Click here to read  the Too Much weekly edition, as emailed to readers on January 4, 2010.
This Week in Too Much
A new year, a new decade — a new look for Too Much, as no doubt you’ve already noticed. We have a new publisher, too. Too Much now appears through the good graces of the Washington, D.C.-based Institute for Policy Studies.
If you’ve been reading Too Much for some time now, you’re already familiar with the Institute. We’ve been highlighting IPS work on executive pay and economic justice ever since Too Much first started up, as a print quarterly, back in 1995.
Over the holiday break, with IPS support, we’ve retooled our entire Too Much operation. We’ve much more closely intertwined this Too Much weekly with the Too Much Web presence . Essentially, we’re finally taking full advantage of our contemporary online world, a step that’s going to help Too Much readers much more easily find and share the information they need — and act upon it.
Too Much readers span a fairly wide range. You’re journalists and educators, trade unionists and entrepreneurs, researchers and just-plain citizens worried about the inequality around us. Whatever your persona, we hope you find the new Too Much of value. As always, we welcome  your ideas and comments.
Greed at a Glance
Newspaper reporters spent a good bit of 2009 writing about the demise of the newspaper industry, with good reason . Some 40,000 newspaper jobs went kaput in 2009, says the U.S. Bureau of Labor Statistics, about double the 2008 total. At papers in the McClatchy chain, among others, staffers who survived the cutbacks found themselves forced to take unpaid “vacations.” But, hey, lighten up! Not everybody in the news business is hurting. McClatchy, just before Christmas, handed CEO Gary Pruitt, the “mastermind” of the company’s takeover of the Knight Ridder papers four years ago, 450,000 shares of stock that will vest year after next. McClatchy shares have dropped  90 percent since Pruitt went public with the Knight Ridder deal. If the shares bounce just halfway back, Pruitt will pocket over $13 million . . .
The holidays have now officially come and gone — with nary a holiday bash at Wall Street’s biggest banks. Two years ago, Morgan Stanley rented out an entire three-story nightclub for its holiday gala. In 2009, the bank hosted no holiday party at all. Neither did Goldman Sachs or Citigroup. New York PR exec Richard Dukas is calling  the no-party move “absolutely the right thing to do.” High-finance kingpins, says Dukas, “should not be trying to broadcast to America how successful they are right now by having lavish parties.” And just how successful would that be? December brought still more evidence on how precious little the federal bailout pay curbs are doing to restrain executive excess. At AIG, the bailed-out insurer, general counsel Anastasia Kelly is walking away  with $3.8 million in severance. Over at Fannie Mae and Freddie Mac, the mortgage finance bailout basket cases, CEOs Michael Williams and Charles Haldeman now each  have the green light to pocket as much as $6 million this year . . .
Who says the super rich are polluting the planet? Sure, those private jets they ride certainly do release more  carbon dioxide per person-mile than any other mode of transport, Hummers included. But the 165 super rich who call The World home don’t criss-cross the globe in private jets. They cruise. The World, a 12-deck ocean liner, operates as a floating condo, “the first and only private residential community at sea.” Residents pay up to $7.7 million per shipboard apartment. The amenities? They can call on 24-hour room service or chow down at five gourmet restaurants. They can even pop golf balls into the ocean from a ship-roof driving range. But mindless hedonism, aboard The World, has its limits. This “cutting-edge community of the super rich,” the Yale Globalist reports , takes great pains to leave as small an environmental footprint as possible. The ship’s “most creative green innovation”: those golf balls. They all dissolve in water . . .
Agatha Christie, the late great murder mystery writer, would have loved 2010. Lawmakers in Congress, by failing to take any estate tax action in 2009, have given every Muffy in America one whale of an incentive to do in Mumsy and Popsy. In 2010, for the first time since 1916, the federal government will levy no tax  whatsoever on the estates the super rich leave to their heirs. But under current law an estate tax will reappear in 2011 — at the rate in effect back in 2000, before George W. Bush’s 2001 tax cut started kicking in. This estate tax repeal-and-rebirth two-step gives impatient heirs a lucrative window of opportunity just 12 months wide. But that window could close. Congress could pass legislation this year that revives the estate tax retroactive to January 1. The best estate tax legislation  now pending: Rep. Jim McDermott’s Sensible Estate Tax Act, a bill that would undo a good chunk of George W.’s estate tax cuts . . .
Anti-estate tax lobbyists have worked relentlessly over recent years, in drives bankrolled  by America’s super rich, to terrify family farmers and small business people. And that terrifying has worked. Many modestly affluent families believe they’ll benefit from estate tax repeal. In reality, notes  the Center on Budget and Policy Priorities, this year’s estate tax vanishing act is going to hurt, not help, small business families. That’s because heirs to small businesses, with no estate tax in effect, will have to pay a capital gains tax if they sell assets they inherit that have appreciated since their parents bought them. Predicts  asset manager Marguerite Mount of the Mercadien Group: “A lot of middle-income Americans could end up being affected by a tax they never expected.” The estate tax in 2009 only affected 5,500 super-rich households. In 2010, the new capital gains levy will impact an estimated 70,000 families, the same small business families estate-tax repealers  have been claiming all along they want to help.
