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| THIS WEEK | |
No event on the annual sports calendar, not even the Super Bowl, attracts more big money than the U.S. Open tennis championships at New York’s Flushing Meadows. Around the Open’s showiest court, Arthur Ashe Stadium, deep pockets fill 90 luxury suites that rent at $250,000 each — for two weeks of tennis action. Some of these deep pockets actually watch the tennis. Others don’t bother. Early in this year’s tournament, four swells in one suite, “drinks in hand and backs to the court,” as one news report put it, spent an entire match loudly laughing and carrying on “as if they were at a cocktail mixer.” At one point, down at courtside, the distinctly displeased chair umpire called for silence. The oblivious swells in the suite kept chattering away. The disrespected players also fumed, but played on. Tournament officialdom, meanwhile, made no move to eject or even rebuke the boorish blatherers. Plutocratic arrogance this raw has become almost commonplace in America today. Sometimes, as at Arthur Ashe Stadium, the victims only have a late summer afternoon ruined. Sometimes plutocratic arrogance exacts a far more significant price. This week’s Too Much explores one high-stakes example. | |
| GREED AT A GLANCE | |
 On Wall Street, CEOs who get the axe don’t launch “foul-mouthed tirades.” They may be too busy counting their money. The 57-year-old Robert Kelly has a bunch of counting to do. He’s exiting his CEO suite at Bank of New York Mellon, after “stepping down” earlier this month, with $33.8 million in severance. Kelly says he’s leaving over “differences in approach to managing the company.” In fact, news reports make clear, Kelly had overstayed his welcome after a four-year CEO stint that saw 1,500 employees lose their jobs and prosecutors target BNY Mellon on banking fraud. But the bank’s big brass certainly took their time yanking Kelly’s welcome mat. Just last year, they paid him $19.4 million . . .
Are America’s rank-and-file wealthy ready to pay, as billionaire Warren Buffettadvises, a heftier share of their income in federal taxes? One national news outlet, after examining a U.S. Trust opinion poll of deep pockets, last week concludedthat “nearly half” of wealthy Americans “agree with Buffett's sentiment.” Unfortunately, the fine print from that poll tells a far less encouraging story. Of the 457 wealthy Americans surveyed — minimum net worth, $3 million — 48 percent do say they ”would be willing to pay more in taxes for the common good.” But a considerably greater share, 64 percent, believe that “higher taxes on the wealthy unfairly penalize those who have earned financial success.” President Obama's recently announced nominee to chair the White House Council of Economic Advisers, Princeton’s Alan Krueger, turns out to know a great deal about the minimum wage — and the economics of rock and roll. That last bit of off-the-beaten-track expertise may come in handy. Rock concerts, as Columbia University economist Moshe Adler has shown, aptly illustrate how economic inequality is fouling every corner of American life. Back in 1980, in a much more equal America, 73 percent of major rock concerts charged the same ticket price for all seats. To get a good seat, fans only needed to show up early. By 2003, only 26 percent of concerts charged the same for all seats. In a society with an increasingly wealthy rich, Adler explains, promoters can charge more for tickets — and not have to worry if their less affluent customers can afford the freight. | |
| INEQUALITY BY THE NUMBERS | |
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| IN FOCUS | |
Plutocracy with a Philanthropic Face Not all plutocrats scheme in the shadows like the rabidly right-wing Koch brothers. We need to learn how to recognize plutocracy's more subtle putches. The best primer? The battle over education's future. “Plutocracy” first burst big-time into our national political consciousness in the late 19th century, and the concept still conjures up today, well over a century later, much the same images as way back then. We envision, at any mention of “plutocrat,” some Wall Street banker, his pockets overflowing with greenbacks, or a robber baron industrialist, muttering the “public be damned” while bribing pols with one hand and busting unions with the other. Some of our present-day plutocrats — the billionaire Koch brothers, for instance — fit this image quite nicely. Koch-like plutocrats slide in and out of the shadows,bankrolling our society’s most reactionary and repulsive politicos, all the while railing against unions and taxes and government regulation. But plutocrats today don’t all spout crude libertarian bromides or even play footsie, as the Kochs have, with sloganeering from our segregationist past. Indeed, many of our mega rich bear little resemblance to the brothers Koch. These more enlightened plutocrats seem to obsess over philanthropy, not profits. They do their