|September 30, 2013|
|Let others spread the doom and gloom. Here at Too Much eternal optimism reigns. And some weeks even bring real reason for that optimism. Last week, for instance, we learned the winners in the latest Nation magazine essay contest.
The Nation had asked high school and college students to pick “one root cause underlying our broken politics” and expound about that one root cause in 800 words. About 700 students across the United States responded. And what did they see at the core of what ails us? They saw plutocracy.
“Inequality,” as one winner, Colorado high school student Bryn Grunwald, put it, “makes democracy impossible.”
We don’t know, of course, exactly how many young people currently feel that way. But many, as the Nation student essays indicate, clearly do. And that augurs well for tomorrow. And what about what’s going on today? More on that, both the good and the bad, in this week’s Too Much.
|GREED AT A GLANCE|
|Some 46.5 million Americans, the Census Bureau reports, lived in official poverty last year, under $23,050 for a family of four, under $11,170 for a single person. Among kids under 18, over 20 percent spent 2012 under the poverty line. How much money would eliminating U.S. poverty take? Analyst Matt Bruenig last week crunched the Census data and came up with a total: $175.3 billion. That, he notes, would be enough to “bring every person in the United States up to the poverty line.” Some perspective: The wealth of America’s 400 richest individuals, Forbes magazine reports, has jumped by $300 billion over the last year . . .
The number three billionaire on the latest Forbes 400, Oracle software CEO Larry Ellison, last week took a pay cut. Ellison “voluntarily declined” to take a $1.2 million cash bonus. He didn’t feel he deserved it. In fiscal 2013, turns out, his Oracle didn’t reach its internal targets. What did Ellison take for the year? Just $78.4 million in stock and other compensation. What do Oracle shareholders get for all these millions? Something less than Ellison’s full attention. Last Tuesday, the chief exec voluntarily declined to deliver the keynote address at the annual Oracle OpenWorld conference, a key annual event that draws over 50,000 tech professionals. Why couldn’t Ellison attend? He had to zip over to San Francisco Bay to watch his $100-million catamaran sail in the America’s Cup, yachting’s premiere global competition . . .
Larry Ellison’s fellow yachtsmen have been feeling a tad defensive of late. Seems that some folks today consider the $4.1 billion spent last year building 169 super yachts an outrage at a time of chronic economic crisis. But the luxury yachting industry, the Financial Times reports, is fighting back. Shipyards and brokers are commissioning studies on the “economic value” yachting generates. Building one medium-sized super yacht, their story goes, creates 350 construction jobs! No other luxury sector, says the International Superyacht Society’s Ken Hickling, can match yachting’s capacity to “redistribute wealth.” Compared to fine art, jewels, and private jets, he insists, yachts clearly rank as the “most ethical” luxury. Adds Hickling: “Buying boats supports jobs. Buying big boats supports more jobs.” In other words, a solution for global hard times: bigger yachts.
Quote of the Week
“Indicators as diverse as happiness, mental illness, infant mortality, children’s educational performance, teenage pregnancy, homicide, imprisonment, social trust and social mobility all get worse as the income gaps within society deepen.”
|PETULANT PLUTOCRAT OF THE WEEK|
|Your company gets a $180 billion bailout, and 73 execs at your firm get over $1 million in bonuses. As the firm’s CEO, what do you get — besides $10.5 million in take-home? You get angry at the taxpaying public that kept your company from sinking! Robert Benmosche, the CEO of the bailed-out insurance giant AIG, last week called public outrage over AIG bonuses “just as bad and just as wrong” as the nooses that once terrorized the Deep South. Rep. Elijah Cummings (D-Md.), the son of sharecroppers “who actually experienced lynchings,” quickly termed Benmosche’s rant “unbelievably appalling.” Benmosche has been appalling before. Right after starting as CEO at the bailed-out AIG, notes CNN, he “requested use of AIG corporate jets for personal travel” and flew to his summer home in Croatia for a two-week vacation.||
Add your name to the petition that demands AIG CEO Robert Benmosche resign for comparing legitimate criticism of Wall Street bonuses to lynching in the Deep South.
|IMAGES OF INEQUALITY|
Find this itty-bitty island off the coast of Connecticut cute? So did Christine Svenningsen, the mega-millionaire widow of a party-goods magnate. Starting in the late 1990s, she spent $36 million out of her quarter-billion-dollar fortune buying up nine of these little gems. But island-hopping must get stale. Svenningsen recently put two of her “Thimble Islands” up for sale. This one, Jepson Island, comes with a century-old cottage and a $2 million price-tag.
