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Too Much

THIS WEEK

How can we tell if we’ve become, as a society, too unequal? The Los Angeles Times has just offered up a novel suggestion: We can count bathrooms.

Reporter Lauren Beale has done just that. She has tallied up the number of bathrooms in Southern California’s most opulent manses. And these numbers will astound you. One newly remodeled Beverly Hills abode, now valued at $60 million, has 30 of them — to go along with 17 bedrooms.

“The idea is never to inconvenience yourself or a guest,” one luxury realtor told Beale. “You almost cannot have too many bathrooms.”

But we can have too much inequality. This week in Too Much we examine the latest edition of a much more conventional — but equally alarming — measure of the economic gaps that divide us. Also this week: a look at an inspiring new profile of deep pockets deeply committed to a more equal tomorrow.

 

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GREED AT A GLANCE

Worried about how much you’re spending these days to fill your gas tank? Relax. Things could be worse. You could be paying $393,000 a thankful. That’s what billionaire Swiss pharmaceutical tycoon Ernesto Bertarelli shelled out just over a week ago to fill the fuel tank of his brand new pleasure boat, the Vava II. The yacht stretches the length of a football field and just left the UK for a shakedown cruise to the Caribbean. The Vava II's two-year, $150-million construction kept 200 engineers and designers gainfully occupied. Actually running the yacht takes a crew of 30. The six-decker can accommodate 22 guests . . .

Shelly YachimovichBack in 2010, Israeli lawmakers appeared poised to cap CEO pay at 50 times a company’s lowest-paid worker take-home. But Israeli prime minister Netanyahu ordered a key vote postponed — for 60 days — to allow a special panel to “study” the CEO pay issue. The panel’s study ended up taking over 600 days. The panel also ended up rejecting any limit on CEO pay, in the process, charges Knesset member Moshe Gafni, “diluting one of the most critical problems in Israeli society.” Adds Gafni: “A maximum cap on salaries must be set.” Earlier this month, Israeli ministers endorsed the study panel's much weaker reform recommendations. The two lawmakers who proposed the original 50-times pay cap, Shelly Yachimovich and Haim Katz, are vowing to resubmit their cap proposal . . .

Wal-Mart heirs Christy, Jim, and Samuel Walton together pocketed a whopping $353.1 million last Monday. Or so reports the world’s latest wealth yardstick, the Bloomberg Billionaires Index. This new Bloomberg list, as Wall Street Journal wealth analyst Robert Frank notes, offers a real breakthrough on the rich people-counting front. Up until now, the world’s various rich lists have been annual affairs. Bloomberg is updating its billionaire wealth totals on a daily basis. Who had last Monday’s worst day? Casino magnate Sheldon Adelson saw his net worth drop $680.2 million. Adelson had a fairly bad week. On Tuesday, the candidate that Adelson is bankrolling in the GOP Presidential primary, Newt Gingrich, flopped in all but one of the 10 states voting in the “Super Tuesday” primaries. But shed no tears for Adelson. He still holds a fortune worth $25 billion.

 

 

 

 

Quote of the Week

“If you believe in leveling the playing field, there's something troubling about the fact that what makes a candidate be taken seriously is their ability to raise money from the wealthy.”
Richard Hasen, University of California at Irvine School of Law, The Day, March 6, 2012

 

 

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PETULANT PLUTOCRAT OF THE WEEK

William Bryan JenningsWilliam Bryan Jennings, Morgan Stanley's exec in charge of North American fixed-income capital markets, lives an hour outside Wall Street in a $3.4 million Connecticut home. This past December 22, Jennings hailed a cab after an evening of Christmas partying. The driver, Mohamed Anmar, says Jennings agreed to pay $204 for a trip into Connecticut, but refused to pay once the taxi arrived. Jennings, says the driver, boasted that “the cops wouldn't do anything because he pays $10,000 in taxes.” The dispute escalated, Jennings pulled out a penknife, slashed Anmar, then fled. The driver called the police. Jennings went vacationing in Florida. Two weeks later, with police searching for Anmar’s attacker, Jennings turned himself in. The police have charged the 45-year-old with assault, larceny, and racial intimidation.

 

Stat of the Week

America’s richest 1 percent, notes DePaul University’s Paul Buchheit, now take in three more dollars for every one they took home in 1980. The nation’s poorest 90 percent have added one cent for every dollar earned in 1980.

 

inequality by the numbers

Saex income data

 

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IN FOCUS

Happy Days Here Again, 21st Century-Style

Great economic cataclysms have in the past knocked the super rich off their stride. Our Great Recession's deep pockets, stunning new income data show, are bucking the historical tide.

