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This 2012 video from Politizane does an excellent job of illustrating the massive, well-documented gap between the wealth-distribution that Americans believe they have, the distribution they would favor (regardless of political affiliation), and what America actually has: a system that rewards CEOs at 380 times the rate of their average employees.
Wealth Inequality in America (Thanks, Fipi Lele!)
Britain's harsh austerity measures have produced a sharp decline in real income and quality of life for the majority of the country; but the number of people earning £1M+ has doubled and is at an all-time high.
Official figures reveal that 18,000 people now earn at least £1m – the highest number recorded by HM Revenue & Customs. In 2010-11, 10,000 earned more than £1m, and in 1999-2000 there were only 4,000 earning such a salary.
There is also growth further down the salary brackets, with 5,000 more earning £500,000 to £1m in 2012-13 compared with 2010-11, an extra 31,000 earning £200,000 to £500,000, and 7,000 more earning £150,000 to £200,000.
The figures will increase concerns that the trends of the 1990s and early 2000s are continuing, with a growing disparity between the top-earning 1%, many of whom work in finance, and the rest of the workforce. In sectors such as manufacturing, construction and hospitality salaries have been squeezed in recent years. A recent report showed that if low to middle earnings were to rise by the 1.1% a year above inflation achieved in the past, average annual household incomes in this group would take until 2023 to reach £22,000 – the equivalent of where they stood in 2008.
Super-rich on rise as number of £1m-plus earners doubles [Daniel Boffey/The Observer]
Linda McMahon (a wrestling magnate who built up the WWE with her husband Vince McMahon) is a failed Republican Senate candidate in Connecticut with a reported net worth of $500M, who has spent a reported $100M on a pair of failed Senate bids. She has also reportedly stiffed her staffers, who claim that they were sent bounced checks from the campaign, and, when they complained, were sent more rubber checks, along with a condom and a message saying "you're screwed." From CBS:
Campaign staffer Twaine Don Gomes was reportedly among the first to make the matter of the bad checks public knowledge through local news media – an action which allegedly inspired the campaign to send a second check with something extra.
“Basically he handed me a check with a condom in it, told me I was screwed,” Gomes told WTNH. “That’s the rudest gesture you can ever do to a person, it’s like spitting in a person’s face.”
Caviar vending machines have been installed in three upscale malls in LA. In addition to $500/oz caviar, they also dispense blinis, mother of pearl spoons, and other caviar essentials. The vending machines (they're billed as "ATMs for caviar") can be found at Westfield Century City, Westfield Topanga, and the Burbank Towne Center. Apparently, these are old news in Russia, where they are favorites of oligarchs and their entourages.
China's wealthy elite is increasingly making offshore moves -- surveys indicate that the Chinese hyper-rich are keenly aware that they have a lot more than their neighbors, and the government might one day decide to take it away. So money is flowing out of China, and if the Mainland one-percenters all go, it'll tank the Chinese economy.
In case you are not already familiar with Prof. Victor Shih’s theory about capital flight from China, enough capital outflow from China (US$1 trillion or more) would cause huge liquidity problems in Chinese banking system, and the wealthiest 1% of Chinese households would be enough to cause that shift of capital should they decided to leave the country, move the money away, or whatever. And that shift might be happening already (albeit rather slowly), as manifested in the slow but consistent money outflow away from China since late last year, which, as we said, is already tightening liquidity in the banking system, now necessitating multiple rounds of liquidity injection in China.
Paul Ryan wants to kill all tax on capital gains, interest, and dividends -- income you get from owning things, rather than doing a job. Under this plan, Mitt Romney's $21,000,000 in 2010 income would be largely tax-exempt. Only his speaking and author fees -- $593,996 -- would be taxed, and only at 25%, for a net tax of $177,650 on $21,661,344 -- that is, 0.82%.
But don't worry, the government won't go broke if the super-rich are virtually tax exempt. Under Ryan's budget, tax on the bottom 30% of earners will increase. Matthew O'Brien explains in The Atlantic:
It might seem impossible to fund the government when the super-rich pay no taxes. That is accurate. Ryan would actually raise taxes on the bottom 30 percent of earners, according to the nonpartisan Tax Policy Center, but that hardly fills the revenue hole he would create. The solution? All but eliminate all government outside of Social Security and defense -- a point my colleague Derek Thompson has made in incredible chart form.
Lenovo CEO Yang Yuanqing took $3,000,000 out of his bonus and shared it among 10,000 of the company's junior employees. From CNN:
Yang had earned $5.2 million in bonuses for the fiscal year ending in March. His total earnings, including salary, incentives and other benefits, amounted to $14 million, according to the company's annual report.
I'm not sure what a "junior" employee is -- if it's a Chinese factory assembly worker, then a $300 bonus would probably contribute a significant improvement in material conditions.
