|November 19, 2012|
The same gang of banking and corporate CEOs that four years ago drove the U.S. economy off the cliff — into the Great Recession — is now parading around Washington with a plan to keep the nation from going off the “fiscal cliff.”
These Fortune 500 chief execs, over 80 strong, have raised over $60 million for a “Fix the Debt” ad and lobbying campaign. They’re presenting themselves — to Congress and the country — as selfless patriots. Some of these CEOs, as a new Institute for Policy Studies report points out, are even proclaiming they’ll gladly accept the expiration of the Bush tax cuts for America's wealthiest.
The catch? The CEOs are asking for tax “reforms” that would add billions to their corporate bottom lines — and trigger mega millions in new CEO pay windfalls. The firms they run would save at least $134 billion if their “reforms” go through, enough to cover the salaries of 2 million elementary school teachers for a year.
In this week’s Too Much, more on our selfless CEOs and their corporate chutzpah.
|GREED AT A GLANCE|
Last week saw an amazing first in the annals of CEO pay excess: a golden parachute for a top executive who, as one analyst quips, “never made it off the runway.” That exec: Chris Kubasik, the Lockheed Martin president all set to become the defense contractor’s CEO this January 1. But Lockheed forced Kubasik to resign November 9 after an ethics probe uncovered his “lengthy, close, personal relationship” with a “subordinate employee.” Kubasik won't leave empty-handed. The Washington Post reported last week that he’ll be exiting with $3.5 million in “separation pay.” That generosity comes courtesy of America’s taxpayers. Some 82 percent of Lockheed’s revenue comes directly from federal contracts. Most of the rest, note Pentagon watchers William Hartung and Stephen Miles, comes from federally subsidized sales to other governments . . .The most powerful man in sports? Sports Illustrated has justbestowed that distinction on Stan Kroenke, the billionaire developer who owns pro sports teams in American football, basketball, hockey, and lacrosse. Kroenke has recently goneinternational. He now owns Arsenal, the storied British soccer franchise. Arsenal fans see 124 years of history when they look at their team. Kroenke sees a cash cow. He has sold off three of Arsenal’s biggest stars since 2010 and raised the price of fish and chips at Arsenal matches to $22. Fans can also pay $2.50 for a one-day pass to watch “premium” Arsenal match highlights online. Among Kroenke’s other hobbies: a vineyard in California’s Napa Valley that markets premium wines that go for up to $1,000 a bottle . . .
The government of Greece has just adopted still another round of austerity budget cuts. Average Greek families, even before the new cuts, had lost 40 percent of their after-tax income. Meanwhile, Greece’s wealthy continue to sidestep taxes on their prodigious incomes. International financial expert Friedrich Schneider is estimating that wealthy Greeks have about 120 billion euros sitting in overseas tax havens. Schneider wants the new Greek government to declare a tax amnesty and let wealthy Greeks face no tax evasion penalty if they pay a 15 flat tax on the money they bring back home. If the amnesty offer brought in just a third of the cash Greece’s wealthy have stashed offshore, Schneider’s numbers show, the projected Greek budget deficit for next year would disappear.
Quote of the Week
“America’s political landscape is infested with many zombie ideas — beliefs about policy that have been repeatedly refuted with evidence and analysis but refuse to die. The most prominent zombie is the insistence that low taxes on rich people are the key to prosperity.”
