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||June 11, 2012|
What lesson should we draw from last week’s gubernatorial recall vote in Wisconsin? Does the victory for that state's embattled friend of the fortunate, Scott Walker, mean Americans really don’t care if the rich get richer? Or does Wisconsin offer still another cautionary tale, maybe the starkest one yet, on the power of our awesomely affluent to distort our democracy?
Conservative pundits dismiss, of course, the significance of Walker’s enormous recall campaign cash advantage. Money, they argue, didn’t decide the election. Voters simply support Walker's assault on unions and collective bargaining.
But if money doesn’t matter all that much, why did Walker hustle to raise so much of it? The governor and his pals spent nearly $50 million on the recall, enough to blanket Wisconsin with TV and radio ads and turn Walker's 58 percent negative approval rating last November into a 52 percent positive.
Fourteen billionaires, in all, came to Scott Walker’s defense. The truly scary part: Their contributions barely put a dent on their fortunes. How much more can our super rich afford to shower down upon the likes of Scott Walker? With help from some new IRS numbers, we do some data digging in this week's Too Much.
|GREED AT A GLANCE|
Nearly three-quarters of Americans, says the newly released 25th annual Pew Research Center poll on core American values, believe that “Wall Street only cares about making money for itself.” And Wall Street, says a new Bloomberg Markets analysis, is doing just fine at that making money. America’s top 50 financial CEOs, the analysis shows, registered a 20.4 percent pay hike in 2011, “a year when most big banks and brokerages saw their revenues, profits, and stock prices plummet.” Topping the Bloomberg list: private-equity barons Henry Kravis and George Roberts, the co-CEOs at KKR & Co. Both took home $30 million. That total doesn’t include the $64.2 million in additional take-home Kravis and Roberts each grabbed from KKR stock dividends and other distributions . . .
Has modern art become, as one art critic charges, little more than gestures made “to capture and embody financial value”? Or can fine art still expose, not serve, the super rich who so avidly invest in it? Two art shows, two different answers. The first: a fawning London retrospective earlier this spring for Damien Hirst, the world’s richest artist. Hirst once admitted he was finding it “hard to see the art for the dollar signs.” In 2008 alone, $270 million worth of Hirst art sold at auction. Later this month, a Duke University show will showcase a less lucrative art ethic, the work of artists who explore top-heavy wealth distributions. Among the highlights: Darwin Economy, a series of Matthew Zigler portraits that compare “genetically engineered pigeons to rich and pampered humans.”
In the new Vanity Fair, the high-end handbook for everything swank and stylish, Nobel Prize-winning economist Joseph Stiglitz is urging the richest among us to support higher taxes — on themselves — as a matter of “unadulterated self-interest.” Too much inequality, Stiglitz explains, rots societies. One Taiwanese billionaire seems to be taking the Stiglitz message to heart. Industrialist Terry Gou, the kingpin behind the notorious Apple computer supplier Foxconn, last week asked Taiwan officialdom to levy a special tax on the island nation’s 300 richest. The projected annual take from the proposed levy: $600 million a year. But Gou appears to be taking the “unadulterated self-interest” aspect of the Stiglitz pitch a bit too literally. Gou wants his tax levy proposal to substitute for a proposed new capital gains tax on Taiwan's entrepreneurs — like himself.
Quote of the Week
“I suppose I arrived at my charitable commitment largely through guilt. I recognized early on that my good fortune was not due to superior personal character or initiative so much as it was to dumb luck.”
|PETULANT PLUTOCRAT OF THE WEEK|
James Bond movies almost all sport a crazed industrialist out to corner the world market on some essential mineral. Ivan Glasenberg, the CEO at global commodities trader Glencore, may be prepping for that part. His new $30 billion merger deal with Xstrata, a global mining giant, has six top banks salivating over a potential $196 million in merger fees. Also salivating: 73 execs at Xstrata. They’ll split $267 million in retention bonuses — with $44.7 million for Xstrata's CEO — if the deal goes through. But Xstrata shareholders have to okay the deal, and the bonuses have them fuming. And that fuming has Glasenberg — who cleared $110 million last year from Glencore dividends — defiantly defending CEO pay excess. Pronounced Glasenberg last week at a mine industry gala: “If you want good CEOs, you are going to have to pay.”
