Blog

The U.S. public sees a danger in the nation’s growing income inequality and says the rich don’t pay their fair share of taxes (click on chart to enlarge), according to a new Pew Research Center survey released yesterday.

Nearly six in 10, or 58 percent, say the rich don’t pay enough in taxes, while 26 percent believe the rich pay their fair share and 8 percent say they pay too much.

Further,

roughly two-thirds of Americans (65 percent) say the income gap between the rich and poor has gotten larger in the past decade. And 57 percent also say this is a bad thing for society (3 percent say this is a good thing).

Sixty-three percent of those polled also say Republicans favor the rich over the middle class and poor, and 71 percent say Mitt Romney’s election would be good for wealthy people. In contrast, 60 percent say if President Obama is re-elected his policies will benefit the poor, while half say they’ll help the middle class and 37 percent say they’ll boost the wealthy. (more…)

The AFL-CIO this week launched the 2012 Executive PayWatch site—now called CEO Pay and the 99%—which includes the most comprehensive data accessible on 2011 executive pay. All of the data available is searchable by industry, by state and by the top 100 highest-paid CEOs. Check it and help us share it widely.

CEO Pay and the 99% shows that a CEO of a company in the S&P 500 Index, on average, received $12.9 million in total compensation in 2011. That’s a 14 percent raise over the previous year. And that’s on top of a 23 percent increase in 2010.

In stark contrast, the average wage for workers hovered at $34,000 in 2011. Median household income fell $3,700 over the past decade. And those who are employed received an average 2.8 percent raise—barely keeping up with inflation.

The new site also features data on:

Swelling corporate cash stockpiles. Corporations have a record $2.2 trillion in cash on their balance sheets, according to the Federal Reserve. But rather than reinvest this capital to grow our economy and create jobs, CEOs are not deploying these resources.

The widening gap between CEO-to-worker pay. Last year, this ratio of CEO-to-worker pay had widened to an astonishing 380 times. In 1980, CEOs of large U.S. companies made 42 times the average wages of workers.

Mutual funds’ votes on executive pay. Mutual funds wield enormous clout on CEO pay issues in part because of the new “say-on-pay” requirement that shareholders cast an advisory vote on CEO pay. In this new section, investors can look up how their mutual funds voted and ask their mutual funds to vote against runaway CEO pay levels.

The shady world of private equity, which Mitt Romney’s candidacy has brought to light.

You also can take action to rein in out-of-control CEO pay: Send an e-mail to the U.S. Securities and Exchange Commission and urge it to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act’s requirement that public companies disclose their ratio of CEO-to-worker pay.

***

This has been reposted from AFL-CIO.

Founders of Patriotic Millionaires, Jerry Fiddler and Garrett Gruener, explain to War Room Host Jennifer Granholm the principle behind the wealthy paying higher taxes and how government resources including infrastructure and public schools helped drive their successes in business. Tune in weeknights at 9:00/8:00c on Current TV.

In today’s economy where plants are shutting down, millions of people across our country are losing their houses, savings and much more. Now is the time we must stand united to fight for what remains of the middle class.

Within the last few years, opponents of unionized labor have been attacking from a political standpoint and an economic standpoint, all for the entire world to see. In some cases, opponents are crushing unions because of economic worries. During any contract negotiations, corporations can and do use fear to split the struggling members and basically take what they want in the process.

Governors are signing bills that hinder union support and hinder honest, hard-working Americans. Corporations see how to take a few more dollars from the middle class, blue collar worker to line the pockets of their CEOs. For example, Goodyear’s CEO compensation rose 21 percent in 2011, and Ford’s CEO Alan Mulally was given an 11 percent compensation increase.

Yet the workers who break their backs to earn a decent living are asked to give up more. Spread the profits to those that helped get you there. We all need to wake up and stand united from the attacks from all sides.

***

To submit a blog to Free Speech Zone, e-mail it to bstack@usw.org. Keep it to 250 words or fewer. You MUST include your full name, hometown, and state. You may attach a photograph of yourself. Please include a phone number. This WILL NOT be published. Posting any given blog is within the discretion of the USW. No blog using foul language (this is a family site), false information (we don’t want to get sued), or unnecessary personal attacks (again, we don’t want to get sued) will be used. Wait a reasonable period of time, then blog again! This is a Free Speech Zone.

In 2010, as the economy began its slow recovery from the Great Recession, a new study shows the richest 1% of Americans captured a staggering 93% of all income growth, while the incomes of most Americans stagnated. 93%. Occupy that. The 1% are back

The stock market — leading source of wealth for the few — rebounded. Housing — the leading source of wealth for middle income Americans — continued to decline. Median CEO pay soared a stunning 27%. When the 2011 figures come out, the disparities will be even greater. America is recovering the old economy’s extreme inequalities.

This divorce of the 1% from the rest of us is bad for the economy and for the democracy. It’s even bad for your health. The question is what can be done about it.

