|August 25, 2014|
|[B]etween 1970 and 2010, the top 1 percent’s share of America’s income jumped from just under 8 to nearly 20 percent. Japan’s top 1 percent started that 40-year span at that same 8 percent share. Japan’s top 1 percent income share in 2010?Only 9.5 percent. Stats like these ought to be convulsing U.S. politics. They aren’t. America’s top pols continue to avoid any concentrating on concentrated income and wealth.
That indifference to inequality doesn’t play elsewhere in the world. Indeed, elsewhere in the world, serious thinkers about economic policy aren’t just talking about inequality. They’re exploring bold egalitarian solutions — like 100 percent tax rates on excessive income.We have more on these explorations — and thoughts on why America’s elected leaders can get away with ignoring inequality — in this week’s Too Much.
|GREED AT A GLANCE|
|Publishing entrepreneur Kory Alden saw a problem he knew needed fixing: Most newly rich super rich simply don’t know how to spend their money. Alden’s solution? A flashy Web site — titled “WLTH” — that aims to help ultra affluent and somewhat clueless 20- and 30-somethings navigate the world of luxury. Explains Alden: “We give them direction about where to vacation, expose them to the most expensive cars and toys, so they can make the most of their wealth.” His new site, says Alden, does “have a more serious side” and regularly runs articles that keep its readers “up with trends and issues.” Last week, for instance, the site dug into “who’s got more wealth,” Conan O’Brien or Jay Leno . . .Some people do good in homeless shelters. St. Louis mega-millionaire Dennis Jones says he does his good sailing the seven seas on his brand-new $34 million yacht. How’s that? The millions spent on his yacht, Jones told an interviewer last month, kept a shipyard in business. And the $170,000 he spends monthly keeping his boat ship-shape, Jones adds, funds paychecks for a 10-person crew. Jones retired in 2000, after selling his pharmaceutical business for $3.4 billion, and now spends his terra firma time at a 31,000-square-foot St. Louis mansion. Between the manse and his yacht, Jones says, he and his wife enjoy the “same level” of luxury “wherever we go.” Jones says he also does good outside yachting. His favorite charity? Maybe Junior Achievement, “because it teaches children about free enterprise.”Dennis Jones hardly rates as the only deep pocket keeping yacht makers busy. Overall global sales of super yachts — boats at least 80 feet long — jumped to 221 in 2014’s first half, a figure about a third higher than the first-half 2013 total. The biggest new boat so far this year: the 459-foot Victory from Italy’s Fincantieri shipyard, only the ninth-longest private yacht ever. Today’s billionaires, saysyachting analyst Chris Cecil-Wright, seem “more sensible” and less interested in having the longest boat. They’re looking instead for innovative “quality” accessories.One example from the new seven-deck Victory: a floodable internal garage that lets the yacht’s “tender” — the small boat that ferries passengers from ship to shore — motor right into the yacht.||
Quote of the Week
“We already have an annual wealth tax on homes, the major asset of the middle class. It’s called the property tax. Why not a small annual tax on the value of stocks and bonds, the major assets of the wealthy?”
|PETULANT PLUTOCRAT OF THE WEEK|
|GE CEO Jeff Immelt can’t imagine why anyone would object to a federal agency that extends to corporate giants — like GE — billions a year in subsidies. That agency, the Export-Import Bank, hands out loans and loan guarantees that make U.S. exports more enticing. The Ex-Im Bank is now facing stiff opposition in Congress, and this opposition to the bank had Immelt fuming earlier this month: “The fact that we have to sit here and argue for it I think is just wrong.” Not as wrong as Immelt’s arrogance, notes economist Dean Baker. Immelt has been urging Social Security cuts to balance the federal budget. Observes Baker: “So we have someone who makes $25 million a year,” in part from taxpayer handouts, “complaining about retired workers getting $1,300 a month” and “whining” because he has to defend his handouts.|
|IMAGES OF INEQUALITY|
|Can well-heeled men ever become as lucrative a luxury shoe market as well-heeled women? Prada certainly thinks so. The luxury retailer has just unveiled a custom shoe service that lets gents pick a lace-up leather brogue in any of 32 colorful shades. The price: a mere $1,245 per pair.||
WealthInequality.org/ Duke sociologist Lisa Keister and three of her colleaguespresent here stats on everything from the basics of U.S. wealth distribution to a breakout on wealth concentration by religious affiliation.
