“The Deal With Rich People”: America Has A Long Standing Bad Deal With The Wealthy
Americans aren’t so sure about rich people.
For every revered Steve Jobs, there’s a reviled Bernie Madoff; for every folksy Warren Buffett, there’s a tone-deaf Mitt Romney. The pursuit of happiness is patriotic, but the pursuit of riches can come off as greedy. This ambivalence toward the wealthy is embedded in American democracy, and no one knows how to yank it out.
Even Alexis de Tocqueville agreed — a good thing, too, because discussing democracy in America without quoting “Democracy in America” is forbidden. “Men are there seen on a greater equality in point of fortune . . . than in any other country in the world, or in any age of which history has preserved the remembrance,” Tocqueville wrote of his travels in the United States. But then, the dagger: “I do not mean that there is any lack of wealthy individuals in the United States. I know of no country, indeed, where the love of money has taken stronger hold.”
So Americans dislike inequality but crave wealth — and this paradox propels our mixed feelings about the rich. Oppressors or job creators? Ambitious go-getters or rapacious 1 percenters?
Robert F. Dalzell, a historian at Williams College, believes he has an answer. America has a long-standing deal with the rich, he explains, one that allows the country to “forge an accommodation between wealth and democracy.” It’s simple: Yes, rich people, you can exploit workers and natural resources and lord your wealth over everyone if you like, and we’ll resent you for it. But if, along the way, you give a chunk of your fortune to charity, all will be forgiven, old sport. History won’t judge you as a capitalist; it will hail you as a philanthropist.
This uneasy bargain is the premise of Dalzell’s “The Good Rich and What They Cost Us,” which chronicles the deal from before the revolution through the recent financial crisis. Of course, just because the deal has lasted this long doesn’t mean that it will endure. Or that it is a particularly good one. Or that the rich aren’t constantly trying to rewrite the terms.
Early on, the wealthy waited until their deaths to strike the deal. Dalzell writes of Robert Keayne, a prominent 17th-century Boston merchant who sought to cleanse his price-gouging reputation by devoting his posthumous riches to college scholarships, improvements in his city’s water supply and defense, and construction of a town hall where important men like him could discuss weighty things. His will became a unilateral contract with town leaders; if anyone tried to sue his estate for past misdeeds, Keayne stipulated, all his giving would “utterly cease and become void.” Boston took the deal.
John D. Rockefeller saw no reason to wait. His Standard Oil empire — whose ruthless business tactics Ida Tarbell exposed and whose interlocking parts the Supreme Court split up — became the basis for the greatest philanthropic enterprise the world had ever seen. From major financial commitments to Spellman College and the University of Chicago, to support for medical research that developed the yellow-fever vaccine, to the financing of the Cloisters museum in Upper Manhattan and the restoration of Colonial Williamsburg, to list just a few initiatives, Rockefeller and his descendants set the model for modern, large-scale philanthropy. And they did so in a way that preserved the family’s influence and wealth over multiple generations.
“There was something Medici-like about the whole effort,” Dalzell writes, “for within the soul of that great Renaissance family there lay an urge to combine what many might have thought uncombinable — vast wealth and dedicated public service.”
But he also sees a more prosaic motivation: Billionaires want to polish their reputations for posterity. Wealth does not dull their sensitivity to what we think of them; it heightens it. Dalzell thinks it is no coincidence, for example, that the Giving Pledge — a public commitment by the world’s richest individuals, led by Buffett and Bill Gates, to donate most of their fortunes — coincided with the Great Recession’s backlash against the wealthy.
So, the rich just want to be loved. Is that so wrong? If more than 100 of the planet’s wealthiest families and individuals are promising to give away unfathomable amounts of money, why quibble?
Well, there’s at least one reason: The deal gets worse as the price paid for the rich’s charity — the inequality between the affluent and the rest — keeps rising. From 1979 to 2007, the real, after-tax income of the top 1 percent of the U.S. population grew by 275 percent, compared with 18 percent for the bottom fifth, according to the Congressional Budget Office. Social mobility has become more stunted in the United States than in Europe. And Americans see themselves falling further behind: A Washington Post-ABC News poll last year found that 57 percent of registered voters believed that the gap between the rich and rest was larger than it had been historically; only 5 percent thought it was smaller.
