|January 21, 2013|
The share of paycheck income going to America’s top 1 percent, we now know, has nearly doubled since 1979. Can we put a human face on a stat like this?
How about the face of Tim Cook, the Apple CEO. Cook has a rather sweet pay deal going. Even if Apple shares show 0% gain over the next eight years, Cook will still be able to pocket $532 million by year-end 2021.
Or how about the face of Jamie Dimon, the JPMorgan Chase CEO who turned his bank's investment division into a high-risk profit center? A JPMorgan report out last week puts a significant share of the blame for a $6 billion trading loss JPMorgan suffered last year squarely on Dimon’s shoulders.
Enough faces for you? In this week’s Too Much, we have more.
|GREED AT A GLANCE|
Back in early 1980s America, “filthy rich” meant Dallas. That famed Larry Hagman TV series made North Texas “flash and cash” the prime national symbol of grand fortune. But today’s North Texas fortunes, says a new Dallas Morning News analysis, make the “oilmen of 1982 seem like quaint relics.” Back then, the most lavish home in Dallas — a four-story manse on the city’s exclusive Park Lane — carried a $2 million price-tag. In 2009, a nearby mansion on that same Park Lane went for $29 million. North Texas billionaire Alice Walton and her immediate family, the heirs to the Wal-Mart fortune, today hold $107.8 billion in net worth, half as much wealth, after inflation, as the entire 1982 Forbes 400 . . .Over 70 top U.S. CEOs think America’s seniors are getting too many of our tax dollars. They’ve joined in a “Fix the Debt” campaign that’s calling for cuts to Social Security. But these same CEOs don’t seem to have any problem with John Sperling, the 91-year-old now collecting more tax dollars than any senior in U.S. history. Sperling has just stepped down as executive chair of the Apollo Group, the for-profit education giant that runs the University of Phoenix. Apollo owes its earnings to the tax dollars that finance federal student aid programs, and Apollo’s board has just gifted a good chunk of these dollars, some $5 million, to Sperling as a “special retirement bonus.” He'll also be receiving a $71,000 per month annuity. Sperling, notes analyst Michelle Leder, currently holds Apollo stock worth $228 million . . .
The poorest 20 percent of Nebraska households pay 6.4 percent of their income on state sales tax. Sales tax costs Nebraska's richest 1 percent only 0.8 percent of their income. Nebraska's tax system, governor Dave Heineman declared last week, “needs to be modernized.” But his proposed modernization won't help any of Nebraska's poor. Heineman wants to expand the state’s sales tax — to raise the $2.4 billion in new revenue Nebraska would need if the state adopts his plan to eliminate the state income tax, a levy that hits the rich harder than the poor. In Louisiana, Bobby Jindal is also now pushing to eliminate state income taxes. Governor Jindal's plan would reduce taxes on his state’s top 1 percent an average $25,423 and raise taxes on middle-income households by $534.
Quote of the Week
“Running for federal office means spending your days and nights courting a very narrow set of very rich donors who have the power to fuel your campaign or turn off the lights.”
|PETULANT PLUTOCRAT OF THE WEEK|
|ten of them make over double the $696,000, plus 30 percent bonus, that Ryba pockets. And none of those ten have had voters trying to cut their pay! This past November, local voters passed a measure that caps Ryba's pay at twice the pay of California governor Jerry Brown. For Ryba, the cap means a pay cut down to $347,974. But she's fighting back. Her El Camino board is suing the two hospital workers who filed the original pay cap ballot initiative. One of the two workers sued, psychiatric technician Kary Lynch, says he will not let the lawsuit intimidate him. Explains Lynch: “I just can't see why anybody should be paid that amount of money.”Tomi Ryba, the CEO at Silicon Valley’s El Camino Hospital, must be feeling a little ornery these days. Ryba only makes a pittance compared to other health care execs in California. In fact,|| |
|IMAGES OF INEQUALITY|
Larry Chait, for the Billboard Project
National Priorities Projct Build a Better Budget/ If America's rich paid income taxes at higher rates, how much more could we do to help create a more perfect union? This interactive tool can help you find answers.
