When the gods dance...

Monday, November 12, 2012

Our Sensible Billionaires



A few weeks before last Tuesday’s elections, researchers at the Institute for Policy Studies in Washington, D.C. released a “report card” that graded lawmakers on their inequality-related votes over the past two years.

Five U.S. senators received “A+” ratings for their “99 percent friendly” voting records. Three of the five stood for re-election last week. All won handily, including Sherrod Brown of Ohio. Out-of-state groups spent $40 million to defeat Brown, four times more than out-of-state groups spent to help re-elect him.

Champions for our 1 percent, on the other hand, didn’t fare so well last week. Incumbents in the House of Representatives hardly ever lose re-election bids. In fact, in seven of the last eight election cycles, at least 94 percent of these incumbents triumphed. But last Tuesday two well-funded House incumbents who rated an “F” on last month’s inequality report card both went down to defeat.   

What wisdom should we be taking away from all these encouraging ballot-box outcomes? In this week’s Too Much, some pondering on our plutocracy.


One of America’s top documentary film makers, Academy Award-winner Alex Gibney, is debuting his latest offering this week on the PBS network. His new Park Avenue: Money, Power & the American Dream zeroes in on 740 Park Avenue in Manhattan, one of the nation’s most exclusive residential addresses. The film’s most chilling moment? That comes when a former 740 Park doorman relates how kids in the building always talk and joke with the doormen until they hit their early teens. At that point, they start totally ignoring them. Notes director Gibney: “I found that really terrifying — the idea that somehow there’d be a socialization process, where you would say, ‘Don’t forget, you’re the son of a billionaire now, so you must treat people below your station with absolute disdain.’”

The number of CEOs in New Zealand making over $1 million a year has more than tripled over the last decade, and the nation’s top execs don’t see anything at all wrong with this enormous pay upsurge. As one Kiwi exec, former Nuplex chair Fred Holland, smugly quipped last month: “You won't get anything but monkeys if you pay peanuts.” Ian Taylor, a high-tech CEO the New Zealand Herald regards as “one of the country's most astute business people,” seems to disagree. Last week he broke ranks with his CEO peers and blasted the bloated paychecks cascading into New Zealand's executive suites. Taylor himself hasn’t taken a pay hike in ten years. Notes the dissident CEO, with a nod to Holland's monkey quip: “If that means I have joined our fellow primates in his eyes, then I know who I would rather spend my time with.”

In decent societies, the “best and brightest” put their gifts to good use. They seek solutions to pressing problems that confront their fellow citizens. In deeply unequal societies, by contrast, many of the gifted narrow their focus. They work at solving the problems that only rich people face. Take Joe Lonsdale, the brilliant child chess champion who graduated from Stanford nine years ago. Lonsdale took his first gig at a hedge fund. Now he’s running an 80-staff Silicon Valley company devoted to developing software that helps the ultra rich better manage their mammoth collections of assets. The 30-year-old Lonsdale clearly considers his software’s development a major global priority. To keep his staffers coding around the clock, BusinessWeek notes, Lonsdale “pays them $300 extra per month to live within a mile of the office and provides free laundry and food.”

Quote of the Week

“I am not going to ask students and seniors and middle-class families to pay down the entire deficit while people like me, making over $250,000, aren’t asked to pay a dime more in taxes.  I’m not going to do that.”
President Barack Obama,Remarks on the Economy and Deficit, November 9, 2012


The top 1 percent cheerleader in Congress? Over the last two years, that may have been Nan Hayworth, the wealthy doctor who represents New York’s Hudson Valley. Hayworth in 2011 introduced legislation to repeal the Dodd-Frank financial reform act provision that requires corporations to disclose the ratio between what they pay their CEOs and what they pay their typical workers. Hayworth also bitterly opposes raising the minimum wage. One slight problem with her stance: The good doctor doesn’t even know how much minimum wage workers are currently making. In a speech shortly before Election Day, Hayworth put the minimum at ”$10 to $11 an hour,” about 40 percent higher than the actual $7.25 federal minimum. The good news? In a major upset, Hudson Valley voters last week refused to return Hayworth to Capitol Hill.


Just when did the political shift to a distinctly more unequal America begin? Some place that moment in 1978, the year California voters passed Prop 13, a property tax cap that saved the state’s wealthy millions and savaged education and other programs that serve the state's working families. Have California voters now started a political shift in the opposite direction? Last week, 54 percent of voting Californiansapproved Prop 30, a measure that raises state income taxes on the 3 percent of state taxpayers who make over $250,000 a year. Income over $1 million will now face a 13.3 tax rate, up from the current 10.3 percent. The new tax rates will last seven years, retroactive through all of 2012. One historical coincidence: The California governor back in 1978, Jerry Brown, just happens to be the governor again this year.

Take Action 
on Inequality

The same CEOs who spent lavishly in 2012 to elect pro-Wall Street candidates arenow lobbying to make corporate hack Erskine Bowles the next U.S. treasury secretary. Learnmore about the Bowles top 1 percent record and sign the petition to stop his nomination.


Stat of the Week

Election Day exit polls, analysts at Citizens for Tax Justice are pointing out, show that 60 percent of American voters support increasing federal taxes, with 47 percent backing an increase only on those making over $250,000 and another 13 percent backing an increase on everyone. Just one third of voters think no one’s taxes should rise.


Election 2012 and Our Sensible Super Rich

Take all that post-election commentary about foolish billionaires and wasted millions in political contributions with a grain of salt. Our billionaires don't have to actually win on Election Day to get their way.

We’ll never know exactly how much America’s super rich pumped into the 2012 elections. Hundreds of millions in “dark money” — contributions laundered throughhyper-politicized nonprofits like the U.S. Chamber of Commerce — will forever remain untraceable.

