|October 13, 2014|
|Sometimes generosity makes no sense. Nevada state officials, for instance, have been exceedingly generous with billionaire Elon Musk and his luxury electric car company Tesla. Nevada has decided to shower the company with $1.25 billion in “economic development incentives.”The incentives, state officials say, will “create jobs.” They will, agrees one Los Angeles Times analysis — at up to $400,000 in taxpayer dollars per job created!On the other hand, sometimes generosity makes all the sense in the world. Here, too, an example from Nevada: Citizens there have upped their charitable giving by 13 percent since 2006, the top increase in the nation. That boost is helping lots of folks. The housing meltdown had its ground zero in Nevada.A new report released last week places this particular Nevadan generosity in a much broader perspective. Generosity that makes sense, turns out, seems to diminish the higher up you go on the income ladder. We have more on that phenomenon — and new report — in this week’s Too Much.|
|GREED AT A GLANCE|
|Has the SAT — the rite-of-passage aptitude test for college-bound students — now become, in effect, a “Student Affluence Test”? The latest SAT test score data, says a new FairTest report, certainly suggest as much. In 2014, students in every U.S. family income bracket scored higher on the SAT than students in the income bracket immediately below them. Emory University researcher Sabino Kornrich, the Dallas News notes, has one explanation for the income-sensitive SAT scores: “Wealthy parents are increasing their education spending so much that middle- and lower-class parents can’t keep pace.” The top 10 percent of U.S. income earners — average income, $253,146 — now spend $5,495 per year on education. The nation’s bottom 90 percent spend an average $1,088 . . .A rough year for Cisco Systems CEO John Chambers. The computer networking company’s total revenue has now declined for the first time in five years. Cisco’s board of directors expected Chambers “to produce” $14 billion in fiscal 2014 operating income. He delivered only $13.4 billion. His penalty? Total pay for Chambers has dropped to $14 million, from $16.3 million the year before. But cheer up, John, things could be worse. This past August, Cisco announced plans to cut 6,000 jobs. You still have yours. You’ll also likely get almost all that lost paycheck income back. CEOs getting “penalized” for poor performance, says new business school research, typically see their pay drop 42.2 percent the year of the “punishment” and leap up 40 percent the next . . .What could be more vexing — for billionaires — than the age-old problem of getting from yacht to shore? In the beginning, billionaires used “tenders” — small motor boats — to make that journey. But seas can get rough. So forward-thinking billionaires put helipads on their yachts and rode helicopters back and forth. But salty air and ocean swells can wreak havoc on helicopters sitting on helipads. The solution? Yachts are now coming outfitted with built-in helicopter hangars. The greater space in today’s yachts, says Airbus Helicopters exec Frederic Lemos, is making these hangars a reasonable option. Ten years ago, Lemos notes, impressive yachts stretched 60 meters — about 200 feet — long. Top yachts these days are running in the range of 100 to 150 meters.|
Quote of the Week
“I sent it because income distribution within our company is poor.”
|PETULANT PLUTOCRAT OF THE WEEK|
|Fabled wheeler-dealer Carl Icahn can’t fathom why workers at the Trump Taj Mahal casino in New Jersey’s Atlantic City aren’t thanking him for demanding that they give up their health insurance. The workers are protesting instead. Last week, 24 of them staged a sitdown that blocked Atlantic City-bound traffic. Icahn, with $26 billion to his name, owns America’s 16th-largest fortune. He also owns the Taj Mahal’s debt and says he’ll force a shutdown unless workers swallow deep cutbacks. The casino, says Icahn, “is on its death bed and rather than helping it, they’re whacking it in the head.” Answers Taj Majal cook Paul Smith, a single father of two who literally did lie on his death bed after a heart attack: “Without health insurance, I wouldn’t be here today.”|
|IMAGES OF INEQUALITY|
|Global deep pockets, one Wall Street analyst noted earlier this month, “are going crazy to get their hands” on the newest private jet from Gulfstream. How crazy? The waiting list for Gulfstream’s $64.5-million G650 model now runs nearly four years. What has the ultra rich drooling? For starters, try speed. The plush G650 can fly 18 passengers nonstop from New York to India’s Mumbai in under 14 hours, two hours faster than the fastest nonstop commercial flight can go.|
State Inequality/ Where does your state you call home rank on inequality? This helpful new map rates U.S. states by four different economic yardsticks.
