is not what is going to get us out of this problem.”

Campbell and his deep-pocket pals have reality upside down, again. Massive tax breaks for wealthy Americans have contributed mightily to “this problem” — the nation’s fiscal crisis — and if the nation doesn’t start undoing those tax breaks for the rich, the only alternative will be massive cutbacks that hurt working families.

That’s what President Obama meant when he asked Americans to “do the math,” and the White House tax plan announced last week definitely does start the nation down the “undoing” road.

The specific proposals in the White House plan — most notably provisions that would let the Bush tax cuts expire for couples over $250,000, limit how much affluents can trim their taxes with itemized deductions, and end the loophole that saves hedge fund managers $200,000 on every $1 million they make in “carried interest” — would raise about $1.5 trillion over the next decade.

But the President last week went beyond these specifics. He called on Congress “to undertake comprehensive tax reform” that would move the nation to “a simpler, fairer, more progressive tax system than we have today.”

On this future system, the White House didn’t offer specifics. The President did offer one overarching principle, the notion that no household making over $1 million should pay less of its income in taxes than middle class families pay — what the President is calling the “Buffett Rule,” in a nod to the billionaire whose attacks on tax unfairness have re-energized the tax reform debate.

The White House may not be offering specifics on how to implement the Buffett rule — or “comprehensive tax reform” in general — but progressive tax advocates certainly are. They rushed last week into the breach.

The most detailed offering came from Citizens for Tax Justice. CTJ released a report that surveys options that range from ending preferential treatment for capital gains — the big reason so many rich pay so little in taxes — to erasing the “deferral” rules that help corporations sidestep taxes, a key driver of theexecutive pay windfalls the Institute for Policy Studies documented last month.

No one in the Capitol Hill know expects either these broader reforms or the measures that the President proposed last week to go anywhere in Congress over the next year. At this point, the tax wars seem to be all about positioning for the 2012 elections and the new Congress that begins in 2013.

In this positioning dance, GOP leaders in Congress are scrambling, somewhat desperately, to figure out how to defend the tax status quo. Billionaire Warren Buffett's outspoken attacks on a tax system that has him paying 17.4 percent of his income in federal tax while his office employees pay, on average, 36 percent have congressional apologists for grand fortune clearly off balance.

GOP leaders, in their desperation, have resorted to insinuations that Buffett must be hiding some deep dark secret. By the end of last week, they were demanding that Buffett disclose his tax return.

“I’d love to see Buffett’s tax returns so we can see what he’s really doing, because he’s kind of operating in the dark here, making some claims,” Senator Jim DeMint from South Carolina told one interviewer.

Buffett, added Rep. Tim Huelskamp from Kansas, is “afraid to show the proof” — as if the “proof” that substantial numbers of wealthy Americans are paying tiny percentages of their incomes in taxes hinges on one billionaire’s tax returns.

The “proof,” in reality, is coming from every statistical direction. The nation’s top 400 taxpayers paid on average, the IRS reports, just 18.11 percent of their incomes in tax in 2008, about what Buffett paid last year. A tenth of Americans making between $10,000 and $20,000, notes the Center for American Progress, pay taxes at higher rates than a quarter of our millionaire earners.

How did this state of affairs ever come to be? Vanderbilt University tax analyst Larry Bartels last week offered one explanation.

Our current tax system, Bartels suggests, reflects “a broader pattern of policy-making skewed toward the interests of affluent citizens.” In a distinctly unequal United States, “low-income people are likely to get their way only when their preferences happen to agree with the preferences of high-income people.”

The upcoming battle to enact the tax increases on the wealthy the President proposed Monday, Bartels feels, may force us to face more fundamental truths.

“If our leaders cannot bring themselves to support even this timid tax increase for the most fortunate Americans,” he observes, “that will be bad news both for our fiscal prospects and for our civic faith that democracy can function effectively in a society marked by vast economic inequality.”


The New Forbes 400 — and Their $1.5 Trillion

The Forbes 400: The Richest People in AmericaForbes, October 10, 2011 issue.

How swell a year have America’s 400 richest enjoyed over the past 12 months? This good: Google billionaires Sergey Brin and Larry Page each saw their personal fortunes jumpby $1.7 billion over the year — and each have slipped five slots in the just-published latest edition of the Forbes 400.

Forbes has been publishing an annual list of America's 400 richest ever since 1982. Wealth in America, interestingly, began hyper concentrating at about the same year. SoForbes, in effect, has been providing a valuable public service. Thanks to Forbes, we know just how phenomenally wealthy America’s mega wealthy have become.

Forbes, year in and year out, does a wonderfully thorough job of gauging the individual fortunes of America’s most fortunate. For this year’s list, the magazine interviewed 97 billionaires — and knowledgeable observers whose ranks even included ex-spouses. Public records helped fill out this latest Forbes portrait.

