Too Much a commentary on excess and inequality

Too Much a commentary on excess and inequality

Email not displaying correctly? Click here for Too Much online | Subscribe | Share


December 2015

This Month

Inequality doesn’t create every problem we face. Inequality just makes every problem we face much harder to solve. The latest case in point: the current four-year drought in California.

This drought — the worst in recorded state history — has average Californians skipping showers and still paying fines for using too much water. Meanwhile, in the state’s poshest neighborhoods, the owners of manses are keeping multiple swimming pools full.

In Los Angeles, investigators have revealed, one exceedingly wealthy “wet prince” went through 11.8 million gallons of water over a year’s time, enough for 90 families, and paid not one penny in penalty. Says his angry neighbor: “Someone has to say, ‘You can’t have five pools — you can have one pool.’”

One pool per plutocrat? We have to start somewhere. Lots more on our inequality and the struggle for much less of it in this month’s Too Much.

 

About Too Much

A publication of the
Institute for Policy Studies

Subscribe to Too Much

Invite a friend to subscribe

Donate! Support the IPS Program on Inequality
and the Common Good

Follow us on Facebook! Follow us on Twitter!

inequality-org
Sign up for content updates from our companion site

Images of Inequality

blimp

The good folks at Andrew Winch Designs have brought onto the luxury scene some of the world’s top super yachts. Now they’re branching out — or rather up. They’ve designed a futuristic blimp that would come with a cargo deck big enough to levitate almost any yacht and an outer ring that could be dropped onto any ocean to create an instant private island. The design company already has FAA approval on a 266-foot prototype and claims the initial airship could be soaring the skies “within a decade of the first order.” The estimated cost of that first order? A mere $330 million.

Share Images of Inequality

 

Greed at a Glance

For just over $1.5 million, the Salamanca Risk Management company will secure the safety of almost any modern mansion by installing bulletproof glass and alarm sensors in all rooms, plus a bomb-proof safe room with its own food and water and “an impregnable” air supply.

For deep pockets looking for fun, not just security, a new trend in U.S. mansion design: a private pool just off the master bedroom suite, separate from the home’s main pool. Also hot: closets with their own fireplaces and seating.

The first exclusive airport lounge in the United States for the super rich is coming to Los Angeles. The special lounge, airport officials estimate, will cost at least $1,500 a pop to access. 

Inequality by the Numbers

December infographic

Share this infographic

 

Stats of the Month

The richest 10 percent of members of Congress, notes a new Center for Responsive Politics study, own nearly 80 percent of total lawmaker wealth. That makes the Congress even more unequal than the United States as a whole. The richest 10 percent of Americans hold 76 percent of the nation’s wealth.

CEOs at major Japanese corporations last year took home a median $1.04 million, just one-tenth of the pay of their U.S. counterparts, concludes a Towers Watson analysis.

From 1979 through 2014, calculates the Economic Policy Institute, paychecks for America’s top 0.1 percent soared 324 percent, after inflation. Paychecks for the nation's bottom 90 percent nudged up, in the same years, 16.7 percent.

A Hong Kong billionaire has just spent a record $48.5 million on a “blue diamond” for his youngest daughter, a seven-year-old.  But he’s not playing favorites. His 13-year-old already has a blue diamond of her own, worth $33 million, and an $8-million brooch.

The typical private jet owner worldwide spends about 1 percent of his — men make up 96.8 percent of private jet owners — total net worth on private aircraft. The average private jet, says a new report co-authored by industry tracker WUNGX Advance, runs $16.4 million.

Thomas Donohue, the top executive at the U.S. Chamber of Commerce, ranks as America’s highest-paid corporate trade group chief. His pay last year: $6.1 million.

 

 

 

The Too Much Interview

Inequality’s Most Pivotal Scorekeeper?

That just may be Martine Durand, the chief statistician of the developed world’s top research agency. How does she view her role and our inequality data future? Too Much asked.

Martine DurandEarlier this fall, in Guadalajara, Mexico, the Paris-based OECD — the official economic research agency of the developed world — brought together social scientists from all over the world for its fifth World Forum on Statistics, Knowledge, and Policy.

One of the world’s top experts on inequality, the Nobel Prize-winning economist Joseph Stiglitz, keynoted the gathering, and he gave the OECD considerable credit for helping the world start to understand “that more equal societies perform better” than their more unequal peers.

That understanding rests, in no small part, on the wealth of data that OECD statisticians have compiled over recent years. The French economist Martine Durand directs the OECD statistical effort, and Too Much editor Sam Pizzigati explored that work with her in an interview at Guadalajara’s World Forum site.