"Death by Degrees," a thoughtful piece in N+1, compares the inherent injustice in a system rigged to produce unequal wealth distributions to the injustice in a system that demands expensive, time-consuming higher education in order to access professional and political life. The authors present this as a blind spot for the left, who criticize poor people for falsely identifying with the monied class and its politics, but who believe that charges of elitism in the left are just knee-jerk anti-intellectualism. They argue that elitism is very real, and, like the barriers to economic justice in labor law and politics, it is an oppressive system of credentialism that concentrates power and access in the same way. In a nutshell: "When we ask ourselves whether populist hostility should be directed against the rich or against the professional elite, the answer must be, 'Yes, please!'"
Today, we take it for granted that practicing medicine or law requires years of costly credentialing in unrelated fields. In the law, the impact of all this “training” is clear: it supports a legal system that is overly complicated and outrageously expensive, both for high-flying corporate clients who routinely overpay and for small-time criminal defendants who, in the overwhelming majority of cases, can’t afford to secure representation at all (and must surrender their fate to local prosecutors, who often send them to prison). But just as a million-dollar medical training isn’t necessary to perform an abortion, routine legal matters could easily, and cheaply, be handled by noninitiates.
The standardization of these professional guilds benefited undergraduate institutions immensely, a fact that was not lost on university administrators. College presidents endorsed the Hopkins model and the AMA’s consolidation of medical authority for good reason: in the mid-19th century, bachelor’s degrees in the United States were viewed with skepticism by the private sector, and colleges had a hard time finding enough students. The corporate-sponsored consolidation of the medical establishment changed undergraduate education from a choice to a necessity. Where once there was indifference, now there was demand: “I want to be a doctor when I grow up,” the child in the PSA says. “I want to go to college.”
No administration has embodied credentialism as thoroughly as the current one. Of Obama’s first thirty-five cabinet appointments, twenty-two had a degree from an Ivy League university, MIT, Stanford, the University of Chicago, Oxford, or Cambridge. No one would advocate staffing the country’s ministries with wealthy imbeciles, as was the custom under George W. Bush; but the President — a meritocrat himself — has succumbed to what might be called the “complexity complex,” which leads us to assume that public policy is so complicated that you need a stack of degrees to figure it out. But major political questions are rarely complex in that sense. They are much more likely to be complicated, in the Avril Lavigne sense, meaning that they involve reconciling disagreements among competing stakeholders — or, as the situation may demand, ratcheting them up.
Mark Bowden's Atlantic article tells the story of Don Johnson, a high-rolling gambler who broke the bank at three Atlantic City casinos without card-counting or other "cheats."
Years ago, I was mildly obsessed with understanding casino economics and cheats, and read a bunch of books on how to win (or at least lose slowly) at a casino. The consensus among the experts I read was to realize that most skill-based casino games are only mildly "negative expectation" (that is, if you play them with perfect statistical strategy, you'll lose a little money over time). Also, most casinos distribute "comps" (freebies) to make up about forty percent of your estimated losses. These losses are calculated by pit bosses who keep an eye on consistent gamblers and observe the size of your normal bet and the tightness of your play, then make a guess at how much you're losing per hour, and multiply that by the number of hours you spend at the table (or at least, they did -- some casinos now use automated stored-value wagering cards that eliminate the need for estimation).
The secret to converting the negative expectation game to a positive expectation game was to trick the pit bosses. Play very slowly when the pit boss isn't watching, making the minimum bet on each hand and losing as slowly as possible. When the pit boss comes by to look, start playing fast and loose, and increase your bet-size. If the ruse works, the pit-boss will be tricked into comping you enough freebies to make your play pay, even if only by a little.
The problem with this method is that it means that you can get a "free holiday" in Vegas or Atlantic City only if you're willing to devote most of that holiday to standing at a blackjack table or video-poker machine playing hand after hand after hand, for eight or ten hours a day, playing with perfect, machine-like precision, making no mistakes at all (get the odds wrong and your profits can disappear in a single hand), in order to win a few nights in a hotel, show tickets, buffet passes, and some golf. Most people capable of that sort of consistent activity and focus can find gainful employment that pays substantially more than they'd earn at the tables and just buy the vacation outright, without having to squander their holidays trying to beat the house.
But Don Johnson went much further. As a high-roller, Johnson was often solicited by the big casinos to come and play at their tables. As the recession deepened, the offers got sweeter. They offered him "discounts" on his losses -- cash rebates of a fixed percentage of the money he lost at the tables. Johnson is also a monstrously focused, skilled blackjack player. So he would negotiate these excellent deals from the casinos, bring a huge stake with him, sit at a blackjack table, and play at high velocity, making zero mistakes, for extremely long stretches. With perfect, high-speed play, he could convert his small positive expectation -- thanks to the discount he'd negotiated with the house -- to multimillion-dollar winnings.
