Tuesday, March 6, 2012

Inequality and the Billionaire's Club

Lifestyles of the Rich and Famous was a television series hosted by Robin Leach from 1984 to 1995. Leach ended each episode with a wish for his viewers that became his signature phrase, "champagne wishes and caviar dreams."

But we didn't know back then, how they got to be...sooo rich. Average Americans had admired the very wealthy, and many worked hard and once aspired to be rich one day too. They weren't aware that the game was fixed. Now we're more aware of American Greed. but people still watch shows like The Real Housewives of Beverly Hills. But why, just to have someone's else's God-given luck and wealth rubbed in their face?

Inequality has been the top issue in the public agenda for sometime now; partly as a result of the financial crisis that helped draw attention to this topic, and also because of the housing crash, massive unemployment, record poverty, stagnant wages, high gasoline prices, and the Occupy Wall Street movement and the 99% Declaration.

Banks, insurance companies, and the auto industry relied on the support of millions of taxpayers, while millions of others had lost their jobs. Then people began to see the compensation of their CEOs as obscene – with an average 2010 pay package of $11.4 million.

American athletes have done well too, as did Hollywood actors; but if you look deeper into the billionaire's club, Forbes lists the top 40 hedge fund managers who earned a combined income $13.2 billion in just one year alone!

Mitt Romney's tax plan is to keep theirs (and his) tax rate the same, at 15% for capital gains, while he wants to lower middle-class wage earners income taxes by 20% (on income of $35,350 to $85,650, from 25% to 20%) -- and he also wants to keep the cap on Social Security taxes for the wealthy. (Read: Obama Tax Plan vs. Mitt Romney's)

Over the last 30 years, as the U.S. population grew from 200 million to over 300 million, those at the top of society have long captured the gains from economic growth. From 1970 to 2008, the annual incomes of the top 1% of U.S. taxpayers rose threefold in real terms -- from $380,000 to $1,140,000. By contrast, the incomes of the bottom 90% remained where they were in 1970 – at $31,500 per year (in real 2008 dollars). Read: A Tide of Inequality: What can Taxes and Transfers achieve?

The Bloomberg Billionaires Index just started a new daily ranking of the world’s 20 richest people and posts an article on how they are ranked. (Bloomberg says it will not consider New York Mayor Michael R. Bloomberg for its list because of his ties to the company.)

Forbes also has a list called The World's Billionaires and the Forbes 400, which is a list of the 400 richest Americans, who are all billionaires. Forbes also has the Celebrity 100 list (Oprah Winfrey ranks #1 with $290 million, just a little more than Mitt Romney).

The #1 ranked for CEO pay on the Forbes list of highest paid American executives is Stephen J Hemsley of UnitedHealth, who earned $102 million last year.

The #2 ranked was Edward A Mueller of Qwest Communications, who earned $65.8 million. It's interesting to note that Mueller's predecessor, Joseph P. Nacchio, was convicted of 19 counts of insider trading in Qwest stock. On July 27, 2007, he was sentenced to six years in federal prison. (Read: New Study: 10% on Wall Street are Psychopaths)

Yes, CEO salaries (and those of hedge fund managers) continue to soar while the rest of America futilely spins its tires in an economic ditch. Yes, our nation is facing a new Gilded Age where the top one percent holds as much wealth as the bottom 90 percent combined. But did they, as individuals, really earn it? Besides just "hard work", did luck or privilege have anything to do with it?

And no, American workers don't lack jobs skills, they just can't compete for jobs at Apple, whose Foxconn factory workers in China earn about $400 a month. Before being forced to work overtime, they're paid wages ranging between $1.50 and $2.20 an hour. The Republicans haven't been honest about why jobs are leaving our shores - - it's not because of "over-regulation" or "high taxes", it's always been for cheaper wages.

Elizabeth Warren brought the theme of inequality closer to the spotlight last year when she said, “There is nobody in this country who got rich on his own… You built a factory out there — good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for… You built a factory and it turned into something terrific or a great idea — God bless! Keep a Big Hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

Governments can reign in inequality through minimum wage legislation and collective bargaining rights to compress the primary distribution of incomes. Republicans argue that government workers shouldn't be paid more than those in the private sector. Why? Was there some "rule" that says they shouldn't? Besides, government jobs have barely kept pace with the rate of inflation over the last 30 years. It's the private sector that has been lagging behind in real wages, and busting labor unions and creating "right to work" states to achieve this...to further income inequality and wealth disparity between the CEOs and their employees. It was no accident.

And who are all these people? Just start looking at the CEOs of America's largest private companies and the publicly traded corporations on the Forbes Global 2000 List.

Jonathan Baird writes for the Monitor "The truth is that the image of the 1 percent and the 99 percent captures an unfortunate sociological reality. Over the past 30 years, America has gotten way more unequal. The rich have gotten fabulously richer, and the poor have gotten desperately poorer - but with a wrinkle. Many formerly middle-income people have fallen into the ranks of the poor, a category that has considerably expanded. Compared to the 1960s and 1970s, we have moved backward toward a more unequal society." (Read: The Republican's War on the Poor)

Liberty is now defined as the value of the billionaire buying elections. It is the value of the payday lender loaning at 500 percent annual interest. It is the mortgage bubble scam. It is the billionaire sheltering his money in the Cayman Islands. (The more money they have, the more inclined they are to also evade paying taxes.)

