|August 27, 2012|
Back in the 1970s, early on in the CEO pay explosion, an IBM corporate lawyer was starting to feel uneasy about America's widening divide between executive and worker compensation. Corporations, the lawyer thought to himself, ought to have to disclose their CEO pay as a multiple of their average wage.
That lawyer, James Cotton, would retire from IBM in 1995, become a law prof, and then pen a 1997 law review article that spelled out his case for pay ratio disclosure. Today 72 and legally blind, Cotton no longer follows the corporate pay scene. He didn’t know, until a reporter called him recently, that the 2010 Dodd-Frank financial reform act actually incorporates his ratio disclosure notion.
But no U.S. corporation, despite Dodd-Frank, has yet had to disclose any pay ratio. The reason? Federal regulators, under heavy corporate pressure, haven't yet released the new rules necessary to enforce the Dodd-Frank mandate.
America’s corporate giants may one day rue their intransigence on pay ratio disclosure. At least one national labor leader now sees this disclosure as only step one toward a far more ambitious goal. In this week’s Too Much, his story.
|GREED AT A GLANCE|
For America’s middle class, the Pew Research Center reported last week, the 21st century's first decade made history: For the first time since the Great Depression, middle class Americans have ended a decade poorer than they began it. After adjusting for inflation, the income of the typical middle class household dropped 5 percent over the new century's first decade, and that household's net worth sank 28 percent. Overall, America’s broadly defined “upper class” — households making over twice the nation's median income, $118,000 in 2011 — have seen their share of the nation's income soar from 29 to 46 percent since 1971 . . .
Back in the 1950s, in an America where income over $400,000 faced a 91 percent tax rate, socialite C.Z. Guest did her best to keep up appearances. The wife of polo-playing steel heir Winston Guest, C.Z. graced best-dressed lists — and even a 1962 Time cover. A living symbol of a dying plutocracy, Guest fascinated — and repelled — middle class Americans with her to-the-manor-born candor. Kids, she declared, “are better brought up with a governess,” explaining she “couldn't go around” with Winston “if I'd had to stay home and take care of the children.” C.Z. died nine years ago. Her only daughter now has her 28-room New York manse up for sale. The house, says Cornelia Guest, “needs a family.” She’s asking $6.9 million . . .
Not all billionaires these days are working feverishly to buy the 2012 elections, not even all the Koch brothers. David and Charles Koch have emerged over the last two years as our plutocracy’s most generous political players. But David and Charles have a brother Bill — net worth, $4 billion — who has kept himself on the political sidelines. Bill’s passion? Old West memorabilia. In 2010, Bill bought an Colorado ghost town and had the over 50 buildings dismantled and rebuilt on 420 acres he owns ten miles away. Observers figure that Bill will be packing his private ghost town with his unparalleled Old West collection. Last year he spent $2.3 million for a photo of Billy the Kid. He had already picked up, notes the Denver Post, Jesse James’ gun, Wyatt Earp’s vest, and Sitting Bull's rifle.
Quote of the Week
“I don’t know about you, but I was not born to carry rich people around on my shoulders.”
|PETULANT PLUTOCRAT OF THE WEEK|
No billionaire loves the shadows more than Jerry Perenchio. At Univision, the TV network he assembled, Perenchio fined and fired execs who violated his first “rule of the road”: “No interviews, no panels, no speeches, no comments. Stay out of the spotlight — it fades your suit.” In 2007, Perenchio sold Univision and reaped a $1.3 billion personal profit. In 2008, he served as John McCain’s fundraising co-chair. So far in 2012, Perenchio has already stuffed $2.5 million into right-wing super PACs. Another $250,000 has gone into the campaign to pass Prop 32, a California initiative that would ban labor unions from collecting voluntary political action contributions from their members via payroll deduction. California's wealthy would, if the measure passes, continue to be able to spend on politics whatever they want.
|PROGRESS AND PROMISE|
A merry band of online pranksters has just launched “Americans for Inequality,” a new tongue-in-cheek group devoted to “changing the narrative away from the costs and perils of inequality — and toward a new appreciation of how inequality plays an important and beneficial role in our economy.” Last week, at an event in New Hampshire, the group took its first official act and endorsed the 2012 Republican national ticket, citing the “the beauty of the Romney/Ryan plan: the higher the income, the higher the tax break.” Some visitors to the group’s Facebook site are apparently taking that endorsement at face value and applauding. Good satire always seems to walk a fine line.
Don't let the stealthy wealthy bamboozle America with TV ads from groups with innocuous-sounding names. Check out Ad Hawk, a Sunlight Foundation app that lets users identify the funders behind political spots.
|inequality by the numbers|
Stat of the Week
As of August 1, at least 33 American billionaires had each contributed at least $250,000 to super PACs out to defeat President Obama. Three billionaires, the New Yorker reports, have given at least a quarter-million to pro-Obama super PAC efforts.
A Bold New Labor Call for a 'Maximum Wage'
The national leader of one of America's feistiest unions is aiming to expand the economic fairness debate. He's proposing a cap on incomes at the top that rises only if incomes at the bottom rise first.
With Labor Day fast approaching, what better time to reflect about those Americans who earn the least for their labor? These Americans — workers paid the federal minimum wage — are now taking home just $7.25 an hour.