|ANTIDOTES TO INEQUITY|
|Public employee pension funds used to invest in only the safest of bonds and stocks. But vast tax cuts — mostly for the rich — have over recent decades put the squeeze on state and local government contributions into pension funds and sent pension trustees desperately searching for higher investment returns. The managers of hedge funds and other “alternative investments” promised to deliver them. At a price, of course. Hedge funds typically charge a 2 percent fee for the money they manage and a 20 percent cut on any profits they produce. Public pension funds have been paying those fees since the 1990s and, in the process, turning hedge fund managers into billionaires. But pension funds may finally be wising up, after years of disappointing returns. Last week, San Francisco set aside a plan to shift billions of pension dollars into hedge funds. Last month, California’s retirement system opted out of hedge fund investing.|
Share with co-workers at your workplace the stunning share-the-wealth letterWells Fargo worker Tyrel Oates emailed last week to his bank’s $19-million-a-year CEO.
|INEQUALITY BY THE NUMBERS|
Stat of the Week
America’s 400 richest individuals now hold a combined $2.9 trillion in wealth, a sum that about equals the gross national product of Brazil, a nation of 200 million people.
Our Empathetic Rich: The Rarest of Birds
A landmark new study has laid bare the dirty little secret of modern American philanthropy: America’s wealthy don’t particularly care all that much about the rest of us.
Billionaire CEO Nicholas Woodman, news reports trumpeted earlier this month, has set aside $450 million worth of his GoPro software stock to set up a brand-new charitable foundation.
“We wake up every morning grateful for the opportunities life has given us,” Woodman and his wife Jill noted in a joint statement. “We hope to return the favor as best we can.”
Stories about charitable billionaires have long been a media staple. The defenders of our economic order love them — and regularly trot them out to justify America’s ever more top-heavy concentration of income and wealth.
Our charities depend, the argument goes, on the generosity of the rich. The richer the rich, the better off our charitable enterprises will be.
But this defense of inequality, analysts have understood for quite some time, holds precious little water. Low- and middle-income people, the research shows, give a greater share of their incomes to charity than people of decidedly more ample means.
The Chronicle of Philanthropy, the nation’s top monitor of everything charitable, last week dramatically added to this research.
Between 2006 and 2012, a new Chronicle analysis of IRS tax return data reveals, Americans who make over $200,000 a year decreased the share of their income they devote to charity by 4.6 percent.
Over those same years, a time of recession and limited recovery, these same affluent Americans saw their own incomes increase. For the nation’s top 5 percent of income earners, that increase averaged 9.9 percent.
By contrast, those Americans making less than $100,000 actually increased their giving between 2006 and 2012. The most generous Americans of all? Those making less than $25,000. Amid the hard times of recent years, low-income Americans devoted 16.6 percent more of their meager incomes to charity.
Overall, those making under $100,000 increased their giving by 4.5 percent.
In the half-dozen years this new study covers, the Chronicle of Philanthropyconcludes, “poor and middle class Americans dug deeper into their wallets to give to charity, even though they were earning less.”
America’s affluent do still remain, in absolute terms, the nation’s largest givers to charity. In 2012, the Chronicle analysis shows, those earning under $100,000 handed charities $57.3 billion. Americans making over $200,000 gave away $77.5 billion.
But that $77.5 billion pales against at how much more the rich could — rather painlessly — be giving. Between 2006 and 2012, the combined wealth of the Forbes400 alone increased by $1.04 trillion.
What the rich do give to charity often does people truly in need no good at all. Wealthy people do the bulk of their giving to colleges and cultural institutions, notesChronicle of Philanthropy editor Stacy Palmer. Food banks and other social service charities “depend more on lower income Americans.”
