SPECIAL IN THE GREANVILLE POST

Dispatches on how the super rich manipulate the US Government and public opinion to gain insuperable advantage in shaping the national agenda

February 21, 2011

The game show Jeopardy! drew record ratings last week as two human former champs on the show squared off against an IBM computer — named “Watson” — designed to understand and answer natural-language questions. Watson won.

Somewhere the original human Watsons, father and son, must be smiling. Thomas Watson founded IBM. Thomas Jr. took over in 1956. Junior retired 15 years later, then passed on in 1993, leaving behind a fortune worth $127 million.

And that sum raises a question for Watson the computer: How could the founding family of IBM, after 70 years on easy street, end up with a fortune no bigger than the $127 million IBM CEO Lou Gerstner took home in 2001 for just one year’s labor? Gerstner left IBM in 2002 with a total personal fortune worth $630 million.

Watson the computer may not be able to answer that question. We can. In the mid 20th century, the Watsons and other wealthy faced stiff tax rates, a significant union presence, and a politics that frowned on vast accumulations of private wealth. Modern execs like Gerstner face none of these obstacles.

Could that situation change? In Wisconsin last week Americans by the tens of thousands shouted out a “yes!” This week in Too Much we have their story.

This past fall, the business magazine Forbes described Apple computer CEO Steve Jobs as “insanely creative.” All that creativity, presumably, explains the $6.1 billion Jobs personal fortune. That fortune keeps growing. Apple last month proudly announced a record $6 billion in profits for its latest fiscal quarter. Last week Apple announced, to less fanfare, another set of numbers — on exploitation at the Asian factories that manufacture Apple’s signature electronics. Only 32 percent of these plants, notes Apple’s Supplier Responsibility 2011 Progress Report, are complying with Apple’s 60-hour maximum work-week standard. This new report also expresses Apple’s sadness over a spurt of suicides at the company’s supplier in Shenzhen, China. The first victim had worked 286 hours the month before his death — at about $1 an hour. His paycheck for the month, points out CNET, wouldn’t have been enough to buy a new $299 iPhone 4 . . .

Who knew? The world now boasts a lavish glossy magazine devoted solely to the design of cutting-edge mega yachts. The London-based Superyacht Design specializes in spotlighting the latest ideas for separating billionaires from their billions. Released last week: a concept design for the Phoenicia, a 328-foot sailing yacht inspired by the ancient Greek trireme warship. But the most over-the-top new concept floating the superyacht world comes from designers at Britain’s Yacht Island Design. They’re pushing what they call the “themed” luxury yacht. Their prime offering, the Streets of Monaco, incorporates miniature versions of the French Riviera’s most famous luxury landmarks. This 500-foot extravaganza will sleep 16 guests, require a 70-person crew, and cost $960 million to build . . .

Wall Street’s top bankers don’t much like the modest reforms in the Dodd-Frank financial industry overhaul enacted last summer. And now they’re threatening to take out their pique on average Americans if federal regulators actually dare to employ the new powers Dodd-Frank gives them. The first banker target: the Federal Reserve’s move, under Dodd-Frank, to cap the debit card fees banks charge merchants. These fees pour $23 billion a year into bank coffers. The Fed cap would slice that windfall by $10 billion. If that happens, Citigroup CEO Vikram Pandit warned last Tuesday, banks will “think hard about who they serve and devise new fee and cost structures,” a set of events that could deny Americans “access to financial services.” What bankers won’t do: Cut back on their industry’s lush compensation. In 2010, Wall Street’s 25 top firms shelled out a record $135 billion in pay . . .

Last year’s “average” pay at Wall Street’s top 25 firms came in at $141,000 per employee. But some “employees” — like JPMorgan Chase CEO Jamie Dimon — did somewhat better than others. JPMorgan announced last week that Dimon took home $17 million in stock awards last year, on top of a $1 million straight salary and a cash bonus that won’t become public until next month. Dimon has been more specific in his threats against Dodd-Frank than Citi’s Vikram Pandit. Last month Dimon “informed” the nation that Dodd-Frank reforms could cost 5 percent of Americans access to traditional bank accounts . . .

Jamie Dimon, Vikram Pandit, and their fellow Wall Street heavyweights are getting plenty of help in their drive to blunt Dodd-Frank — from lawmakers on Capitol Hill. GOP congressional leaders are working to choke off the Dodd-Frank reforms by denying funding to the federal regulators responsible for enforcing them. Last week a coalition of over 250 citizens groups — ranging from the Consumer Federation of America to the Council of Institutional Investors — urged Congress to reject funding cuts that would “increase the danger of another financial crisis.” But the House voted, by 270-160, to kill a budget amendment from Rep. Barney Frank that would have restored funding GOP leaders have cut from the Securities and Exchange Commission budget and add new funding for Dodd-Frank enforcement. The Senate can still block the House move.