On paper, minimum wage workers are making exactly what they made in July 2009, the last time the minimum wage bumped up. In reality, minimum wage workers are making less today than they made last year — and the year before that — since inflation has eaten away at their incomes.
And if we go back a few decades, today’s raw deal on the minimum wage gets even rawer. Back in 1968, minimum wage workers took home $1.60 an hour. To make that much today, adjusting for inflation, a minimum wage worker would have to be earning $10.55 an hour.
In effect, minimum wage workers today are taking home almost $7,000 less over the course of a year than minimum wage workers took home in 1968.
Figures like these don’t particularly discomfort our nation’s most powerful. We live in tough times, their argument goes. The small businesses that drive our economy, we’re informed, can’t possibly afford to pay their help any more than they already do.
But the vast majority of our nation’s minimum wage workers don’t labor for Main Street mom-and-pops. They labor for businesses that no average American would ever call small. Two-thirds of America’s low-wage workers, the National Employment Law Project documented last month, work for companies with over 100 employees on their payrolls.
The 50 largest of these low-wage employers are doing just fine, even with the Great Recession. Over the last five years, these 50 corporations — outfits that range from Wal-Mart to Office Depot — have together returned $175 billion to shareholders in dividends or share buybacks.
And the CEOs at these companies last year averaged $9.4 million in personal compensation. A minimum wage worker would have to labor 623 years bring in that kind of pay.
So what can we do to bring some semblance of fairness back into our workplaces? For starters, we obviously need to raise the minimum wage. But some close observers of America’s economic landscape believe we need to do more. A great deal more.
Count Larry Hanley among these more ambitious change agents. Hanley, the president of the Amalgamated Transit Union, sits on the AFL-CIO executive council, the American labor movement’s top decision-making body. Earlier this month, Hanley called for a “maximum wage,” a cap on the compensation that goes to the corporate execs who profit so hugely off low-wage labor.
This maximum, if Hanley had his way, would be defined as a multiple of the pay that goes to a company’s lowest-paid worker. If we had a “maximum wage” set at 100 times that lowest wage, the CEO at a company that paid workers as little as $15,080 — the annual take-home for a minimum wage worker — could waltz off with annual pay no higher than just over $1.5 million.
During World War II, Amalgamated Transit Union president Hanley points out, President Franklin D. Roosevelt called for what amounted to a maximum wage. FDR urged Congress to place a 100 percent tax on income over $25,000 a year, a sum now equal, after inflation, to just over $350,000.
Congress didn’t go along. But FDR did end up winning a 94 percent top tax rate on income over $200,000, a move that would help usher in the greatest years of middle-class prosperity the United States has ever known.
Throughout World War II, FDR enjoyed broad support from within the labor movement — and the general public — for his pay cap notion. Now’s the time, Hanley believes, to put that notion back on the political table. We need, he says, “to start a national discussion about creating a maximum wage law.”
Hanley may just have started that discussion, just in time for Labor Day.
David Moberg, How To Succeed in Business Without Adding Value, In These Times, August 20, 2012. A solid intro into the windfall world of private equity kingpins.
Dean Baker, David Leonhardt's List of Causes of Inequality is Too Short, Center for Economic and Policy Research, August 20, 2012. Why a New York Times stab at explaining our economic divide has missed some key reasons why the United States is growing far more unequal.
David Sirota, The Citizen Kane Era Returns, Harper's, August 21, 2012. U.S. metro areas now stand more at the mercy of billionaire newspaper owners’ personal and political agendas than ever before.
Scott Klinger, CEOs won big with Bush tax cuts, Detroit News, August 22, 2012. Some 57 CEOs saved at least $1 million on their 2011 tax returns thanks to Bush-era tax cuts.
George Monbiot, After Capitalism, Guardian, Auhust 23, 2012. We deserve a political and economic system “that redistributes both wealth and the decisions about how it is used.”
Payoff in the Pit of Plutocracy. Corporate Crime Reporter, August 23, 2012. A new book by a former White House lawyer looks at why Wall Street almost always wins.
Victor Fleischer, Romney’s Management Fee Conversions, A Taxing Blog, August 23, 2012. The analyst who exposed the "legal" carried interest loophole now exposes Mitt's illegal carried interest stretch.
Harold Meyerson, Where is today’s Teddy Roosevelt? Washington Post, August 24, 2012. A century ago we had a presidential race that targeted America's intense concentration of wealth and power. We need another.
|new and notable|
Edward Kleinbard, Paul Ryan’s Roadmap to Inequality, University of Southern California Center in Law, Economics and Organization Research Papers Series, August 20, 2012.
GOP Vice-Presidential candidate Paul Ryan’s 2010 budget gameplan, Roadmap for America’s Future, “contemplates a much more radical restructuring of the federal tax system than is commonly appreciated,” this new analysis carefully details. If Ryan's plan ever became law, taxpayers with annual incomes between $20,000 and $200,000 “would on average pay more in tax,” and taxpayers making over $1 million “would on average enjoy tax reductions exceeding $500,000 per year.” With Ryan's Roadmap in place, wealthy Americans would pay no federal income taxes on their “dividends, interest, capital gains, and net business profits.”
Scholars Strategy NetworkThis new site highlights the work of some of America's top scholars — From Dean Baker to Theda Skocpol — on inequality-related concerns. A useful source for jargon-free insights that reflect the latest social science research.