Chronicles of Inequality [Oct. 16, 2013]

In Bell, a small Los Angeles County working class community, that modest power and authority once belonged to Angela Spaccia. As Bell’s assistant city manager for a seven-year span that ended in 2010, Spaccia helped stuff hundreds of thousands of dollars into the pockets of the city’s top officials, including herself. Spaccia in one year alone took in $564,000.

Prosecutors eventually caught up with Spaccia and her pals. Her boss, the Bell city manager, cut a plea deal in October to 69 corruption charges. He pulled in $1.18 million in his most lucrative year. Spaccia chose to go to trial instead, claiming she did nothing illegal.

“Everyone’s greedy,” her defense attorney argued in November. “There’s no crime in taking too much money.”

Jurors disagreed. Last week, they found Spaccia guilty on multiple counts of criminal behavior, including one misappropriation of public funds designed to pump $15.5 million in pension checks to Spaccia and her boss.

9/ Dylan Lauren: Sweet Squeezer

They don’t come more suave and sophisticated than Dylan Lauren, the only child of billionaire designer Ralph Lauren. Or more ambitious either.

Not for Dylan the empty heiress life. Over a decade ago, she opened up her own business, a luxury candy emporium on Manhattan’s Upper East Side where moldings atop display cabinets mimic dripping chocolate and a cocktail bar offers Gummy Bear martinis.

“Dylan’s Candy Bar” would go on to become wildly successful, expanding into Miami Beach, Los Angeles, and the Hamptons, all the prime watering holes for America’s super rich.

Things today could hardly be peachier for the young Lauren. She has by her side a totally smitten hedge fund manager husband. Maybe even better, the 39-year-old has realized the life’s dream she’s had ever since she first saw Willy Wonka and the Chocolate Factory at the ripe old age of six.

“I just wanted,” as Dylan gushed recently, “to live in a world full of candy.”

Dylan’s employees, meanwhile, would be satisfied with a world where they could just make ends meet. Workers at her Manhattan flagship store have been protesting their meager $8.50 hourly compensation and management policies that make sure employees never work enough hours to qualify for overtime pay.

The New York workers are seeking full-time weekly set schedules and a hourly wage at $13.99, the price of a Dylan’s Candy Bar pound of candy.

Earlier this month, in a pouring rain, the workers demonstrated to make their case, carrying lollipops that read, “Dylan, we’re not suckers.” Their chant: “Dylan, Dylan, Candy Queen, you’re filthy rich, so share your green!”

8/ Michael Duke: Low Wages All the Time

This may well be Walmart CEO Michel Duke’s last hurrah in America’s most greedy. He’ll be stepping down as CEO early in 2014, after an embarrassing final year at Walmart’s summit.

The crowning embarrassment? At the company’s 2013 annual meeting, a glitzy affair that management packs with “loyal” employees, one Walmart worker actually won cheers when she denounced Duke’s $20.7 million 2012 paycheck.

Researchers have calculated that Duke is essentially making$6,898 an hour, 779 times the $8.86 average Walmart wage.

In the nation’s capital this fall, city council members tried to up that worker average. They passed a bill that would have required Walmart stores in D.C. to pay at least $12.50 an hour. Duke reacted swiftly. He had his company threaten to pull up stakes if the bill became law.

Washington’s mayor promptly panicked and vetoed the measure.

Duke took a PR pounding for that threat and still another pounding when the Demos think tank in New York revealed that the $7.6 billion Duke had Walmart spend last year buying back company shares, if redirected to worker compensation, could have raised Walmart’s lowest wages by $5.83 an hour — and ensured all the company’s workers at least $25,000 for full-time work.

Poor Michael Duke won’t have to face any more pounding come his retirement this February. He won’t face any financial worries either. Duke is sitting on $113.2 million in retirement assets, thanks to a tax loophole that lets corporate execs annually set aside unlimited sums, tax-free, into their retirement accounts.

Duke’s retirement stash, notes the Institute for Policy Studies, “could yield him a monthly retirement check of $669,169.” The average Walmart worker 401(k), by contrast, will generate a monthly retirement check of $89.

