“The Undeserving Rich”: Capitalism As Currently Constituted Is Undermining The Foundations Of Middle-Class Society
The reality of rising American inequality is stark. Since the late 1970s real wages for the bottom half of the work force have stagnated or fallen, while the incomes of the top 1 percent have nearly quadrupled (and the incomes of the top 0.1 percent have risen even more). While we can and should have a serious debate about what to do about this situation, the simple fact — American capitalism as currently constituted is undermining the foundations of middle-class society — shouldn’t be up for argument.
But it is, of course. Partly this reflects Upton Sinclair’s famous dictum: It is difficult to get a man to understand something when his salary depends on his not understanding it. But it also, I think, reflects distaste for the implications of the numbers, which seem almost like an open invitation to class warfare — or, if you prefer, a demonstration that class warfare is already underway, with the plutocrats on offense.
The result has been a determined campaign of statistical obfuscation. At its cruder end this campaign comes close to outright falsification; at its more sophisticated end it involves using fancy footwork to propagate what I think of as the myth of the deserving rich.
For an example of de facto falsification, one need look no further than a recent column by Bret Stephens of The Wall Street Journal, which first accused President Obama (wrongly) of making a factual error, then proceeded to assert that rising inequality was no big deal, because everyone has been making big gains. Why, incomes for the bottom fifth of the U.S. population have risen 186 percent since 1979!
If this sounds wrong to you, it should: that’s a nominal number, not corrected for inflation. You can find the inflation-corrected number in the same Census Bureau table; it shows incomes for the bottom fifth actually falling. Oh, and for the record, at the time of writing this elementary error had not been corrected on The Journal’s website.
O.K., that’s what crude obfuscation looks like. What about the fancier version?
I’ve noted before that conservatives seem fixated on the notion that poverty is basically the result of character problems among the poor. This may once have had a grain of truth to it, but for the past three decades and more the main obstacle facing the poor has been the lack of jobs paying decent wages. But the myth of the undeserving poor persists, and so does a counterpart myth, that of the deserving rich.
The story goes like this: America’s affluent are affluent because they made the right lifestyle choices. They got themselves good educations, they got and stayed married, and so on. Basically, affluence is a reward for adhering to the Victorian virtues.
What’s wrong with this story? Even on its own terms, it postulates opportunities that don’t exist. For example, how are children of the poor, or even the working class, supposed to get a good education in an era of declining support for and sharply rising tuition at public universities? Even social indicators like family stability are, to an important extent, economic phenomena: nothing takes a toll on family values like lack of employment opportunities.
But the main thing about this myth is that it misidentifies the winners from growing inequality. White-collar professionals, even if married to each other, are only doing O.K. The big winners are a much smaller group. The Occupy movement popularized the concept of the “1 percent,” which is a good shorthand for the rising elite, but if anything includes too many people: most of the gains of the top 1 percent have in fact gone to an even tinier elite, the top 0.1 percent.
And who are these lucky few? Mainly they’re executives of some kind, especially, although not only, in finance. You can argue about whether these people deserve to be paid so well, but one thing is clear: They didn’t get where they are simply by being prudent, clean and sober.
So how can the myth of the deserving rich be sustained? Mainly through a strategy of distortion by dilution. You almost never see apologists for inequality willing to talk about the 1 percent, let alone the really big winners. Instead, they talk about the top 20 percent, or at best the top 5 percent. These may sound like innocent choices, but they’re not, because they involve lumping in married lawyers with the wolves of Wall Street. The DiCaprio movie of that name, by the way, is wildly popular with finance types, who cheer on the title character — another clue to the realities of our new Gilded Age.
Again, I know that these realities make some people, not all of them hired guns for the plutocracy, uncomfortable, and they’d prefer to paint a different picture. But even if the facts have a well-known populist bias, they’re still the facts — and they must be faced.
