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THIS WEEK

Back in the 1990s, America's conventional political wisdom — in both parties — openly derided the notion that the wealth then amassing so furiously at the nation’s economic summit posed any threat to the nation’s well-being.

President Clinton’s top economic adviser, for instance, asked Americans to imagine the economy as an apartment building, with some living in penthouse luxury, others in a “rat-infested basement.” What should the nation do? Forget the penthouse, the adviser counseled, just worry about the basement.

How things have changed. Last week, a President of the United States gave a speech that disapprovingly rattled off staggering stats on America’s top-heavy distribution of income. This maldistribution, President Obama made clear, is rotting our economy and democracy — and even everyday trust between people.

A President offering a coherent case against inequality. That’s progress. But not enough. This President is still not offering up policies potent enough to discomfort our penthouses. He is, as analyst Robert Borosage notes, pulling his punches. This week in Too Much, more on why we so need to keep punching away.

 

About Too Much, a project of the Institute for Policy Studies Program on Inequality and the Common Good

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GREED AT A GLANCE

Last week saw the close of the official comment period on proposed federal regulations that would require America’s corporations to annually disclose the ratio between what they pay their CEOs and typical workers. The U.S. Securities and Exchange Commission received a remarkable avalanche of letters supporting the regs, over 116,000 in all. Observers expect the SEC to issue a final rule on ratio disclosure early in 2014. But corporate groups will likely challenge the rule in court, and that challenge won't surprise anyone. Corporate America has been battling to kill pay ratio disclosure ever since the 2010 Dodd-Frank Act first wrote a mandate for it into federal law . . .

Dennis KozlowskiA decade ago, Dennis Kozlowski reigned as America’s “poster boy for CEO greed.” His lavish lifestyle as the chief exec at Tyco International, a global conglomerate, scored headlines on a regular basis. Kozlowski owned mega-million getaways in Colorado, Boca Raton, and Nantucket. His Manhattan apartment sported a $15,000 umbrella stand and a $6,000 shower curtain. He spent $2 million on a toga party. Then the roof caved in. In 2005 a New York jury found Kozlowski and an associate guilty of giving themselves illegal bonuses and grabbing loans later forgiven. Kozlowski went to jail. Now he's going free. His parole board made that announcement last week. As top gun at Tyco, a contrite Kozlowski told the parole board last April, “I was living in a CEO-type bubble.” Added the 67-year-old: “I had a strong sense of entitlement.”

A “sense of entitlement” still, of course, infuses America’s executive suites, and nowhere more so than the financial industry. The latest example: the industry’s reaction to new European Union bonus cap rules. The new rules will limit banker annual bonus pay to twice regular 2014 salary and apply to executives at the European offices of U.S. financial giants like JPMorgan. The banker response: The industry’s mega players are bumping up executive salaries and introducing “housing allowances” and “loyalty payments” to help execs avoid any bonus cap pay cut. Regular U.S. bank employees, meanwhile, are making so little that a third of them, says a new study released last week, qualify for food stamps and other federal assistance programs. That cost to taxpayers: $900 million a year.

 

 

Quote of the Week

“Americans have a very strong sense that the deck is stacked against them by powerful corporations and the super rich who use their lobbyists and campaign contributions to control our government. If Obama is going to rally people to take on those forces, he has to name them and take them on.”
Richard Kirsch, Roosevelt Institute, December 5, 2013

PETULANT PLUTOCRAT OF THE WEEK

Yaron BrookAmerica’s most self-righteous plutocrats? They hang out at the Ayn Rand Institute, an outfit chaired by a ex-Goldman Sachs managing director. Earlier this fall, Fox Business asked Institute executive director Yaron Brook, for his reaction to a news clip of demonstrators calling for a higher minimum wage. Sneered Brook: “I don’t see anyone of those looking like starving people.” Brook's response to another clip of a fast-food worker explaining that some of his co-workers labor 80 hours a week and still “can’t make ends meet”: “Nobody owes them anything.” Last week, Brook lectured University of Texas business students on “Shrugging the Stigma of Success.” This week, he's lecturing assorted New York power suits, pols, and pundits on “The Virtues of Inequality.”