Responsible Budget Reporting/ Pols who harangue us about the “high cost” of food stamps — and other programs meant to ease our gaping economic divides — like to throw around big budget numbers to confuse us. This handy online calculator from the Center for Economic and Policy Research lets you place these incomprehensible big numbers in a much more meaningful perspective.
|PROGRESS AND PROMISE|
|Two think tanks in Ireland, a nation that has been struggling mightily since the Great Recession hit, have just proposed a new antidote for Irish austerity: a wealth tax calibrated to fall only on Ireland’s top 2 percent. An annual 0.6 percent levy on household wealth over 1 million euros, the TASC and Nevin Economic Research Institute think tanks note, would raise revenue equal to at least 0.1 percent of Ireland’s GDP — and likely much more. Several European nations, TASC’s Thomas McDonnell notes, have abandoned wealth taxes over recent years. But poor policy design doomed these taxes. If unencumbered with myriad exemptions, says McDonnell, a new Irish wealth tax could be “an important element of social solidarity, particularly at a time of deteriorating living standards for a large section of the population.”||
|inequality by the numbers|
Stat of the Week
The median, or most typical, U.S. household collected $51,017 in income last year, the Census Bureau calculates. To live a “middle class” life — a house, a car, a periodic vacation, decent health care, a retirement nest-egg, and savings for your kids’ college years — requires over $81,000 in annual income, says the U.S. Department of Commerce.
The Year Persistence Edged Plutocracy
Exactly a hundred years ago, decades of progressive struggle finally paid off and outfitted America with a tool for braking the unlimited accumulation of grand private fortune.
The federal income tax this week turns a century old. A hundred years ago, on October 3, 1913, President Woodrow Wilson signed into law the first modern federal tax on income.
John Buenker has been researching and writing about the events — and attitudes — that led to that signing for a good bit of the last 50 years. His 1985 book, The Income Tax and the Progressive Era, remains the single most insightful history of the years of struggle that led to federal income taxation.
That history clearly matters to Buenker, an emeritus historian at the University of Wisconsin-Parkside. But should this history also matter to the rest of us?
Actually, John Buenker’s income tax history may matter more today than ever before. Here in 2013, after all, Americans face almost the same exact challenge our counterparts in 1913 faced. They lived amid a staggeringly intense concentration of wealth and income. We do, too.
Today’s plutocrats, in fact, strike Buenker as even “more dangerous than the Robber Barons of yore.”
The Rockefellers, Carnegies, and their ilk, the veteran historian told Too Much last week, could certainly be vicious. But these plutocrats had to “moderate their actions,” at least to some degree, because they needed U.S. workers and consumers. Their plutocratic wealth sat largely rooted in America’s “factories, mines, machinery, and transportation networks.”
Today’s wealthy have no such roots.
“With globalization, outsourcing, off-shore schemes, and ‘free trade’ agreements,” Buenker points out, “today’s ‘masters of the universe’ operate virtually beyond the reach of the even the most progressive of governments and powerful of unions.”
Still, even so, America’s original plutocrats a century ago did wield formidable power. The world had never seen fortunes as massive as theirs, and America’s deepest pockets seemed to enjoy nearly a lockgrip over the nation’s politics.
U.S. senators back then never had to stand before voters. State legislatures, not average Americans, decided who served in the Senate, and the state lawmakers who filled these legislatures often considered corporate giants their only constituents who mattered.
And should legislation hostile to plutocratic interests somehow slip into law, the Supreme Court stood ready to rescue the nation’s most comfortable. In 1894, with the West and South aflame in Populist revolt, Congress passed a modest income tax on America’s affluent. The Supreme Court the next year declared the tax unconstitutional.
Americans of modest means, despite this stacked political deck, would eventually prevail over America’s plutocrats in the battle to tax high incomes. Growing economic hardship, historian John Buenker believes, certainly played a key role in this victory.
The depression of the mid 1890s, the sharp inflation of the early 1900s, and the financial panic of 1907 all nurtured growing public unease over the political and economic domination the rich exercised over American life.
But this growing unease, Buenker observes, only translated into an income tax because progressive activists had spent decades on the “frustrating, brutal, and boring work” of building a “multifaceted, nationwide coalition” committed to taxing the rich.
“They kept grinding away against all that wealth and power,” says Buenker. “They refused to give up, no matter how many barriers their opponents threw in their path.”
Conservatives in Congress threw up the last major barrier in 1909. Challengers of plutocracy that year finally appeared to have enough votes to put an income tax into law. But a series of cynical congressional deals sent to the states instead a constitutional amendment that only gave Congress the authority to consider income taxation sometime in the future.
Conservatives felt sure this amendment would never gain enough states to win ratification. They would be unpleasantly surprised. In 1910 and again in 1912, progressive groups mobilized to elect pro-income tax state legislative majorities in state after state.
The 1912 elections also gave Congress pro-income tax majorities in the House and Senate, and these majorities would welcome the newly ratified income tax amendment and move expeditiously to act upon it.
That first income tax statute lawmakers sent to President Wilson in 1913 wouldn’t amount to much more than a nuisance for America’s rich — no dollar of income faced more than 7 cents in tax — but tax rates on high incomes would go on to rise significantly in the years to come.