|PROGRESS AND PROMISE|
|new study revealed last week, America's top 32 donors to Super PACs contributed an average $10 million each — and together poured as much into the elections as candidates Obama and Romney raised from their 3.7 million less-than-$200 contributors combined. A “plutocracy of donors,” notes Public Citizen’s Robert Weissman, is replacing a “democracy of voters.” But this past weekend, thousands of those voters came together for a “Money Out, Voters In” day of protest. Over 350 cities and towns, organizers note, have already called for a repeal of the Supreme Court’s Citizens United decision, the 2010 ruling that has opened the door to a virtually unlimited billionaire presence in America’s elections.In 2012, a|| |
Help demand democracy. Take a look at a possible action plan for organizing a “Money Out, Voters In” citizens campaign in your community.
|inequality by the numbers|
Stat of the Week
The world’s 100 richest billionaires netted $240 billion in income last year, calculates the Bloomberg Billionaire Index. That would be enough, notes an Oxfam International report released last week, to end extreme global poverty four times over.
Why Some No Longer Sing the Beltway Blues
How do unequal societies solve the problems — like traffic congestion — that make us miserable? They come up with solutions that make life easier for rich people.
Politicians and bureaucrats “inside the Beltway” that circles Washington, D.C., pundits like to prattle, simply do not understand the challenges of daily life that average Americans face “outside the Beltway.”
But here’s something the pundits have yet to realize: If you really want to understand everyday life in a deeply unequal society like the United States, the best place to look may now be on the Beltway.
Right there on the asphalt concrete, anyone who bothers to look can see all the tensions and frustrations that define daily life in an America ever more divided between a prospering rich and a shrinking, struggling middle class.
The highway officials who run the Beltway stretch that winds through Northern Virginia have just opened up the nation’s latest set of “Lexus lanes.” For a stiff fee, affluent motorists can now zip around the Beltway in “express toll lanes” while their less affluent fellow motorists sit stalled in rush-hour traffic jams.
And those fellow motorists do a lot of stalling. The Washington region has more traffic congestion than any other major U.S. metro area. In 2010, the latest national Urban Mobility Report details, commuters in the D.C. area lost an incredible 74 hours to traffic jams, up from just 20 hours in 1982.
Something else fundamental — besides traffic — has changed around Washington since 1982. The area has become substantially more unequal.
The national capital region used to be a middle class haven, a place where average Americans, the Washington Post recalls, could take home “modest but steady paychecks” as federal employees.
But a string of White House initiatives, starting under Bill Clinton and accelerating in the Bush years, have outsourced a heavy share of federal jobs to private contractors. The dollars that the federal government is funneling to these contractors in the Washington area have, overall, quadrupled since 1990.
For average workers, this sea-change in federal employment practice has meant less secure employment and smaller paychecks. For Washington’s “growing upper class of federal contractors, lobbyists, and lawyers,” notes a recent Reuters analysis, this switch has brought a steady gusher of windfalls.
Two decades ago, a family had to be making $368,000, after adjusting for inflation, to enter the Washington region’s most affluent 1 percent. Top 1 percent status in the region today doesn’t kick in until a household is making $527,000.
In 2011, the top 5 percent of households in the D.C. region took home 54 times more income than households in the poorest 20 percent. No state in the entire nation has a wider top-to-bottom gap.
Economists see some powerful links between levels of inequality this high and traffic congestion. The more wealth concentrates, they explain, the more speculative the housing market becomes. In deeply unequal regions, the wealthy bid up the price of the choicest real estate, and that forces cash-squeezed middle-class families to move further out to find decent housing.
The further away people live from their work, the more traffic on the roads. Those American counties where commuting times have increased the most, Cornell economist Robert Frank points out, just happen to be those counties “with the largest increases in inequality.”
How should we respond to all this congested commuting? Americans have traditionally battled traffic jams by building new roads and bridges, with the dollars for this construction coming primarily out of taxes on gasoline.
Highway officials, denied adequate gas tax revenues, have had to hunt for alternative solutions. Enter “Lexus lanes.” A dozen metro areas, USA Today reports, now have highways that “charge cars rising tolls as traffic increases.”
