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||April 2, 2012|
Spring — at least on the inequality front — brings data. Lots of it. Early every spring, major media outlets start releasing annual reports on America’s biggest income earners, and USA Today has just helped kick off this year's data surge.
Our most typical big-time CEOs, says the paper, saw their take-homes rise 12 percent to $7.8 million in 2011. CEO pay for the year actually may have risen quite a bit more. USA Today's numbers only cover early corporate pay report filers. They don't include paychecks like the $53.2 million that went to J.C. Penney CEO Ron Johnson. That paycheck only became public last Wednesday.
Johnson took home in 2011 over 3,000 times the annual pay of a starting J.C. Penney sales clerk. But, we learned last week, he has cause to feel underpaid. Last year’s top-earning hedge fund manager, a financial trade journal reported Thursday, pulled in $3.9 billion last year, 73 times more than Johnson's total.
We’ll have much more on hedge fund managers, CEOs, and this spring’s data surge in next week’s Too Much. What do we have this week? News about a wonderful new book that’s going to give Ron Johnson and his hedge fund betters the stuff of nightmares — and the rest of us the stuff of hope.
|GREED AT A GLANCE|
Lawmakers in the U.S. House of Representatives worked up quite a sweat last week — protecting America’s richest. They voted Thursday, by an overwhelming 346-78 margin, to reject a Congressional Progressive Caucus budget proposal that would have put in place a 0.5 percent wealth tax on assets over $10 million and upped the tax rate on all income over $1 billion to 49 percent. That rate currently runs as low as 15 percent for capital gains. The same day, by a 221-198 vote, House lawmakers lustily endorsed a GOP leadership budget that gives taxpayers making over $1 million an average $265,000 in new tax breaks, above and beyond the $129,000 they’ll each receive from extending the Bush tax cuts of 2001 and 2003, a move the budget also advances. Observers are expecting House and Senate budget wrangling to last most of the rest of the year . . .
Only one outcome seems almost certain after next month’s French presidential election: The rich will pay more in taxes. Five of the six candidates in the race are now calling for stiffer taxes on France’s most wealthy, including the race’s two front-runners. The stiffest of the five tax hike proposals comes from the Left Front’s Jean-Luc Melenchon. He’s urging a 100 percent tax — a “maximum wage” — on income over 360,000 euros, the equivalent of about $480,000. Income over 500,000 euros in France currently faces a 41 percent regular top rate, plus a 4 percent surtax. Melenchon‘s poll numbers have jumped sharply since early February, about doubling, and some analysts now see him finishing third . . .
Penthouses and plutocrats have gone together ever since luxurious — and cavernous — upper-floor apartments made their New York tower debut back in the staggeringly unequal 1920s. But penthouses have never soothed billionaire souls more than they do now. Last spring, a three-floor penthouse in London sold for £136.4 million, or $218 million. The buyer, Ukrainian financier Rinat Akhmetov, then spent another £60 million decorating. Why so much? The finest penthouse spaces typically sell as totally empty shells. An executive with a company that specializes in selling these shells, Harry Handelsman of the Manhattan Loft Corporation, last week explained why. Noted the luxury developer: “The people I deal with do not like being dictated to.“
Quote of the Week
“If belief and participation in democracy are sustained by people’s conviction that democracy produces good economic outcomes, then the growing concentration of wealth and income in the United States is a long-term threat to everything we profess to stand for.”
|PETULANT PLUTOCRAT OF THE WEEK|
Antonio Claudio Resende, a founder of Latin America's top rental car company, started building his dream getaway six years ago on Cavala Island, a bit of tropical paradise off Brazil’s east coast. But his getaway, a huge manse dug deep into tropical forest, happens to violate all sorts of Brazilian environmental laws. In 2007, prosecutors charged Resende with environmental crime, and Brazilian authorities have since ordered Resende to tear his mansion down. He’s defying the order. The rich like Resende, charges Brazilian environmental watchdog Eduardo Godoy, spend fortunes on lawyers to keep cases in endless loops of appeal while they despoil sensitive tropical preserves and privatize beaches with armed security guards. Adds Godoy: “They think they are the only ones who deserve to enjoy a piece of paradise because they are rich.”
Stat of the Week
The snow may be slowing in Aspen, the top spot in North America for super-rich skiers. But property values are soaring. The Colorado mountain town saw 13 properties sell for over $10 million in 2011, up from just eight in 2010.
|inequality by the numbers|
Another Homerun for the Walloping Wealthy
Behind last week’s record-smashing $2 billion sale of the Los Angeles Dodgers, a global economy that’s enriching only the world’s super rich
The Los Angeles Dodgers didn’t win all that many baseball games in the eight years owner Frank McCourt signed the team's player paychecks. But McCourt has now won plenty. The mega-rich developer last week emerged as the biggest financial winner in the history of professional sports.