|PETULANT PLUTOCRAT OF THE WEEK|
|wheeling and dealing in hotel and restaurant franchises. At one point, he flirted with buying up the entire Denny’s chain. These days, Metz owns four dozen restaurants — and fumes about Obamacare. Soon after Election Day, Metz announced he would cut his workers below 30 hours a week to avoid the Obamacare mandate that businesses with over 50 full-time workers must offer health insurance. This “terrible” mandate, says Metz, is “going to force my employees to go out and get a second job.” Metz claims his restaurants can’t afford health care. But Metz can afford, as a franchise trade journal details, to reward his top managers 20 percent of each restaurant’s bottom line. Metz gets his own cut as well. He charges his restaurants both administrative fees and an arbitrary fixed percentage of their sales for rent. Explains Metz: “I also like making money.”John Metz has amassed a tidy fortune|
|PROGRESS AND PROMISE|
|now urging a new approach. They're building on the work of Arthur Pigou, the UK scholar who pioneered the notion of taxing the harmful side-effects — the negative “externalities” — that markets can bring us. Chases after grand fortune, notethe pair, can impose heavy costs on society, as Wall Streeters have demonstrated so vividly over recent years. The “Pigovian” solution? If you want less of something — in this case, inequality — tax it, at rates high enough to reduce the negative side-effects. On income over $20 million, Malloy and Case propose a 90 percent tax rate, the same top rate that helped reduce U.S. inequality after World War II.Most advocacy for taxing the rich revolves around questions of fairness. But economists Liam Malloy and John Case are|
This Black Friday, the super shopping day after Thanksgiving, might just launch a major political push against inequality. Pledge tosupport Black Friday worker protests at Walmart, the source of four of the world's largest billionaire fortunes.
|INEQUALITY BY THE NUMBERS|
Stat of the Week
Between 1975 and 2008, median annual household income in the United States rose by about $8,000, in today’s dollars, to $50,000,notes a new American Prospect analysis. But if average Americans today were receiving the same share of the nation’s income as they did in the immediate postwar decades, the typical U.S. family would now be making $86,400 a year.
Finish This Sentence: The Rich Get Richer . . .
Yes, the poor have struggled mightily while our rich have become phenomenally flush. But middle-income Americans haven't been able to jump off the treadmill either.
We’ve all heard plenty of chatter over recent years about the widening gap “between rich and poor.” But what about the gap between rich and middle? This divide seldom ever gets much media play, an inattention that makes no sense. The gap between America’s high-income and middle-income households, after all, has been growing almost as fast as the gap between rich and poor.
The latest evidence: a new income inequality study from two of Washington’s most respected research groups, the Center for Budget and Policy Priorities and the Economic Policy Institute.
These two groups have been tracking U.S. income disparities, on a state-by-state basis, for years now, and they publish their findings in a report series they've titled Pulling Apart. The latest Pulling Apart, released just last week, takes our inequality story through our new century's first decade.
The core story hasn’t changed much. The gap between America’s poorest 20 percent and America’s most affluent 20 percent continues to stretch out.
In the three-year span from 2008 through 2010, in 15 different states, our most affluent 20 percent averaged over eight times the income of our poorest 20 percent. Back in the late 1970s, the new Pulling Apart points out, not one single state had a top-to-bottom ratio that ran over eight times.
Overall, after adjusting for inflation, the nation’s richest fifth of households have seen their incomes rise an average $2,550 each year since the late 1970s. Average incomes in the nation’s bottom fifth have increased a mere $1,330 for the entire last three decades.
And incomes for the households in America's middle fifth? In all 50 states, the gap between top 20 and middle 20 percent has widened “significantly.” The gap between middle 20 percent and top 5 percent has widened even more.
In New York, for instance, the average, inflation-adjusted incomes of the state’s middle fifth increased by just $14,118 between 1977-1979 and 2005-2007. Over that same time span, top 5 percent incomes soared by $193,877.
The new Pulling Apart zeroes in on 11 of America’s largest states. Back in the late 1970s, the top 5 percent of households in these states averaged 2.8 times more income than households in the middle 20 percent. The ratio three decades later: 4.7 times. In one state, Illinois, the gap essentially doubled.
All these figures, the new Pulling Apart emphasizes, “understate” the real gap between our affluent and everyone else. The data for Pulling Apart come from the surveys on household income that the Census Bureau conducts every year. These Census surveys do not take into account income from capital gains, the profits that come from buying and selling stocks and bonds and other assets.