7/ Art Pope: A Backroom Bully Goes Public

In North Carolina these days, few people think Francis first when they hear “Pope.” A different Pope has been dominating headlines here, an exceedingly deep pocket who owes his fortune to a discount store chain his daddy built.

In the run-up to the 2012 elections, this Art Pope invested over $40 million of his personal wealth to gerrymander how North Carolinians cast their votes.

The gerrymandering worked. This year opened with the state sporting — for the first time ever — a conservative GOP governor, Supreme Court majority, and legislature all at the same time. The state budget director? Pope himself.

Pope’s budget priorities would soon start wreaking havoc with the lives of North Carolina’s most vulnerable. In a state with America’s fifth-highest jobless rate, lawmakers indebted to Pope and his millions slashed top weekly jobless benefits and denied 170,000 long-term jobless special federal aid.

North Carolina’s conservatives didn’t stop there. They put in place, notes one Duke University analyst, an agenda that cuts education and social programs, shifts the tax burden “toward the less affluent,” and restricts voting rights.

North Carolinians have responded to this rich people-friendly legislative onslaught with spirited demonstrations. The latest protest: an “educational picket campaign” outside the discount stores the Pope family owns.

Art Pope, sums up state NAACP president William Barber, has brought a “cynical and sinister form of wealth and power manipulation” to North Carolina.

Pope has put his stores “deliberately and publicly in communities of low wealth,” used low wages to make his wealth “off of people” in these communities, and then employed his resulting power, notes Reverend Barber, “to push and promote policies” that undercut the quality of average people’s lives.

6/ Tim Cook: Lost Even with a Compass

The $100 million club, researchers from the corporate watchdog GMI Ratings revealed this past October, has become a bit less exclusive. Last year, for the first time, America’s ten highest-paid CEOs all realized over $100 million in compensation. High on that list, at $143.8 million: Apple CEO Tim Cook.

Cook’s good fortune came as no surprise to computer industry observers. Apple retail stores, notes Forbes, “take in more money per square foot than any other United States retailer.”

Yet Apple store employees only average $25,000, and Apple can’t seem to afford to compensate its 42,000 retail workers for the time they spend every day waiting to get searched — for stolen goods — before they can leave the store premises.

Two former Apple employees have filed a class-action lawsuit to recoup those unpaid wages, estimated at about $1,500 per year.

But give Apple credit. The company remains an equal-opportunity exploiter. The company mistreats workers both at home and abroad. Workers at Apple’s offshore suppliers continue to work in factories that, says the Economic Policy Institute, “reflect some of the worst practices of the industrial era.”

Apple, details EPI analyst Isaac Shapiro, “has not met commitments to ensure that workers in its supply chain receive retroactive compensation for working unpaid overtime” or “ensured promised wage increases.”

Apple CEO Cook’s response to critiques like this?

“Apple,” he told reporters before U.S. Senate testimony this past spring, “has a very strong moral compass.”

5/ Ron Packard: The ABCs of Avarice

Some of us look at school buildings and see students learning. Ron Packard looks at schools and sees himself becoming fabulously richer — if he could only empty the buildings.

Packard runs K12 Inc., a for-profit company that specializes in “virtual” education. K12 Inc. operates online “schools” that supply lessons to kids sitting in front of computers, a business endeavor that Packard pronounces a noble step toward “educational liberty.”

“Kids have been shackled to their brick-and-mortar school down the block for too long,” he has declared.

An army of corporate lobbyists has been spreading this message over the past five years, backed by the right-wing American Legislative Exchange Council, and more than three dozen states have now enacted legislation that lets companies like K12 Inc. grab students — and tax dollars.

K12 Inc. currently has nearly 130,000 students in its “virtual learning” empire, with only one problem. Compared to their traditional school peers, K12 Inc. students are not doing much learning. Critics are, understandably, blasting the K12 Inc. business model as a giant scam.

In that model, heavy K12 Inc. advertising on kid-centric media like Nickelodeon gets kids enrolled for the company’s offerings. State government education officials, after their annual student “head count,” then pay K12 Inc. for each kid signed up. But after the head count, many of the “virtual” students drop out. K12 Inc. doesn’t mind. The company gets to keep the money.

