A serial journal of cogent reflections and irreverent insights on the social effects of capitalism and the roots of partisan politics. Pairing prose with HDR photography and “flash points” drawn from current and historical perspectives, the author seeks to recover lost wisdom and courageous action beyond the shouting and noise of today's headlines.
Chapter Thirteen, Part One
My Own Little Tea Party
Talking About the Concentration of Wealth
Time Range: Present Times
If I had 400 people come over my house for tea and they happened to be the wealthiest 400 people in the United States, their accumulated wealth would be equal to the wealth of the bottom half of the entire US population, or approximately 150 million people. This would be true with or without my personal financial assets included. How did so few come to have so much, and conversely, how did so many come to have so little? Disparity in wealth has grown rapidly in the United States over the past half-century. What are some of the factors? Wouldn’t it be fun for my guests to discuss this?
From 1940 through 1970, the ratio of CEOs’ pay to their workers’ average hourly wages held steady. However, during approximately the next 30 years, wages for workers slowed to a halt, and the earnings for the top 5 to 10% of senior executives went through the roof. From the 1970s to the 1980s, the compensation gap between incomes of CEOs and hourly wage earners escalated from 11:1 to 42:1. From the 1980s to the 1990s, it climbed further to 85:1. In 2000, the gap was 531:1.*
To put this in perspective, if an average worker made about $20,000 a year, the chief executive would make about $11 million a year, or more than $45,000 a day. As difficult as this is to comprehend, the numbers seem in line with those in a study done of the average compensation among CEOs of 367 US firms in 2004. The average compensation for CEOs was $11.8 million. Among the top 100 firms, the figure is even higher.
The surplus value of labor was being shared with senior executives and top-end professionals but no further. The Christian injunction to never envy another’s wages if it does not affect the wages you have agreed upon for yourself was now being put to the stress test. The wealth disparity was even more evident in pension funding.
As journalist Ellen Schultz documented in The Retirement Heist, legal maneuvers have allowed retirement savings for modest-income individuals to be shifted to senior executives. In one of many examples, she noted how GE addressed corporate profitability as being adversely affected by out-of-control factors such as a large number of retirees, poor stock market returns, and foreign competition for cheap labor. GE argued that adjustments in new employee medical benefits and retirement plans were necessitated by such market forces. What they neglected to say was a $4.4 billion obligation was dedicated to senior executive pensions. Some things just don’t seem worth mentioning.
What about the stock market? Certainly this appears a more participatory institution involving tens of millions of people directly or through such things as annuities and retirement plans. This is true to a degree, but 90% of the nation’s financial assets, including stocks and pension fund holdings, are owned by the wealthiest 10% of American households. The top 1%, including the 400 individuals I invited for tea, own 38%. So, for example, when the market goes up in value by $1.46 trillion, as it did in the fourth quarter of 2011, $1.3 trillion goes to the 10%. And the 1% would make out with $554.8 billion. With that kind of money, what is a few million here and there to promote political agendas and politicians who share your passion for liberty and freedom? Meanwhile, most Americans, whose financial assets are mostly in their homes, realized a loss in value.
Of course, not everyone at my tea party agrees with each other. At this gathering of the very wealthy, Warren Buffett is seen as somewhat suspect, at least when he is not being asked for stock tips. Why? Buffett went around his office and asked approximately 20 people—secretaries, clerks, and assistants—what they paid in taxes.
He found that he paid a lower tax rate than any of them. And he didn’t think this made a lot of sense. “I have never had it so good,” he said on national television, sitting next to his secretary, who pays double the percentage of taxes that he does. “What has happened in recent years,” he noted, is that “we were told a rising tide would lift all boats, but the rising tide has lifted all yachts.”(source) Recalling those lines, some at the tea party grumbled about how much he actually paid his secretary (quite a bit), and others thought it was poor judgment to be seen sitting next to her. Many shared with each other the belief that if he wanted to write a check to the government, he was free to do so.
Buffett Rule Vote: Tax Measure Fails in Senate
“WASHINGTON — Democrats’ attempt to pass a Buffett Rule tax on the super wealthy failed Monday in the Senate, as Republicans blocked the measure in a sharply partisan debate.
Democrats cast it as a bid for fairness that would end the circumstance in which billionaires like Warren Buffett pay a lower percentage of their income in taxes than their secretaries.
Republicans cast it as a political gimmick and an attempt by President Barack Obama to give more Americans a ‘free ride.’”
~ Huffington Post, April 16, 2012
Next Week: Chapter Thirteen: My Own Little Tea Party, Part Two
The issue of taxes appears to be quite a touchy subject. The people at my party feel they have good reason to be concerned. They made extraordinary gains regarding cutting their tax burdens over the past half-century.