“The Misguided War On Envy”: Conservatives Love To Hate The Envy Their Policies Caused
Conservatives have launched a War on Envy. This week, Arthur Brooks, president of the American Enterprise Institute lamented “a national shift toward envy” which, he said, would be “toxic for American culture.” Venture capitalist Tom Perkins recently made the same point in much more inflammatory terms: He equated those who criticize rising inequality with Nazis persecuting Jews, a salvo attack that quickly drew censure from those now running KPCB, the VC powerhouse that he once led.
Both conservatives and progressives agree on basic facts: The percentage of Americans who see this country as a land of opportunity, in which hard work leads reliably to material reward, is falling rapidly. This shift brings envy, resentment, cynicism and despair. And these negative emotions undermine our social structure and bring unhappiness.
But that’s where the agreement ends. Conservatives insist the problem is one of perception. They think that if the media would just stop talking about inequality things would get better. They say that if our leaders (read: President Obama) would simply offer up “an optimistic vision in which anyone can earn his or her success,” the envy would dissipate and everything would be just fine.
That is not going to work.
It won’t work because the sense that the dream is slipping away, the sense of diminished mobility, of a system that’s increasingly rigged, is not a fantasy that can be dispelled with clever rhetoric. It is the everyday, lived experience of millions of Americans. The only consequence of elites refusing to discuss it will be to confirm that those elites are indeed out of touch with ordinary Americans and their problems. That aloofness is reflected in the appallingly low approval ratings of the current Congress.
Brooks and other influential conservatives fail to acknowledge that the envy they lament, and the loss of opportunity that fuels it, results directly from the policies they have championed over the years. Consider higher education, which is acknowledged by both liberals and conservatives as the single most powerful force for economic mobility. Conservatives have succeeded in slashing taxes at all levels of government, and these cuts have gutted state funding of higher education.
Tuitions have spiked as a result. The soaring cost has put college out of reach for many middle-class families and nearly all of the poor and near poor. In 1971 an American family at the median income level had to pay 13 percent of its annual income to send each child to a public four-year university. That’s tough but it’s doable, with considerable sacrifice, savings, loans, a part time job and so on. Now the cost has more than doubled to 29 percent of income. This puts college out of reach for many, and leads to students graduating with staggering debt burdens. To put it mildly, this much debt does not encourage entrepreneurship.
That’s not the only way that conservative policies have limited upward mobility and destroyed confidence in the American Dream. Conservatives have long championed corporate tax policies that accelerate the harsher aspects of globalization, outsourcing and offshoring. As a result, American workers in many industries have seen their wages stagnate even as productivity has gone up, profits have soared and those who hold stock and options have done exceedingly well. Hard work now means breaking even for most Americans, rather than pulling ahead.
Here’s another example: Conservatives have championed individual tax structures that reduce the share of taxes born by the richest and increase the share born by the rest. Tax law changes such as the reduction in top tax brackets, lowering of capital gains rates and elimination of estate taxes confirm many Americans’ suspicion that the deck is indeed stacked against them.
I built and enjoyed a successful career in business before becoming an advocate for a sustainable economy. One of the things I learned in my career was to look for the true root cause of problems and not waste time attacking symptoms. Another thing I learned was that if what you’re doing isn’t working, stop doing it and try something else.
We are not going to bring optimism back to ordinary Americans by belittling those who discuss the real state of our economy. Waging war on envy won’t make people more confident in their job prospects and more entrepreneurial in their careers. Not if the reality of our tax, trade, labor and other policies is to strip away the rewards of working Americans and concentrate more and more wealth at the top.
It’s good that both left and right want to make the American dream credible again for more people. It’s good that both sides see loss of optimism as a problem. But diminished opportunity won’t be solved by refusing to talk honestly about its causes, and envy won’t be eliminated by more of the policies that kindled it in the first place. The success of the American economy and the American political system depends on people having the genuine conviction, based on the reality of their day-to-day experience, that hard work brings upward mobility.
