|November 11, 2013|
|Back in 1980, the richest 1 percent of New Yorkers took in 12 percent of their city’s total personal income. The current top 1 percent share: 39 percent. New York has become the most unequal major city in America.
New Yorkers have noticed. Last week, by a landslide margin, they voted to replace their three-term billionaire mayor, Michael Bloomberg, with Bill de Blasio, a “fiery voice of New York’s disillusionment with a new gilded age.”
That disillusionment first exploded out onto America’s political center stage two years ago with Occupy Wall Street. Now this resistance to inequality has a real foot in the door, an opportunity to start remaking a great city.
Seventy years ago, with the fiery Fiorello LaGuardia, the people of New York helped fashion a new middle class America. Can they repeat that performance? Maybe. The one certainty: We all have a stake in their success. In upcoming issues of Too Much, we’ll be closely tracking their New York story.
|GREED AT A GLANCE|
|Feeling depressed? Analysts with the Harvard School of Public Health can make an educated guess where you probably live: in an distinctly unequal place. They’ve just published the latest research that links depression to income distribution. Residing in a state “with higher income inequality,” the researchers behind the new study find, “increases the risk for the development of depression among women.” Their research controlled for a wide range of other possible explanations, including prior family history of depression. Women in unequal states — like New York — turned out to be “nearly twice as likely” to experience depression as those in Utah, Alaska, and other much more equal states . . .
The U.S. Justice Department has shut down a major hedge fund. In a settlement announced last week, SAC Capital has pled guilty to insider trading and will shell out $1.8 billion in penalties. The settlement bans SAC from managing money for outside investors. From now on, the fund will essentially manage only the $7 billion personal fortune of Steven Cohen, SAC’s owner and top exec. Cohen will likely enjoy his fortune in peace. Prosecutors may still file criminal charges against him, but they’ve ruled out a long-jail-time racketeering case. The guilty plea from SAC they’ve extracted instead, complains New Yorker analyst John Cassidy, “perpetuates the myth” that corporate abstractions “rather than flesh-and-blood humans are responsible for financial wrongdoing.”
If you run a financial institution eager to get your hands on rich people’s money, how can you best establish your street cred with the deep-pocket crowd? More and more banks these days are choosing to become scorekeepers — of grand fortunes. Last week Switzerland’s UBS entered the scorekeeping sweepstakes with its inaugural global “Billionaire Census.” As of June 2013, this new census pronounces, a record 2,170 individuals could legitimately claim billionaire status. The world’s fastest-growing billionaire hotspot: Asia. That’s great news for mega movie-screen maker IMAX. The company has just signed a deal to market home IMAX screens in China and environs. The installations will start at $250,000 each.
Quote of the Week
“We will bring an end to inequality in this city.”
|PETULANT PLUTOCRAT OF THE WEEK|
|Eddie Lampert used to think he could do anything. He made billions in hedge funds, then decided he’d show the world how to turn corporate dreck into a world-class company. In 2005, he bought up K-Mart and Sears and vowed to create a global retail powerhouse. But no powerhouse ever materialized, and Lampert has blamed everything from the weather to worker pensions. Observers point instead to Lampert’s preference for buying back shares — to inflate his share price — over updating “his tired lineup of stores and merchandise.” In 2012, an analysis last week noted, Lampert invested just $1.46 per square foot in his stores. His competitors average $9.45. Lampert seems to invest far more liberally in himself. Last year he spent $40 million for a winter pad in Florida.||
|IMAGES OF INEQUALITY|
Anna Healy Fenton, an enterprising journalist on the wealth beat, has come up with a new list of “Christmas toys for wealthy boys.” Among her featured items: the exotic poker boxes of London’s Lancelot Lancaster White. This UK box maker bills itself as the “world’s most exclusive recycling company.” One of its limited-edition poker boxes uses “redundant wood removed from the hull of Lord Nelson’s battleship HMS Victory.” The firm’s poker boxes can top $165,000 each.