The basic numbers from all this research: As of the end of last month, August 26 to be exact, America’s top 400 held a combined $1.53 trillion in personal wealth, a total 12 percent up from last year — and not that far off the top 400 all-time high, $1.57 trillion, set in 2007, the year before the Great Recession hit.

These massive numbers impress. But we need some historical perspective to really appreciate their magnitude. Try this: Back in 1982, an American of means needed at least $75 million to enter the ranks of the Forbes 400. The entry threshold for the current 2011 list: $1.05 billion.

In other words, every deep pocket on this year’s Forbes 400 list ranks as a billionaire. That first 1982 list sported only 13 billionaires.

Now these comparisons, to be sure, don’t take inflation into account. What happens when we adjust for inflation? The incredible concentration of America’s wealth still shines through just as clearly.

The single richest American on the 1982 list, shipping and oil magnate Daniel Ludwig, held a personal fortune of $2 billion, the equivalent of $4.7 billion today. On the 2011 Forbes 400 list, a $4.7 billion fortune rates only a 66th place tie.    

The $230.8 million average Forbes 400 fortune in 1982 — an inflation-adjusted $540.4 million today — wouldn't even be enough to make this year's top 400. In fact, $540.4 million today only gets a deep pocket halfway to top 400 status.

One more sobering statistical observation: Between 1982 and 2011, the total combined fortunes on the Forbes 400 list have soared — after taking inflation into account — an eye-popping 612 percent.

To add a little levity to this year’s top 400 coverage, Forbes is running a sidebar on “When Really Rich People Do Really Stupid Things,” a series of chuckles at rich people’s expense gathered from the records of the Chartis insurance company. Can you believe that one mega rich dunce set his Porsche on fire trying to dry a rear-seat floor mat with a leaf blower?

But the ultimate joke, the Economic Policy Institute’s Larry Mishel noted earlier this month, may be on us.

Between 1983 and 2009, Mishel reports, America’s richest 5 percent grabbed 82 percent of all the nation’s gains in wealth. The nation’s bottom 60 percent of households “actually had less wealth in 2009 than in 1983.”

Americans, in short, have tolerated a massive redistribution of America’s wealth, from middle and bottom to top. In the process, we have tanked — for millions of Americans — the American dream. That surely qualifies, by any benchmark, as a “really stupid thing.”

Quote of the Week

“Is God into class warfare? No, of course not. God really does love us all, sinners and saints alike, rich and poor, mansion dwellers and ghetto residents. But the God of the Bible has a special concern for the poor and is openly suspicious of the rich. And if that is not clear in the Bible, nothing is.”
Jim WallisGod and Class Warfare, Sojourners, September 22, 2011

Stat of the Week

The richest family in America? That remains the clan of Wal-Mart founder Sam Walton. The six Walton heirs on the latest Forbes400 list released last week hold a combined fortune of $93 billion. If that $93 billion all sat in an investment returning 3 percent, the six would average $465 million each this year in income. An assistant Wal-Mart store manager would have to work 10,764 years to match that total.

New Wisdom
on Wealth

Thomas Schaller, From taxing wealth to taxing workBaltimore Sun
September 20, 2011. How our tax structure demands more sacrifice from those who labor.

Chuck Collins, A Tax Plan to Rally Around: The Buffett Rule, Common Dreams, September 20, 2011. The four reasons for taxing the wealthy that we should flag at every opportunity.

Stephen Colbert, Barack Obama Unveils the 'Buffett Rule,' Colbert Nation, September 20, 2011. Another homerun from a top American satirist.

Paul Solman, Easy As Pie: Inequality In Downloadable Charts, PBS NewsHour, September 21, 2011. A terrific resource for spurring discussion on what income distribution in the United States is versus ought to be.

Peter Apps, As crisis bites, rising wealth gap becomes key, Reuters, September 21, 2011. Will global rich follow Warren Buffett or continue “retreating into secure estates protected by private security and bullet-proof vehicles and secreting wealth in offshore tax havens.”

Lucy Madison, Elizabeth Warren: "There is nobody in this country who got rich on his own," CBS News, September 22, 2011. Background on the eloquent video that last week went viral.

Richard Jolly, MDG targets are overlooking inequalityGuardian, September 22, 2011. Global efforts to meet the UN “millennium development goals” haven't addressed the inequality that exacerbates crime, disease, and environmental problems.

Jon Stewart, Millionaire Tax Abuse, The Daily Show, September 23, 2011. Rep. John Fleming, a millionaire lawmaker leading the charge against tax hikes on the wealthy, gets a little comeuppance.

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