Too Much: This OECD World Forum has been partly about encouraging “people-focused” policy tools for measuring economic activity. Do you think a policy tool can be people-focused if it’s difficult for the public to understand. So, for instance, the Gini coefficient for measuring inequality, would you term that a people-focused measurement tool?

Martine Durand: All measures have to be solid conceptually. But you cannot simply say that because a measure may be difficult to explain or to understand, we need to move to another measure. We have to be serious.

But I agree with you that the Gini shouldn’t be the single measure we use. The Gini puts a lot of emphasis on the middle of the income distribution. But we want to understand what’s up in all parts of the distribution, the top and also the bottom, and for that you have simpler measures than the Gini. We have ratios, for instance, between the income share of people in the top 10 percent and the population at the bottom end.

The Gini coefficient shouldn’t be the only inequality measure we use.

TM: Like the Palma ratio, the measure that compares the income share of the top 10 percent to the share of the bottom 40 percent?

Durand: Yes, the Palma ratio can be easier to understand. But I think that each of the measures we have has a particular focus, one for the bottom of the distribution, another one for the top, the Gini for the middle. The panoply of these measures, well explained, will tell you the full story about what’s happening in income distribution, and that’s what probably should be our “people focus.”

Read the rest of the full Too Much interview . . .

 

Quotable

“We can understand poverty only by understanding affluence.”
Max Rashbrooke, The Spinoff, November 9, 2015

“'What’s your position on equality?' is not a question CEOs are accustomed to getting. How many companies in the world have equality as a core value?"
Marc Benioff, Salesforce CEO, Business Insider, November 10, 2015

“I’ve spent most of my working life interviewing and observing CEOs and I can assure you the average CEO is pretty average.”
Michael Pascoe, Why bank CEO wages are simply obscene, Yahoo Finance, November 12, 2015

“What is needed in society is social justice and fairness across the board and one way to ensure that peace is maintained and continues to prevail is to ensure that there is an equitable distribution of wealth.”
Boniface Chembe, executive director, Southern African Centre for the Constructive Resolution of Disputes, Sunday Post, Zambia, November 14, 2015

“It shouldn’t take a careful empirical study to convince you that CEOs don’t get where they are on the basis of ability alone. If that were true, the C-suite would not be so dominated by white men.”
Walter Frick, Are Successful CEOs Just Lucky? Harvard Business Review, November 16, 2015

“The billionaire class cannot have it all. Our government belongs to all of us, and not just the one percent.”
Senator Bernie Sanders, Democratic Socialism: Let Us Finish What FDR and MLK Started, November 19, 2015


Petulant Plutocrat of the Month

Charles KochPity the poor plutocrat who can’t get America to bend to his bidding. Billionaire Charles Koch last month staged what may be this year’s highest-profile pity party yet. He and his billionaire brother David, Charles told MSNBC, have been “largely failures” at influencing the political process. By and large, he groused days later to USA Today, the candidates the Koch brothers support don’t “follow through.” On top of all that, Charles adds, our national political discourse lacks “civility.” Maybe Koch should look in the mirror. A news analysis has just linked Koch-backed groups to a “grossly misleading” newly released TV ad that attacks the new federal Consumer Financial Protection Bureau as a savage Stalinist assault on average people who need car loans.

 

Plutocrats at Play

How long does a luxury auction house need to move a masterpiece for $170.4 million? Selling Modigliani’s nearly century-old Nu Couché took all of nine minutes early last month at Christie’s in New York. Six bidders competed. The sale price fell just $9 million short of the all-time art auction record set for a Picasso last May.

Antidotes to Inequality

To Help Retirees, End CEO Pay Subsidies

The average American retiree on Social Security collected $15,943 in 2014. The average big-time CEO in the United States grabbed $16.3 million. Who needs a cost-of-living raise more?

Not Social Security recipients apparently. Federal officials have announced that the nation’s 65 million Social Security recipients will be receiving zilch in the way of a  cost-of-living adjustment next year.

But 19 senators, led by Elizabeth Warren of Massachusetts, have a better idea. They’re backing new legislation that would lift Social Security benefits an average $580 in 2016, a 3.9 percent raise.

The subsidy for CEO ‘performance pay’ costs taxpayers $10 billion a year.

That 3.9 percent just happens to equal the average raise major U.S. corporate CEOs received last year. Those CEOs don’t need another one. They also certainly don’t need the taxpayer subsidy that their extravagantly excessive pay currently enjoys.