Quote of the Week
“Middle-income households made less in 2008, when adjusted for inflation, than they did in 1999 — and the number is sure to have declined further during a difficult 2009. The Aughts were the first decade of falling median incomes since figures were first compiled in the 1960s.”
Neil Irwin, Aughts were a lost decade for U.S. economy , Washington Post, January 2, 2010
Stat of the Week
The biggest payday of 2009? That may wind up belonging to David Tepper, the top exec at Appaloosa Management, one of the world’s top hedge funds. The New Jersey-based Tepper bet big last spring that the federal government would not nationalize Citigroup or Bank of America — or let the troubled banks fail. That bet, says one news report , paid off and helped Tepper hit a $2.5 billion personal jackpot.
In a Lost Decade, We Had Big Winners
Average Americans have been losing ground — to the rich — for three full decades now. Will the ‘Teens’ make that four?
Pawn shops always do well in recessions. CEOs of pawn shops, at least these days, do even better. At EZCorp, the Texas-based regional chain that runs over 670 pawn shops and payday loan storefronts, CEO Joseph Rotunda just picked up a 20 percent  salary hike.
CEOs do better. Can any three words more aptly sum up the decade we put to rest last week? For power suits, an uninterrupted string of windfall paychecks. For everyone else, the insecurity of the worst economic times in over 70 years.
Actually, by one economic measure, the first decade of the 21st century turned out to be America’s worst ever. The stock market ended the “Aughts” with the poorest calendar decade  performance record in U.S. investment history.
Adjusted for inflation, stocks lost an average of 3.3 percent a year during the ’00s. Back during the 1930s, the previous worst-performing decade, stocks averaged an 1.8 percent annual gain.
If you have your retirement tied to a 401(k), you’re already feeling the stock market woes — and reeling from them. Most Americans working at major companies used to have pensions that tied checks to years worked. You labored 35 years, you knew exactly what your pension check would be.
Most retirement plans today, by contrast, offer workers no such guarantee, only stock. If share prices fall, you lose at retirement time.
Top executives don’t. The wheelers and dealers who populate America’s executive suites enjoy preferential retirement treatment — via “supplemental” plans that shove pay dollars into “deferred-compensation accounts.”
These accounts let executives set aside — and defer from taxes — far more than the $16,500 maximum that ordinary workers can defer into 401(k)s. But these accounts go one giant step further. They typically guarantee the executives who hold them a guaranteed investment return on their deferred dollars.
In 2008, a Wall Street Journal report has just revealed , cable giant Comcast paid its top execs a way-above-market-rate 12 percent interest on the dollars they had parked away in their deferred-compensation accounts. For Comcast VP Stephen Burke, that 12 percent guarantee generated $7.4 million.
And Comcast’s 70,000 regular employees? Over the same period, their 401(k)s, dependent on the vagaries of the stock market, dropped 28 percent in value, a collective loss of $649 million.
We don’t have figures yet for 401(k) losses in 2009. In 2008, says the Boston College Center on Retirement Research, 401(k)s overall fell at least $1 trillion.
A sizeable piece of that misfortune befell the 1.2 million workers in Wal-Mart’s 401(k). Their retirement nest-eggs took a 18 percent hit. But Wal-Mart gave CEO H. Lee Scott Jr. a guaranteed 6.6 percent return on his supplemental retirement savings. Scott’s gain: $2.3 million.
Lee Scott almost perfectly personifies our just completed decade’s CEO story. He moved into the Wal-Mart chief executive slot right at the start of the ten years, in January 2000, and retired last January 31. His predecessor, David Glass, averaged  $4.5 million a year in the five years before Scott took over. Scott, in his first four years as CEO, averaged $23 million.
In his last full year at Wal-Mart’s summit, Scott took home  $30.2 million, over 1,500 times the average $19,200 pay that went that year to Wal-Mart workers.
Our executive gravy train didn’t start, of course, in the Aughts. The CEO pay spiral actually began turbo charging two decades earlier, in the early 1980s, a time when top execs were still averaging only 30 to 40 times more take-home than their workers.
Forbes, the business magazine, conveniently started keeping score of Corporate America’s biggest windfall winners about that same exact time. In 1982, in the magazine’s first annual list of America’s 400 richest, Forbes reporters counted just 13 billionaires. The current count: 359.
The total top 400 today hold $1.27 trillion in wealth. Since 1982, the wealth of the Forbes top 400 has jumped an amazing 12 times  faster than inflation.
How much of this good fortune has “trickled down” to average American families? Average American families with children, headed up by someone under age 50, hold less net worth today, after inflation, than they held back in 1983.