We need to get beyond automatic dismissal of any new idea as "socialism" or "tax and spend." The government, especially the federal government, does not deserve the demonization it has received in recent years. It is the government that has shored up capitalism during its boom-and-bust cycle. Over the past 80 years, it is the federal government, whatever its faults, that has vastly contributed to the quality of our collective lives. Think Social Security, unemployment insurance, Medicare, Medicaid, the Department of Veterans Affairs, civil rights, Head Start, and Legal Services, to name a few. These programs have made the Unites States a more civilized, humane society. We would be so much worse off without them. (And "big government" has always been a very good job creator, despite the Republican bashing.)

Thomas Schakker writes in The Baltimore Sun : "Income mobility is also related to income inequality. Depicted by what's known as the Gatsby Curve, rising inequality tends to be associated with lower inter-generational income mobility. This makes intuitive sense: When income and wealth are largely inheritable, the ability of families to "rise and fall" from one generation to the next abates. (Also, read: Gift Taxes on the Fabulously Rich)

The current state of affairs is no accident; in fact, it is the product of willful political design. In the 30 years following the Reagan revolution, America became both more unequal and more class-rigid because powerful, wealthy forces steadily constructed and reinforced a stratified society. How does this happen?

You first have to create disparity. So you prosecute a state-by-state assault on unionization in favor of "right to work" legislation (that is, "right to work for less"). You resist raising or even inflation-adjusting the minimum wage. You attack the pension and health care benefits of these less-powerful, lower-paid workers - if you haven't already replaced them with part-time or foreign-based substitutes who qualify for little if any benefits. Soon enough, the ratio between the incomes of corporate chiefs and their lowest-paid workers widens.

Next, you cement these disparities for the longer term. To do that, you gradually shift the tax burden from wealth (inheritance and capital gains) to work (payroll, income taxes), making gains more inheritable. You rely on a property tax-based public education system that perpetuates advantage by providing the best schools to the communities already at the front of the economic queue. And you cling to an antiquated, employer-based health care system in favor of a universal-coverage system, making it difficult for poorer, part-time workers to maintain coverage.

Finally, you make sure that voters in a democracy are unable to use the ballot box to reverse this state of affairs by pushing for populist correctives. To thwart them, the wealthy and well-connected spend a sliver of their resources to protect the rest. And although the Democrats have their corporate minders and trade association connections, when it comes to skewing the political process in favor of the haves over the have-nots, conservatives and Republicans are without peer.

The Citizens United case granting corporations and wealthy Americans vast influence over campaigns was authored by Republican-appointed Supreme Court justices, and the conservative American Legislative Exchange Council is working to systematically limit ballot access in states. Some on the right are even calling for a repeal of the 17th Amendment and a return to the pre-1914 practice of state elites appointing U.S. senators. Why not go the last full step toward a Colonial revival and have state legislatures choose presidential electors and re-impose 18th-century property qualification for voting, too?

Should anyone dare complain about the conversion of America from a meritocracy into a plutocracy - or rather, back into the plutocracy it once was - just start screaming about "class warfare." The only thing left to do is find a plutocratic poster boy.

Enter Mitt Romney: the son of a wealthy politician who, if elected, would become the wealthiest president since the Colonial era. Now, here is a man whose time has come.

Government can focus on the secondary distribution of disposable incomes and use their tax and transfer systems to offset some of the inequality. The Republicans label this as "socialism" and "redistributing the wealth", akin to stealing from the rich to give to the poor. For that last 30 years, this has been their big lie. Wealth has been redistributed upward to the top 1% for decades. Young people don't remember what is was like to work an average job and earning a good living relative to the cost of living 30 years ago.

Barack Obama has proposed raising taxes on the well-to-do, both for revenue and distributional reasons. This raises, anew, the question of what the revenue-maximizing top rate is. Conservatives continually assert that the United States is always on the wrong side of the Laffer Curve, such that a tax rate reduction will increase revenues. A review of recent literature on this subject, however, indicates that the top tax rate could rise very substantially before a further increase would lead to lower revenues. Estimates suggest that this rate is at least 63 percent and probably much higher (almost as high as they were during the Fabulous Fifties).

Of course, the Republicans don't want to tax the "job creators", the top 1% of the 1%. In the middle of a presidential primary season, no candidate on the Republican side has gotten close to touching this issue. It has been like kryptonite to Superman.

On the other hand, on Democratic side, President Obama talks about jobs, mortgage modification, taxing the ultra-wealthy, building infrastructure, regulating the banks, ending oil subsidies, and helping the 99 percent.

Billionaire Parties - "The splashiest billionaire fetes proves that these titans don’t just know how to make money, they also know how to spend it. Their parties--often costing well into the millions--are spectacular exercises in hedonism, frequently featuring intimate performances by rock stars, week-long extravaganzas on private islands and mingling with A-List crowds of other magnates and celebrities. Not to mention all the finest champagne, caviar and other gourmet treats they can get down their gold-plated gullets."

- - - This is what $1 billion can buy you today - - -

For someone like Bill Gates, that's x (times) 59.

A $150 million mansion (The Spelling Manor in Los Angeles)

A $2.4 million sports car (2011 Bugatti Veyron Super Sport)

A $600 million ultra-luxury yacht (The 557-foot Eclipse)

A $60 million private jet (VistaJet RETNA), a little more than a Gulfstream G550

And to help celebrate your good fortune, a $275,000 bottle of rare champagne (Shipwrecked 1907 Heidsieck)

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