By: Paul Krugman, Op-Ed Columnist, The New York Times, January 19, 2014
“Poor Little Rich Boys”: Weeping In Frustration At The Obstinate Refusal Of The American People To Recognize The Natural Aristocracy
If you read Matea Gold’s long piece at WaPo today about the vast, byzantine web of organizations—many just dummies or decoys or the purest kind of money launderers—set up by the Koch Brothers and their friends to exert massive influence on American politics behind multiple veils of secrecy, you may have been a bit underwhelmed by the Koch’s often-repeated rationale for all the skullduggery:
In a rare in-person interview with Forbes in late 2012, Charles Koch defended the need for venues that allow donors to give money without public disclosure, saying such groups provide protection from the kind of attacks his family and company have weathered.
“We get death threats, threats to blow up our facilities, kill our people. We get Anonymous and other groups trying to crash our IT systems,” he said, referring to the computer-hacking collective. “So long as we’re in a society like that, where the president attacks us and we get threats from people in Congress, and this is pushed out and becomes part of the culture — that we are evil, so we need to be destroyed, or killed — then why force people to disclose?”
Playing the victim has long been part of the Brothers’ shtick. Some readers may recall a stomach-churning Wall Street Journal op-ed by Ted Olson early in 2012 defending the Kochs (his clients) from the omnipotent, malevolent, Nixonian hostility of Barack Obama, before which they were apparently cowering in fear. This was in the midst of a presidential cycle in which the Brothers walked very, very tall, per Gold’s estimates:
Together, the 17 conservative groups that made up the [Koch political] network raised at least $407 million during the 2012 campaign, according to the analysis of tax returns by The Washington Post and the Center for Responsive Politics, a nonpartisan group that tracks money in politics.
That was all self-defense spending, you see—just as Sheldon Adelson’s vast investments in American and Israeli politics are merely the feeble efforts of an honest entrepreneur to protect himself from persecution.
It would be funny if it weren’t so pathologically sincere. I suggest you read Gold’s piece in tandem with Molly Ball’s fascinating profile of Frank Luntz, who is apparently going through some sort of mid-life crisis because of Obama’s re-election:
Luntz dreams of drafting some of the rich CEOs he is friends with to come up with a plan for saving America from its elected officials. “The politicians have failed; now it’s up to the business community to stand up and be heard,” he tells me. “I want the business community to step up.” Having once thought elites needed to listen to regular people, he now wants the people to learn from their moneyed betters.
Luntz’s populism has turned on itself and become its opposite: fear and loathing of the masses. “I am grateful that Occupy Wall Street turned out to be a bunch of crazy, disgusting, rude, horrible people, because they were onto something,” he says. “Limbaugh made fun of me when I said that Occupy Wall Street scares me. Because he didn’t hear what I hear. He doesn’t see what I see.” The people are angry. They want more, not because we have not given them enough but because we have given them too much.
For the time being, Luntz appears focused on breaking into Hollywood, presumably to reform the people via popular culture:
If he could, Luntz would like to have a consulting role on The Newsroom, Aaron Sorkin’s HBO drama. “I know I’m not supposed to like it, but I love it,” he says. He feels a kinship with Jeff Daniels’ character, the gruff, guilt-ridden, ostensibly Republican antihero, who is uncomfortable with small talk and driven by a “mission to civilize.” “I love that phrase,” Luntz says. “That doesn’t happen in anything that we do.”
When he’s at home in Los Angeles, The Newsroom is the high point of Luntz’s week. He turns off his phone and gets a plate of spaghetti bolognese and a Coke Zero and sits in front of his 85-inch television, alone in his 14,000-square-foot palace. “That’s as good as it gets for me,” he says.
Yes, Frank’s another poor little rich boy, weeping in frustration at the obstinate refusal of the American people to recognize the natural aristocracy that seeks to guide them away from the evil demagogues who demand limits on their wealth and power. Luntz is a relative small-fry in the counter-revolutionary universe, but the Kochs’ whining sounds to me like the warning rattle of a coiled snake.
