March 11, 2013
Those of us who pound away at the keyboard about how unequal our world has become have grown accustomed to one particular line of attack. You envy, the attack goes, the super rich. You blast them because you can’t be them.
Well, truth be told, those of us who write about inequality do have an envy problem. Only we don’t envy the rich. We envy those talented visual artists who can explore inequality far more compellingly than our words ever could. We particularly envy “Politizane.”
Who’s Politizane? A total mystery. All we know: Someone identified as Politzanelast November uploaded to YouTube a six-minute video entitled “Wealth Inequality in America.” Before this month, hardly anyone had seen these six minutes. That all suddenly changed. In an eye's blink, this amazing video became the biggest share-the-wealth cyber sensation ever, with millions of hits.
We can’t wait to see Politzane’s encore. Indeed, who knows, the idea for it might even come from a story in this week’s Too Much.
GREED AT A GLANCE
Add another casualty — the cultural sector — to the toll that high levels of inequality exact from society. Two Polish sociologists, Tomasz Szlendak and Arkadiusz Karwacki, have published new research that compares levels of cultural activity across 22 European Union nations. In more equal societies, the two researchers note in the journal International Sociology, people attend more theatrical performances, visit more art museums, and read more books. What’s shoving time for culture aside in more unequal nations? Wider income gaps, Szlendak and Karwacki suspect, raise the profile of high-status material goods and shift people’s focus onto work-related activities that can help them afford these high-status goods — at the expense of less visible cultural activities . . .
This January, for the first time ever, over 50,000 people slept every night in New York City’s homeless shelters. The number of homeless families in New York overall has soared 18 percent since last year. Also soaring: the pay of Wall Street’s top private equity execs. At KKR, Henry Kravis and George Roberts pulled in $207.9 million in dividends alone last year. Their 2011 dividend total: $128.4 million. Making the windfalls even sweeter: The “fiscal cliff” tax deal enacted in January continues the preferential tax treatment of dividend income. On their 2012 tax return, that preferential treatment will save Kravis and Roberts alone over $40 million, nearly enough to restore state funding for a program ended in 2011 that subsidized rent for families leaving homeless shelters . . .
India’s top economic analyst suggested earlier this year that India’s rich ought to pay more in taxes. India’s rich promptly erupted. Higher tax rates, the Times of India intoned, would only “encourage tax evasion.” But tax evasion is already running wild in India, despite a tax rate that has maxed out since 1997 at a mere 30 percent, less than a third India’s top rate 40 years ago. Only 42,800 Indians today admit to making over $180,000 in U.S. dollars. Observers estimate India boasts at least ten times that many high-earners. The just-announced latest Indian budget raises the top tax rate on India’s rich only to 34 percent. Even so, the rich are still complaining — and threatening to exit India. They won’t be going anywhere, retorts finance minister P. Chidambaram. Where else but India, he asks, could a rich person “afford to employ” as many servants?
Quote of the Week
“It’s perverse that stock market averages are treated in the business and popular media as a proxy for the health of the economy. They are now the indicator, at most, of the well-being of the wallets of the wealthy, which is coming more and more at the expense of everyone else.”
Yves Smith, As Dow Sprints to New High, the Middle Class and Manufacturing Languish, March 6, 2013
PETULANT PLUTOCRAT OF THE WEEK
The CEO of energy giant Transocean had it all figured out back in 2008. The newly elected President Obama, Steven Newman felt sure, would heavily hike taxes on firms like his. So right after the election Newman moved the headquarters of his Houston corporation, the world’s largest offshore driller, way offshore, all the way to Switzerland, a nation that knew how to keep CEOs happy. Newman would go on to pocket $9.9 million in 2011, and good times appeared eternal — until this March 4 when Swiss voters approved the world’s tightest CEO pay law. Newman can now forget about merger bonuses and golden parachutes. The new Swiss law bans them. Still upcoming: another Swiss referendum that would limit CEO takehome to 12 times the pay of a firm’s lowest-paid worker.
IMAGES OF INEQUALITY
Larry Chait, for the Billboard Project
The No Billionaires Campaign/ The United States needs a serious discussion about outlawing billionaires. This site helps explain why.
PROGRESS AND PROMISE
How many big-time U.S. corporate CEOs are so far backing the push for a higher federal minimum wage? Exactly one: Craig Jelinek, the top exec at Costco. Jelinek is working withBusiness for a Fair Minimum Wage, an advocacy group thatlast week applauded a new legislative initiative in Congress that would hike the current $7.25 minimum to $10.10. What might get more CEOs behind a higher minimum wage? One suggestion surfaced last month in the American Prospect: Create a new federal income tax bracket for income over 25 or 50 times the minimum wage, with a tax rate on that income well above the current top 39.6 percent federal rate. With that linkage in place, CEOs might have an incentive to hike pay for their lowest-wage workers, not just exploit them.
INEQUALITY BY THE NUMBERS
Stat of the Week
In 2010, the most recent year with stats available, the top 1 percent of Americans owned 35 percent of all shares of stock, either directly or indirectly through mutual funds and retirement plans. The share of the nation's stock wealth held by America's bottom 80 percent? Just 8.3 percent.
Once Upon a Time, Corporations Paid Taxes
The current European revolt against CEO greed, if successful, might leave Corporate Europe looking just like Corporate America — in 1950.
In America today, the New York Times reports, we’re living in “a golden age” — for corporate profits. These earnings have been leaping at a 20 percent annual clip. In fact, to find a year when corporations were grabbing as great a share of America’s income as they’re grabbing now, you have to go back to 1950.
But corporate execs in 1950 had cause to mute their celebrating. Unlike execs today, they paid heavy taxes on both their corporate and individual earnings.