On Tuesday, in a special bankruptcy auction, a group of deep-pocketed bidders agreed to pay $2.15 billion for the Dodger franchise, an all-time record for a U.S. pro sports team, nearly double the previous high-water mark, the $1.1 billion football’s Miami Dolphins fetched in 2009.
Out of that $2.15 billion, McCourt will have to pay off the $706 million in debt that his widely derided incompetence and greed saddled on the Dodgers. After that debt settlement, analysts estimate, he'll walk away with a crisp $1 billion profit.
The Dodgers rate as one of the world’s most iconic pro sports franchise, and last week’s sale spurred an endless and predictable stream of commentary about Dodger history and the economics of contemporary sports.
But last week’s sale amounts to much more than a sports story. McCourt’s windfall helps define and dramatize just how incredibly unequal our world has become — and how that inequality is turning our 99 percent into squeezed spectators of games only the super rich can afford to play.
What makes these games so expensive? Three powerful trends loom large behind last week’s record Dodger sale.
The first: The ranks of the world’s super rich have expanded enormously since the Great Recession first hit.
The latest evidence for this enormous increase comes from the sixth annual Wealth Report from Citi Private Bank and the Knight Frank consultant firm. This latest global wealth tally, released last Wednesday, counts “63,000 people worldwide” worth at least $100 million.
The total global “centa-millionaire” population, Knight Frank and Citi calculate, has soared 29 percent since 2006. All combined, the world’s centa-millionaires hold an astounding $39.9 trillion in assets, an average of $620 million each.
The second key global wealth trend: The world’s rich don’t know what to do with all their money. In “normal” times, the super rich park a chunk of their hefty change in stock and commodity markets and another significant chunk in bonds that guarantee smaller but still healthy returns.
But today’s super rich see stocks as sucker bets, given all the world’s ongoing economic instability, and commodities have been alarmingly “volatile.” Yields on safe and secure government bonds, meanwhile, have sunk to record lows.
And things could get even dicier for the awesomely affluent. Global deep pockets are paying close attention to the Occupy movement, and they fear, observes Citi Private Bank senior political analyst Tina Fordham, that “dissatisfaction with income inequality” may “gain momentum.” In response, the super rich worry, governments will likely ratchet up tax rates on high incomes.
“It’s going to be a tougher playing field for the rich,” laments Citi Private Bank chief economist Willem Buiter.
In sum, the super rich face a world where fewer and fewer safe yet lucrative investments beckon. To “preserve wealth” in this world, Citi’s Luigi Pigorini noted last week, the ultra wealthy are plowing ever larger stashes of cash into property that sits in nations that respect “the rule of law and stability.”
“Those markets considered ‘safe-haven’ locations continue to attract private investors looking for both prime residential and commercial property,” explains Wealth Report editor Andrew Shirley. “Political and economic uncertainty across the world is only helping to exacerbate the trend.”
London has been this trend’s single biggest beneficiary. The super rich are buying up office and apartment buildings in the city’s ritziest neighborhoods at a frenetic pace. Other cities are also feasting off the super-rich investing spree, most notably Miami. The value of “prime property” in Miami — the penthouses and manses the super rich covet — leaped 19 percent in 2011.
The third trend driving the global uber rich: “Preservation of wealth” investment strategies can get awfully boring. No one with a heart that thumps gets kicks spending multi millions on office buildings in London.
In this climate, many of the world’s wealthiest have concluded that if we’re not going to be making much of a return from our investments, we might as well be getting some fun out of them.
The global wealthy, says the new Knight Frank-Citi Wealth Report, “are increasingly looking to combine their investments with something they can also enjoy.” This attitude has spurred a major uptick in “investments of passion,” everything from fine wine and art to fine athletes.
Pro sports leagues have traditionally “frowned upon ownership by consortiums of investors,” notes Knight Frank and Citi. But pro sports leagues today are doing less frowning, and pro sports ownership has become, as a consequence, much more inviting to far wider circles of super rich.
Billions are now flowing into sports ownership, all over the world. In South Asia, cricket’s new Indian Premier League sold its first eight franchises in 2007. Their total original value: $750 million. Their current value: nearly $4 billion.
The world’s biggest sports marketplace remains, of course, the United States, home to the world’s greatest concentration of wealth and income. In North America, says the new Wealth Report, a stunning 61 percent of individuals with at least $25 million available to invest now hold a pro sports ownership stake.