Lots of it, enough to reward Packard over $19 million in personal compensation the last five years. Not bad, notes the Center for Media and Democracy, for a former Goldman Sachs executive “who started K12 Inc. with a $10 million investment from convicted junk-bond king Michael Milken.”

4/ Lloyd Blankfein: An Appetite for Aluminum

Five years ago, Wall Street’s Goldman Sachs tottered near disaster, as did every other major U.S. bank.

America’s taxpayers came to the rescue. Goldman CEO Lloyd Blankfein soon had at his disposal $814 billion in near zero interest loans from the Federal Reserve and $10 billion from the Treasury Department.

Blankfein has made the most of this generous support. Forbescalculates his total compensation for the last five years at $159.5 million. Blankfein currently holds over a quarter-billion dollars worth of Goldman shares in his personal portfolio.

How have Blankfein and Goldman Sachs done so nicely the past five years? We learned a good bit about that in 2013. The juiciest revelations came over the summer when the New York Times exposed a commodity speculation scheme that Goldman “intentionally created” to drive up the global price of aluminum.

This scheming, the Times estimates, has cost consumers $5 billion since 2010.

Blankfein has shared, at tax time, precious little of the profits from Goldman’s speculative ventures, thanks in large part to Goldman’s dozens of offshore tax havens. In 2010, these tax havens cut Goldman’s tax bill by $3.32 billion.

Blankfein is putting his share of those tax savings to something less than productive social use. News reports have him down as an advance buyer in the new $1 billion Faena Miami Beach, an 18-story oceanfront luxury tower set to open next year. The tower’s 47 residences are going for up to $50 million each.

3/ Jim McNerney: Middle Class Manslaughter

The U.S. manufacturing giant Boeing, analyst Harold Meyersonobserved last week, has only one global rival in the large-scale passenger-plane market, the European conglomerate Airbus.

Workers at these two aerospace giants turn out to make about the same compensation. But executives at Boeing make more.

Question: Given these realities, what should Boeing do to compete more effectively? The answer from Boeing CEO Jim McNerney: Cut Boeing worker wages, benefits, and pensions!

Earlier this fall, McNerney gave his Seattle area workers an ultimatum: Either accept a contract “extension” that would leave them paying more for health care and getting less in retirement — and force new hires to work 10 extra years at substandard wages — or Boeing would go elsewhere to manufacture its new 777x passenger jetliner.

Boeing gave Washington State’s political leaders a similar ultimatum: Either fork over new subsidies and tax breaks or see your state lose jobs by the thousands. Washington lawmakers caved almost instantly. They voted Boeing the largest subsidy deal in U.S. history, over half a billion annually for the next 16 years,over double the state’s annual funding for the University of Washington.

Boeing’s workers didn’t cave. They rejected the Boeing ultimatum, and McNerney, who pulled in $27.5 million in take-home last year after $23 million the year before, is now parsing subsidy offers from half a dozen other states.

How does this story end? Maybe with the “Walmartization of aerospace.”

“This,” as Seattle author Timothy Egan puts it, “is how the middle class dies.”

2/ David Novak: Fast-Food Glutton

At first glance, corporate CEO David Novak doesn’t need a subsidy from anybody. The fast-food empire Novak oversees, Yum! Brands, amassed $1.59 billion in profits last year.

And Yum — think Pizza Hut, Taco Bell, and KFC — is doing pretty well by Novak, too. He pocketed $94 million worth of “performance pay,” notes an Institute for Policy Studies analysis, in just 2011 and 2012 alone.

But Novak and Yum are collecting subsidies anyway — and plenty of them. One comes directly from the U.S. tax code. Current tax law lets corporations deduct executive “performance” pay off their taxable income. This sweet subsidy saved Yum $33 million the last two years on Novak’s ample compensation.

Average Americans are actually subsidizing Novak and Yum at much higher levels than this single tax break suggests. In fact, taxpayers are subsidizing Yum’s entire fast-food business.

Workers at fast food giants like Yum simply don’t make enough to make ends meet for their families. So how do these workers get by? They depend on taxpayer-financed social safety net programs, from food stamps to Medicaid.