By: Ed Kilgore, Contributing Writer, Washington Monthly Political Animal, January 6, 2014
“The Cruelty Of Unleashed Capitalism”: Rich Catholic Republicans Threaten Pope Francis, Because He Frightens Them
If anyone wonders whether Pope Francis has irritated wealthy conservatives with his courage and idealism, the latest outburst from Kenneth Langone left little doubt. Sounding both aggressive and whiny, the billionaire investor warned that he and his overprivileged friends might withhold their millions from church and charity unless the pontiff stops preaching against the excesses and cruelty of unleashed capitalism.
According to Langone, such criticism from the Holy See could ultimately hurt the sensitive feelings of the rich so badly that they become “incapable of feeling compassion for the poor.” He also said rich donors are already losing their enthusiasm for the restoration of St. Patrick’s Cathedral in Manhattan – a very specific threat that he mentioned directly to Cardinal Timothy Dolan of New York.
Langone is not only a leading fundraiser for church projects but a generous donor to hospitals, universities, and cancer charities (often for programs and buildings named after him, in the style of today’s self-promoting philanthropists). Among the super-rich, he has many friends and associates who may share his excitable temperament.
While his ultimatum seems senseless – would a person of true faith stiff the church and the poor? – it may well be sincere. And Langone spends freely to promote his political and economic views, in the company of the Koch brothers and other Republican plutocrats.
Still, a Pope brave enough to face down the Mafia over his financial reform of the murky Vatican Bank shouldn’t be much fazed by the likes of Langone.
Yet Langone has reason to worry that the Holy Father is in fact asking hard questions about people like him. Indeed, he could serve as a living symbol of the gross and growing economic inequality that disfigures the American system and threatens democracy.
As a leader of the New York Stock Exchange, he was largely responsible for the scandalous overpayment of his friend Richard Grasso, the exchange president who received nearly $190 million in deferred compensation when he stepped down. Although New York’s highest court eventually upheld Grasso’s pay package, it was a perfect example of the unaccountable, self-serving greed of Wall Street’s elite.
Anything but repentant following the revelation and repudiation of the Grasso deal by NYSE executives, Langone told Forbes magazine in 2004: “They got the wrong f—ing guy. I’m nuts, I’m rich, and boy, do I love a fight. I’m going to make them sh-t in their pants. When I get through with these f—ing captains of industry, they’re going to wish they were in a Cuisinart—at high speed.”
He embarked on a furious vendetta against Eliot Spitzer, who had fought to recapture Grasso’s millions as New York attorney general. And when Spitzer was forced to resign as governor in the wake of a prostitution scandal, Langone’s public gloating seemed to indicate that he had played a personal role in exposing his enemy’s indiscretions. He particularly hated Spitzer for attempting to punish and curtail the worst misconduct in the financial industry.
While Langone passionately defended the outlandish grasping of the super-rich like his friend Grasso, however, he has displayed far less indulgence toward workers, especially those struggling to support their families on poverty wages. Until just last year, he was a director of Yum! Brands, the global fast-food conglomerate that includes Taco Bell and Kentucky Fried Chicken among its holdings – and that spends millions annually to hold down the minimum wage and prevent unionization of its ill-paid employees and farmworkers.
What all this adds up to is hundreds of millions of dollars in questionable compensation for financial cronies, but not a dime more for low-income workers. It is exactly the kind of skewed outcome that the Pope means when he speaks about today’s capitalists, “the powerful feeding upon the powerless,” and the need for renewed state regulation to bring their burgeoning tyranny under control. He is talking about Langone, the Kochs, and an entire gang of right-wing financiers.
“How I would love a church that is poor and for the poor,” Francis said not long after his election to the papacy. That could be what he gets – and that might not be so bad, for the poor and for all of us, Catholic or not, who love justice.