The deal will get even worse if efforts to push laws and policies that benefit wealthier Americans succeed. In “Rich People’s Movements,” Isaac William Martin, a sociologist at the University of California at San Diego, says today’s tea party is just the latest manifestation of another American tradition: the mobilization of wealthy and middle-class citizens in an effort to cut their taxes and contributions to the state.
Before the tea party, Martin tells us, there were tax clubs — groups of bankers throughout the South that agitated for tax cuts and helped bring about the Revenue Act of 1926, which “cut the tax rates on the richest Americans more deeply than any other tax law in history.” Before we had Grover Norquist and Americans for Tax Reform, we had J.A. Arnold and the American Taxpayers’ League, and Vivien Kellems and the Liberty Belles, a 1950s women’s movement that campaigned to repeal the income tax. And before Arthur Laffer and supply-side economics, there was Andrew Mellon, the banker, philanthropist and Treasury secretary whose 1924 book, “Taxation: The People’s Business,” argued that cutting income tax rates would create more revenue through greater economic growth.
Rich people’s movements respond to perceived threats, such as the New Deal, President Franklin Roosevelt’s effort to cap incomes during World War II (because “all excess income should go to win the war,” FDR explained) or, now, the policies of the Obama administration. But these movements sell their efforts not as benefiting the rich alone — that would be too transparent, too tacky. Instead, they claim to protect freedom, promote growth, safeguard the Constitution or fend off an ever-more-intrusive government. Martin calls this “strategic policy crafting,” and it brings more allies to the fight.
In fact, it is not just the wealthy, but often the middle class or the slightly-richer-than-average who have campaigned for lower taxes on affluent Americans. “People need not be dupes in order to protest on behalf of others who are richer than they are,” Martin argues. “The activists and supporters of rich people’s movements were defending their own real interests, as they saw them. A tax increase on the richest 1 percent may be perceived by many upper-middle-income property owners as the first step in a broader assault on property rights.” In other words, there’s nothing the matter with Kansas.
Shortly before the Republican National Convention gathered last year to nominate a man who could have become one of the richest presidents in U.S. history, the Pew Research Center conducted a survey on American attitudes toward the wealthy. The chronic ambivalence was there: Forty-three percent of respondents said rich people are more likely than the average American to be intelligent, and 42 percent believed that the rich worked harder than everyone else. The good rich! But 55 percent said wealthy people were more likely to be greedy, and 34 percent thought they were less likely to be honest. The bad rich.
Can “giving pledges” and foundation grants sustain America’s deal with the wealthy in a time of increasing inequality and falling social mobility? In his conclusion, Dalzell worries that the belief in the generosity of the good rich leads us to “tolerate, even celebrate, the violation of some of our most cherished ideals” of fairness and egalitarianism.
Perhaps the dilemma of extreme wealth and disparities in a democracy is that noblesse oblige becomes necessary. These two books show that the wealthy give much with one hand but seek to contribute far less with the other. That makes the giving they choose to do all the more critical but all the less accountable.
And that doesn’t sound like such a good deal.
By: Carlos Lozada, Outlook Editor, The Washington Post, November 27, 2013
“Coverage That Is Surprisingly Affordable”: As Glitches Fade, Obamacare Approval Will Rise
The latest polls on Obamacare are bleak. A Kaiser Family Foundation survey found that almost half of those questioned last week had an unfavorable opinion of the law. Just a third had a favorable opinion, even less than the 40 percent support for the law in the Nov. 14 Gallup poll.
But those poll numbers will change as more people like Bob Freukes of St. Louis and Donna Smith of Denver are finally able to shop for coverage on the new health insurance websites — and find coverage that is surprisingly affordable.
Considering all the negative stories about the malfunctioning HealthCare.gov website and policy cancellations folks have been receiving, the steep decline in support for Obamacare shouldn’t surprise anyone.
But in the very week that poll numbers reached an all-time low, people who had tried for more than a month to enroll online in a health plan were finally able to do so.
Just minutes after the administration’s tech surge team said 90 percent of applicants were now able to enroll online, I started getting emails from people eager to share their success stories.
“My wife and I are both self-employed small sole proprietors,” wrote Freukes, a photographer. “This will be the first time in our married lives we will have health insurance.”
Freukes said that over the course of the past year, he and his wife — married 30 years and are now in their fifties — rarely went to the doctor because of the expense.
“We paid for doctor visits, prescriptions, eye glasses and everything else out of [our] own pockets, always knowing we were one major illness away from bankruptcy.