Stat of the Week
|inequality by the numbers|
Join Occupy Graduation at commencements all this month to spotlight the nation's over $1 trillion in student loan debt.
Urge the SEC to require companies
to report their
CEO-to-worker pay ratios.
Our Top 400: A Little Historical Perspective
All those millions that America's billionaires are pouring into super PACs, where do they come from? We cab trace a huge chunk of that political cash to the enormous tax cuts our rich are now enjoying.
Statistics don’t always lie. But they do always lag. And sometimes this unavoidable lag — between the time a turn of events takes place and the time we have numbers on it — can create a lie, or at least a gross misperception.
Take the just-released new IRS figures on the incomes of America’s most affluent 400. The 400 taxpayers who reported the most income on their 2009 tax returns, the new IRS stats document, averaged $202.4 million each in income, 25.2 percent less than what the top 400 averaged in 2008.
This $202.4 million average represents an even more substantial 41.3 percent dip from the $344.8 million the top 400 averaged in 2007, the year before the Great Recession started pummeling the nation.
America’s rich, the new IRS stats seem to shout, have “suffered” significantly from the Great Recession, just like everyone else.
Well, not exactly. The “suffering” the new IRS stats appear to show — that substantial dip in top 400 income — took place at the bottom of the Great Recession in 2009. The new IRS data don’t tell us anything about what has happened to America’s top 400 incomes in the three years since then.
But we do have clues from other data sources. We know, for instance, that share prices on Wall Street rebounded quite sharply in 2010, setting the stage for a host of windfalls on Wall Street and in Corporate America’s top executive suites.
Next year’s IRS stats on top 400 incomes will likely reflect these 2010 windfalls and show that any “suffering” that America’s super rich experienced after the Great Recession hit turned out to be extremely short-lived.
What about average Americans? A different story. We know from Census data that average-income Americans are still reeling from the Great Recession. The real incomes of most Americans dropped in 2008 and kept dropping through 2010. Typical workers saw their incomes fell 4.6 percent from 2007 to 2010.
The Great Recession, in short, has amounted to a temporary inconvenience for America’s super rich — and a dream-killer for average Americans.
The new IRS data don’t tell this story. They can’t, since the new data only cover top 400 incomes through 2009. More recent figures haven’t yet become available.
But the new IRS data on 2009 incomes do have a powerful story to tell, even with the data lag. To get at this story, we need to go back in time, not forward, and compare the incomes America’s top 400 collected in 2009 — and the taxes they paid — to the incomes they collected and the taxes they paid in decades gone by.
The official IRS top 400 income figures go back to 1992. In that year, America’s top 400 taxpayers averaged, after adjusting for inflation, $46.8 million each.
The top 400 of 2009 — with their $202.4 million average income — put the rich of 1992 to shame. In 2009, the worst year of the Great Recession, America’s top 400 still took home over four times the income of 1992’s top 400.
If we go back further in time, the contrast becomes even more stunning. The IRS hasn’t published official top 400 lists for any year before 1992. But other IRS data do allow us to approximate a near top 400 for some pre-1992 years.
For 1961, for instance, we can identify a top 398. This 1961 near 400 averaged, after adjusting for inflation, only $14.5 million each. In other words, the top 400 of 2009 collected 14 times more income than their counterparts in 1961.
We can make a similar comparison for a near 400 in 1955. Those rich, in dollars inflation adjusted to 2009, averaged just $13.2 million.
More staggering still: the real-life tax rate on that $13.2 million. The rich of 1955, after exploiting every tax loophole they could find, paid 51.2 percent of their incomes in federal income tax.
Their counterparts in 2009, after exploiting every tax loophole they could find, paid a mere 19.9 percent of their incomes in federal income tax.