We can wait all we want, but sometimes history never gets around to repeating.

History — more specifically, the history of the Great Depression in the 1930s — has been a constant presence in America’s political discourse ever since the Great Recession started slamming us in 2008.

Analysts have drawn all sorts of useful and entirely appropriate parallels between the run-up to the Great Depression and the years before the Great Recession. And inequality — the gap between America’s rich and everyone else — has figured prominently in those parallels.

In 1928, the year before the stock market crash, America’s richest 1 percent were taking in just shy of 24 percent of the nation’s income, a modern-day high.

In 2007, the year before our Great Recession's Wall Street meltdown, America’s top 1 percenters were pulling in 23.5 percent of the nation’s income, the top's highest share since 1928.

But the parallels go even deeper.

The early years of both the Great Depression and the Great Recession hammered incomes at America’s economic summit. In 1928, the nation's top 1 percent were averaging just over $400,000, in today's dollars. Two years later, that top 1 percent average income had dropped by half, to just over $256,000.

The early years of the Great Recession had much the same impact. America’s top 1 percent averaged $1.44 million in 2007, the year before Wall Street's epic meltdown. In 2009 top 1 percenters averaged over $520,000 less, more than a 36 percent dropoff.

Back in the Great Depression, after the initial income shock for the super rich, the shocking would continue. Top incomes kept dipping as the Great Depression wore on. Average top 1 percent income didn’t reach the $256,000 level of 1930 again until 1936 and didn’t regain 1928’s $400,000 level — the inflation-adjusted pre-Great Depression high-water mark — until decades later, in 1965.

By that time, the incomes of America’s bottom 90 percent had jumped from just over $9,400 — their 1928 level — to nearly $28,000.

In other words, in the three decades after the onset of the Great Depression, the incomes of America’s top 1 percent — after you take inflation into account — essentially didn’t rise at all. Over those same years, Americans in the bottom 90 percent saw their average incomes triple.

No gains for America’s rich. Big gains for average Americans. By the 1960s, those average Americans were sharing in the wealth their labor created. The United States had become a fundamentally more equal and prosperous place.

A history worth repeating? Absolutely. But this history, new data released earlier this month indicate, isn't repeating. Not at all. Our contemporary rich have already resumed their rocket ride to ever grander fortune.

The rich back in the 1930s were still reeling three years after the Great Depression hit. The rich today, we now know from the newly released data, are reeling no longer.

The new data come from University of California at Berkeley economist Emmanuel Saez, the scholar who has revolutionized our understanding of America’s highest incomes with his work over the last decade.  

Saez has spent this last decade parsing IRS statistical records to tease out the incomes of America’s richest, over time, and compare the incomes of these rich — in the top 1, top 0.1, and top 0.01 percent — to the incomes of much more average Americans.

Earlier this month, using newly available IRS data, Saez updated his numbers, to take the U.S. income story through 2010. The Great Recession, Saez found, is most definitely no longer following the Great Depression script.

Back in the early 1930s, incomes for America’s top 1 percent were still dipping two, three, four, and more years into the Great Depression. In our Great Recession, the dipping of high incomes hasn't even lasted two years.

In 2010, the incomes of America’s top 1 percent did not decline. These incomes rose sharply — by an average $105,638, or 11.6 percent, over 2009 levels.

Incomes for America’s bottom 90 percent? These incomes did continue to dip in 2010 — by $127, to $29,840. Some perspective: In 1973, after adjusting for inflation, America’s bottom 90 percent took home an average $33,795.

So where do all these numbers leave us? Back in 1929 Coca-Cola filled the airwaves with what would prove to be an all-time classic advertising slogan, “the pause that refreshes.” Our Great Recession, if current income trends continue, may prove to be the pause that refreshes . . . inequality.

The Great Depression began a hammering of incomes at the top that left the United States more equal. The Great Recession, the new Emmanuel Saez data suggest, will have nowhere near that impact. Our rich appear about to regain most all the ground they lost in the Great Recession's early stages.

But we need some caveats here. The equalizing that began in the 1930s didn’t just happen. Average Americans made it happen. They marched and rallied and staged walkouts and sitdowns. They elected candidates who fought to level up America’s least fortunate and level down our most fortunate and powerful few.

All this mobilizing would take years to make a significant equalizing impact. We today can make a significant equalizing impact, too. We just need to get going. History will only repeat if we make it.

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New Wisdom
on Wealth

Michael Yates, The Great Inequality, Monthly Review, March 2012. Incomes and wealth have become so unequal, this review essay explains, “because the power of those at the top has risen at the expense of those at the bottom.”