“We tried to find an affordable policy, but the going rate for my wife and me was roughly $900-$1,400 dollars a month with deductibles in the $5,000 range.” Considering that their combined annual income is often no more than $25,000, health insurance was out of the question.
Not only will they finally have coverage starting January 1, it will cost the Freukes less than they had expected because of the federal tax credits available to low- and middle-income individuals who buy coverage on the state exchanges. In fact, with the tax credits, the Freukes will not have to pay monthly premiums at all.
“I sat rubbing my eyes in amazement as the website did the math. Our portion of the premium for both plans was ZERO. No cost to us at all. I was stunned.”
Donna Smith wasn’t that fortunate, but she at long last will be able to get a comprehensive policy that she can afford.
Like Bob Freukes, it took Smith weeks of effort before she was finally able to enroll in a plan. Her delay, though, was caused by a different, though no less frustrating quirk in the system. Colorado is one of 13 states and the District of Columbia operating their own exchanges, which generally have experienced fewer problems than the federal website, where residents of most states have been sent. Several thousand people were able to begin the application process in Colorado but they had to wait — and wait and wait — while state officials checked to see if the applicants were eligible for Medicaid.
Smith knew her income was too high to qualify for Medicaid, but she nevertheless had to fill out an extensive questionnaire and was put in what she described as a “bureaucratic black hole” for 37 days. It was an agonizing wait for Smith, a cancer survivor who — along with husband Larry — had to file for bankruptcy several years ago because of medical debt. If her name sounds familiar, by the way, it might be because you’ve seen her in the movies. When she wrote filmmaker Michael Moore about her plight, he included her in the 2007 documentary, SiCKO. Since then she has been an active supporter of health care reform.
After she finally got the Medicaid denial she was expecting, Smith called Connect for Health Colorado — the name of the state exchange — and worked with an employee to complete her application.
“If people can get through the Medicaid process, I think they’ll be pleasantly surprised,” said Smith, who has been paying $875 a month for an individual policy. Beginning next year, she will be covered in a better plan, but it will cost her only $450 a month after factoring in a $72 federal tax credit.
As happy as she was to discover she will soon have affordable coverage —and that it can’t be canceled if her cancer returns, thanks to Obamacare — she still believes a single-payer, Medicare-for-all type system would be better.
She has a point. The Affordable Care Act is far from perfect. But in the coming months and years, millions of us who have been unable to find affordable coverage will at long last be insured. Poll numbers will eventually reflect that.
By: Wendell Potter, The Center for Public Integrity, November 25, 2013
“Throwing Their Own Under The Bus”: CEO’s With Massive Retirement Fortunes Push Social Security Cuts
With budget negotiations on the horizon, a buzz is building around Social Security, from Elizabeth Warren and other Democrats calling for an expansion of benefits to The Washington Post arguing that seniors must be sacrificed for the good of the “poor young.”
Two of the biggest players in the debate are largely behind the scenes: Business Roundtable and Fix the Debt, corporate lobbies that use deficit fear-mongering to sell benefit cuts. These groups are made up of CEOs of America’s largest corporations—people with retirement accounts that are more than 1,000 times as large as those of the average Social Security beneficiary.
Each of the 200 executives of Business Roundtable has retirement savings averaging $14.5 million, according to a new report from the Institute for Policy Studies and the Center for Effective Government. That’s compared to the $12,000 that the median US worker near retirement age has managed to put away. Once Business Roundtable CEOs start drawing Social Security themselves, they’ll be cashing a monthly check that is sixty-eight times larger than an ordinary retiree’s, ensuring that they’ll never bear the burden of the cuts they’re advocating.
“I find it hypocritical to see CEOs sitting on massive retirement fortunes of their own saying that the solution to the country’s fiscal challenge is to put an even greater burden on retirees, many of whom already struggling,” said Sarah Anderson, director of the Global Economy Project at IPS and one of the report’s authors.
One of those CEOs is David Cote, the vice-chair of Business Roundtable and a member of the steering committee for Fix the Debt. After eleven years at Honeywell where he’s now the chief executive, his retirement assets are worth $134.5 million. That means that as a retiree he’ll draw a monthly pension of nearly $800,000.
Cote is a deficit hawk, and claims to be worried about the long-term stability of Social Security. A member of the Bowles-Simpson commission and President Obama’s debt committee, Cote has called for $3 to $4 trillion in spending cuts over the next decade, “especially when it comes to entitlements.”