Income Share of the Top 1 Percent, 1913-2012/ An annotated chart from historian Colin Gordon that helps explains why America’s income distribution became much more equal over the first half of the past century — and much less equal since.
|PROGRESS AND PROMISE|
|Another sign of inequality’s rising profile in public policy circles: A long-time Washington insider with ties to both Presidents Clinton and Obama is launching a new research center to explore the causes — and impact — of America’s growing economic divide. The moving force behind the new center, Center for American Progress founder John Podesta, says he hopes the new Washington Center for Equitable Growth will bring policy makers the most rigorous inequality research available. Heather Boushey, a veteran progressive economist with a background in inequality work, will direct the new center, and a number of insightful scholars on inequity — like Berkeley’s Emmanuel Saez — have already enlisted.||
Top U.S. corporate execs routinely fatten their corporate bottom lines — and own paychecks — by stiffing Uncle Sam on taxes. U.S. senator Carl Levin’s Stop Tax Haven Act would close some of the tax code’s worst loopholes. Sign on your support.
|inequality by the numbers|
Stat of the Week
You don’t have to live in a major metropolitan area to live in an staggeringly unequal one. Working off Census Bureau 2012 income data, 24/7 Wall St. has calculated America’s ten most unequal metro areas. Number one on the list: Sebastian-Vero Beach in Florida, where 17.2 percent of local households rate as officially poor and 33.8 percent rate within the nation’s top 5 percent.
Counting Dollars the Rich Want Uncounted
Americans are gaining, ever so slowly, a more accurate picture of just how wide the gap has stretched between the nation’s most fabulously privileged and everyone else.
How unequal have workplaces in the United States become? Our best answer happens to come from an unlikely source: the Social Security Administration.
Social Security statisticians each year tally up how much compensation gets reported on W-2s, those forms that employers have to file for all their employees, from clerks to chief executives. Social Security reports these numbers out, by income level, once a year — and in the process paints an incredibly detailed pay portrait of the contemporary American workplace.
For typical Americans workers, this workplace has become steadily less rewarding. The latest Social Security figures, released last month, show annual wages for the typical American worker down $980 in 2012 from five years earlier. David Cay Johnston, the nation’s top analyst of Social Security’s wage data, last week placed that total in a paycheck perspective.
The median American worker — an employee at the nation’s exact pay midpoint — labored 52 weeks last year, notes Johnston, “but earned about the equivalent of working just 50 weeks at 2007 pay levels.”
Over in America’s elite corner offices, by contrast, the pay keeps pouring in. The ranks of Americans making over $5 million a year grew 27 percent in 2012, the new Social Security figures show, to nearly 9,000 most fortunate souls. The actual compensation this cohort collected soared 40 percent over what the $5 million-plus crowd pocketed in 2011.
But these numbers, we need to keep in mind, don’t tell America’s full income inequality story. Social Security statisticians only tally paycheck data. Their work leaves uncounted income from dividends and interest, as well as capital gains and profits from business operations.
For income totals that take these and other non-wage income streams into account, we need to dive into data the Internal Revenue Service collects.
University of California economist Emmanuel Saez has done that diving. His latest calculations, released this past September, show that taxpayers in America’s most affluent 0.01 percent grabbed 993 times more income in 2012 than taxpayers in America’s bottom 90 percent averaged.
In 1975, this lofty top 0.01 percent only averaged 114 times the income of America’s bottom 90 percent.
These IRS numbers tell us a great deal about America’s grand income divide. Do they tell us everything? Not quite. The dramatic IRS figures on high incomes only count what America’s rich want the government to count. They don’t count all the income the wealthy harvest from secret tax havens overseas.
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How much income are these secret stashes generating? We’re slowly getting a better idea, thanks in part to a federal amnesty program for tax evaders.
Affluent tax evaders can currently avoid criminal prosecution if they pay up all their taxes overdue on their secret income, plus interest and penalties. With this amnesty program in effect, the Wall Street Journal reports, IRS officials are now seeing “a new rush by U.S. taxpayers to confess secret offshore accounts.”