By mid-century, notes Buenker, the income tax had become the federal government’s “most effective tool for dealing with the obscene maldistribution of income and wealth.” By 1944, the tax rate on income over $200,000 had jumped to 94 percent, and the nation’s top tax rate would hover around 90 percent for the next two decades, years of unprecedented middle class prosperity.
John Buenker started researching all this income tax history as a grad student in the mid 1960s. Back in those years, he remembers, historians took the income tax as a done deal. They saw progressive income taxation as a basic reform that had helped permanently transform the United States.
These historians a half-century ago never imagined the massive conservative counterattack that would soon start blindsiding the reforms of the Progressive Era, New Deal, and Great Society.
“I guess,” says Buenker, “we were living in something of a ‘fool’s paradise.’”
Given this conservative drive to “repeal the 20th century,” what would Buenker do differently if he were writing his income tax history today?
“I would go into much more depth,” he notes, “in researching the dynamics and mechanics of building the multifaceted, nationwide coalition that brought the income tax into effect.”
The lesson from that coalition? Achieving success against concentrated wealth and power, says Buenker, “takes persistence over a long period of time.”
We need, he believes, to show that same persistence today in the struggle against America’s contemporary plutocracy.
“We need to keep plugging away because trying to change things protects us from accepting them,” the historian adds.
And Buenker, for his part, will keep plugging.
“As a grandfather and great grandfather,” as he puts it, “I don’t want my progeny to inherit the world that the Koch brothers, Fox News, and the Tea Party want to force upon them.”
Jared Bernstein, The Path to Dysfunction, Economix, September 24, 2013. How concentrated wealth and lax campaign finance mean big money can buy the facts, not just the politics, it wants.
Chuck Collins, Our Road to Elysium, OtherWords, September 25, 2013. A new sci-fi film envisions an astonishingly unequal Los Angeles in the year 2154. A new documentary may help avoid that future dystopia.
Rick Wartzman, The Long View: Why ‘Maximizing Shareholder Value’ Is on Its Way Out, Time, September 25, 2013. The director of the Drucker Institute explores the backlash against short-term corporate thinking.
Alyce Lomax, These Corporate Managers Aren’t Sweating Over CEO-to-Worker Pay Disclosure, Motley Fool, September 26, 2013. Not all top execs are brazenly plundering.
Gus Lubin, Three Charts that Show How Income Inequality Is Hurting America, Business Insider, September 27, 2013. Our economic divides are limiting our lives: some compelling visual evidence.
Paul Krugman, Plutocrats Feeling Persecuted, New York Times, September 27, 2013. The rich already have the multiple big houses, the servants, the private jet. What they really want now: our adulation.
Sanjay Sanghoee, A solution to skyrocketing CEO pay, Fortune, September 27, 2013. Offer firms tax credits if they keep their CEO-worker pay ratio within modest bounds.
|NEW AND notable|
Much, Much More than a Lesson in Economics
Inequality for All, a documentary film directed by Jacob Kornbluth. National release: September 27, 2013. Running time: 110 minutes. Rating: PG. Music composed by Marco D’Ambrosio. Cast: Robert Reich.
If you know anything at all about Robert Reich, the former U.S. labor secretary, you’ll walk into Inequality for All, the just-released feature film that revolves around his work and thought, with a set of specific expectations.
You would expect, for starters, to laugh. Reich has a delightful, self-deprecating sense of humor, and Inequality for All doesn’t disappoint on this score. You will laugh.
You would also expect any film that features Robert Reich to be deeply informative, and this movie doesn’t disappoint here either.
Seldom have serious stats come through, on the big screen, any more clearly than they do in Inequality for All. The film’s always effective graphics drive home just how amazingly unequal the United States has become — and why.
So the big surprise in Inequality for All? That may be how emotionally moving the film turns out to be. Director Jacob Kornbluth lets both Reich and average Americans share their personal stories. The deeper they go, the more inspiring the film becomes.
Inequality for All doesn’t, to be sure, cover all the inequality bases. No single movie can. The film, for instance, does a fine job getting across how deeply inequality has savaged our economy and our democracy.
But the film doesn’t go into how inequality has also savaged our social fabric and left us with a stressed-out society where people, affluent and poor alike, don’t live as long as people who reside in nations more equal than the United States.
The good news: The next big inequality movie on the horizon — The Spirit Level, a documentary based on the work of British epidemiologists Richard Wilkinson and Kate Pickett — neatly fills in the gaps that Inequality for All leaves behind. Watch for this film next year.
In the meantime, gather your friends, co-workers and colleagues, neighbors and family, and go see Inequality for All. You’ll laugh. You’ll learn. And you may even walk out with a lump in your throat.
Looking for Inequality for All theater listings? Check here.