To make some of those reductions via cuts to Social Security, Business Roundtable has proposed raising the retirement age to 70, restricting benefit growth and changing the way inflation is calculated in a way that amounts to a benefit cut for seniors. (Read George Zornick on why this change, called Chained CPI, is a bad deal.) At the same time, Business Roundtable and Fix the Debt are calling for more corporate tax breaks.
“If Congress approves of proposals like ones that Business Roundtable are pushing, we could see severe cuts that could mean the difference between any kind of dignified retirement and absolute poverty,” Anderson said. Two-thirds of retired Americans rely on Social Security for the majority of their income, and more than 40 percent would be in poverty without those benefits.
These CEOs aren’t just trying to short the average American retiree; they’re throwing their own under the bus. While raising alarm about the federal debt, Business Roundtable CEOs have run up massive deficits in their employees’ pension funds. According to the report, ten companies led by members of Business Roundtable have shortfalls in their employee pension funds of between $4.9 and $22.6 billion. The largest of those belongs to General Electric, run by Business Roundtable and Fix the Debt member Jeffrey Immelt, the prospective beneficiary of a $59.3 million retirement fund.
GE stopped offering traditional pension plans for new employees in 2011, forcing workers to switch to 401(k) plans. Many other companies have shifted the burden of retirement savings to their employees in this way in recent years, and that’s been a significant driver of the retirement crisis. Just 18 percent of workers can expect traditional pensions today, compared with 38 percent in 1985. Instead of getting a fixed check, retirees are at the mercy of the market—making the assurance of Social Security benefits even more essential. But Business Roundtable continues to put the responsibility for the retirement crisis on retirees themselves. “[T]rue retirement security will be achieved only if Americans save more,” reads the group’s 2013 CEO Growth Agenda.
Saving more is an increasingly unworkable solution for the millions of workers whose wages and benefits are being undercut by some of the same CEOs directing them to do so. As the report lays out, many of the most effective ways to strengthen Social Security involve asking more of executives, not employees. Eliminating the cap on wages subject to Social Security taxes (currently set at $113,700) would eliminate 95 percent of the projected shortfall for seventy-five years, according to the Congressional Research Service. That’s three times the deficit reduction achieved by raising the retirement age to 70. Subjecting stock-based compensation to Social Security taxes would raise billions more.
Don’t expect to hear about those proposals from Business Roundtable, however. “I do think that it is a real weakness of these corporate lobby groups, that they’re making the public face of the agenda to cut Social Security these CEOs that are sitting on massive nest eggs of their own,” said Anderson. “It undercuts their credibility and influence in these debates, and I’m hoping it will make it difficult to achieve the cuts they’re proposing.”
By: Zoe Carpenter, The Nation, November 19, 2013
“Getting Secret Money Out Of Campaigns”: It’s In The Public Interest To Disallow Sleazy Secret Money In Campaigns
The Internal Revenue Service spent years averting its eyes while clever campaign operatives abused the tax code for political purposes. Advocacy groups, mostly on the right, wanted to run attack ads while concealing the source of their money, and they came up with a brilliant way to do it: claim to be “social welfare” groups, which are allowed to hide donors.
Federal statutes say these groups can only engage in social welfare activity, but the tax agency decided political activity was fine as long as it wasn’t the primary purpose of the group. That helped create the torrent of secret money that poisoned the last few federal elections. The I.R.S. never explained, though, what kinds of activities are considered political, or why these groups, also known as 501(c)(4)’s, should be allowed to participate in campaigns at all.
On Thursday, long after the abuse became too rampant to ignore, the I.R.S. took the first tentative steps at reining in the problems it helped create. It proposed a definition of “candidate-related political activity,” an important starting point in determining what tax-exempt groups are really allowed to do. But it will have to do much more than that if it wants to be taken seriously as a regulator on this battlefield.
According to a press release from the Treasury Department, the agency said the new definition of political activity would include ads or other communications that clearly advocate for a candidate or party, or ads that mention a candidate within 60 days of a general election (30 days for primaries). That’s a good start for a definition, though 60 days is far too narrow a window — many of these attack ads air a full year or more before voting begins.
Once political activity is defined and separated from social welfare activity, 501(c)(4)’s will no longer be able to claim, as Karl Rove and others have, that “issue ads” mentioning candidates are for social welfare purposes. (These are the kinds of ads that say, “Dog-kicking is terrible. Call Senator Jones and tell her to stop doing it.”)