Corporations can today deduct off their taxes whatever they pay in executive pay, so long as they define that pay as “performance-based.”

This “performance pay” loophole costs the federal government about $10 billion a year. Senator Warren’s SAVE Benefits Act would eliminate this giveaway and use the proceeds to fund the 3.9 percent increase in Social Security benefits her bill proposes.

Social Security recipients nationwide will be receiving this month their official notice about the planned zero cost-of-living adjustment in 2016. Warren and advocacy groups around the nation will be taking that opportunity to publicize the SAVE Benefits Act.

Closing the performance-pay loophole could fund a benefit hike for 65 million retirees

Lawmakers, says Warren, simply need to stop “subsidizing billions of dollars’ worth of bonuses for highly paid CEOs.”

All those billions themselves, meanwhile, are coming under increasing scrutiny from some unexpected quarters. The idea of a maximum wage, the London-based business magazine World Finance noted last month,  “deserves maximum attention.”

That attention certainly seems to be building in the United States. Even Republican lawmakers are contemplating caps on the income society’s most financially fortunate can be making.

One of those lawmakers, South Carolina conservative Mick Mulvaney, raised eyebrows during this fall’s debate over reauthorizing U.S. Export-Import Bank with a proposal to deny bank assistance to any firms that pay their CEOs over 100 times the median salary for American workers.

Even some Republicans are now talking about capping executive compensation.

That CEO pay lid would have kicked in last year at $4.17 million — and would have denied Ex-Im Bank subsidies last year to General Electric (CEO pay last year: $18.9 million) and Boeing ($28.9 million).

Mulvaney called his amendment an attempt to even the playing field for small business. House leaders prevented a vote on it, but one corporate analysis has dubbed his move “a preview of how executive compensation may be used as a leverage point in the future.”

Another pay cap bill did come up for a vote last month — and pass. In a unanimous voice vote, the House voted to cap CEO pay at Fannie Mae and Freddie Mac, the giant federally sponsored mortgage financing companies, to $600,000. The CEOs had each been set to receive $3 million over that level.

Senate legislation to cap pay at Fannie and Freddie, co-sponsored by Massachusetts senator Elizabeth Warren, passed unanimously in October. The White House appears ready to okay the cap, too.

Hospital workers in California want to see a CEO pay cap
on next November’s ballot.

“It is entirely legitimate for the executives at those institutions to be subject to compensation limits,” notes the White House’s Josh Earnest.

But why stop at just two institutions? Hospital workers in California’s tri-city area — covering Carlsbad, Oceanside, and Vista — want to go further. They’re now campaigning to put a cap on local hospital CEO pay on the 2016 ballot. The cap would more than halve the current CEO pay.

In brief: Who says the super rich have a right to dominate the electoral process? Voters in Seattle have approved a new campaign finance plan that gives every registered voter $100 in “democracy vouchers” to spend on candidates for city office . . .

Our struggle against inequality, economist Dean Baker contends in a spirited new analysis, needs to go way beyond taxing the rich. We need to focus on changing the market rules that enable the rich to amass their fortunes in the first place. As Baker puts it: “We need to stop the wealthy from rigging the game.”

 

Take Action
on Inequality

Econ4 — the group working to build an alternative to economic orthodoxy in America’s schools and colleges — has just announced its first “video remix context.” To enter, just download the video clips Econ4 provides, then remix them with your own video, voice-over, and text.

The theme for the contest: greed. The funniest, most creative, and most inspiring three-minute video remixes submitted by February 1 will all win $500 prizes.

Check Econ4 on the Web for entry details — and info on the Econ4 drive for an economics that nurtures fairness in the distribution of private and social wealth.

Sign the petition to support Elizabeth Warren’s new proposal to close the CEO “performance pay” tax loophole — and use the proceeds from that fix to fund a special 3.9 percent increase in 2016 benefits for Social Security recipients and veterans.

Peasants
with Pitchforks

Hundreds of Chicagoland activists blocked the entrance to the Chicago Board of Trade last month to protest a state budget stalemate that’s threatening basic social services for millions of Illinois residents.

That threat would disappear, the activists note, if the state imposed a tiny tax on all financial transactions on the Chicago Mercantile Exchange and the Chicago Board Options Exchange, two of the world’s largest financial markets.

Police arrested 41 of the demonstrators at the Board of Trade building while their fellow activists kept the heat on chanting “No cuts! Tax the rich!” and “What is America going to be? Corporate greed or democracy?”