Overall, researchers noted in 2013, American taxpayers “are spending nearly $7 billion a year to supplement the wages of fast-food workers.”

And how are fast-food executives like David Novak spending the profits this generous taxpayer support makes possible? They’re having their companies, for starters, buy back shares of company stock off the open market, a strategy designed solely to bump up their share prices.

Higher share prices, in the meantime, produce higher “performance pay” awards for execs like Novak.

If Novak had plowed the vast millions that Yum spent last year on share buybacks into worker pay, estimate researchers from Demos, worker wages at Pizza Hut, Taco Bell, and KFC would have jumped by as much as $3 per hour.

1/ Larry Ellison: An Awesome Arrogance

Drum roll, please. Our 2013 greediest of them all: Larry Ellison, the longtime chief exec at business software kingpin Oracle.

Ellison currently owns a quarter of Oracle, a chunk that makes the 69-year-old the ninth richest individual in the world. His total net worth sat last week at $38.6 billion.

Enough? Not for Ellison. Last year, the software kingpin had Oracle award him $96.2 million in compensation. Unhappy shareholders considered those millions a tad excessive. In a nonbinding 2012 say-on-pay vote, an Oracle shareholder majority turned thumbs-down on Ellison’s pay package.

Ellison, of course, gave none of that $96.2 million back. This year, he had Oracle hand him another $76.9 million. Unhappy shareholders again expressed their displeasure, making Oracle just the 12th company in U.S. corporate history to have its shareholders go on record against their CEO’s pay in consecutive years.

No frustrated shareholder better try getting any of Ellison’s latest paycheck back. Oracle spends $1.5 million a year on security personnel to protect him. And why not? Ellison, as Oracle general counsel Dorian Daley gushes, rates as Oracle’s “most critical strategic visionary.”

Ellison pays dearly to surround himself with such fawning adulation. His two top executive underlings collected $43.6 million each in compensation in Oracle’s fiscal 2013.

Ellison’s billions, to be sure, buy him more than office sycophants. This past year Ellison hosted global yachting’s premiere race, the America’s Cup, in San Francisco Bay. Each race’s host sets the race’s rules. Ellison’s rules limited the field to ultra-expensive — and ultra-dangerous — catamarans.

One sailor died in training runs for the race.

Whose yacht eventually won? Guess.

The best 2013
retorts to apologists for inequality

Lawrence Mishel, John Schmitt, and Heidi Shierholz on why getting more young people to complete college won’t end the inequality that presses down upon us, Economic Policy Institute, January 11, 2013

Jim Tankersley on why the middle class really is falling behind, despite new conservative claims to the contrary, Washington Post, January 24, 2013.

Andrew Jackson on why higher taxes on the ultra rich do indeed amount to an effective tool for easing income inequality, Globe and Mail, January 30, 2013.

Lita Kurth on why the myth of the ultra-rich job creator so distorts our historic reality,Classism Exposed, February 13, 2013.

Dean Baker on why the upward redistribution of income over the last three decades does not reflect “natural” market dynamics,Beat the Press, March 17, 2013.

Rick Wartzman on why “pay for performance” does not justify excessive executive compensation, Forbes, March 26, 2013.

Sheila Krumholz on why the argument that rich candidates for political office can’t be corrupted doesn’t wash, New York Times, April 3, 2013.

Chye-Ching Huang and Nathaniel Frentz on why we need a strong, vibrant estate tax, Center for Budget and Policy Priorities, April 16, 2013.

Chuck Collins on why inequality will always give children of privilege a huge head start, American Prospect, May 28, 2013.

Paul Krugman on why education can’t be the answer to rising inequality, New York Times, June 14, 2013.

Sonali Kolhatkar on why we do need to worry at election time about the wealth of the wealthy, TruthDig, October 23, 2013.

Sarah Anderson on why corporate lobbyists opposing proposed new federal regulations that require firms to disclose their CEO-worker pay ratio haven’t been able to pass the laugh test,Huffington Post, November 20, 2013.

John Miller on why the case that inequality isn’t messing us up holds no water, Dollars & Sense, December 2013.

