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Too Much

THIS WEEK

Rand Paul, our newly elected junior senator from Kentucky, had some astounding thoughts to share after his ballot-box victory last Tuesday. Raising taxes on Americans who make over $250,000 a year, Paul contended in a CNN interview, would bring on “a second American depression.”

“We’re all interconnected,” the senator-elect went on to explain. “We all either work for rich people or we sell stuff to rich people.”

In effect, Paul argued, by “punishing rich people,” we’re punishing ourselves. In fact, as a landmark new report from the United Nations reminded us last week, any society that sits on its hands as the rich get richer is stunting our basic human freedom to shape our “own destinies.”

Politicos like Kentucky's Rand Paul aren’t, of course, going to tell you anything about this latest UN work on our global well-being. We will. Read on!

 

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GREED AT A GLANCE

The most disheartening election result last Tuesday? That may have come in Washington State, where voters soundly rejected a ballot initiative that would have placed a 9 percent tax on income over $1 million. The measure, Initiative 1098, seemed to have everything going for it, including a respected spokesman — Bill Gates Sr., the public-spirited attorney whose son co-founded Microsoft — and enough funding to match the opposition. But that opposition carried the day, mainly by painting the tax-the-rich measure as the first step toward an income tax on Washington’s middle class. The state currently has no tax on income. The vote against Initiative 1098, concludes Wall Street Journal analyst Robert Frank, amounted to “a vote against taxing the middle class” and “not a vote supporting the wealthy.” Ample evidence for that conclusion came from a major pre-election poll: 63 percent of state residents called our rising rich-poor gap “a bad thing.”  

The Washington State tax vote may also reflect, says one veteran observer of the American scene, a generation-long cascade of anti-tax political demagoguery. That observer, David Stockman, speaks from first-hand experience. In 1981, as Ronald Reagan’s first budget director, Stockman helped push to passage the “largest tax cut in American history.” Now he's singing a different tune. We’ve “demonized taxes,” Stockman told CBS News late last month, and “created almost the idea they're a metaphysical evil.” The former Reaganite wants to see America levy a one-time 15 percent surtax on the wealth of the wealthy. The nation’s richest 5 percent, he notes, have seen their net worth soar from $8 trillion 25 years ago to $40 trillion today. Says Stockman: “The top 5 percent have gained more wealth than the whole human race had created prior to 1980.”

Mark DaytonIn last Tuesday’s election, only one gubernatorial candidate seems to have made taxing that enormous wealth at the top a campaign “centerpiece.” That candidate, Minnesota’s Mark Dayton, struck political junkies early on “the most fragile” hopeful on the state Democratic ticket. But Dayton last week scored what appears to be a narrow victory, and election-watchers credit that surprise success to his campaign’s clear and consistent concentration on concentrated wealth. As one statewide media outlet headlined a news report on the campaign’s final weekend: “For Dayton's campaign, a simple message: tax the rich.” Minnesota’s richest 1 percent, a state revenue department report noted last year, will face — under current law — a 8.8 percent effective state and local tax rate in 2011. Middle-income Minnesotans pay those taxes at an effective 12 percent rate . . .

California voters had no strong tax-the-rich initiative — or candidate — on the ballot. But state voters did have an opportunity to vote for a billionaire, former eBay CEO Meg Whitman. They respectfully declined that invitation. After spending over $140 million out of pocket — “by far the largest amount any person in the United States has ever spent trying to get elected to anything,” notes Wired magazine — Whitman snagged only 41 percent of the statewide vote. A host of other deep-pocket candidates also fell short in this year’s elections. Of the 58 candidates nationwide who spent at least $500,000 of their own money running for office in 2010, 30 didn’t even make it onto last Tuesday’s ballot . . .

Billionaires like Meg Whitman, suggests new research from a team of Swiss sociologists, have no logical reason — beyond vanity — to seek the power elective office offers. Concludes the Basel University team, after a rigorous analysis of Swiss political dynamics: “Having capital means having power.” The ultra wealthy exercise that power “through networks and in a very targeted way that benefits the rich.” Switzerland's richest 3 percent today hold as much wealth as the remaining 97 percent, the new Basel University research details, and Switzerland currently boasts the world’s third highest billionaire concentration.

 

 

 

Quote of the Week

“Somehow, we have got to convince more of the affluent voters that the ever-widening gap between the rich and poor is not in their interest, no matter how uncertain the future looks. It rips communities apart. It leads to every kind of social ill and unrest, from increased crime to depression to teen pregnancy. It’s ruinous to democracy and it’s even destructive to capitalism. Society will absorb only so much unfairness, only so much disparity between haves and have-nots.”
Lynn Parramore, media fellow, Roosevelt Institute, Green Tide, November 4, 2010

 

Stat of the Week

One sign of our unequal global times: The nation with the world's highest current per capita income, Liechtenstein, has three times more average income than the richest country in 1970, according to new United Nations data. But today's poorest nation, Zimbabwe, has 25 percent less income than the world's poorest nation 40 years ago.