By: David Brodwin, U. S. News and World Report, March 6, 2014
“Obamacare Won’t Cause Society To Collapse”: Americans Choosing To Work Less Doesn’t Mean They’re Losing Their Jobs
A small war has erupted over the recent Congressional Budget Office report on the employment effects of the Affordable Care Act. Last week, the CBO itself felt compelled to offer a lengthy and detailed rebuttal to the spin that millions of Americans will “lose their jobs” as a result of Obamacare.
So let’s first be clear about what the CBO report concluded: As a result of the ACA, millions of Americans will choose to work less, if at all. That doesn’t mean that they will “lose their jobs.” Rather, it means that many will choose to give up working double-shifts just so they can make enough to afford health insurance or leave jobs they hate but have kept simply because they can’t maintain their coverage otherwise. In virtually all cases, these are decisions people are making for themselves and presumably welcome. As the CBO points out, as opposed to “losing their jobs,” in which case we’d all feel sad for them, friends and neighbors will invariably feel happy for these individuals.
But, of course, not everyone. To conservatives, the CBO report demonstrates what they have said about Obamacare – and about the government dole generally – all along: It creates “perverse incentives” encouraging people not to work.
The conservative argument is based on several underlying assumptions, like a DirecTV ad: When you give things to people, they work less. When they work less, they’re worse off. When they’re worse off, they demand more. When they demand more, liberals give them more. And when liberals give them more, society collapses. Don’t have society collapse: Stop the Affordable Care Act.
Of course, the CBO report did in fact find that providing this health coverage will induce millions of people to work less or not at all. So let’s look a little more closely at this syllogism.
It’s undoubtedly true that if you give things to some people, they’ll work less. But it’s not true in all cases. Unfortunately, this sort of assertion is a staple of anti-government rhetoric: For any government expenditure, it can be shown to have enriched some deadbeat or rip-off artist. But so has the derivatives market. Meanwhile, plenty of people work more when you give them more.
In fact, most conservative policies these days are based on the idea that certain people need to be given more to induce them to work harder and to produce more. Of course, those highly-sensitive individuals are the rich and corporate executives, who, without more money (including from the government) simply wouldn’t keep working and creating. By the same logic, though, we should extend even more benefits to more working people – perhaps even raise wages at the low end – to encourage them to work. But for some reason low-income Americans, unlike the wealthy, are presumed to work best if we take incentives and benefits away from them.
Moreover, as the CBO pointed out, there is indeed a “perverse” work disincentive in Obamacare – but it’s the opposite of what conservatives have taken the report to say. Rather, it’s that, as people’s incomes rise, they get less support – a “tax,” in effect, on work. And, of course, taxes are bad. So we actually should be less stingy about giving even better health care benefits to even more people.
Of course, we’d need to pay for those expanded benefits, which appears to be the real point of the “collapse of our culture” argument – not so much that people won’t work as that people who do work will wind up having to support them. But there’s then an obvious way to pay for these benefits if you want to encourage work: tax unearned income (which accrues, by definition, to nonworkers) at a higher rate than we tax earned income. And if giving people money or benefits for which they didn’t have to work encourages sloth, then we’d best start taxing away all inheritance post-haste, as well.
We don’t, of course, because that would tax primarily the rich. But most parents want to leave something behind for their children, because we know that getting a leg up is usually the way to climb even higher. Few people throw their kids out of the house with no means of support, on the grounds that that will make them more successful. Nevertheless, many argue that helping other people’s children only cripples them as opposed to, well, helping them.
It is incumbent upon liberals to assert not just that children “deserve” health care or that people “shouldn’t have to” work grueling hours and still not make ends meet. Such assertions are, after all, merely subjective. But if investments in human capital actually improve total productivity, then the only argument against is that “the poor you always have with you” actually is a commandment, not a condemnation. And various studies (such as this and this) have shown – not surprisingly – that health care is one of the better bets for boosting productivity and workforce engagement.