A Wisconsin Wake-Up: ‘Fight like an Egyptian’

Wisconsin’s capitol continues to reverberate with the sound and fury of workers and students united — against the ‘Mubarak of the Midwest’ and the wealthy he so diligently shields from any inconvenience.

In 1911, exactly a century ago, Wisconsin enacted America’s first state income tax, a tax-the-rich move initially proposed, a few years earlier, by the state’s innovative progressive Republican governor, Robert La Follette.

Now another Wisconsin Republican governor is trying to make history — in the opposite direction. The newly elected Scott Walker isn’t just demanding pay and benefit givebacks from the state’s public employees. He’s pushing labor law changes that would, if enacted, essentially drive their unions out of business.

But Wisconsin workers are trying to make some history, too. They mobilized last week, in record numbers, to stop Walker’s plan.

Day after day, tens of thousands of protesting Wisconsans surrounded the state capitol building in Madison. On Thursday, inside that capitol, the governor’s Senate allies couldn’t round up enough votes for a quorum. The governor’s rush to gut union rights had fallen strikingly short.

But last week’s stunning success, protestors understand, represents only round one. They’re gearing up for a protracted struggle against what one Wisconsin union activist, Carmen Clark, is calling the “owning class.” 

And Wisconsin workers are hoping, along with their retired and young student supporters, that this struggle will prove a game-changer — for the nation.

“Unless we begin acting to recover our democracy from the plutocracy now in control,” as retiree Dave Svetlik put it last week, “the ‘American dream’ will continue to drift ever further from the reach of average citizens.”

That drift will become a powerful push if Wisconsin’s new governor ever gets his way. Some 20 states now have GOP governors and GOP-majority legislatures poised to follow the Scott Walker script.

Walker the gubernatorial candidate kept that script secret from Wisconsin voters in his election campaign last fall. He ran — and won — as a candidate pledging to work, on a bipartisan basis, to create jobs.

But a week ago Friday Walker unveiled a budget package that went far beyond anything he had ever hinted at during his campaign. Walker proposed to double what public employees pay for health care and hike their required pension payouts as well. The impact? The governor’s plan would cost one typical public employee family, teachers Brad and Heather Lutes, over $8,000 a year.

Wisconsin public employees, as one new study notes, already take home 8.2 percent less annually than private-sector workers with comparable educations.

The budget package Walker unveiled earlier this month also asks lawmakers to strip away basic workplace bargaining rights. Under his plan, public employee unions in Wisconsin would no longer be able to bargain over health coverage, pensions, or any other benefits.

Unions would still be able to bargain over wages, but wage increases, the governor’s plan stipulates, would not be allowed to inch up over inflation. Unions would also not be allowed to collect operating expenses via dues checkoff. On top of that, the governor’s plan would force them to run workplace elections each and every year to continue to be recognized as an employee bargaining agent.

In other words, notes University of Wisconsin historian Stephen Meyer, Walker’s plan “requires that unions get certified by their members yearly, at the same time that the unions are prevented from accomplishing anything for their members.”

Governor Walker claims that his state’s budget crisis leaves him no choice. Wisconsin, to be sure, is currently facing a budget shortfall — $137 million this year and $3.6 billion over the next two.

But stripping unions of bargaining rights Wisconsin public employees have held for half a century — ever since their state became the nation’s first to enact a state public employee bargaining law in 1959 — will do nothing to narrow the state’s budget deficit. And the governor refuses to consider other steps that would — like raising taxes on Wisconsin taxpayers who make over $200,000 a year.

The state top rate on income over that figure currently sits at 7.75 percent, a rate down substantially from the 11.4 percent Wisconsin top rate in effect throughout the 1970s. A hike in that 7.75 percent top rate to 10.95 percent — on income over $200,000 — would raise about $600 million a year.

The public employee wage and benefit cuts the governor is pushing, by contrast, will save only $30 million this year and $300 million in the next two combined.

Is a 10.95 percent top rate politically possible? Minnesota governor Mark Dayton thinks it is. Last week Dayton proposed just this rate for his state’s top-income bracket, plus an additional temporary surcharge on income over $500,000 and a new state property tax on homes valued over $1 million.

Dayton’s tax hikes on Minnesota’s wealthiest 5 percent will raise enough revenue to cut in half the state’s $6.2 billion budget shortfall over the next two years.