Low- and middle-income people, adds Palmer, “know people who lost their jobs or are homeless.” They’ve been sacrificing “to help their neighbors.”
America’s increasing economic segregation, meanwhile, has left America’s rich less and less exposed to “neighbors” struggling to get by. That’s opening up, saysVox policy analyst Danielle Kurtzleben, an “empathy gap.”
“After all,” she explains, “if I can’t see you, I’m less likely to help you.”
The more wealth concentrates, the more nonprofits chase after these less-than-empathetic rich for donations. The priorities of these rich, notes Kurtzleben, become the priorities for more and more nonprofits.
The end result? Elite universities get mega-million-dollar donations to build mahogany-appointed students dorms. Art museums get new wings. Hospitals get windfalls to tackle the diseases that spook the high-end set.
Some in that set do seem to sense the growing disconnect between real need and real resources. Last week billionaire hedge fund manager David Einhorn announced a $50 million gift to help Cornell University set students up in “real-world experiences” that address the challenges hard-pressed communities face.
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“When you go out beyond the classroom and into the community and find problems and have to deal with people in the real world,” says Einhorn, “you develop skills for empathy.”
True enough — but in a society growing ever more unequal and separate, not enough. In that society — our society — the privileged will continue to go “blind to how people outside their own class are living,” as Danielle Kurtzleben puts it.
We need, in short, much more than Empathy 101. We need more equality.
James Bloodworth, Inequality: where Labour really did ‘crash the car,’Left Foot Forward, October 8, 2014. A lesson from the UK: Why we can’t fight inequality just by lifting up the poor.
What the Statue of Liberty Would Look Like as a $300M Condo, Fast Company, October 9, 2014. Developers are already turning historic landmarks into luxury abodes. Why not go all the way?
Harold Meyerson, How workers lost the power struggle — and their pay raises, Washington Post, October 9, 2014. Understanding our upward redistribution of wealth requires a look at our institutional dynamics.
Bob Lord, From the First Forbes Rich List to the Last, Inequality.Org, October 10, 2014. America’s super rich today hold more wealth than their counterparts in 1918, the year Forbes first tried identifying the nation’s grandest fortunes.
Kathy Kristof, How Overpaid CEOs Hurt Investors, Kiplinger’s Personal Finance, November 2014. If more firms spread their wealth beyond the boardroom, they’d improve their true bottom lines.
In 1944, the tax rate on income over $200,000 in the United States hit 94 percent. How did that happen? Too Much editor Sam Pizzigati’s gripping history of the triumph over America’s original plutocracy tells that story — and much more. Read the introduction online.
Kids Say the Darndest Things: An Update
Danny Dorling, a distinguished social geographer now at the University of Oxford, can speak academese as well as any academician. But Dorling also has a gift for explaining complicated concepts and stats in clear and compelling prose.
That prose abounds in this fine new inequality primer.Dorling is targeting a UK audience with these pages, but those of us who may reside far beyond the UK’s borders will find plenty of value here.
The book’s prime question: “Can we afford the super rich?” The answer comes in chapters devoted to work, wealth, health — and childhood.
This childhood chapter may be the book’s most fascinating. One highlight: Dorling’s exploration of the pocket money that kids bring to school every day.
Actually, many UK kids — one in six — have no pocket money at all to bring. Those that do average £6.50, about $10.40, a week. But that average, Dorling notes, blurs a wide pocket-money gap among UK students.
How wide would that gap be, Dorling then wonders in an engaging thought experiment, if we had exactly 100 kids in a school where pocket money averaged that $10.40 per week, but the distribution of that pocket money reflected the distribution of income in the United States?
That level of inequality, he points out, would leave one child “with 20 percent of the combined pocket money that all the children in the school receive every day,” the equivalent of about $225 per week!
“Next,” writes Dorling, “try to imagine what that rich child might think about the other children, and how the other children might treat that richest child.”
Dorling does that imagining in his newly published Inequality and the 1%. We need to imagine with him.
|ABOUT TOO MUCH|
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