 

 

 

 

inequality by the numbers

Inequality Human Development Index

 

 

IN FOCUS

At Our Financial Summit, No Need to Fret

Newly victorious lawmakers have wasted no time rushing to show they really do care — about keeping Wall Streeters lavishly rewarded.

All in all, not a bad week for Wall Street. On last Tuesday, voters gave friends of high finance a lock grip over the U.S. House of Representatives. On Thursday, a top Wall Street pay analyst announced that overall annual financial industry take-home, despite America's continuing hard times, is once again rising.

So why so little exuberance last week in the canyons of Wall Street? Apparently, not all power suits this year are sharing in that rising pay wave.

Hedge fund managers, private equity wheeler-dealers, and bankers who handle the accounts of rich families are looking at pay boosts in 2010 that run between 5 and 15 percent over last year. But bank traders who spend their days betting with their bank’s own money are looking at earnings down over 15 percent.

At Wall Street powerhouse Goldman Sachs, trading dips have helped drop the bank’s total compensation 26 percent so far this year.

And that has Spencer Bachus worried. Bachus, a Republican member of Congress from Alabama, ran unopposed for re-election last week. He’ll likely now become the next chair of the House Finance Committee — and he’s already started flexing his chairman-to-be muscles.

On Wednesday, Bachus sent a missive to the Financial Stability Oversight Council, the panel with final say over the rules that will implement the financial reform Congress passed earlier this year. The letter told the Council to back off any tough limits on how much speculative trading investment banks can engage in.

Such limits, Bachus charged, could “hurt shareholders of the banks” as these banks find themselves forced “to divest from profitable lines of businesses.”

Those bank shareholders whose future so worries Bachus include Wall Street’s mightiest movers and shakers, execs like Lloyd Blankfein of Goldman Sachs. CEO Blankfein currently holds Goldman shares worth $396.9 million.

Last year, Blankfein pocketed a mere $9 million in bonus, just a fraction of the $68.5 million he took home in 2007. Company-wide, the average pay for the 35,400 employees of Goldman Sachs has dropped to $387,655 for the first nine months of 2010, down from $527,192 for the first nine months of 2009.

Numbers this huge — at a time of national economic crisis — tend to strike most Americans, if not Rep. Bachus, as just another sorry sign that our economy has gone completely crazy. Our political system, too: With millions of Americans hurting, after all, what's a powerful member of Congress doing throwing his weight around trying to protect America’s most privileged?

Politicos like Bachus have an answer. The rich rewards at America’s economic summit, they argue, supply the grease that keeps our economy going. Any step that puts these rewards in jeopardy, the Bachus letter last week to the Financial Stability Oversight Council warned, risks a “mass exodus” of U.S. jobs overseas.

Bachus and his newly victorious GOP friends in Congress have plenty of incentives to see things that way. Wall Streeters have spent the last year shifting their campaign contributions. In 2008, 75 percent of financial industry campaign cash went to Democrats. This year, 56 percent has gone to Republicans.

These incentives conveniently cloud the actual historical record. America's economy has functioned just fine in the past — without any Wall Street windfalls.

The 20th century's middle decades, for instance, saw America's greatest ever years of middle class prosperity. Wall Streeters in those years, even the most prominent of them, took home relatively modest earnings.

Last month, in a New Yorker analysis, author Malcolm Gladwell offered a fascinating glimpse at just how modest. In the mid 1950s, Gladwell relates, Goldman Sachs chief exec Sidney Weinberg spent two years coordinating the stock offering that took the Ford Motor Company public.

By its 1956 completion, Gladwell notes, that huge stock offering would rate as “far and away the biggest initial public offering in history.” For his two years labor on that deal, Goldman Sachs chief Weinberg collected a $250,000 fee, the equivalent of just over $2 million in today’s dollars.

Some modern perspective for that figure: Weinberg's contemporary counterpart at Goldman Sachs, Lloyd Blankfein, took home $122.8 million in the two years before Wall Street crashed the U.S. economy in 2008.

Pay for Blankfein and other high-finance CEOs, Wall Street compensation expert Alan Johnson forecast last week, appears headed back to those pre-crash levels.

“I did not expect compensation would come back the way it has,” Johnson told the New York Times. “I underestimated the industry’s resiliency.”

And political might.


 

 

 

New Wisdom
on Wealth

David Moberg, Why Democrats Got Shellacked, In These Times, November 3, 2010. Most voters “want Democrats to live up to their main and most effective historic claim on voters’ support — to stand up for the interests of working people against big business and the rich.”

Embarrassment of Riches: Picturing Global Wealth, a Minneapolis Institute of Arts exhibit now open through January 2. Nine artists focus “on the exploits of the rich and spoiled folks” who “occupy the upper echelon of society.” Images from the show also appear onlinw here.