Sophisticated gamblers won’t play by the standard rules. They negotiate. Because the casino values high rollers more than the average customer, it is willing to lessen its edge for them. It does this primarily by offering discounts, or “loss rebates.” When a casino offers a discount of, say, 10 percent, that means if the player loses $100,000 at the blackjack table, he has to pay only $90,000. Beyond the usual high-roller perks, the casino might also sweeten the deal by staking the player a significant amount up front, offering thousands of dollars in free chips, just to get the ball rolling. But even in that scenario, Johnson won’t play. By his reckoning, a few thousand in free chips plus a standard 10 percent discount just means that the casino is going to end up with slightly less of the player’s money after a few hours of play. The player still loses.
But two years ago, Johnson says, the casinos started getting desperate. With their table-game revenues tanking and the number of whales diminishing, casino marketers began to compete more aggressively for the big spenders. After all, one high roller who has a bad night can determine whether a casino’s table games finish a month in the red or in the black. Inside the casinos, this heightened the natural tension between the marketers, who are always pushing to sweeten the discounts, and the gaming managers, who want to maximize the house’s statistical edge. But month after month of declining revenues strengthened the marketers’ position. By late 2010, the discounts at some of the strapped Atlantic City casinos began creeping upward, as high as 20 percent.
Outgoing New York Times CEO Janet Robinson received an exit package worth $23.7 million after presiding over an eight year tenure that saw the company's share price fall by 80 percent. The company's net earnings over the past four years were $3 million. In addition to her exit package, Robinson earned a $1 million annual salary. Edmund Lee for Bloomberg News:
Robinson gets pension and supplemental retirement income valued at $11.4 million, performance awards of $5.39 million, restricted stock units worth $1.07 million and stock options worth $694,164, according to the company’s proxy statement filed with the Securities and Exchange Commission today. She will also earn $4.5 million in consulting fees for this year.
Robinson’s exit, which costs Times Co. more than the company earned in the past four years, marks an end to a period during which the publisher’s sales and earnings slumped amid intensifying online competition. Times Co. (NYT) stock plunged more than 80 percent during Robinson’s tenure as CEO, which began in December 2004.
The departure of Robinson, 61, also leaves a leadership vacuum at Times Co., publisher of the namesake newspaper. The company, based in New York, faces falling print-advertising revenue, profit squeezed by pension costs, and pressure from members of the Ochs-Sulzberger family to restore a dividend once worth more than $20 million annually.
New York Times CEO Robinson’s Exit Compensation Package Tops $23 Million [Bloomberg News via Tech Dirt]
Bloomberg's Max Abelson takes us deep into the spectacle of members of Wall Street's 1% bemoaning their difficult straits as they struggle to make ends meet with their reduced bonuses. One doesn't know how he'll tell his children that they can't go to an exclusive private school anymore, another bemoans his mere 1200sqft New York apartment, and a third is gutted at the thought that he and his family no longer toss away the coupon circular that is left in their doorway -- now they glance at it!
“People who don’t have money don’t understand the stress,” said Alan Dlugash, a partner at accounting firm Marks Paneth & Shron LLP in New York who specializes in financial planning for the wealthy. “Could you imagine what it’s like to say I got three kids in private school, I have to think about pulling them out? How do you do that?”
...“They have a circular that they leave in front of the buildings in our neighborhood,” said Arbeeny, 49, who lives in nearby Cobble Hill, namesake for a line of pebbled-leather Kate Spade handbags. “We sit there, and I look through all of them to find out where it’s worth going.”
...The malaise is shared by Schiff, the New York-based marketing director for Euro Pacific Capital, where his brother is CEO. His family rents the lower duplex of a brownstone in Cobble Hill, where his two children share a room. His 10-year- old daughter is a student at $32,000-a-year Poly Prep Country Day School in Brooklyn. His son, 7, will apply in a few years.
“I can’t imagine what I’m going to do,” Schiff said. “I’m crammed into 1,200 square feet. I don’t have a dishwasher. We do all our dishes by hand.”
With the Citizens United ruling, the Supreme Court turned money into a form of political speech, paving the way for enormous influxes of cash from the American ultra-elite one-percent-of-one-percent, and, to a lesser extent, organized labor (money given to the GOP by big business dwarfs labor's contribution to the Dems by a factor of about 2.5). The extent to which this has distorted American politics is only now becoming apparent, as statistics about SuperPACs and their "donations" are gathered and published. In this Salon report, Justin Elliott publishes some eye-opening figures about the new political reality in money-as-speech America.
Especially concerning: 80 percent of the money sloshing around in America's SuperPACs' warchests came from just 58 donors.
The Super PACs are not paragons of transparency, but what has been disclosed gives a sense of where the money is coming from and the interests of those giving it. Based on the donors and the origins of these groups, we can already discern what messages the Super PACs will generate in the home stretch of the campaign.
A gentleman in a nice suit who's disgustedly watching an Occupy LA protest proudly identifies himself as "part of the one percent" and asks, "Have you ever heard of anybody great that's come out of the 99 percent?"