But a definition alone won’t do any good unless the I.R.S. tells these groups how much political activity is permitted. The ideal answer would be: zero. Social welfare groups have no business meddling in politics. Any group with a political interest has its own place in the tax code — they can be a 527 political organization. Those groups, which include political parties and official campaign organizations, also get tax exemptions, but there is one crucial difference: they have to disclose their donors, and 501(c)(4)’s don’t.
Conservatives immediately claimed that the I.R.S. was trying to take away their free-speech rights, which is laughable. Absolutely nothing is stopping advocacy from running ads, and the Supreme Court, in the Citizens United case, even granted corporations the right to make unlimited donations to independent groups that produce political ads. But there is no right to keep these donations a secret.
The Treasury announcement, tantalizingly, said the I.R.S. would consider comments from the public on how much political activity should be permitted for a social welfare group, suggesting that decision was farther down the road. It’s in the agency’s interest to end the confusion surrounding 501(c)(4)’s, which has led to charges that it has been arbitrary in its audits. But it’s in the public interest to do even more, and disallow sleazy secret money in campaigns.
By: David Firestone, Editors Blog, The New York Times, November 27, 2013
“A Pope’s Pointed Message”: Our Sacred Responsibility Is To One Another
“Some people continue to defend trickle-down theories, which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting.”
That passage is not from some Occupy Wall Street manifesto. It was written by Pope Francis in a stunning new treatise on the Catholic Church’s role in society — and it is a powerful reminder that, however tiresome the political trench warfare in Washington may be, we have a duty to fight on.
The full implementation of Obamacare matters. Raising the minimum wage matters. Reforming a financial system that, as Francis noted, “rules rather than serves” matters. Hearing the anguished voices of those left hopeless by poverty matters; answering their pleas with education, health care and employment matters even more.
Francis, the first Jesuit and first non-European in the modern era to be named pope, clearly intends to make a real difference in the world — too much of a difference, it appears, for some conservatives: Sarah Palin, a born-again Christian who attends a nondenominational church, said recently that Francis’s open-arms attitude on social issues “has taken me aback.” Would that a few more words might take her all the way aback to the obscurity from which she came.
Francis’s remarks on economics and poverty came in a 50,000-word Apostolic Exhortation, released Tuesday, that gives the clearest vision to date of how he sees the church and how he intends to reshape it. In its boldness, the statement suggests that, just as Pope John Paul II played a political role in the fall of communism, so might Francis try to help shape events by obliging the faithful to recognize, and resist, a growing pattern of inequality throughout the world.
“To sustain a lifestyle which excludes others, or to sustain enthusiasm for that selfish ideal, a globalization of indifference has developed,” Francis wrote. “Almost without being aware of it, we end up being incapable of feeling compassion at the outcry of the poor, weeping for other people’s pain, and feeling a need to help them, as though all this were someone else’s responsibility and not our own. The culture of prosperity deadens us; we are thrilled if the market offers us something new to purchase; and in the meantime all those lives stunted for lack of opportunity seem a mere spectacle; they fail to move us.”
Francis explicitly calls for “financial reform,” though he wisely does not lay out a policy agenda. But in a passage likely to make libertarians want to hide amid the dense thickets of Ayn Rand’s prose, where no light can penetrate, Francis wrote that “the private ownership of goods is justified by the need to protect and increase them, so that they can better serve the common good; for this reason, solidarity must be lived as the decision to restore to the poor what belongs to them.”
The basic positions Francis takes on economic and social justice are not new; all recent popes have expressed a similar critique of modern capitalist society, including John Paul II, whose views on poverty and the need for community are often conveniently overlooked by those who would paint him as Ronald Reagan in robes.
But no recent pope has been so forceful in denouncing the “idolatry of money” and making the inexorable rise of inequality one of the church’s central concerns. Francis intends his message to be heard. I hope leaders everywhere, and especially in Washington, are listening.
Jesus commanded his apostles to give to the poor. Yet many elected officials who claim to follow Jesus’s teachings are determined to keep the poor from receiving health care, food assistance, housing subsidies and a host of other benefits. Inequality is celebrated as a virtue. Life, we are told with a shrug, is sometimes unfair.
But for Christians, Francis reminds us, life is supposed to be as fair and compassionate as we can make it. Money is a false idol, a golden calf. Our sacred responsibility is to one another.
Amen, Your Holiness. Amen.
By: Eugene Robinson, Opinion Writer, The Washington Post, November 28, 2013
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