|ANTIDOTES TO INEQUITY|
|The folks behind a landmark California bill that links tax rates to CEO-worker pay ratios aren’t giving up. Their bill, SB 1372, won a Senate majority in May. But tax bills in California require a two-thirds majority to pass. Under SB 1372, firms that pay their CEOs 25 times their typical worker pay would face a 7 percent state corporate income tax rate. The rate for firms with a 400:1 divide: 13 percent. Senator Lori Hancock, an SB 1372 co-sponsor, hopes some tweaks to the bill will bring in the few extra votes needed for passage. CEO flacks are claiming that passage would spark a business exodus. Stephen Silberstein, the Marin County business leader who proposed SB 1372’s basic thrust, calls that claim ridiculous. SaysSilberstein: “No company is going to give up selling its merchandise in California. It’s too big a market.”||
As You Sow, a shareholder advocacy foundation, has just launched an executive compensation initiative to help shareholders use the “power of the proxy” to challenge CEO pay excess and create greater equity in corporate compensation. Learn what you can do.
|INEQUALITY BY THE NUMBERS|
Stat of the Week
Over the first decade of the 21st century, notesUniversity of Massachusetts analyst William Lazonick, the corporate giants in America’s S&P 500 sunk $4.5 trillion, a sum equal to 94 percent of their earnings over that span, in either dividends or stock buybacks designed to boost their share price — and executive compensation.
Inequality and the USA: A Nation in Denial?
America’s top central bankers didn’t make much time for inequality at their annual hobnob last week. Over in Germany, the world’s Nobel Prize winners in economics did. But few Americans noticed.
Every August, for most of the last four decades, top central bankers from around the world have been making their way to the Wyoming mountain resort of Jackson Hole for an invitation-only blue-ribbon economic symposium.
This year’s Jackson Hole hobnob, once again hosted by the Federal Reserve Bank of Kansas City, last week attracted the usual assortment of central bankers, finance ministers, and influential business journalists. But this year’s gathering also attracted something else: protesters.
For the first time ever, activists converged on Jackson Hole — to let the Fed’s central bankers know, as protest organizers put it, that “it’s not just the rich who are watching them.”
Over 70 groups and unions backed the protest and signed onto an open letter that calls on America’s central bankers to start nurturing an economy that works for workers. At one point, early on in the Jackson Hole gathering, protesters actually had a brief exchange with Federal Reserve Board chair Janet Yellin.
“We understand the issues you’re talking about,” Yellin told them, “and we’re doing everything we can.”
But that “everything” remains distinctly dispiriting. Many of Yellin’s fellow central bank officials, protesters note, are pushing the Fed “to put the brakes on growth so wages don’t rise” and, the fear goes, stimulate inflation.
Those “brakes”— higher interest rates — are definitely coming, Kansas City Fed president Esther George told protest leaders in another Jackson Hole exchange. America needs them, she added, to better “balance” the economy.
But America, the protesters point out, needs a balancing of an entirely different sort. The nation’s top-heavy economy needs to become less top-heavy. The nation can’t afford to be a place where far too many “struggle to secure even basic levels of dignity” while “the wealthiest Americans are richer than ever.”
The green-shirted protesters at Jackson Hole had plenty of support for that stance at last week’s other blue-ribbon global gathering of economic dignitaries, Germany’s fifth Lindau Meeting on Economic Sciences.
No hotshot central bankers show up in Bavaria for this Lindau conference, only Nobel Prize laureates in economics and aspiring economic researchers from around the world. This year’s Lindau event attracted half the world’s living Nobel laureates and over 450 young economists from more than 80 countries.
The central focus of their dialogue? Our increasing global maldistribution of income and wealth. Session after session zeroed in on “drivers of rising inequality” and the “counteractive measures” that can narrow our global divides.
Soaring inequality, Nobel laureate Joseph Stiglitz told the Lindau assembly, has brought the global economy well past the point where any tinkering will cure what ails us. The provocative title of his Lindau address: “Inequality, wealth, and growth: why capitalism is failing.”
Wages for average U.S. workers, Stiglitz notes, have fallen over the past 40 years — at the same time that American worker productivity has doubled.
“Any economic system that doesn’t deliver for a majority of its citizens,” notesStiglitz, “is failing.”
What sort of rebalancing could leave us with an economy that does deliver? Another Nobel laureate at Lindau, Scotland’s Sir James Mirrlees, put on the table a notion that no central banker at Jackson Hole would ever dare whisper: a 100 percent top tax rate on income over a certain point, in effect a “maximum wage.”