 

 

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IMAGES OF INEQUALITY

Freedom Ship

What might you call a vessel that offers rich people the world over a chance to live in a floating luxury city that stretches a mile long and offers all sorts of opportunities for tax evasion? If you happen to be the entrepreneurs trying to raise the $10 billion needed to build this “escape from the 99 percent,” you’d call your vessel the “Freedom Ship.” The Florida-based exec leading the venture told reporters last week that “we’ve been getting more interest in the project” over recent months. Condos on the Freedom Ship will go for up to $10 million each.

 

Web Gem

Your income tripled/ Mother Jones magazine has come up with a handy-dandy online calculator you can use to see how much more you would be making today if incomes in America had all been increasing equally over the past 50 years.

PROGRESS AND PROMISE

Three U.S. senators — Republican Charles Grassley of Iowa and Democrats Joe Manchin of West Virginia and Barbara Boxer of California — have introduced a legislative amendment that would slash what federal contractors can charge the government for executive pay. The current annual maximum, just raised to $952,308 per executive, would drop to $230,700, the vice-president's salary. Trimming top contractor pay, says a General Accountability Office study, would save taxpayers over $440 million per year. The proposed Senate amendment limits only the executive pay corporations can directly bill the government for reimbursement. Contractor execs make most of their money off taxpayers indirectly, through stock options and other “performance” awards that profits from government contracts turn into windfalls. Lockheed’s CEO, for instance, last year pocketed $23.8 million, with $18.1 million of that from stock options.

 

Take Action
on Inequality

Imagine a city where everyone’s needs are met because people make the personal choice to share. You can help build it. Learn more about the “Sharing Cities Network.”

inequality by the numbers

Trillion-dollar club

 

 

Stat of the Week

Between 2000 and 2010, Economic Policy Institute researchers note, the Washington, D.C. area added more top 1 percent households than any other metro area in the United States. Public officials make up less than 8 percent of D.C.'s top 1 percent households. Exactly half the D.C. area's rich provide “professional services,” a category that includes the private contractors who feast off federal contracts.

 

IN FOCUS

Inequality: A Sure Way to Kill a Good Time

What makes a society a fun place to be? Really nice weather and exciting nightlife options certainly help. So does avoiding a starkly skewed distribution of income and wealth.

World Bank economist Branko Milanovic does serious work. His explorations into global income distribution have won him a wide — and appreciative — audience in scholarly and policy-making circles all the world over.

But Milanovic isn’t always crunching data and writing up insightful articles and books. In fact, Milanovic likes to have a good time as much as anyone. He may even rate, in some people’s eyes, as a fun sort of guy.

Recently, in a light-hearted moment, Milanovic brought his two passions together and came up with a new yardstick for human progress, a cross-national international index for measuring “funness.”

This “funness” index, Milanovic acknowledges, “started as a joke.” The world has “all kinds of international indexes,” as he told an Australian journalist earlier this fall. We should have one, he thought, “that explores fun.”

But the joke soon turned intellectually interesting. What does, after all, make one society more fun to live in than another?

Milanovic would eventually work up a list of ten basic factors than encourage good times. Some of his “elements” would be rather obvious. Fun places, as the Milanovic yardstick recognizes, have “lots of restaurants and good nightlife.”

Other elements on the Milanovic list turn out to be far more edgy. Fun places, Milanovic writes, have a “slight decadence floating in the air” — and “frequent changes in government.” How do changes in government help people have fun? They give people, Milanovic explains, plenty of “topics to talk about.”

But truly fun societies, Milanovic ends up stressing, have more than hot spots and hot topics. They have “low inequality and small differences in social status.”

“I think people treat each other better in societies that do not have very rigid social divisions and distinctions,” comments Milanovic. “You have more fun in places where people treat each other well.”

How specifically does inequality turn savagely unequal societies into party-pooping places? Milanovic doesn’t delve too deeply into specifics with his “funness” index. He does offer one anecdotal example. If you come out of a restaurant after a great meal and have “20 people asking you for money,” Milanovic suggests, that’s probably going to “spoil your fun.”

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Other chroniclers of our unequal times have actually gone far more deeply into this fun phenomenon, most notably the journalist Michelle Quinn.

Back in 1999, at the height of the dot.com bubble, Quinn did a powerful series of articles in the San Jose Mercury News, the hometown paper of California’s Silicon Valley. Her focus: the street-level impact of the high tech industry’s incredibly unequal distribution of rewards.