Reports

A quick look at major new inequality-related research efforts

All That Glitters Is Not Gold: An Analysis
of U.S. Public Pension Investments in Hedge Funds

A joint publication of the AFT, Roosevelt Institute, Refund America Project, and the Haas Institute, November 2015

All That Glitters

Once upon a time, pension funds for public employees put their dollars in safe and reliable investments. But then political leaders began cutting the tax bills of their richest constituents — and cutting their contributions to pension funds as the tax cuts shriveled their revenues.

Pension funds, in response, began searching for investments with higher returns. Hedge fund managers claimed they could deliver those returns. Pension fund dollars soon cascaded into hedge fund manager hands.

The result? This new study examines 88 fiscal years of public pension fund performance to tell the sordid story.

Public pension fund investments in hedge funds, the study finds, have helped make hedge fund managers exceedingly rich. They’ve collected $1.7 billion in fees. In effect, All That Glitters notes, the 11 major pension funds studied “paid 57 cents in fees to hedge fund managers for every dollar of net return to the pension fund.”

And those hedge fund returns, to make matters worse, trailed the returns from other more traditional investments. In all, this new report suggests, investing in hedge funds cost these pension funds an amazing $8 billion!  

Pay Ratios reportPay Ratios: Just Do It
Paul Marsland, High Pay Centre, November 2015

In 2017, the Securities and Exchange Commission ruled this past summer, U.S. firms will have to start compiling the ratio between their CEO and typical worker pay. In India, mandatory disclosure of corporate pay ratios has already begun.

Will the UK be the next nation to take the pay-ratio-disclosure plunge? The London-based High Pay Centre certainly hopes so, and the group has just published this guide on how to do it.

Author Paul Marsland tackles all the technical issues that ratio disclosure inevitably raises, everything from defining pay to taking workers in subsidiaries into account. But he also tackles the more philosophical objections that corporate leaders have raised to mandated disclosure.

Corporate leaders, he argues, can’t have it both ways. They justify pay gaps as “an incentive to rise up the career ladder and raise performance levels.” But if gaps “are to be justified by reference to their motivational effect,” the gaps “must be known in order to draw any conclusions.”

Also released last month: New research from American University political scientist Matthew Wright shows that rising economic inequality in the United States has brought with it a widening gap in social capital between affluent and poorer Americans . . .

Fifty Shades of Tax Dodging, a new study from the European non-governmental organizations that make up the Eurodad network, explores how top corporate executives are continuing to play governments off one another in a race to the low-tax bottom . . .

In Understanding Short-Termism: Questions and Consequences, the Roosevelt Institute’s J. W. Mason examines the vast sums corporations are shelling out to shareholders, through dividends and share buybacks. In the 1970s, firms paid out 50 percent of their profits to shareholders — and internally reinvested the rest. The share today: 90 percent!

 

New Wisdom
on Wealth

Glenn Reynolds, To reduce inequality, abolish Ivy League, USA Today, November 3, 2015. Or at least end the massive taxpayer subsidies for it.

Victor Fleischer, The Executive Paycheck Myth, New York Times, November 5, 2015. Performance pay as urban legend.

David Callahan, At Ford, the Revolution That Wasn’t, Inside Philanthropy, November 9, 2015. Inequality and the nation’s premiere foundation.

Rich Yeselson, The Decline of Labor, the Increase of Inequality, TPM, November 10, 2015. The key dynamic behind our income and wealth maldistribution.

Philip Kotler, What the Presidential Candidates Are Failing to Address About CEO Pay, Fortune, November 11, 2015. The excess is rotting our economy.

Ariana Eunjung Cha, Inequality in U.S. organ transplants, Washington Post, November 12, 2015. Researchers detail how the wealthy game the system.

Martin Whittaker, What Americans Think About Income Inequality, Fast Company, November 2015. New polling finds widespread worry over CEO pay.

Jay Sullivan, Created for inequality, Chronicle, November 16, 2015. How campus housing policies entrench privilege.

Sarah Anderson and Sam Pizzigati, Cap the Gap: Wealth concentration will increase until governments stop feeding it, ActionAid, November 18, 2015. The case for a pay-ratio politics.

Pam Martens and Russ Martens, John Reed: How to Be Dead Wrong as a CEO and Still Get Super Rich, Wall Street on Parade, November 23, 2015.

Nicholas Confessore, A Wealthy Governor and His Friends Are Remaking Illinois, New York Times, November 29, 2015. How wealth becomes power.

Retorts

Handy rejoinders to the apologists for our top-heavy status quo

Free Tuition for Donald Trump’s Kids?

The claim: Making benefits — like free college tuition — available to everyone will end up wasting scarce tax dollars on rich households that don’t in any way need them.