By: Joe Conason, Featured Post, The National Memo, January 3, 2014
“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
“Billionaires’ Row And Welfare Lines”: It’s A Great Time To Be Rich In America
The stock market is hitting record highs.
Bank profits have reached their highest levels in years.
The market for luxury goods is rebounding.
Bloomberg News reported in August, “Sales of homes priced at more than $1 million jumped an average 37 percent in 2013’s first half from a year earlier to the highest level since 2007, according to DataQuick.”
A report last week in The New York Times says that developers are turning 57th Street in Manhattan into “Billionaires’ Row,” with apartments selling for north of $90 million each.
And there’s no shortage of billionaires. Forbes’s list of the world’s billionaires has added more than 200 names since 2012 and is now at 1,426. The United States once again leads the list, with 442 billionaires.
It’s a great time to be a rich person in America. The rich are raking it in during this recovery.
But in the shadow of their towering wealth exists a much less rosy recovery, where people are hurting and the pain grows.
This is the slowest post-recession jobs recovery since World War II. The unemployment rate is falling, but for the wrong reason: an increasing number of people may simply be giving up on finding a job. The labor force participation rate — the percentage of people over 16 who either have a job or are actively searching for one — fell in August to its lowest rate in 35 years.
This disconnecting is particularly acute among young people. Measure of America, a project of the Social Science Research Council, recently released a study finding that a staggering 5.8 million young people nationwide — one in seven of those ages 16 to 24 — are disconnected, meaning not employed or in school, “adrift at society’s margins,” as the group put it.
Median household income continues to fall, according to recent data from the Census Bureau. The data showed, “In 2012, real median household income was 8.3 percent lower than in 2007, the year before the most recent recession.”
And according to an April Pew Research Center report, “During the first two years of the nation’s economic recovery, the mean net worth of households in the upper 7 percent of the wealth distribution rose by an estimated 28 percent, while the mean net worth of households in the lower 93 percent dropped by 4 percent.”
The dire statistics take on even more urgency when we consider what they mean for America’s most vulnerable: our children.
According to First Focus, a bipartisan advocacy organization focusing on child and family issues: “The 1,168,354 homeless students enrolled by U.S. preschools and K-12 schools in the 2011-2012 school year is the highest number on record, and a 10 percent increase over the previous school year. The number of homeless children in public schools has increased 72 percent since the beginning of the recession.”
A report last month by the Carsey Institute at the University of New Hampshire bemoaned the stagnation of the child poverty rate in this country, saying, “These new poverty estimates released on Sept. 19, 2013, suggest that child poverty plateaued in the aftermath of the Great Recession, but there is no evidence of any reduction in child poverty even as we enter the fourth year of ‘recovery.’ ”
Nearly one in four American children live in poverty.
A report last year from the National Poverty Center estimated “that the number of households living on $2 or less in income per person per day in a given month increased from about 636,000 in 1996 to about 1.46 million households in early 2011, a percentage growth of 130 percent.”
And yet, the value of aid for those families is shrinking and under threat.
A report this week by the Center on Budget and Policy Priorities found, “Cash assistance benefits for the nation’s poorest families with children fell again in purchasing power in 2013 and are now at least 20 percent below their 1996 levels in 37 states, after adjusting for inflation.”
The number of Americans now enrolled in the Supplemental Nutrition Assistance Program (SNAP) is near record highs, and yet both houses of Congress have passed bills to cut funding to the program. The Senate measure would cut about $4 billion, while the House measure would cut roughly ten times as much, dropping millions of Americans from the program.
Next week, lawmakers will start trying to find a middle ground between the two versions of the farm bills that include these cuts.
There is an inherent tension — and obscenity — in the wildly divergent fortunes of the rich and the poor in this country, especially among our children. The growing imbalance of both wealth and opportunity cannot be sustained. Something has to give.
By: Charles M. Blow, Op-Ed Contributor, The New York Times, October 25, 2013
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