In the New York Times last week, financier Steven Rattner summarized the conventional remedies: “better education and training, a fairer tax system, more aid programs for the disadvantaged” to help them “escape the bottom rung.”

OK, but as Harold Meyerson suggests in the Washington Post, this agenda ignores the major source of the new inequality: the changes in how corporations reward their employees.

Who is in the 1%? As Emmanual Saez, the author of the inequality study report, writes, today’s top earners tend to be “working rich.” About a third (31%) of the top 1% are executives and managers outside of finance. Another 14% are “financial professionals.” Doctors are about 16%, lawyers 8%.

Inside our companies, CEO pay has soared, while worker pay has stagnated at best. According to the Institute for Policy Studies, CEOs are now making 325 times what the average worker makes. CEO pay has soared as companies have dramatically increased stock options as part of compensation packages. Worker pay has stagnated as companies have waged relentless and successful war on unions. Even mid-level executives have not shared in the fabulous rewards offered the top.

The Costs of CEO Excess

Ironically, the new concentration of rewards at the top is dysfunctional to companies, as well. As Roger Martin details in his brilliant, Fixing the Game: Bubbles, Crashes, and What Capitalism can Learn From the NFL, CEO pay exploded when companies adopted reward systems based upon maximizing shareholder value. Stock options were dramatically increased as a source of CEO pay, on the theory that the CEO would share the interests of shareholders. Before the change — from 1960 to 1980, CEO compensation per dollar of net income earned for the 365 largest publicly traded U.S. companies FELL by 33%. CEO pay rose, but they earned more for the shareholders for steadily less relative compensation. After 1980, as new compensation schemes came into play, CEO compensation per dollar earned doubled from 1980 to 1990 and quadrupled between 1990 and 2000. And, stockholders fared better in the earlier period than the latter. (more…)

The economic policies that led to the financial crash of 2008 and the subsequent Great Recession should have been permanently discredited by their epic failure. Instead, the Republican presidential candidates are now resurrecting the same failed policies and pretending the crash never happened.

America cannot afford to go down this path again. If we want to fix what is wrong with our economy, we have to learn from our mistakes and avoid repeating them.

The crash of 2008 and the Great Recession were inevitable consequences of three decades of economic policies designed by and for Wall Street and the wealthiest Americans. At the heart of the problem was the hollowing out of American manufacturing, the growing dysfunction of our financial sector and a rapid increase in economic inequality, all of which crippled the growth engine of the U.S. economy.

Starting in the 1980s, corporate America decided to boost profits by shipping U.S. jobs overseas. NAFTA and the admission of China into the World Trade Organization (WTO) accelerated the drive to relocate production to “export platforms” in foreign countries that would ship goods back to the U.S. market. Corporations that sent jobs overseas became forceful proponents of a “strong” (overvalued) dollar, which enhanced the profitability of their overseas operations but at the same time made much of the U.S. manufacturing sector uncompetitive and led to perennial U.S. trade deficits.

Also by the 1980s, the U.S. financial sector was failing to perform its essential function of channeling savings to productive investment in the real economy. Financial firms on Wall Street focused instead on making a quick buck by stripping assets from existing businesses and downsizing their workforces, and on various forms of complex financial engineering that had little economic value. Financial firms also provided critical support for a “strong dollar” policy that diverted productive investment away from the U.S. manufacturing sector toward overseas operations. By the eve of the crash of 2008, the manufacturing sector had shrunk to half its 1960 size, while the financial sector had doubled in size and accounted for 40 percent of corporate profits.

The deindustrialization of America and the substitution of speculation for productive investment were not accidents, they were not inevitable, and they were not the outcome of natural forces. They were the predictable results of mistaken policy choices made by politicians of both parties for more than a generation. These policy choices had victims with first and last names: millions of displaced workers, shuttered factories and hollowed-out communities across the country hobbled by shrinking tax bases that no longer could support vital public services.

Both deindustrialization and the dysfunction of finance contributed to a remarkable rise in economic inequality starting in the late 1970s. Trade deficits and offshoring wiped out millions of well-paying, middle-class jobs, and the threat of offshoring held down wages for all workers. But a long list of other deliberate policy choices also played key roles in the rise of inequality. These included the abandonment of full employment in favor of fighting inflation, the prolonged attack on workers’ right to organize and bargain collectively with their employers, the erosion of the minimum wage and other labor protections and massive tax cuts for the wealthy. In the end, nearly two-thirds of the pre-tax income gains after 1979 were captured by the richest 10 percent and more than half was captured by the richest 1 percent.

The experience of the past 30 years shows that rising inequality is bad not only for workers, but also for the economy as a whole. Less affluent households tend to spend more of their income, generating more economic activity, while more affluent households tend to consume less. Wage stagnation undermines political support for the levels of taxation necessary to support public investment in things like roads and schools, which underpins future economic productivity. And high levels of inequality are associated with political decision-making that leads to slower growth. In short, the upward redistribution of income throws sand in the gears of the economy. (more…)

Let Santorum and Romney duke it out for who will cut taxes on the wealthy the most and shred the public services everyone else depends on.