Johann Hari, America is now officially for sale, Independent, November 5, 2010. A closer look at our politicos who, in the name of the people, “pillage Middle America and redistribute its wealth to the rich.”

Rachel Johnson and Jim Nunns, A New Tax Bracket for Millionaires? Tax Policy Center, November 5, 2010. Thoughts on the ins and outs of structuring a new higher tax level.

Sarah Byrnes, Can Small Group Organizing Save the Country? Yes, November 5, 2010. Encouraging words on building “a new economy based on real wealth that serves people” from a Common Security Club network organizer.

Nicholas Kristof, Our Banana Republic, New York Times, November 7, 2010. Asks this sober appraisal on our unequal social order: “Is our economic priority the jobless, or is it zillionaires?”

 

 

In Review

After 20 Years, a New Inequality Emphasis

United Nations Development Program, Human Development Report 2010: The Real Wealth of Nations, November 2010.

Twenty years ago, in 1990, the United Nations began publishing an annual Human Development Report. The economists behind this new initiative — India’s Nobel Prize-winning Amaryta Sen among them — clearly saw themselves as scholarly subversives. They were openly challenging economic orthodoxy and that orthodoxy’s ultimate yardstick and holy grail, the “Gross National Product.”

To register social progress, economic orthodoxy held back then, nations needed to simply hike their “GNP,” their sum total of economic goods and services.  

But real human development, Sen and his colleagues countered, involves much more than economic growth. Real progress, their first Human Development Report in 1990 emphasized, encompasses “the freedom to be healthy, to be educated, and to enjoy a decent standard of living.”

GNP cannot measure this real human development. The inaugural Human Development Report offered a statistical yardstick that could: a Human Development Index, a measure that tracked not just economic growth, but health and education — as expressed in life expectancy and literacy — as well.  

The UN has been releasing an annual “Human Development Index” ever since, grading almost every nation in the world by a single number that reflects people’s capacity to live life to the fullest. And this Index, the HDI, has had an impact.

“It is now universally accepted that a country's success or an individual's well-being cannot be evaluated by money alone,” as UN Development Program director Helen Clark writes in her intro to the UN Human Development Report’s just-published 20th anniversary edition. “We must also gauge whether people can lead long and healthy lives, whether they have the opportunity to be educated.”

UN HDRAcing that gauging, the authors of the 2010 Human Development Report go on to argue, now requires a correcting of the inadequacies that marred the original HDI measure. The most notable of these: “a reliance on national averages” that conceal “skewed distribution.”

Over the past 20 years, the new Human Development Report contends, the UN development index hasn’t taken the reality of unequal distribution into account. The new 2010 Human Development Report does — by adding a new “Inequality-adjusted Human Development Index.”

In nations that distribute health, education, and income in a dramatically unequal fashion, this new index recognizes, the national “average” for health, education, and income will tell us precious little about how a nation’s “average” person experiences health, education, and income.

The 2010 UN Human Development Report applies the new inequality adjustment to 139 nations — and generates some striking results. Some nations that rank relatively high on the standard Human Development Index drop significantly when the focus shifts from national averages to the average person.

The United States, for instance, ranks fourth on the traditional UN Human Development Index, trailing only Norway, Australia, and New Zealand. On the new inequality-adjusted index, the United States falls to 12th.

Why, after 20 years, is the United Nations finally getting around to recognizing the impact of inequality on the lives average people lead? One reason: We have more inequality today than we had back in 1990, the year the UN Human Development Index first appeared.

For every one nation where levels of inequality have dropped over recent decades, the 2010 Human Development Report notes, these levels have “worsened in more than two.”

A second reason for acknowledging inequality in the new UN data: a growing body of global research “that shows how reducing inequality — both in the population as a whole and across gender and other groups — can improve overall outcomes in health and education, as well as economic growth.”

Our globe, in short, “has much to gain from concentrating its efforts on equity-improving reforms.” And we have, as the new UN report notes, a lot of inequity that needs improving.

“Nearly 7 billion people now inhabit the earth,” the report observes. “Some live in extreme poverty — others in gracious luxury.”

One British daily, the Guardian, is already predicting that the new Human Development Report's emphasis on distribution “could again revolutionize our way of assessing progress” — because nations “do care” about where the UN Human Development Index has them ranked.

Countries that manage to reduce inequality in the future, the Guardian notes, will see themselves move up on the new UN index rankings.

As well these countries should.

“Inequitable development,” as the new 2010 Human Development Report sums up, “is not human development.”

 

 

 

Inequality Links

Working Group
on Extreme Inequality

Common
Security Clubs

United for a
Fair Economy

The Equality Trust

One Society

Wealth for the
Common Good

New Economy
Working Group

Class Action

Tax Justice
Network

USAgainstGreed

 

About Too Much

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