Let’s pause over these numbers for a moment. They tell a remarkable tale. America’s top 400 in the Great Recession “down” year of 2009 collected over 15 times more income, after adjusting for inflation, than the top 400 of 1955 and paid nearly three times less of their incomes in federal taxes.
What if 2009’s top 400 had paid taxes at the same real rate as 1955’s top 400? What sort of difference would that have made?
Our 2009 top 400, if they had paid taxes at actual 1955 rates, would have together ended up with $25.4 billion dollars less in their pockets.
This over $25 billion in tax savings — for just 400 taxpayers — amounts to a plutocracy tax credit, a giveaway to the super rich that gives our financially favored far more capacity to dominate the American political process than America’s richest enjoyed back in the 1950s.
We can end that domination. But first we need to end that giveaway.
David Cay Johnston, The fortunate 400, Reuters, June 6, 2012. America’s most perceptive tax analyst gives his take on the latest IRS data on our awesomely affluent.
Subodh Varma, Vast inequality simmers below surface in China, The Times of India, June 7, 2012. China's richest 10 percent earn 23 times more than China's poorest 10 percent. In 1988, this gap ran seven times. In Nordic countries, the ratio currently stands at six times. The U.S. differential: 14 times.
Can a Politician Win Without Wall Street? New York Times, June 7, 2012. A symposium asks whether candidates can win elections without tapping into 1 percenters who can funnel unlimited money into super PACs.
Gar Alperovitz, How Big Banks Run the World — at Your Expense, Truthout, June 8, 2012. Money, and those with great sums of it, demystified.
Will Ashworth, Wall Street CEOs: Pigs at the Pay Trough, InvestorPlace, June 8, 2012. How the financial industry’s finest parlay “performance pay” into windfalls never ending.
Where Reasonable People May Not Disagree
Timothy Noah, The Great Divergence: America’s Growing Inequality Crisis and What We Can Do About It. New York: Bloomsbury Press, 2012, 264 pp.
Our contemporary American scene desperately needs a book about economic inequality that echoes with the moral majesty of a Victor Hugo — and helps inspire Americans by the millions to do battle against plutocracy.
Timothy Noah hasn’t written that book. Indeed, his new book on inequality, The Great Divergence, doesn’t even mention the notion of “plutocracy.”
But Noah has written a book that we also desperately need, a reasonable book. The Great Divergence isn't going to stir readers. It is going to help Americans understand that no one willing to listen to reason should ever accept the level of inequality that currently afflicts the United States.
Noah, a veteran journalist with mainstream media street cred, set the stage for The Great Divergence two years ago with a 10-part series on the “United States of Inequality” he authored for the online Slate magazine. That series rebounded all across the blogosphere.
Readers appreciated the dispassionate tone of Noah's Slate series. His patience as well. One by one, Noah dissected the various explanations — and obfuscations — that analysts have advanced to help us figure out why we've become so unequal. One by one, he even-handedly demolished the bogus red-herrings.
The Great Divergence builds on the framework of Noah's award-winning Slate series. His new pages run rich with fascinating background and anecdotes. And he adds in a series of policy ideas for attacking inequality.
Noah’s reforms — tax rates as high as 70 percent on income over $20 million, universal preschool, a regulated Wall Street, the repeal of Taft-Hartley and other barriers to labor movement renewal, among others — all rate as reasonable policy prescriptions. Noah never oversteps into more fanciful political territory.
But more fanciful, nervier proposals may be just what we need right now, to break through the political clutter. Ironically, the award that Noah’s 2010 Slate series won — the Hillman Prize for magazine journalism — went in 2009 for another series on inequality, published by the Nation magazine.
This Nation series did end with some fanciful proposals, like leveraging the power of the public purse by denying federal contracts or subsidies to companies that pay their top execs over 25 times what their lowest-paid workers receive.
Our politics today deems moves along this line totally “unreasonable.” If more folks read Timothy Noah — and better understood how incredibly absent in reason our unequal status quo has become — that attitude might begin to change.
|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.