These rich all hope to preserve their wealth and have a little fun at the same time. That means less fun — in sports — for the 99 percent. The higher the cost to own pro sports franchises, the tighter the squeeze on sports fans.
Prices rise for tickets and ballpark beer. Cable companies that telecast our games charge higher monthly cable fees. And even 99 percenters who care zilch about sports end up paying more — as super rich franchise owners play off one city against another and demand lucrative government subsidies and tax breaks.
The alternative to this dismaying pro sports status quo? In the short term, notes sports writer Dave Zirin, we need more community controlled franchises, along the model of football’s Green Bay Packers.
And over the longer haul? We need in sports exactly what we need in every other facet of our lives. A much more equal world.
Eduardo Porter, The Case for Raising Top Tax Rates, New York Times, March 27, 2012. Top tax rates could go as high as 80 percent or more, a growing body of research shows, without undermining the economy.
Robert Borosage, The 1% Strike Back, Campaign for America's Future, March 29, 2012. Building a new foundation for shared prosperity will require an end to the concentration of wealth and power “that cripples our economy and corrodes our democracy.”
Bill Moyers and Michael Winship, Who’s buying your TV station? Salon, March 29, 2012. U.S. media giants and local TV stations stand to pull in as much as $3 billion this year from political ads. But they're refusing to reveal the identities of the billionaires footing the bill.
George Irvin, Britain and France Differ over Tax Justice, Social Europe, March 29, 2012. A leading authority on Britain's super rich examines a fresh French idea for taxing the wealthy and their wealth.
Americans for a Fair Estate Tax Coalition Urges Congress to Restore Strong Estate Tax, March 29, 2012. Some 77 state and national groups, including the YWCA and the AFL-CIO, explain why the estate tax ought to be restored to inflation-adjusted pre-2001 levels.
Jared Bernstein, The Myth of the Myth of the Disappearing Middle Class, On the Economy, March 30, 2912. Debunking the latest thrust from inequality deniers.
For Occupy Spring, an Insightful New Primer
Chuck Collins, 99 To 1: How Wealth Inequality Is Wrecking the World and What We Can Do About It, Berrett-Koehler Publishers, 150 pp. Foreword by Barbara Ehrenreich.
We’ve needed this book for a long time, and especially since the Occupy movement rose up last fall. We’ve needed a book that clearly and compellingly spells out how unequal we’ve become — and why.
We’ve needed a book that patiently and powerfully explains the price we pay, in each of our daily lives, for tolerating this inequality.
And we’ve ever so desperately needed a book that gives all of us, people who’ve worried about inequality for years and people just starting to feel alarmed, the confidence that we can indeed narrow the gaps that so divide us.
A tough order. This book we’ve needed demands an author who understands both the stats that define our great economic divide and the spiritual emptiness this divide engenders within us.
But we need from this author so much more. We need a mastery over the practical politics of attacking inequality. We need someone who has actually organized grassroots campaigns that take aim at inequality’s drivers, someone who has built coalitions for change among working families and affluents alike.
The Boston-based Chuck Collins fits this bill. Over the past two decades and more, Collins has been moving among — and rallying on — all the key players and groups working to make America a more equal place. Think tanks and trade unions. Tax reformers and concerned business leaders. People of faith and people of wealth uneasy about their privilege.
Collins has launched economic justice advocacy groups and co-written a book about saving the federal estate tax with Bill Gates Sr., the father of America’s richest man. He has shared strategic insights with Occupy activists and listened and spoken at hundreds of community forums.
And Collins writes well, too, with welcome touches of humor. Early on in his new 99 To 1, he notes that he surveyed hundreds of people for ideas on titling the book. He still can’t help smiling when he remembers one of the ideas that came in, Eating the Rich: Recipes for Ending the Class War.
But Collins has no interest in “eating” — or bludgeoning — anybody. He’s looking for allies, wherever he can find them, for taking on the “compounding inequalities” that are “sucking the life energy out of our communities and destroying our health, livelihoods, well-being, and happiness.”
“We really have no choice,” he explains in these pages, “but to throw our energies into stopping these forces.”
This brief and accessible volume can help significantly in that effort. Read, enjoy, and learn from it. Most of all, share it.
Watch author Chuck Collins talk about his new '99 To 1' online here.
|About Too Much|
Too Much, an online weekly publication of the Institute for Policy Studies | 1112 16th Street NW, Suite 600, Washington, DC 20036 | (202) 234-9382 | Editor: Sam Pizzigati. | E-mail: email@example.com | Unsubscribe.