And productivity, after all, is really the issue. No one longs for the days when people had to toil every waking moment to scrape out subsistence livings, instead of a modern world where a 40-hour work week can enable one to produce more economic value than the greatest medieval monarchs could even dream of. So do we really think it’s good if more and more Americans feel compelled to work 80 hours a week just to make ends meet? Would it mean our economy, or our morals, were headed downhill if more Americans decided they didn’t need to work two shifts every day but could get by, having all they want, on only one?
In short, it isn’t clear that more work is self-evidently good. Or that society will collapse if people work a little less – let alone if it makes them more productive overall – because they have health care. Just as it didn’t collapse when we moved to a 40-hour workweek and ended child labor. But it’s possible. After all, when I can’t get cable, I do get angry.
By: Eric B. Schnurer, U. S. News and World Report, February 22, 2014
“Bad Incentives Haven’t Gone Away”: You Still Need To Care About Sky-High Wall Street CEO Pay
According to a new regulatory filing, Bank of America CEO Brian Moynihan received a compensation package for 2013 worth $14 million, a $2 million increase over 2012. This places Moynihan third on the list of big bank CEOs, behind Goldman Sachs chief Lloyd Blankfein, who made $23 million last year and JPMorgan Chase’s Jamie Dimon, who made $20 million. Moynihan’s top underlings also received multi-million dollar compensation packages of their own.
With these numbers, it seems that Wall Street’s biggest banks are trying to put the financial crisis of 2008 firmly in the rear view mirror. (Never mind that many of them, most prominently JPMorgan, are still paying out hefty fines, penalties and settlements due to their actions in the lead up to that crisis.) Nothing more to see here! Back to business as usual! All’s well that ends profitably!
Over at the New York Times’ Dealbook this week, Ohio State University professor Steven Davidoff even lamented the outsized attention still garnered by CEO pay at Wall Street firms, when, for instance, tech CEOs sometimes make much more. “This double standard for finance and technology doesn’t make sense,” he wrote, adding that “perhaps it is time to call a truce on the Wall Street bias in looking at executive compensation.”
But there’s a good reason for the focus on Wall Street pay. For tech firms, misaligned incentives aren’t likely to crash the economy. For Wall Street, however, short-term risk-taking in pursuit of bigger bonuses can cause systemic problems, as several studies have shown. That’s why the Dodd-Frank financial reform law included new regulations meant to tie executive compensation at banks to longer-term performance (and it didn’t hurt that reining in Wall Street pay makes for good politics).
Sure, Davidoff is right that sky-high CEO pay deserves a broader look across the board. After all, it’s a big driver of income inequality. As the Economic Policy Institute has found, “Executives, and workers in finance, accounted for 58 percent of the expansion of income for the top 1 percent and 67 percent of the increase in income for the top 0.1 percent from 1979 to 2005.” Not only that, but taxpayers are subsidizing these big pay packages thanks to a loophole allowing corporations to write off CEO pay that is “performance based.” (Rep. Lloyd Doggett, D-Texas, has introduced legislation to fix that particular problem, but given what the Republican-held House is interested in these days, I wouldn’t expect it to come up for a vote anytime soon.)
But the fact remains that Wall Street pay is unique due to its ability to cause harm to the wider economy. The simple solutions for reining in pay that would work in other industries – such as higher taxes, more transparency and stronger unions – don’t reduce that risk. And the fixes in Dodd-Frank, while helpful, haven’t done enough, as professor J. Robert Brown Jr., an expert in corporate law, wrote recently:
Executive compensation is not adequately bounded by legal standards under state law. Efforts to address these concerns by Congress have been useful but remain incomplete. The system as it currently exists does not ensure that compensation will be based upon actual performance or that the approach will not encourage excessive risk taking.
Now, Wall Street will tell you up, down and all around that its new pay packages are not like those of yesteryear. And maybe that’s even the case for now. But as 2008 fades further and further into memory, it’s worth remembering just how the economy was brought to the brink and what still hasn’t been done to fix those problems. Without firm rules, there’s nothing stopping Wall Street from slipping right back to the same old bad habits when it thinks everyone has lost interest.