Nursing hopes for a more equal future: Top officials of the Massachusetts Nurses Association have just submitted petitions — with over 100,000 signatures — calling for a new state law that levies fines against any state hospital, profit or nonprofit, that compensates its CEO over 100 times the hospital’s lowest-paid worker wage. If state lawmakers don’t act on the petition, the nurses plan to collect the 11,000 additional signatures necessary to place their proposal on next November’s 2014 statewide ballot.

An Alpine assault on privilege: In Switzerland this fall, young activists fell short in their attempt to limit CEO compensation to no more than 12 times worker wages. In a national referendum, voters rejected the proposal — but only after a massive corporate ad blitz. Just weeks before the late November voting, the “1:12 Initiative for Fair Pay” was actually even in the polls. Expect more on the 1:12 front in the year ahead. Activists in Spain, France, and Germany are already discussing similar campaigns.

Irish eyes smiling — on a wealth tax: In the Great Recession’s wake, austerity budgets are squeezing working families the world over. But instead of slashing public spending on programs the public needs, two Irish think tanks are pointing out, governments could be taxing the enormous wealth that has concentrated at society’s economic summit. A mere 0.6 percent annual levy on household wealth over 1 million euros, note the TASC and Nevin Economic Research Institute think tanks, could recast Ireland’s entire fiscal landscape.

Ignore inequality? Fuhgetaboutit!: New York City voters amazed the nation this November by giving a landslide victory to a mayoral candidate who made fighting gaps in income and wealth his campaign battle cry. Among the proposals the newly elected Bill de Blasio will be pushing when he assumes office: an 11 percent hike in the city tax on income over $500,000 to finance universal access to prekindergarten and afterschool programs. That proposal, with a few tweaks, could begin remaking America’s most unequal city.

Caucusing against concentrated wealth: If Congress ever gathered up the nerve to take a swipe at plutocracy at budget time, what might the resulting budget include? Probably everything in the “Back to Work” budget the lawmaker Progressive Caucus brought to the House floor earlier this year. In the plan: tax rates on high incomes topping off at 49 percent and applied to all income, even capital gains. Also in the budget proposal: a financial transactions tax on Wall Street speculation and a much higher estate tax rate.

Giving our wealthy options: How can we keep the wealth of the wealthy fromdistorting our politics? Dean Machin, a political philosopher at University College London, suggests we give the wealthy a choice. Under his “simple proposal,” the super rich could either pay a 100 percent tax on the wealth that makes them super rich or lose their political right to lobby, bankroll think tanks and political parties, or control media outlets. Those ultra wealthy who choose money over political clout, proposes Machin, would still get to vote.

More transparency: Only 17 members of Congress last year voluntarily releasedtheir tax returns. Emory law school’s Dorothy Brown wants the IRS to start releasing an annual summary of lawmaker tax returns. A report on this order, says Brown, might build public pressure for moves against tax loopholes. Back in 1934, Congress actually enacted a law that required all high-income earners to reveal their incomes and taxes paid. But America’s wealthy quickly mobilized and, in less than a year, had the law repealed.

Pension power: Britain’s major unions announced this past March that they will be voting the shares their pension funds hold in UK corporations — currently worth over $1.5 billion — against any corporate pay plans that compensate CEOs at over 20 times what workers receive. British unions will apply the 20-to-1 ratio at first to the gap between executive and average or median worker pay. They hope eventually to apply the ratio to the gap that divides top executives and their company’s lowest-paid workers.

Rescuing the minimum wage: Few of America’s awesomely affluent have publicly called for a significantly higher minimum wage. What might get more of these privileged behind a fair shake for the working poor? How about a new tax bracket for income above 25 or 50 times the annual take-home of a minimum-wage worker, suggest two Institute for Policy Studies analysts. With that linkage in place, CEOs might actually have an incentive to hike pay for their lowest-wage workers, not just simply exploit them. What could the linked new top rate be? Why not the 91 percent top-bracket tax level in effect throughout the 1950s?

“Make room for The Rich Don’t Always Win on your bookshelf right next to Howard Zinn’s A People’s History of the United States.”
Barbara Ehrenreich, author, Nickel and Dimed

See the video where Too Much editor Sam Pizzigati describes his new book.

Read the Introductiononline. Order at the special publisher’s discount.