Unlike Wisconsin’s Walker, Minnesota’s Dayton clearly signaled his intentions to voters. In his campaign last fall, he ran on an aggressive tax-the-rich platform.

Walker, since taking office last month, has pandered to the rich. Once sworn in, he pushed into place $140 million in tax breaks that almost exclusively benefit the rich and corporations. The ultimate irony: These tax breaks for Wisconsin’s affluent created the $137 million deficit in this year’s budget that Walker is using to justify his demand for cutbacks in what Wisconsin public workers take home.

Governor Walker, as protestor Kathy Wilkes reminded one rally in Madison Tuesday, ought to be “talking about the corporate elite and their gargantuan salaries.” Instead, he’s “demonizing workers.”

“We did not create the economic crisis and we are not going to pay for it,” college faculty organizer Bryan Pfeifer told that same rally. “Fight like an Egyptian!”

A Game-Day ‘Program’ for the NFL Lockout

Dave Zirin, Bad Sports: How Owners Are Ruining the Games We Love. Scribner, 223 pp.

You don’t have to be a sports fan to care about whether pro football’s owners make good on their threat to lock out their players next month. You just have to be a taxpayer.

Hundreds of millions of tax dollars are currently flowing, each and every year, to pro football franchises — via a variety of tax breaks and subsidies.

Hundreds of millions more are flowing in from ticket sales, broadcast rights, and merchandising. In all, the National Football League’s 32 franchises are pulling in $9.3 billion a year.

The owners of those franchises, under pro football’s expiring collective bargaining agreement, get the first billion that comes in, then move 60 percent of the rest to the players fans pay to see. The owners, Washington Post columnist Sally Jenkins noted last week, are now demanding another billion up front.

To get that extra billion, these owners are willing to shut the next football season down. This bit of executive extortion is now generating, predictably enough, daily sports page headlines. Need help understanding this greed offensive? You need Dave Zirin’s new Bad Sports: How Owners Are Ruining the Games We Love.

Zirin, the nation’s most unabashedly progressive sportswriter, writes as colorfully as any classic sportswriter from years gone by, and his passion for the games he covers shines through everything he writes. So does his disgust at sports ownership grasping.

Zirin’s new book chronicles this ownership greed, in one sport after another. The worst owner of them all? Tough to say. Former Wal-Mart CEO David Dayne Glass, the owner of baseball’s Kansas City Royals, certainly rates as a contender.

Glass helped engineer the player lockout that cancelled the 1994 World Series, then cut his Royals payroll in half and turned a competitive team into a perennial cellar-dweller, while pocketing a sweet $20 million a year in profits.

The obvious question: Are today’s owners any worse than yesterday’s? In fact, on any scale of personal venality, today’s owners probably rate as no better or worse. But they certainly do function in a markedly different environment.

In the old environment, the sports landscape of the mid 20th century, the wealthy and average working people always coexisted. Rich people might own the nation’s sports franchises, the movers and shakers in sports understood, but their teams, to be successful, had to belong to average people.

A franchise simply could not flourish, assumed the conventional sports wisdom, without the support of massive numbers of fans from middle class families.

America would change over the closing decades of the twentieth century. So would the assumptions of America’s sports franchise ownership.

In the new — and much more unequal — America that would emerge in the 1980s, the economy no longer revolved around middle class households. In the new America, wealth would tilt toward the top, and owners would tilt that way, too. They suddenly saw they no longer needed the average fan.

The average fan, after all, only spends average money. The real money, in the new, much more unequal America, rests in affluent pockets.

“The old model of the paternalistic owner caring for a community,” as Zirin explains, “has become as outdated as the Model T.”

With publicly funded stadium subsidies, luxury box licenses, sweetheart cable deals, and globalized merchandising, today’s owners no longer have any need to cater to a local working family fan base. So they don’t. They price tickets out of the average fan’s price range. They charge $8 for beers.

The games we love, says Zirin, no longer love us back.

The solution? A more equal America would help. So would community ownership of sports teams, a model already existing with the community-owned Green Bay Packers. Zirin lovingly explains how the nonprofit Packers work.

Zirin also notes that the National Football League constitution now explicitly bans any franchise from going community nonprofit in the future.

“We all have a stake in demanding that our local owners live up to the dreams their teams inspire,” concludes Zirin. “There’s a time to cheer and a time to seethe. We all have a stake in knowing the difference.”

Too Much, an online weekly publication of the Institute for Policy Studies | 1112 16th Street NW, Suite 600, Washington, DC 20036 | (202) 234-9382 | Editor: Sam Pizzigati. | E-mail: editor@toomuchonline.org | Unsubscribe.

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