The 78-year-old Mirrlees explored in his address a series of model situations where a 100 percent top marginal tax rate would make eminent sense and went on to suggest applying such income caps “in certain fields or professions.”
A practical political possibility? Perhaps, says Mirrlees. “Particularly in Europe,” he observes, serious people are already discussing limiting banker pay.
In the United States, on the other hand, concern about income and wealth concentration hasn’t yet reached the point where ideas as bold as income caps are gaining any significant traction.
Why not? Another Lindau presenter, Judith Niehues of Germany’s Cologne Institute for Economic Research, has some clues.
Niehues has analyzed surveys of public perceptions about inequality in two dozen European nations and the United States. In all these nations save one, her research has found, people overestimate the level of inequality around them.
On average, for instance, the French believe that just under 15 percent of their nation’s households have incomes that fall between 80 and 110 percent of France’s median — most typical — income. In fact, nearly 28 percent of the French have middle class incomes.
And the share of the French people living in poverty, with incomes less than 60 percent the nation’s median income, is actually running at just half the poverty level that the French people estimate.
The one nation where people underestimate the inequality that engulfs them? The United States. Americans believe that a little over a quarter of their fellow Americans, 25.7 percent, have incomes that fall between 80 and 110 percent of the national median. The actual share of Americans clustered in this statistical middle: just 15.3 percent.
The United States, Niehues goes on to relate, ranks as “the only country in our sample with a more optimistic perception of the society than suggested by the actual distribution of incomes.”
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The United States, in sum, doesn’t just have the world’s most unequal major developed economy. The United States has the most people in denial about the inequality they live amid.
Niehues doesn’t go into the reasons for this denial. Her new paper does note one consequence: People who underestimate their society’s level of inequality turn out to be less likely to support policies that would help distribute their society’s income and wealth more equally.
Inequality, in other words, matters. But the perception of inequality may matter — in the struggle for a fairer future — even more.
Ann Crotty, Hidden costs of the CEO pay bonanza,Business Day Live, August 10, 2014. How executive excess eats away at enterprise effectiveness.
Harold Meyerson, Economic inequality, not just wages at the bottom, needs to be addressed, Washington Post, August 13, 2014. A solid explanation why.
Tom Malleson, Economic democracy in the 21st Century, OurKingdom, August 15, 2014. Worker co-ops, public banks, and participatory budgeting can build a more equal future.
Alex Ulam, How a widely beloved tax deduction really just benefits the well-off and exacerbates inequality, American Prospect, August 20, 2014. The top 2 percent of U.S. taxpayers gobble up 35 percent of the mortgage interest subsidy.
Ben Christopher, Data Wonk for the 99 Percent: The Shy Academic Who Diagnosed Income Inequality, California Magazine, August 21, 2014. A profile of UC Berkeley’s Emmanuel Saez.
Jim Wellehan, Excessive CEO pay is more than unfair, Portland Press Herald, August 22, 2014. A Maine business leader wants an 80 percent tax and an end to corporate tax deductions on all CEO pay over 50 times worker pay.
Lynn Stuart Parramore, The 1 percent’s devious new scheme: How CEOs are getting rich at your expense, Salon, August 23, 2014. How stock buybacks help turbo-charge U.S. income inequality.
Jay Parini, What Jesus knew about income inequality,CBS 6, August 23, 2014. Jesus discouraged wealth’s concentration, notes his latest biographer, and worried about its impact.
Looking for inspiration? Check out Too Much editor Sam Pizzigati’s gripping historyof the triumph over America’s original plutocracy. Read the entire intro chapter in your Web browser — and then try the publisher’s online discount.
Building Faith in a More Equitable Tomorrow
Jonathan Brandow, The Just Market: Torah’s Response to the Crisis of the Modern Economy. Langdon Street Press, July 2014, 238 pp.
The groups that make up the Faith in Public Life coalition, organizations that range from the Franciscan Action Network to Sisters of Mercy, emphasize in their new offering that we all suffer “when so much wealth is concentrated in the hands of a few.” In Catholic social teaching, In This Together posits, no question can be more important than “who benefits and who is left behind.”
The Just Market’s most fascinating section: Brandow’s discussion of the ancient Sabbatical and Jubilee years, two annual practices — one every seven years, one every 50 — that sought to keep society’s wealth evenly distributed.
Our contemporary societies, Brandow notes, “offer no similar initiatives to refresh economic opportunity from generation to generation.” We need some.
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