Should average taxpayers be paying to send Donald Trump’s children to college? Hillary Clinton doesn’t think so. In last month’s Democratic presidential primary debate, she called the prospect of Trump’s kids getting free tuition the reason she opposes the Bernie Sanders proposal for tuition-free public colleges.  

The non-rich can end up paying a heavy price when
we means-test everything.

But other analysts see this play of the “Trump card” as a distortion of the real policy issues at stake — and an attack on the “universal benefits” principle so essential to building an egalitarian society.

For starters, these analysts point out, the kids of the really rich don’t go to public colleges. They go to elite private schools. Free tuition at public colleges would hold little interest for them.

The perhaps more important point: Making sure that no kid from an affluent family ever gets tuition benefits at a public college would require an elaborate “means-testing” bureaucracy, with eligibility rules, lots of paperwork, appeals processes, and the like.

The more rigorous the means testing, the greater the burden on applicants. In effect, as one advocate of universal benefits puts it, “denying government benefits to rich people just makes it that much harder for less than rich people to qualify.”

So must we choose between giving the affluent a free ride or burdening less-than-affluent families? No, analysts note, we have an alternative. To prevent any potential for a “free ride,” we simply tax the rich.  

In an egalitarian society, basic government programs aim to benefit everyone, and everyone shares the burden for supporting those universal benefits. Truly sharing that burden requires progressive taxation, a higher tax rate on the rich than everyone else. With progressively graduated tax rates, everyone feels a comparable pinch.

So, yes, let Donald Trump’s kids go to a public university tax-free, if they so choose. But make sure that Trump pays his full and fair tax share.

 

What to Watch

Turn It Right-Side Up, a new campaign from the Corporation for Enterprise Development, features a sprightly animated video that explores how Congress is spending billions to make inequality worse — and what we can do about it.

Now featured on
Inequality.org

Sheila Kennedy on the not-so-great Gatsby Curve

Bob Lord on why the top 1 percent might want to rethink all those nice things they’ve been saying about equality of opportunity

Too Much editor Sam Pizzigati on why inequality may be exacting a steeper price than we thought

Sign up for updates
on Inequality.org postings

 

 

Books

Inequality and Social Security’s Future

Social Security WorksSocial Security Works!
Nancy Altman and Eric Kingson
The New Press, 290 pp.

The message that the title of this important new book carries will come as no surprise to most Americans. Indeed, Social Security today enjoys phenomenal support all across the political spectrum: 94 percent among Democrats, 91 among Independents, even 81 percent among rank-and-file Republicans.

But Social Security “can work even better,” veteran analysts Nancy Altman and Eric Kingson argue in these compelling pages.

Expanding Social Security, the pair believe, would go a long way toward solving the insecurity facing today’s retirees, the retirement income crisis facing working Americans, and “the unacceptable inequality threatening the American dream, ours, our children’s, and our grandchildren’s.”

Expanding Social Security could be the key to reversing growing economic inequality.

Social Security Works deftly picks apart the myths that drive “the three-decade-long, billionaire-funded campaign to dismantle Social Security.” These efforts to cut Social Security, Altman and Kingson note, reflect “the larger attacks” on social spending, government, and unions” that have fed “the nation’s increased income and wealth inequality.”

Expanding Social Security benefits just may be the best single step we could take to start reversing that growing inequality. Altman and Kingson show how. To underwrite Social Security’s expansion, they call for — among other steps — an end to the cap on the income subject to Social Security tax and a 10 percent tax hike on annual income over $1 million.

Steps like these, notes one commentary on Social Security Works, would over 15 years up Social Security benefits by 15 percent for new retirees and raise taxes on only the top 1.5 percent of wage-earner income.

For more info on the drive to expand Social Security, check the Social Security Works campaign’s online presence.

 

 

Senator Bernie Sanders is trying to make the 2016 election a referendum on plutocracy. In 1912, three candidates campaigned against plutocracy in the general election, and they shared over three-quarters of the final vote!

You’ll find that story — and much more — in The Rich Don’t Always Win, Too Much editor Sam Pizzigati’s compelling history of the triumph over America’s initial plutocracy. Try the first chapter free online.

RDAW cover

 


About Too Much

ISP logoToo Much, an Institute for Policy Studies monthly publication | Institute for Policy Studies, 1112 16th Street NW, Suite 600, Washington, DC 20036 | 202-234-9382

Editor: Sam Pizzigati | editor@toomuchonline.org | Archive | Unsubscribe

 

 

 

Like Too Much?
Email this issue
to a friend