sliding in and out of foundation board rooms, pledging their support, at one high-minded symposium after another, for initiatives sure to bring “efficiency” and “innovation” to our society’s most pressing problems. This may be plutocracy's future face, what plutocracy, in the 21st century, really “looks like.” What will this plutocracy really do, for — and to — us? We have one clue from the ongoing high-stakes battle over reforming America's public schools. “The hottest cause among Wall Street hedge-fund managers these days is not financial reform,” as the Toronto Globe and Mail’s chief U.S. political writer, Konrad Yakabuski, noted earlier this month. “It’s education reform.” Billionaires, of course, have every right as citizens to advocate whatever public policy stance and vision they choose. But, in a deeply unequal America, these billionaires don’t just have rights. Their immense fortunes give them enormous power, more than enough to dominate, not just advocate. “A few billion dollars in private foundation money, strategically invested every year for a decade, has sufficed,” notes education analyst Joanne Barkan, “to define the national debate on education.” Three billionaire foundations set the pace for this defining, one funded out of the Microsoft fortune, one out of Wal-Mart, and one out of the AIG insurance empire. The Gates, Walton, and Broad foundations don’t agree on every single educational policy twist. But they do all follow the same basic script. America’s public schools are failing poor kids, this script’s storyline posits, because too many ineffective teachers are staffing our classrooms. We need to test kids to identify — and replace — these ineffective teachers. We need to hire good teachers, pay them extra if they perform well, and keep subjecting students to standardized tests to make sure these good teachers keep performing. Teacher unions, the storyline continues, will fight these reforms. But real reformers can beat back the unions — by shutting down “failing” schools, for instance, and replacing them with publicly funded, privately managed “charter schools.” Such charter schools will succeed because they don't have to worry about due process, seniority, or any other teacher union contract niceties. This entire approach to school “reform” rests on two seldom defended assumptions. The first: that poor kids would learn just fine if only they only had better teachers. The second: that student scores on standardized tests give us all we need to identify better teachers. But independent education researchers have repeatedly exposed the emptiness of both these assumptions. The research consensus, one recent surveyrelates, has concluded that teaching likely “accounts for about 15 percent of student achievement outcomes.” Out-of-school factors — poverty dynamics that range from homelessness and hunger to home and neighborhood instability — make four times more impact. And high-stakes standardized tests can be gamed, add researchers like Harvard’s Dan Koretz, by drilling students in “test-taking strategies that pollute testers’ ability to see what the students actually know.” If drilling fails, the high stakes in high-stakes testing — “pay for performance” bonuses and promotions — create systemic incentives for cheating. Massive testing scandals have already surfaced in Atlanta, Baltimore, and Washington, D.C., three cities where billionaire foundations have wielded massive influence. These scandals haven’t much slowed the billionaire education “reform” push. Nor has the distinct lack of positive results from districts like New York City and Chicago, where billionaire reformers reign supreme. Instead, despite the dismal billionaire track record, the billionaire approach to education reform has essentially become official U.S. Department of Education policy, and states, to qualify for new pools of federal aid, are having to rewrite their laws and regs along the lines the mega rich have been promoting. What will all this mean for schools in the future? Even some conservative analysts, like the American Enterprise Institute’s Frederich Hess, are predicting a “train wreck” ahead. Progressive analyst Joanne Barkan, for her part, has spelled out what that wreck could bring: “an extreme degree of ‘teaching to the test,’ demoralized teachers, rampant corruption by private management companies, thousands of failed charter schools, and more low-income kids without a good education.” Why can’t more people see the wreck coming? The billionaires and their foundations, Barkan notes, have polluted the political process. They've undermined, with their largesse, the independence of institutions that ought to be protecting the public interest. The billionaire foundations, Barkan explains, lavish grants on research groups and think tanks to study the programs they fund. They ladle still more millions “to TV networks for programming and to news organizations for reporting.” And plenty of major corporations have a vested