Journalist David Cay Johnston, in an analysis just published in the widely respected Tax Notes journal, is calling that finding — teased from data collected  by Barry Bosworth and Rosanna Smart for the Brookings Institution — simply “stunning.”
How much longer will growing inequality in the United States continue to generate such stunning stats? Will the “Teens” turn our 30 years of rapidly growing inequality into 40?
Or will the Teens, like the Depression 1930s, set the stage for an explosion of equality that totally reinvigorates American life and labor?
New Wisdom on Wealth
Colin Barr, Wall Street’s bonus baby steps , Fortune, December 30, 2009. A preview of the soon-to-be-announced record Wall Street bonus haul for 2009.
Michael Hiltzik, Peter Drucker’s revolutionary teachings decades old but still fresh , Los Angeles Times, December 31, 2009. An appreciation of the management guru who advocated for no more than a 25 times gap between worker and executive pay.
Neil Buchanan, Tax Wall Street’s huge bonuses , CNN, December 31, 2009. A scholar now at Cornell Law School dissects and destroys the arguments against taxing the outsized rewards pouring into high-finance pockets.
Linking Work and Reward: A New Calculation
Susan Steed, Helen Kersley, and Eilís Lawlor, A Bit Rich: Calculating the real value to society of different professions. New Economics Foundation, London, December 2009. 40 pp.
What if we paid people by the real contribution their work makes — to our economic and social well-being? If we did, would investment bankers routinely make more in a morning, as they do today, than teachers make in a year?
Of course not. Yet the pay gap between professions like banking and teaching continues to widen. People who do vitally necessary work, throughout our economy, continue to take home far less than people whose jobs add trivial value to the lives we lead.
That should worry us. Think about it. Our current pay rate patterns give talented people a powerful financial incentive to enter professions that do the rest of us little good.
What can we do to change this sorry situation? For starters, suggests Britain’s New Economics Foundation in this provocative new report , we can try to determine exactly how much value various jobs actually create — or destroy. Researchers at the foundation, a “think-and-do tank” that seeks to challenge standard-issue economic discourse, have done just that.
Their new study, A Bit Rich, examines six jobs, three high-paying (banker, advertising executive, and tax avoidance accounting specialist) and three low-paying (child care worker, hospital custodian, and waste recycling worker).
For each of these six, the New Economics Foundation analysts “quantify the social, environmental, and economic value” the role produces — or undermines. They take into account impacts both obvious and subtle and lay out all their analytical assumptions in a thoroughly detailed methodological appendix.
Their basic conclusion?
“We found,” the researchers write, “that some of the most highly paid benefit us least, and some of the lowest-paid benefit us most.”
High-earning British investment bankers, for instance, turn out “to destroy £7 of social value for every pound in value they generate.” Child care workers, on the other hand, generate between £7 and £9.50 worth of benefits to society for every £1 they get paid.
Child care workers in Britain, as in the United States, get paid quite little. In the UK, child care workers seldom make more than £13,000, or $21,000.
But the authors of A Bit Rich repeatedly emphasize that they’re not “simply suggesting that people in low-paid jobs should be paid more.” Their fundamental message: We need “a relationship between what we are paid and the value our work generates for society.”
To move us in that direction, A Bit Rich offers a wide-ranging set of policy recommendations.
Lawmakers, the report urges, need to get more serious about taxing progressively.
“The wealthiest do not pay their fair share of tax,” the authors note. “Redistribution, particularly of assets and land, is an effective way both to offset inequality and to reward jobs that the market does not.”
That market doesn’t function particularly well at the top end either. Those fortunate enough to bestride that top end, the foundation researchers note, “have the power to command salaries over and above what the market will bear.”
To curb that power, the foundation researchers argue, our modern societies ought to establish “a national maximum pay differential,” a ratio that limits pay at the top of an enterprise to a multiple of what workers at the bottom take home.
But wouldn’t limiting pay at the top strangle the philanthropic capacity of our society’s rich — and end up hurting people at the bottom? And shouldn’t those who create profits get rewarded for their creations?
And don’t people at the top of the economic ladder work harder — and deserve much more — than people at the bottom? And wouldn’t capping pay at the top take away the incentive that drives people to want the climb that ladder?
A Bit Rich directly takes on all these rationales for our deeply unequal compensation status quo. The authors, in their debunking, offer up both sophisticated statistical analyses and common-sense reasoning.
For the ablest kids of waste recycling plant workers to “climb the ladder” and find places at the top, as the report notes at one point, an equivalent number of banker kids would have to move down. But that doesn’t happen in a society where wealth sits concentrated.
“Those with high incomes,” A Bit Rich notes, “can protect their position and that of their children by buying assets and advantage.”
These wealthy, in effect, can “kick away” the ladder that those below are trying to climb. So what must we do to encourage true opportunity? Make society more equal. We need above all, sums up A Bit Rich, to “shorten the ladder.”