Even so, we do know that hundreds of billionaires and mega millionaires spent at incredibly extravagant levels on 2012 election campaigns. Las Vegas casino magnate Sheldon Adelson appears to have spent at least $53 million. The notoriously right-wing Koch brothers likely spent even more.

The prime targets of this super-rich cash offensive, from President Obama on down, almost all seem to have survived quite nicely on Election Day. In race after race, candidates that super-rich conservatives opposed swept to victory.

The final election results, a New York Times editorial declared yesterday, amounted to “a landslide loss for big money.” Rich people, adds Slate political analyst David Weigel, "wasted their money.”

These super rich themselves are now coming across, in the election wake, as a cast of rather pathetic characters, as egotistical political dilettantes and rigid ideologues unable to make rational political calculations.

Who ever thought, marvels Washington Post analyst Steven Pearlstein, that businessmen would be “even worse at making political investments than politicians are in making business investments.”

This image of bumbling billionaires no doubt comforts many mainstream pundits. Our democracy has triumphed, their emerging narrative goes. We don’t have to worry about our super rich. All their billions can’t buy victory at the ballot box.

But our super rich didn’t bumble — or waste away — anything in 2012. Ideology didn’t blind them. Self-interest drove them. They behaved rationally.

All investments involve some level of risk. Wise investors balance risk and reward. The political investment the right-wing super rich made in this year's elections involved little risk — and promised substantial reward.

Let's examine, as an example, the political calculus for a deep pocket with a $1 billion fortune and $100 million in annual income. Let’s assume that our billionaire pays federal taxes on this income at a 14 percent actual rate, the same rate that Mitt Romney paid on his 2011 income, after exploiting various tax loopholes.

After federal taxes, our billionaire would be left with $86 million in annual income. In 2012, this billionaire could have spent $10 million on political contributions and still ended the year with a higher personal net worth than he had when the year began. In other words, that $10 million would hardly represent much of a risk.

And the potential reward? Consider the tax implications alone.

Candidate Mitt Romney pledged that he would repeal Obamacare. Much of the Obamacare funding comes from new taxes on the rich, a 0.9 percent payroll tax on ordinary income that couples pull in over $250,000 and a 3.8 percent tax on capital gains, dividend, and interest income over that same threshold.

President Obama also campaigned on a pledge to let the Bush tax cuts for wealthy households expire, a move that would hike the top marginal income tax rate on ordinary income from 35 to 39.6 percent and the core tax on capital gains from 15 to 20 percent. A Romney victory would have prevented these increases.

Just the tax savings alone from a Romney victory would have saved our billionaire, in just one year, his entire $10 million in 2012 political contributions. Quite a reward, a most satisfying return on investment.

But candidate Mitt Romney, of course, lost his White House bid.  Does that make our billionaire’s $10 million investment to elect him a total waste? Absolutely not. Even without a Romney victory, our billionaire’s investment will pay dividends for years to come.

Here’s why. All those millions super rich right-wingers pour into politics force the candidates they target, if they want to remain electorally competitive, to go out and aggressively cultivate their own deep-pocket sources of campaign cash.

The more cash these targeted candidates need to raise to remain competitive, the greater the pressure on them to push a political agenda that an appreciable number of affluent deep pockets will find appealing.

This inexorable dynamic may help explain why President Obama isn’t proposing to restore taxes on America’s super rich to their pre-Ronald Reagan levels. The President is only asking the rich, as ne noted repeatedly on the campaign trail, to pay a “little more.”

If President Obama wins all the tax increases on the rich he has proposed — and the new Obamacare taxes on the rich stay in place — America's super rich will still be paying taxes at less than half the rate that our richest faced back in the 1950s, under Republican President Dwight D. Eisenhower.

So right-wing billionaires like Sheldon Adelson are essentially winning, even when they lose on Election Day. Their hundreds of millions in political contributions are distorting our national political discourse — and keeping real change off the table.

Our conservative billionaires, in short, only look crazy. They're actually behaving, given their long-term goals, quite sensibly. We have to behave sensibly, too, and start fighting to trim their colossal fortunes down much closer to democratic size.

New Wisdom
on Wealth

James Galbraith, The coming debt battleSalon, November 8, 2012. Our rich build too many mansions. Letting the Bush tax cuts expire would usefully dent that purchasing power.

Nick Hanauer, A Message from Us Rich Plutocrats to All You Little People,Business Insider, November 9, 2012. A successful entrepreneur explains the “status, privileges, and power” at the heart of the plutocratic mindset.

Todd Gitlin, A Charter for the 99 PercentDissent, November 8, 2012. A proposal for the next move against top 1 percent domination.

Bill Emmott, Follow the moneyFinancial Times, November 9, 2012. Forget the 1 percent. It's the richest 0.1 percent who have been really pulling away from the rest.


Financing the global sharing economy, Share the World's Resources, London, October 2012, 168 pp.

Humanity, the London group Share the World’s Resources notes in this new gameplan for a more equal international order, “is now facing what can only be described as a global emergency.” Some 40,000 people a day are dying from poverty, and austerity regimes are only compounding the world's suffering. What we need: a “wholesale reform of the world economy.” To start that process, Share the World’s Resources thoroughly details 10 practical steps that “could harness over $2.8 trillion each year to reverse policies of economic austerity, prevent life-threatening deprivation, and mitigate the human impacts of climate change.” The first step: taxing global financial speculation.

Web Gem

The Equality Trust/ This UK-based site highlights thepioneering work of British epidemiologists Richard Wilkinson and Kate Pickett, the world's top experts on the price we pay, in our societies, when we tolerate vast divides in income and wealth.

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