The rest of us ought to be having a serious discussion about a wealth tax. Because if you really want to know what’s happening to the American economy you need to look at household wealth — not just incomes.

The Fed just reported that household wealth increased from October through December. That’s the first gain in three quarters.

Good news? Take closer look. The entire gain came from increases in stock prices. Those increases in stock values more than made up for continued losses in home values.

But the vast majority of Americans don’t have their wealth in the stock market. Over 90 percent of the nation’s financial assets – including stocks and pension-fund holdings – are owned by the richest 10 percent of Americans. The top 1 percent owns 38 percent.

Most Americans have their wealth in their homes – whose prices continue to drop. Housing prices are down by a third from their 2006 peak.

So as the value of financial assets held by American households increased by $1.46 trillion in the fourth quarter, the wealthiest 10 percent of Americans became $1.3 trillion richer, and the wealthiest 1 percent became $554.8 billion richer.

But at the same time, as the value of household real estate fell by $367.4 billion in the fourth quarter, homeowners – mostly middle class – lost over $141 billion (owners’ equity is 38.4 percent of total household real estate). (more…)

More confirmation that the extremely rich are getting richer and those without jobs are suffering even more.

In 2009 and 2010, the first year of the current “recovery,” the 1 percent captured 93 percent of U.S. income growth. Repeat: 93 percent of income growth went to the 1 percent.

Even the Wall Street Journal writes:

Forget two-speeds. It’s more like the 1 percent is in a fast lane and the rest are stalled in the parking lot.

Affirming the findings of the study, authored by Emmanuel Saez, Economic Policy Institute (EPI) President Lawrence Mishel adds that at the same time, those in the bottom 90 percent of the income scale have seen their wage share retreat to what it was in 2006—when it was the lowest in any year (dating back to 1937).

A big contributor to declining income is the nation’s historically high long-term unemployment, and a new report from the Center for Economic and Policy Research (CEPR) looks at how many of the millions of workers struggling with unemployment and under-employment are not being counted—yet are experiencing “significant and long-lasting loss of earnings, deterioration of skills, poverty and even higher rates of divorces and reduced physical and mental health.”

Under the standard measure of long-term unemployment, half of all unemployed African American men have been jobless for more than six months or longer, followed closely by roughly 49 percent of unemployed Asian men, African American women and Asian women, according to “Long-Term Hardship in the Labor Market.”

However, the report’s alternative measure (which includes discouraged workers, workers marginally attached to the workforce and workers who are part-time for economic reasons) shows that African American men are much more likely than other workers to experience long-term hardship. About 9 percent of all black men in the labor force, compared with 7 percent of black women, 5 percent of Latinas and 4 percent of Latino men had been unemployed for six months or longer in 2011. (more…)

Last Friday, the Social Security Administration released its figures on how much money Americans made in 2010 from wages, salaries, and tips (but not from capital gains, dividends or rents). Turns out that the 150,398,796 Americans for whom employers issued W-2 forms made just over $6 trillion in net compensation. If you calculate the raw mean average, that comes out to $39,959.30 per worker. But 66 percent of wage earners actually made less than that (or that amount exactly)—which means, the high level of pay for upper-income workers produced a much higher mean average than the average American worker actually makes. The median wage—the dollar amount that 50 percent of wage earners made more than, and 50 percent made less than—was $26,363.55. Twenty-six thousand bucks is what the average American worker makes on the job. That’s right in line with the figures for median household income, which hover around $49,000 once you total the income for everyone at home who has a job.

To be sure, once you allow for the income that people don’t report, or that they make on investments, the income level may rise a bit, even though the vast majority of Americans don’t have significant investments. If the minimum wage were higher, and indexed; if the rate of private sector unionization hadn’t been battered down to its current 7 percent; if manufacturing hadn’t shrunk to 11 percent of the GDP, employing less than 10 percent of the work force; if we hadn’t offshored our industry to China and stood idly by as wages in the States declined accordingly – if we had done any of the things that could have preserved our once-vibrant middle class, then that figure would be higher than 26 thou. But we didn’t and it ain’t. (more…)

Rep. Paul Ryan (R-WI) resumed his attacks on President Obama’s economic policy Sunday morning, suggesting that the President’s plan to tax millionaires’ profits from capital gains in order to fund job creation efforts constitutes “class warfare”:

RYAN: It adds further instability to our system — more uncertainty — and it punishes job creation and those people who create jobs. Class warfare, Chris, may make for really good politics but it makes for rotten economics. We don’t need to divide people and prey on people’s fear and envy and anxiety. We need to remove the barriers so entrepreneurs can hire people. These tax increases don’t work. [...]

This is a double tax. If we tax investment and tax more you will get less of it. It looks like to me not a very good sign. It looks like the President wants to move down the class warfare path. Class warfare will simply divide this country more, will attack job creators,  divide people, and it doesn’t grow the economy.

(more…)