Poster boy for corporate impunity: United Technologies’ retiring chief Louis Chenevert typifies the American breed of corporate magnate: exorbitant pay not tied to performance and early retirement (at 57) with a package topping over 200MM. Long live capitalism!
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December 1, 2014 |
| THIS WEEK | |
| We’re hearing a great deal these days about the sanctity of the legislative process. GOP leaders are raising holy hell about the new White House executive order on immigration. The President, charges Rep. Jeb Hensarling from Texas, has “thumbed his nose at the American people and our system of democracy.”Last Monday, Hensarling did his own thumbing. He urged the Securities and Exchange Commission, the federal agency that regulates Wall Street, to forget about a duly enacted CEO pay reform — in the 2010 Dodd-Frank Act — that requires companies to disclose the ratio between their CEO and worker pay.Corporate CEOs hate this law. Hensarling does, too. He doesn’t want the SEC to write the regulations needed to enforce it. But aren’t executive branch agencies, in a “system of democracy,” supposed to enforce laws the legislative branch has voted into law? In a democracy, of course. In a plutocracy, that depends.
In a plutocracy, what top corporate CEOs want, they usually get. The SEC, we learned last week, has now decided to shelve its long-overdue CEO-worker pay ratio regs still another year. In Too Much this week, still more on our plutocrats. |
About Too Much, a project of the Institute for Policy Studies Program on Inequality and the Common Good
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| GREED AT A GLANCE | |
Miami Beach’s classic Eden Roc hotel has a new mission in life: to make room service fun again — for the super rich. The landmark hotel has just unveiled six new in-room dining options, “each with its own unique twist and story.” The menu’s “Blue Eye Mayhem” special, for instance, comes complete with an original 1950s Eden Roc beverage napkin signed by Frank Sinatra. Accompanying each choice: a bottle of the finest spirits. The cost of ordering off the new Eden Roc room service menu? Up to $4,000 for a single dinner. Finding takers should be no problem. A new report estimates the world’s 211,273 deep pockets worth at least $30 million spend an average $38,000 a year on alcoholic beverages . . . The ultimate bummer for a CEO? That may be getting the bum’s rush right at the start of the holiday season. But Louis Chenevert, the United Technologies chief exec just rushed into “retirement,” still has reason to be jolly. Chenevert won’t be exiting empty-handed. His going-away severance package, Bloomberg News reported last week, appears likely to total $172 million. Chenevert already owns a stash of United Technologies shares worth $64 million. Before his surprise exit announcement last month, the 57-year-old led the defense contracting giant for what a Wall Street analysis from Morgan Stanley now describes as six “weak” years . . .Technology just keeps making life ever more convenient for the world’s wealthiest. Yachting Partners International, a leading luxury boat broker, is now offering a mobile phone app that makes chartering a super yacht almost as easy as ordering a pizza. With the app’s “Yachts Around Me” feature, novice mariners can search for the available luxury boats closest to them — and even sort the results by “desired facilities,” everything from helipads to fully equipped on-board gyms. Holidays don’t get any “more bespoke, discreet, or rewarding,” says Yachting Partners International marketing director Mark Duncan, than sailing the seven seas on “a personally chartered yacht, with the owner’s personal crew and chef at your service.” Duncan’s new yacht search app spotlights boat-chartering opportunities that range in cost up to $1.2 million per week. |
Quote of the Week “Poverty doesn’t bind the poor together as much as wealth and the need to protect it bind the rich. If it did, we would hear the rattle of tumbrels in the streets.”
Give a gift of inspiration this holiday season, Too Mucheditor Sam Pizzigati’s gripping history of the triumph over America’s original plutocracy. Read the reviews, then take the publisher discount. |
| PETULANT PLUTOCRAT OF THE WEEK | |
 Saudi Arabia’s richest person, the billionaire prince Alwaleed Bin Talal Al Saud, doesn’t like his honor questioned. Forbes last year questioned that honor — in a series of articles that conveyed “strong grounds for suspecting” dishonesty on Alwaleed’s part. Alwaleed promptly sued for libel, but a British judge last week limited the claims he can make at trial. The prince’s flacks, now busy trying to spin this ruling as a victory for Alwaleed, don’t have an easy job. A judge in an earlier case has called the prince “completely unreliable.” On the other hand, Alwaleed’s over-the-top lifestyle does give his flacks fodder for stories that can distract the media from Alwaleed’s business dealings. Alwaleed’s mammoth estate in Riyadh, for example, sports a personal zoo with live giraffes. |
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| IMAGES OF INEQUALITY | |
 A quarter-century ago, in 1989, half of America’s counties ranked as places with both low poverty and low income inequality. Today, says new research out of the Population Reference Bureau, only a third of the nation’s counties — shown here in green — rate as low in both. A greater share of America’s counties — the 37 percent in red — rank as high in both poverty and income inequality. The blue marks counties with high inequality and low poverty, the brown the reverse. |
Web Gem The Political Economy of Distribution/ This Institute for New Economic Thinking online site offers a series of working papers that explore how income inequality is subverting both our economic and environmental health. |
| ANTIDOTES TO INEQUITY | |