What’s driving this rush? To a surprising degree, Swiss banks. Four years ago, the long-standing Swiss bank secrecy wall started cracking when officials at the Swiss banking giant UBS found themselves forced to admit they’d been helping Americans conceal assets. UBS had to pay out $780 million in penalties.
Other Swiss banks, eager to avoid a similar fate, are now pushing their secret American depositors to end the error of their tax-evading ways, and this banker pressure is apparently having an impact.
Just one New York attorney, Bryan Skarlatos, has already handled over a thousand confessions. Skarlatos used to receive just a couple confession calls a week. How he’s getting two to three a day. Many of the wealthy Skarlatos takes to the IRS have over $10 million in their secret stashes, a few over $100 million.
We don’t know yet how many billions the current amnesty will eventually produce. As of last year, 38,000 U.S. taxpayers had revealed undeclared offshore assets. The declarations from these tax evaders, the IRS reports, figure to bring in $10.5 billion. But this total doesn’t cover the recent confession surge.
The final collections will undoubtedly dwarf the sums so far collected — and fill in still another chapter in America’s deeply distressing inequality story.
John Ketchum, Income inequality and the pursuit of un-happiness, Marketplace, November 5, 2013. New OECD data reinforce the link between unhappiness and maldistributions of income.
Paul Buchheit, Five ways the super rich are betraying America, Salon, November 5, 2013. Wealthy “takers” are giving up on the nation that enabled their fortunes.
Neil deMause, No Class Warfare, Please, We’re Americans, Fairness & Accuracy in Reporting, November 2013. An excellent analysis of recent U.S. media coverage — and avoidance — of America’s widening economic divide.
David Callahan, De Blasio’s Opportunity: A Local Attack on Inequality, Policy Shop, November 6, 2013. Solid ideas for tackling New York City’s near-record inequality are sitting on the drawing board.
Robert Reich, What Tuesday’s Election Results Really Mean, Common Dreams, November 6, 2013. Americans are catching on to the scourge of the nation’s raging inequality.
Vikas Bajaj, Protesting Twitter, New York Times, November 8, 2013. The Twitter initial stock offering places the divide between San Francisco’s haves and have-nots in stark relief.
Carol Morello and Ted Mellnik, Washington: A world apart, Washington Post, November 10, 2013. A detailed look at increasing economic segregation in the nation’s capital and beyond.
Get the scoop on this new history of the struggle America’s plutocrats lost.
|NEW AND notable|
A New Take on Inequality and Crime
Hector Gutierrez Rufrancos, Madeleine Power, Kate Pickett, and Richard Wilkinson, Income Inequality and Crime: A Review and Explanation of the Time-Series Evidence, Sociology and Criminology, October 2013.
Do crime and inequality run together? Sociologists, psychologists, and epidemiologists — scientists who study the health of populations — have over recent decades released serious research that does show a strong connection.
But most of this research has been what investigators call “cross-sectional.” Researchers have compared different places and found that these places — be they nations or U.S. states or metro areas — will be more likely to have higher crime rates if they also have higher rates of income inequality.
British investigators Hector Gutierrez Rufrancos, Madeleine Power, Kate Pickett, and Richard Wilkinson have chosen a different focus. In this new paper, they probe whether “time-series” data confirm the crime-inequality connection. In other words, does crime increase over time as inequality increases?
This new analysis reviews 17 different time-oriented research efforts and “very strongly” confirms an inequality link with property crime. The link with violent crime turns out to depend on the type of violence. Homicides, murders, and robberies show a sensitivity to rising inequality. Other violent crimes don’t.
That finding may, the authors of this Inequality and Crime study note, reflect criminal incident “measurement error.” High-profile violent crimes like homicides typically get reported comprehensively. Other violent crimes — most notably rape — tend to get underreported.
Just how does inequality impact crime? We still have, the researchers note, “no conclusive evidence” on the exact mechanism linking inequality and crime rates.
That remains, the four add, an area “where future research would be valuable.”