financial industry in keeping the billionaire educational reform vision on course. The standardized testing regimes the billionaires demand have become a gold mine. One top education industry giant, Pearson, is collecting $500 million from one state alone, Texas, for the contract to create and administer five years worth of standardized tests. But billionaires, the Nation magazine’s Dana Goldstein suggests, may have a deeper reason for pushing their education vision, for insisting that putting “better” teachers into America’s classrooms can “completely overcome poverty.” “If the United States could somehow guarantee poor people a fair shot at the American dream through shifting education policies alone,” Goldstein observes, “then perhaps we wouldn’t have to feel so damn bad about inequality — about low tax rates and loopholes that benefit the super rich and prevent us from expanding access to child care and food stamps.” “Taxpayers still fund more than 99 percent of the cost of K–12 education,” adds Joanne Barkan. “Private foundations should not be setting public policy for them.” That's not democracy. That's plutocracy. | |
| IN REVIEW | |
What Taxes Leave People the Happiest? Shigehiro Oishi, Ulrich Schimmack, and Ed Diener, Progressive Taxation and the Subjective Well-Being of Nations, Psychological Science (upcoming), September 6, 2011. Two decades ago, after the Soviet Union's collapse, various conservative groups from the United States rushed into Eastern Europe. These eager advocates for free-market fundamentalism set out to imprint on impressionable new nations all sorts of public policies they couldn’t get enacted into law back home. On taxes, these American right-wingers hit the jackpot. A host of Eastern European nations would quickly adopt “flat tax” systems that taxed people with high incomes and people with much lower incomes at the same exact rate. How’s this flat taxing working out? Pollsters recently put that question to flat-taxed Czechs. Two-thirds of the Czech people, the poll found, “consider the current single rate of 15 percent unjust.” An even greater proportion of the Czech population, almost 75 percent, want to see a return to progressive tax rates — that is, tax rates that rise as income rises. These poll results won’t surprise psychologists Shigehiro Oishi, Ulrich Schimmack, and Ed Diener. The three scholars have just completed a 54-nationcomparative study that explores whether the shape of a nation’s tax system can impact the happiness of its people. Their conclusion? People who live in societies where incomes face progressive tax rates report higher levels of happiness — or “subjective well-being,” in the technical phrase — than people who live in flatter tax systems. “If the goal of societies is to make citizens happy, tax policy matters,” explainsthe University of Virginia’s Shigehiro Oishi. “Certain policies, like tax progressivity, seem to be more conducive to the happiness of the people.” Oishi, the University of Toronto’s Ulrich Schimmack, and veteran University of Illinois happiness analyst Ed Diener conducted their research within a database of 59,634 Gallup interviews. They measured happiness by three different yardsticks. Their findings, the three report, show “that a fair redistribution of wealth via progressive tax increases the mean happiness of the nation.” In other words, the researchers sum up, policy makers need to see tax policy as something much more than a matter of “economic measures.” Tax policy impacts how people feel about their “everyday lives.” | |
Quote of the Week
“Business CEOs now pay themselves 325 times the compensation of shop-floor and cubicle workers. That ratio was closer to 25-to-1 in the 1960s.”
David Olive, Should we raise taxes on the rich,Toronto Star, September 9, 2011
Stat of the Week
Five of the nine justices on the U.S. Supreme Court hold personal fortunes worth at least $1 million, says a newCenter for Responsive Politics analysis. Current disclosure law only requires justices to reveal the value of their assets and liabilities within broad ranges. The five high court millionaires, at the top end of these ranges, sport net worths between $2.6 and $45.5 million. Only one justice, Sonia Sotomayor, comes in under $400,000.
New Wisdom
on Wealth
Richard Murphy, Should the 50 percent tax rate be abolished? Guardian, September 7, 2011. An entrepreneur explains the difference between rich people and “wealth creators” and makes the case against cutting the UK's 50 percent top marginal tax rate.
Nancy Skinner, State should raise income tax on super wealthy, Contra Costa Times, September 9, 2011. California's rich, this state lawmaker notes, paid more in taxes when Ronald Reagan served as governor than they do now.
Editorial, The Enlightened Rich Want to Be Taxed,New York Times, September 10, 2011. A wise dollop of self-interest drives the wealthy who are calling for higher taxes on the rich.
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