The constant goal: keep the traffic in Lexus lanes moving at a fast clip. If too many people start using the lanes and traffic slows, the tolls rise — and don't start sinking until the car volume drops enough to get traffic moving again.
Toll fees on the new Washington Beltway Lexus lanes have no cap. In really bad traffic, officials acknowledge, tolls might jump to $1.25 per mile. For a 28-mile round-trip on the Beltway Lexus lanes, a motorist could face a toll over $20.
Some motorists — like the top execs at Fluor, the Fortune 500 construction giant — won’t have any trouble affording fares that rise that high. Fluor teamed with Transurban, another private company, and the Virginia Department of Transportation to build the Beltway Lexus lanes.
In exchange for its investment in this construction, the Fluor-Transurban consortium will now get all the toll revenue the Beltway Lexus lanes generate over the next 75 years.
That should be enough to keep the CEOs of Fluor in considerable clover. The current CEO, David Seaton, made $6.75 million in 2011. The five top execs at Fluor took in $23.4 million in 2011, up from $22.7 million in 2010.
A real solution to the Washington metro area’s chronic road congestion would, of course, bring public transportation into the mix. Interestingly, a project to expand the Maryland side of the D.C. area’s subway system with light-rail has been floating around for years — but still can’t find the funding to start.
This inaction in Maryland reflects a broader national trend. U.S. investments in infrastructure have fallen off dramatically, from 3.3 percent of the nation’s gross domestic product in 1968 to 1.3 percent of GDP in 2011, a long-term decline that began at almost exactly the same time as inequality in America started rising.
Researchers see no coincidence here. The U.S. states where the rich have gained the most at the expense of the middle class turn out to be the states that invest the least in infrastructure.
One explanation: Middle class people, a 2012 Center for American Progress report points out, have a vested interest in infrastructure investment. They depend on good public roads, schools, and transit.
Wealthy people don’t. If public services frazzle, they can opt out to private alternatives. And the more wealth concentrates, the more political leaders will tilt toward the wealthy — and deny public services the funds they need to thrive.
And so, in an ever more unequal United States, we get more Lexus lanes. For the affluent, the lanes make for an ideal solution. The wealthy get speedy, tension-free commutes — at a cost they find negligible.
The rest of us do get something out of the deal. We get a reminder, as we sit and stew in horrific traffic, why inequality as deep as ours simply makes no sense.
Adam Davidson, The Smartphone Have-Nots, New York Times, January 15, 2013. Why has the United States grown so unequal? A useful introduction to the current state of the debate.
Chuck Marr, The 'Fiscal Cliff' Deal and Income Inequality, Off the Charts, January 16, 2013. The latest tax changes, notes this Center for Budget and Policy Priorities, undo only a tiny bit of America's intense concentration of income in top 1 percent pockets since 1979.
Government contemplates imposing higher tax slabs on the super rich, IBN Live, January 17, 2013. In India, where top tax rates have dropped from 56 percent 20 years ago to 30.9 percent today, the prime minister’s top economist is calling for stiffer tax rates on the nation’s wealthy.
Emma Seery, Widening gap between rich and poor threatens to swallow us all, Guardian, January 19. 2013. In a world of limited resources, notes this Oxfam adviser, we'll never be able to end extreme poverty without an “end to extreme wealth.”
|new and notable|
An Estate Tax Primer and a Good Bit More
Paul Caron and James Repetti, Occupy the Tax Code: Using the Estate Tax to Reduce Inequality, Pepperdine Law Review, January 2013.
Don’t let the title of this excellent new scholarly article fool you. Yes, this piece does detail how estate taxes have historically helped narrow the gap between our richest and everyone else. But the University of Cincinnati’s Paul Caron and Boston College’s James Repetti offer an equally useful bonus: an up-to-date survey on the stats that show how unequal America has become and a cogent summary, beyond the stats, of why no reasonable society should tolerate the levels of inequality that now afflict us. Caron and Repetti also take on those who argue that the really rich have never had any trouble sidestepping estate taxes. If that claim held water, they note, “one would have to wonder why 18 wealthy families contributed $500 million to bankroll a campaign to repeal the estate tax.”