By: Pat Garofalo, U. S. News and World Report, February 20, 2014
“We’ve Got A Good Thing Going”: Why Can’t You Miserable Commoners Be Happier With Your Lot?
Venture capital billionaire Tom Perkins may be new to the trolling game, but he made an absolutely spectacular debut when he wrote to the Wall Street Journal a few weeks back warning that resentment toward the super-rich in American society reminded him a lot of the Nazi campaign against the Jews. Then last weekend, he followed that bit of wisdom by proposing that the wealthy ought to get more votes than the unwashed masses, since they pay more in taxes. “The Tom Perkins system is: You don’t get to vote unless you pay a dollar of taxes,” he said in a speech. “But what I really think is, it should be like a corporation. You pay a million dollars in taxes, you get a million votes. How’s that?”
That, you’re probably saying, is abominable. Why not just let the richest one person choose the president? He’s got the most money, so he’s obviously the wisest and has the greatest interest in government, right? Although Perkins might not be too pleased with that outcome, since the richest person in America is Bill Gates, who seems pretty liberal, what with his efforts to improve global health and fight poverty rather than letting the sick and destitute contemplate their well-deserved fate while they gaze up in admiration at their betters.
Okay, so Tom Perkins is kind of a lunatic. But is he a representative lunatic? Do his peers up in the penthouse suite and down at the yacht club think the same things he does, or is he an outlier?
This is actually a difficult question to answer, because while most good surveys ask about people’s income, their scales usually stop at a pretty modest level. Often the final option is “$100,00 per year or more,” which doesn’t allow you to separate the wealthy from the upper-middle-class. Nevertheless, the higher you go up the income scale, the more Republican people tend to be. Take, for instance, the 2012 election results:
Even if those with incomes over $100,000 tilt Republican, there are still plenty of Democrats there. But that’s not really the people Perkins is talking about. The people who arouse his concern are those earning seven, eight, or nine figures a year, and being Republican is only the start (I’m sure there are plenty of Republicans who think Perkins takes his advocacy for the upmarket downtrodden quite a ways too far). I’ve only come across one study that attempted to assess these people’s opinions quantitatively. It’s this one from Benjamin Page, Larry Bartels, and Jason Seawright. The sample of ultra-wealthy people they managed to assemble is pretty small, so we shouldn’t make too many sweeping judgments from it, but the differences with the general public they found are pretty striking:
The days of noblesse oblige are obviously long gone. Fortunately for these folks, it isn’t really necessary for them to get votes proportional to their net worth; the government already works hard for them. Even in the administration of that socialist Barack Obama, the Dow has hit record levels and the wealth of the wealthiest has gone nowhere but up. So things are working out pretty well. Which is why, I’m guessing, most of them would like Tom Perkins to keep his mouth shut. Sure, there may be a few who actually agree with him that the wealthy deserve more votes. But why admit that in public? After all, they’ve got a good thing going.
By: Paul Waldman, Contributing Editor, The American Prospect, February 19, 2014
“An Epidemic Of Plutocrat Self-Pity”: Filthy Rich But Secretly Terrified, Inside The 1 Percent’s Sore-Winner Backlash
What explains the toxic mélange of entitlement and shame that’s driving the raging 1 percent sore-winner backlash? From Tom Perkins comparing the ultra-rich to Jews during “Kristallnacht,” to tycoon and newspaper-destroyer Sam Zell insisting “the top 1 percent work harder,” to investment banker Wilbur Ross proclaiming that “the 1 percent is being picked on for political reasons,” there’s an epidemic of plutocrat self-pity afoot. Just last week ex-CEO of Morgan Stanley John Mack told the media to “stop beating up on” CEOs Jamie Dimon and Lloyd Blankfein after they got obscene raises from JPMorgan Chase and Goldman Sachs.