Rabbi Shmuly Yanklowitz, Are Taxes Fair, Good, or Jewish? A Defense of the Progressive Taxation, Jewish Journal, March 5, 2012. A survey that places the graduated income tax within the traditions of Jewish thought and law.

Sarah Ayres and Michael Linden, Rich Americans Are Not Overtaxed: The Bogus Statistics Conservatives Use to Misrepresent the Facts, Center for American Progress, March 6, 2012. The rich pay a greater share of taxes "because they have more, period."

Bruce Bartlett, Fanning the Flames of Class Warfare, New York Times, March 6, 2012. A former Ronald Reagan aide examines a curious economic crisis phenomenon: The rich always whine they're the ones suffering the most.

Jeffrey Thompson, Should States Continue to Place the Lowest Tax Rates on Those With the Highest Incomes? Truthout, March 8, 2012. A review of the research that rebuts the arguments against raising state tax rates on high-income households.

Jack Temple, Income Inequality Highest in the Deep South, Policy Shop, March 8, 2012. The pols who most regularly dismiss progressive tax policies as "class warfare" represent constituents who live in districts with the highest levels of inequality, new Census data show.

 

 

In Review

On 'Making It' Alone and 'Punishing Success'

Self-Made Myth coverBrian Miller and Like Lapham, The Self-Made Myth: And the Truth about How Government Helps Individuals and Businesses Succeed. Berrett-Koehler, 2012, 196 pp.

Banker John Allison, the former chair of BB&T, will gladly arrange to have your local school get a grant worth up to $2 million. The catch? Your local school will have to agree to offer a course that makes Ayn Rand’s 1957 novel, Atlas Shrugged, required reading.

Rand has become the American right wing’s patron saint. Her basic theme: that all progress comes from heroic entrepreneurs whose innate daring and drive will always work wonders — unless those nasty creeps from the government get in the way.

Variations on this theme have been floating around U.S. politics for generations. For veteran activists Brian Miller and Mike Lapham, these variations amount to what they call the “self-made myth,” the notion that individual and business success results entirely from the “hard work, creativity, and sacrifice of one individual with little outside assistance.”

This self-made myth tends to loom largest whenever income and wealth start concentrating in the hands of a precious few. The original Horatio Alger stories flourished in the staggeringly unequal post-Civil War Gilded Age. In today's new Gilded Age, Ayn Rand’s books are breaking sales records.

No coincidence here. The self-made myth serves to legitimize grand fortunes. If wealth derives solely from individual spirit and spunk, then any subsequent concentration of income and wealth must rate as absolutely moral and just. And any attempt to limit this concentration “punishes success.”

In their timely new book, The Self-Made Myth, Brian Miller and Mike Lapham attack this noxious notion from an unexpected direction. They let the “successful” expose the emptiness of “punishing success” claims. They give voice to an assortment of men and women of means who understand that no individuals ever succeed solely — or even mostly — on their own.

Some of these thoughtful successful will be familiar to almost everyone in America today: billionaire investor Warren Buffett, for instance, and Ben Cohen, the ice cream magnate of Ben and Jerry’s fame.

But most of the successful Miller and Lapham introduce have made their millions outside the public spotlight. A software entrepreneur who sold his successful start-up to Intel for $884 million. A language-learning impresario who built a $30 million business. The co-founder of the nation’s third-largest craft brewery.

The Self-Made Myth lets all these talented individuals share the backstory to their success. And in that backstory these talented give full credit to all the people and public institutions that enabled the success they've achieved.

Among these enablers: The public schools and colleges these successful attended. The public roads they use to ship their goods. The publicly initiated Internet that speeds their outreach. The patent and copyright laws that protect their intellectual property. The government regulations and court systems that bring order to the marketplace and confidence to investors and customers.

The successful Miller and Lapham profile in The Self-Made Myth certainly do take pride in their personal hard work. But they recognize the help they’ve received — and recognize, as well, that not all who work hard see rewards for their labor.

“Race, class, gender, birthright, and other factors,” as Miller and Lapham put it, “still weigh heavily on one’s prospects in life.”

Given all this — what Miller and Lapham dub the “built-together reality” — any society that asks the rich to give back, that taxes progressively, is not “punishing success.” It’s raising the wherewithal to broaden opportunities for success.

The thoughtful successful who speak to us in The Self-Made Myth all agree totally on this score. After reading their stories, you will, too.

 

 

 

Inequality Links

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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: editor@toomuchonline.org | Unsubscribe.

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