| Religious activists worried about inequality have launched a new campaign this fall to make America’s retail and fast food giants worry — about their public image. The activists are submitting shareholder resolutions urging 20 major corporations to disclose the ratio between their CEO and median worker pay. The Rev. Michael Crosby, a Capuchin friar who directs an Interfaith Center on Corporate Responsibility branch for Wisconsin, Iowa, and Minnesota, says he has never seen so many Catholic orders come together over one issue as they have on this wage disparity effort. The new pay ratio resolutions, he notes, don’t figure to pass, but they can serve to help people realize “there’s something wrong with this system.” CEO pay at major fast food companies, a Demos study estimates, is running over 1,000 times the earnings of average fast food workers. |
Take Action Share your personal narrative on income inequality via the #MyHungerGames hashtag on Twitter. Learn more at Odds in Our Favor. |
| INEQUALITY BY THE NUMBERS | |
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Stat of the Week A shopping fact for Black Friday: America’s top 5 percent, notes Washington University economist Steven Fazzari, is now consuming almost as much as the nation’s entire bottom 80 percent. |
| IN FOCUS | |
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Why Our Lives Feel Squeezed: 400 Reasons America’s 400 richest are collecting far more of the nation’s income than they did two generations ago — and paying Uncle Sam far less. To fudge these facts, pals of plutocrats are having to work overtime. We don’t know who exactly filed the tax returns with America’s 400 largest incomes in 2010. The IRS won’t reveal any of these 400 individually by name. But a just-released new IRS annual report on America’s highest incomes has revealed just about everything else about these top 400, from how much they claim in deductions to how much their incomes have swelled over time. And these top 400 incomes, the IRS data show, have done some significant swelling. Back in 1992, the 400 highest incomes reported on America’s tax returns averaged $46.8 million. In 2010, the top 400 averaged $265.1 million. Inflation does explain some of that increase, but not most. Before taking inflation into account, top 400 incomes multiplied nearly six times over between 1992 and 2010. After inflation, top 400 incomes quadrupled — over the same years that incomes for typical American households barely increased at all. Top 400 households, after taxes, have actually done considerably better over the past two decades than these before-tax figures suggest. In 1992, after exploiting every tax loophole they could find, top 400 taxpayers paid 26.38 percent of their incomes to Uncle Sam. In 2010, they paid their taxes at an 18.04 percent rate. The impact — in dollars — of this rate drop? If 2010’s top 400 had paid taxes at the same rate as their counterparts in 1992, they would have each paid, on average, $22.1 million more to Uncle Sam than they did. Go back a few decades beyond 1992 and the good fortune of today’s super richest becomes even more striking. The IRS hasn’t published exact top 400 income numbers for years before 1992, but the agency’s historical stats do offer up figures for comparably sized cohorts in some earlier years. In 1955, for instance, taxpayers with the nation’s 427 highest reported incomes paid taxes at a 51.22 percent rate. If 2010’s top 400 had paid taxes at that rate, they would have each shelled out an average $88 million more in taxes! Those top 427 taxpayers back in 1955, by the way, didn’t just pay taxes at a much higher rate than today’s richest. They also pocketed far less in pre-tax income. The flushest taxpayers of 1955 averaged, in inflation-adjusted dollars, only $13.4 million in income for the year. The top 400 in 2010 averaged considerably more than $13.4 million every month. The bottom line: 2010’s most affluent Americans took home 20 times more before-tax income than their 1955 counterparts and 33 times more after taxes. Figures like these pose a problem for the pals of our modern-day plutocrats. With average Americans stuck on an economic treadmill that has them exhausted and getting nowhere, how can the friends of grand fortune possibly defend the explosion of wealth at America’s economic summit? Give these friends of fortune credit. They have a strategy. The best defense, the scribes at rich people-friendly think tanks and media outlets understand, can be a good offense. And take to the offense they have. They’ve fashioned a counter narrative that paints America’s fabulously wealthy as the terribly wronged victims of an economy and polity gone senselessly redistributive. This upside-down world view has just turned up again on the editorial pages of the Wall Street Journal. America has suffered, insists the Journal, an Obama “redistribution” that has left the rich harried and everybody else no better off. The Wall Street Journal rests this latest screed in part on a new analysis from the American Enterprise Institute, a conservative D.C. think tank bankrolled by right-wing foundations and appreciative corporate sponsors. This analysis purports to show that America’s highest-income fifth is “basically financing the entire system of transfer payments to the bottom 60% AND the entire operation of the federal government.” “And yet,” continues the AEI study author Mark Perry, “don’t we hear all the time that ‘the rich’ aren’t paying their fair share of taxes and that they need to shoulder a greater share of the federal tax burden?” Perry claims that his rich-pay-everything analysis reveals “a yet-to-be discussed major implication” of a recently released report on American household income and taxes from the nonpartisan Congressional Budget Office. But Perry’s “major implication,” counters Institute for Policy Studies tax analyst Bob Lord, plays fast and loose