Capital gains income, Pulling Apart notes, goes “overwhelmingly” to America’s most affluent. In 2012, 87 percent of all capital gains “will go to families in the top 5 percent of the U.S. income distribution.” The gaps the new Pulling Apart details would be substantially wider if we took this income into account.
But do these gaps, in the end, matter all that much? The researchers behind the new Pulling Apart have a clear answer. Rising inequality, they contend, “adversely affects our economy and political system.” The most basic problem with growing income gaps? They eat away at our social cohesion.
In a democracy, the civics textbooks tell us, people come together to discuss, debate, and decide solutions to the common problems they face. But this democratic deliberation only works effectively when most people have the same problems in common. In deeply unequal societies, they don’t. The rich in these societies live apart, in their own private universes.
These wealthy, Pulling Apart observes, “become increasingly isolated from poor and middle-income communities” as income gaps widen. One example: They send their children to private schools and “can lose sight of the need to support public schools.”
“As a result,” Pulling Apart explains, “support for the taxes necessary to finance government programs declines, even as the nation’s overall ability to pay taxes rises.” This “failure to invest adequately in programs that educate children,” in turn, “can dampen” our future economic growth.
The encouraging news in the new Pulling Apart? We may still have gridlock in Washington, but states, individually, can take steps to narrow the gaps that divide our rich from our poor and our middle. States can enact state minimum wages higher than the federal minimum wage rate. They can de-emphasize sales taxes and focus instead on taxing the income of ultra wealthy households.
The payoff from moves like these?
“States that narrow — rather than widen — income gaps,” promises Pulling Apartco-author Elizabeth McNichol, “will reap economic benefits in the long run.”
Eduardo Porter, Charity’s Role in America, and Its Limits, New York Times, November 13, 2012. Why philanthropy isn't coming close to fixing what ails us.
Robert Reich, Obama’s grand bargain: broaden the base or tax the rich?Christian Science Monitor, November 15, 2012. If Republicans won’t budge on raising tax rates but insist on broadening the base, the former U.S. labor secretary argues, Democrats should take aim at the single biggest tax loophole for America’s wealthy: the preferential treatment for capital gains.
Citizens for Tax Justice,Extending Tax Cuts to Millionaires: Still a Terrible Idea, November 15, 2012. Why President Obama and lawmakers should resist new proposals to extend income tax cuts for up to $1 million of income.
Annie-Rose Strasser,Hostess Blames Union For Bankruptcy After Tripling CEO’s Pay, Think Progress, November 16, 2012. No more Twinkies. The greed grab from the Hostess executive summit proved too big to overcome.
Janet Payne, Why the growing wealth gap is bad for America, Austin Statesman, November 17, 2012. Four reasons why a top-heavy distribution of wealth hurts us all.
Chrystia Freeland, On planet Plutocracy,Financial Review, November 17, 2012. What the global uber rich talk about in global uber rich circles.
|NEW AND NOTABLE|
Sarah Anderson and Scott Klinger, The CEO Campaign to ‘Fix’ the Debt: A Trojan Horse for Massive Corporate Tax Breaks, Institute for Policy Studies, Washington, D.C., November 13, 2012. 16 pp.
The all-time classic bait-and-switch? That came a few millennia ago in Troy when the Greeks pulled a fast one with a wooden horse. That Trojan horse, this rather chilling new report details, has clearly inspired over four score of America’s top corporate CEOs. They’re now working to translate the fiscal cliff “crisis” negotiations between the White House and Congress into a green light for a corporate tax reform — “territorial” taxing — that would enable America’s S&P 500 to avoid U.S. taxes on $1.5 trillion in profits currently parked offshore. If this territorial tax change sneaks into law, as part of a fiscal cliff “grand bargain,” corporate profits will soar — and, notes this eye-opening new study, “CEO pay will skyrocket.”
WageClassWar.Org/ This just-published site — from the Campaign for America's Future — salutes the 2012 elections as the “first class warfare election of the new Gilded Age.” Highlighted here: the candidates who “supported the economic interests of the many over the few ”