In 1950, by statute, major corporations faced a 42 percent tax rate on their profits, a rate that would jump the next year to just over 50 percent. The share of profits corporations actually paid in taxes, after exploiting loopholes, averagedabout 40 percent throughout the 1950s.
The tax hit on top executive individual incomes would be even heftier. In 1950, General Motors chief Charley Wilson took home more pay than any other U.S. chief executive. Wilson reported $586,100 in income that year, about $5.6 million in today’s dollars. He paid $430,350 of that income — 73 percent — in taxes.
Top corporate executives today operate in a totally different universe. The corporations they run, for starters, face a much smaller tax bill. The top corporate tax rate has dropped to 35 percent, and loopholes have proliferated.
In 2011, major U.S. corporations actually paid on average only 12.1 percent of their earnings in taxes. That same year, adds the Institute for Policy Studies, 25 major U.S. corporations paid their CEOs more than they paid the federal government in corporate income taxes.
Corporate execs as individuals enjoy an even better deal these days than the corporations they run, both before and after taxes.
General Motors ranked as America’s mightiest corporation in 1950. Yet the executive pay that Charley Wilson took in for running GM amounts to less than half the $12.1 million average pay, after adjusting for inflation, that went to the CEOs at America’s 500 top publicly traded corporations in 2012.
Two years ago, the CEO of contemporary America’s mightiest corporation, Apple computers, pocketed a pay deal worth $378 million, or over 67 times what GM, after inflation, paid Charley Wilson in 1950.
We don’t know how much Apple CEO Tim Cook is paying in federal income taxes today. We do know, from IRS stats, that Americans who made over $10 million in 2010 paid on average just under 24 percent of their incomes in federal income tax, less than a third what Charley Wilson paid in 1950.
How much should we read into these huge contrasts between corporate profits, pay, and taxes back over a half century ago and today? What difference does any of this make for the rest of us?
A huge difference. The outrageously rich rewards that top executives can pocket in 21st century America — and the absence of any meaningful tax bite on these rewards — give our top executives a powerful incentive to behave outrageously, to relentlessly pump up profits by whatever means necessary.
Our modern top execs, as one analyst notes, have more of an incentive “to loot” their companies than invest in their futures. The more they “loot” — by downsizing and outsourcing, by squeezing consumers, by stiffing Uncle Sam at tax time — the fatter the quarterly bottom lines, the greater their personal pay.
The end result of this looting: an America where corporate profits are setting records while typical workers, as former U.S. labor secretary Robert Reich points out, are making less today, in real dollars, than they earned a dozen years ago.
Corporate executives in Europe have been watching this U.S. corporate greed grab with intense personal interest. Over recent years, they've done their best to mimic U.S. corporate standard operating procedure, sky-high executive pay included. But Europeans are pushing back against this “Americanization.”
In Switzerland, 68 percent of voters in a landmark March 3 referendum opted to ban the most lucrative categories of executive pay bonuses. This overwhelming voter support for executive pay limits, a leading Zurich newspaper opined last week, reflects a deep-seated public sense “that company managers have been ransacking the coffers at the expenses of society.”
The Swiss vote, Bloomberg reports, is “raising pressure” on German chancellor Angela Merkel “to adopt her own tougher rules on executive pay,” and European Union ministers have already agreed to limit banker bonuses to no more than the equivalent of one year’s salary, down from the typical five to ten times.
In France, meanwhile, the government elected last year will be limiting total CEO pay at firms where French taxpayers have a controlling interest to no more than 20 times the pay of the lowest-paid worker.
All this activity has Corporate America starting to get a little nervous. U.S. corporate consulting firms are sending out alerts on the new Euro developments. The “reverberations from the Swiss vote,” notes Harvard analyst Stephen Davis, “could put fresh momentum into shareholder rebellions in the U.S.”
But Americans eager to counter corporate greed really don’t have to look to Europe for inspiration. They need just remember America’s not-so-misty past.
Dean Baker, Has NPR Joined Peter Peterson's Crusade Against Social Security and Medicare?CEPR, March 6, 2013. How media cloud the reality that the “most striking feature of the U.S. economy over the last three decades has been the upward redistribution of income.”
Haley Sweetland Edwards,He Who Makes the Rules,Washington Monthly, March/April 2013. How America's top execs — “he who holds the gold” — are dismembering the laws that most irritate the wealthy.
Mark Price, Wealth inequality will keep growing unless workers demand better, Guardian, March 6, 2013. Ending economic insecurity will require overcoming the financial powers “benefiting from rising inequality.”
Ronald Brownstein, How Colleges Are Making Income Inequality Worse,National Journal, March 7, 2013. Since 1970 the gap in college completion between rich and poor students has doubled.
Merryn Somerset Webb, A wealth of inequalities bodes ill, Financial Times, March 8, 2013. Want to create more wealth? History offers a clear lesson how: Don’t let wealth concentrate in a precious few pockets.
“Make room for The Rich Don't Always Win on your bookshelf right next to Howard Zinn's A People's History of the United States.”
Barbara Ehrenreich, author, Nickel and Dimed
Check the video on Too Much editor Sam Pizzigati's new book, The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970.
NEW AND NOTABLE
No Magic: How Wealth Translates into Power
David Callahan and Mijin Cha, Stacked Deck: How the Dominance of Politics by the Affluent & Business Undermines Economic Mobility in America. Demos, February 28, 2013.
Ordinary voters, most Americans understand, face a political deck stacked against them. What many Americans don't yet see as clearly: just how economic inequality — the intense concentration of America's wealth in the pockets of a few — actually goes about reinforcing the political inequality Americans see and feel every day. This new report from the New York think tank Demos walks us down the many paths that take us to plutocracy.