“Economic disparity,” Quinn would note in her reporting, “has always made socializing awkward.”

This awkwardness, her reporting detailed, can spoil even the most casual of encounters. Just going about “picking a restaurant to meet friends,” Quinn related, can end up sparking considerable social static if some acquaintances in a group can easily afford a hot new dinner spot and others can’t.

Wealthy people, once singed by such static, tend to take steps to avoid it in the future. They start, sometimes consciously, sometimes not, only “making friends with those whose economic profile is similar to theirs.”

In the process, old social circles shrink and crumble. Daily life becomes ever more stratified — and stressful.

Girls and boys who really do just want to have fun might be wise to keep all these dynamics in mind. The narrower the gaps that divide us, the better the chances that good times are going to be rolling.

 

New Wisdom
on Wealth

Rowland Atkinson, How do the rich live? Le Monde Diplomatique, December 2013. Sociologists have largely ignored the super rich.

John Miller, Vice Versa: Inequality and Our Economic Problems, Dollars & Sense, December 2013. An ace rebuttal to claims that inequality isn't messing us up.

Sarah Anderson and Sam Pizzigati, Swiss Activists: Let’s Cap CEO Pay, The Nation, December 2, 2013. How the Swiss pay campaign is echoing on this side of the Atlantic.

Romain Hatchuel, The Coming Global Wealth Tax, Wall Street Journal, December 3, 2013. Indebted governments, says this financial industry analyst, may soon consider a levy on capital assets.

Jana Kasperkevic, Tax breaks for CEOs pay for million-dollar salaries, Guardian, December 3, 2013. One reason why CEO pay is ballooning.

Jed Perl, The Super Rich Are Ruining Art for the Rest of Us, New Republic, December 4, 2013. Those who can’t believe in anything not monetized are trashing one of our last hopes for transcendence.

Peter Dreier, NPR’s Robert Siegel Needs a Reality Check, Huffington Post, December 5, 2013. A $369,347-per-year radio host says families can “make ends meet” on $14,000 a year.

Chad Stone, Danilo Trisi, Arloc Sherman, and William Chen, A Guide to Statistics on Historical Trends in Income Inequality, Center on Budget and Policy Priorities, December 5, 2013. A revised edition.

NEW AND notable

Fast Food subsidiesSubsidizing KFC's Millionaires

Sarah Anderson, Taxpayer Subsidies for CEO Pay in the Fast Food Industry, Institute for Policy Studies, Washington, D.C., December 3, 2013.

Last Thursday, in over 100 American cities, thousands of fast food workers went out on strike against an industry that rakes in billions in profits every year and pays out — to millions of workers — wages that barely run over the $7.25 federal minimum wage.

But fast food execs aren’t just exploiting workers, details this welcome new study from the Institute for Policy Studies. They’re exploiting taxpayers, too.

In two ways. The first: Over half the nation’s fast food workers, a University of California-Berkeley study notes, make so little on the job that they have to rely on tax-funded social safety net programs to make ends meet.

The second: Taxpayers are subsidizing the sky-high compensation of the fast food industry’s top execs.

Under current tax law, U.S. corporations can deduct off their income any “performance pay” they shell out to their top executives. Over the past two years, the new IPS study documents, the CEOs at America's top six fast food chains alone pocketed over $183 million in “deductible ‘performance pay,’ lowering their companies’ IRS bills by an estimated $64 million.”

The biggest individual winner: the CEO at YUM! Brands, the corporate giant that owns Taco Bell, KFC, and Pizza Hut. Yum’s David Novak pocketed $94 million worth of “performance pay” in 2011 and 2012. The taxpayer subsidy for that largesse: $33 million.

How much overall is the corporate tax deduction for excessive executive pay costing taxpayers? One estimate comes from the congressional Joint Committee on Taxation. Passing legislation now pending that would prevent corporations from deducting more than $1 million in pay per executive, the panel concludes, would save taxpayers $50 billion over the next 10 years.

 

 

 

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The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class cover

A great gift idea — for anyone on your list wondering if America will ever become more equal. Learn more about this lively new history by Too Much editor Sam Pizzigati.

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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