with the actual data in the new CBO study. The CBO study divides Americans by income into five groups, from the poorest 20 percent of the nation’s households to the richest. For each of these “quintiles,” CBO highlights the average “market” income from work and investments, the average value of federal benefits received, and the average federal taxes paid. In 2011, for instance, households in the nation’s poorest quintile averaged $15,500 in market income, $9,100 in federal benefits, and $500 in taxes paid. The American Enterprise Institute’s Perry, in his new paper, manipulates these numbers to fit the right wing’s rich-as-victim narrative. Perry subtracts, for each quintile, the value of benefits received from the amount of federal taxes paid, something the CBO does not do. Average households in America’s poorest 20 percent, he then pronounces, come out $8,600 ahead. They get that much more in benefits, Perry asserts, than they pay in taxes. Like this article? Sign up Households in the highest-income quintile, the AEI analyst continues, pay on average $46,500 more in taxes than they get in benefits. That, says Perry, gives them “an average net tax rate after government transfers” of 18.9 percent. By contrast, according to Perry’s American Enterprise Institute take, the three bottom income quintiles each show a negative “net tax rate.” So forget, Perry urges, that debate over whether the rich are paying their fair tax share. We ought to be debating instead, he pronounces, why the poorest 60 percent of Americans — “net recipients of transfer payments” from the top 20 percent — are “not paying anything” in federal taxes. But Perry’s math makes no logical sense, notes the Institute for Policy Study’s Bob Lord. Each of America’s bottom three income quintiles, he explains, include people whose income comes all or mostly from market sources and others — mostly the retired and unemployed — whose income comes mostly from government benefits. Perry’s paper subtracts the benefits received by the second group from the taxes paid by the first and ordains the resulting numbers the determinant of whether an entire quintile has paid its “fair” tax share. “It’s hard to fathom why Perry thought it appropriate to net the tax payments made by a McDonald’s worker in Brooklyn and the Social Security benefits paid to a retiree in Fresno,” muses Lord, “but that’s essentially what he’s done.” This distorting math, in fact, may not be too hard to fathom at all. How else, after all, can fortune’s dearest friends make the case that out-of-control “redistribution” is somehow squeezing America’s rich? |
New Wisdom Lynn Stuart Parramore, Thomas Piketty is right: Income inequality is holding us back, Salon, November 27, 2014. How the wealth gap undermines the job market. Paul Krugman, Pollution and Politics, New York Times, November 28, 2014. Soaring inequality explains why the GOP now so staunchly opposes efforts to address climate change. Luke O’Neil, Black Friday brawl videos are how rich people shame the poor, Washington Post, November 28. A privileged segment of the population sits back and dehumanizes lower-income Americans for its collective amusement. Aditya Chakrabortty, In Mumbai, the wealthy elite’s willingness to show off has reached new extremes, Guardian, November 28, 2014. Homes with helipads poisoning an entire generation. David Callahan, The Billionaires’ Park, New York Times, December 1, 2014. A new privately funded Manhattan public park shows how billionaire beneficence threatens the ability of everyday Americans to have an equal voice in civic life. Branko Milanovic and Roy van der Weide, Inequality is bad for income growth of the poor (but not for that of the rich), Vox EU, November 29, 2014. An exploration into “social separatism.” Mike Konczal and Bryce Covert, Conservatives’ silver bullet is a joke, Nation, December 1, 2014. Demolishing the notion that higher marriage rates will “fix” inequality. |
| NEW READS | |
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That Oh-So-Lucrative Revolving Door Shane Shifflett, Jay Boice, Hilary Fung, and Aaron Bycoffe, Pay Pals, a Huffington Post project, with financial research provided by the Center for Economic Policy and Research, November 2014. For an economist, serving as chair of the Council of Economic Advisers for the President of the United States may be as good as it gets. Pols and pundits routinely hang on your every word. But what can come next, after Council of Economic Advisers service, can certainly be far more lucrative. An enterprising former Council chair can count on oodles of invitations to serve on corporate boards of directors, the panels that determine, among other things, how much CEOs take home. Michael Jay Boskin served as a George H.W. Bush Council of Economic Advisers chair. Laura D’Andrea Tyson chaired the Council for Bill Clinton. Both have done mighty well as corporate directors — and mighty well for the CEOs they serve. Between, 2008 and 2012, Boskin picked up $4.7 million as a corporate director, not bad for attending a few board meetings every year. Tyson pocketed just over $3 million. Boskin’s CEOs averaged $68.2 million in the last of those years, Tyson’s $16.5 million. Tidbits like these abound in Pay Pals, a fascinating new interactive online resourcefrom the Huffington Post and the Center for Economic Policy and Research. Pay Palslets Web surfers discover just how much the directors of America’s top 100 corporations are paying themselves and their chiefs. Corporations, in a sense, are people. These people. |
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| ABOUT TOO MUCH | |
| Too Much, an online weekly publication of the Institute for Policy Studies | 1112 16th Street NW, Suite 600, Washington, DC 20036 | (202) 234-9382 | Editor: Sam Pizzigati. | E-mail: editor@toomuchonline.org | Unsubscribe. | |
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