The sore winner backlash is odd timing. There’s no longer any real movement to hike taxes on their income or their wealth, both of which are at all-time highs. President Obama has said an increase in tax rates is “off the table.” There’s no more discussion of the “Buffett Rule,” named for the Berkshire-Hathaway oracle who famously suggested his secretary should no longer pay higher rates than her boss.
Almost nobody talks about ending the “carried interest” loophole that lets hedge fund managers pay a shamefully low rate on much of what should be considered income; instead there’s a “boom in trusts passing carried interest to heirs,” the Wall Street Journal reports. Yes, they’ve figured out a way to pass that unfair advantage onto their heirs through new estate-tax dodges. Sadly, Occupy Wall Street has fizzled, so they can even enjoy Zuccotti Park unaccosted.
So why all the whining now? I read Kevin Roose’s buzzy “I crashed a secret Wall Street society” piece Monday morning looking for insight. You should read it if you haven’t. It’s a fun hate-read. You’ll come away thinking, if you don’t already, that a lot of these people are monsters.
Apparently the secret fraternity Kappa Beta Phi gathers the titans of Wall Street at the St. Regis once a year for a gala that celebrates their wealth and power and mocks the rest of us. New inductees to the fraternity are charged with putting on a variety show to entertain the long-tenured. The evening features all the standard bad behavior common to male societies, from sports teams to military units to the boys of the Bohemian Grove. Cross dressing? Check.
After cocktail hour, the new inductees – all of whom were required to dress in leotards and gold-sequined skirts, with costume wigs – began their variety-show acts.
Misogyny and homophobia? Check.
The jokes ranged from unfunny and sexist (Q: “What’s the biggest difference between Hillary Clinton and a catfish?” A: “One has whiskers and stinks, and the other is a fish”) to unfunny and homophobic (Q: “What’s the biggest difference between Barney Frank and a Fenway Frank?” A: “Barney Frank comes in different-size buns”).
Mocking the loser-outsiders, who paradoxically make their great wealth possible? Check.
One of the last skits of the night was a self-congratulatory parody of ABBA’s “Dancing Queen,” called “Bailout King.”
When Roose was discovered, he was ejected from the ballroom, and the story wound up in his new book, “Young Money,” a portrait of eight entry-level Wall Street traders, which came out today. The Kappa Beta Phi story was excerpted in New York magazine.
What the excerpt captured was the insularity and paranoia of plutocrats who band together to protect themselves from mostly imagined social approbation and self-doubt. As Paul Krugman has argued, they aren’t like the titans of yore who made things; they “push money around and get rich by skimming some off the top as it sloshes by.” They’ve gotten insanely wealthy mainly by rigging the rules of the game to privilege the world of finance, and it’s no wonder they’re worried the rest of us will someday figure that out.
The good news from Roose’s work? Among younger Wall Streeters, there’s more doubt than you might expect. The percentage of Ivy Leaguers going into investment banking straight out of college is dropping. Before it faded, Occupy Wall Street had an impact on some of his young subjects, Roose reveals. The bad news is, the people who have doubts about the morality of their enterprise, and about their own privilege, tend to leave, so that those who remain are particularly entitled and/or deluded.
Still, that nagging doubt helps explain the backlash. They project in order to protect themselves. Their self-defense gets ever louder.
Last week Tom Perkins doubled down on his plutocrat paranoia at the Commonwealth Club, insisting the more money you have, the more votes you should get. He later “clarified” his remarks by saying he was only warning about the dangers of the 50 percent of the country that doesn’t pay taxes nonetheless having the right to vote. It was an uglier version of Mitt Romney’s 47 percent remark. Neither Romney nor Perkins nor their many defenders seem to realize that the people who pay no taxes are either retirees, or low-wage workers who are paid so little they’re not taxed.
These men who rigged the rules of the game to make themselves obscenely wealthy are trying to convince themselves, and us, that they’re entitled to those rewards. If only there were a genuine political movement triggering their paranoia. Instead, it’s preemptive, a product of their buried guilt and practiced entitlement.
By: Joan Walsh, Editor at Large, Salon, February 18, 2014
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