Saturday, August 12, 2017

Capitalism means this

 According to the Center on Budget and Policy Priorities, corporate profits are "near all-time highs." Wages for most workers, meanwhile, have been stagnant for decades. And the richest are rewarded with ever-lower tax rates. Only 0.1 percent of full-time workers earning the minimum wage can afford to rent a one-bedroom apartment in any state in the U.S. As long as workers continue to vote in the same representatives that are robbing them expect more of the same. The problem is not with the Congress it is with the voters. While CEOs are earning unconscionable amounts of money, their workers are often forced to make ends meet on $20,000 annually or less, with decreasing benefits every year. Walmart has become notorious in this regard; their employees are even given instructions on how to apply for welfare and food stamps during their orientation. The fact that some of these companies are paying their workers so little that they qualify for government subsidies seems to have largely escaped the attention of the voters, who have been trained to focus their anger on the poorest individuals, benefiting from some nominal form of government assistance. In the minds of many Americans, it’s fraud for a decidedly poor person to be on government assistance and still have what appears to be too good of an automobile or television for someone of their lowly lot in life, but it’s okay for huge corporations to be given unlimited handouts from taxpayers to subsidize the shameful pittances they pay their employees.

The results of a study published in the New York Times on July 22, 2013, confirmed that whether you’re born poor or born rich you tend overwhelmingly to stay that way. Nationally, a Pew poll found that 43 percent of Americans born in the bottom fifth of the economic ladder never move up at all, while 70 percent never reach the middle rung. Even students from wealthy families with lower test scores are more likely to graduate from college than poor students with higher test scores. So few people control the marketplace that, according to the Institute for Policy Studies, the top One Percent own half of all the stocks in this country, while the bottom 50 percent own only .5 percent of them. Sociologist and author G. William Domhoff revealed, in a report on his Who Rules America? website, that the One Percent has only 5 percent of the collective personal debt, while the bottom 90 percent has 73 percent. When we contrast the distribution of income and debt, it becomes obvious just how difficult economic upper mobility is in present-day America. Joseph Stiglitz went over much of this material in an excellent article in the May 2011 Vanity Fair, titled “Of the 1%, by the 1%, for the 1%.” There is probably no truer saying than, “The rich get richer and the poor get poorer.”

US corporations repeatedly argue that businesses are being strangled by high tax rates and that American corporations pay the "highest tax rates in the world," it states. A new analysis by the Economic Policy Institute (EPI) finds, however, that this is "misleading because what corporations actually pay (their effective rate) is far lower" than the statutory rate of 35 percent. By taking advantage of various loopholes and tax avoidance strategies American corporations are able to pay far less. The Trump administration has reversed its position on commitments to close the deferral loophole, and their most recent proposal followed congressional Republicans’ plans to institute a territorial tax system, which would no longer tax multinational corporations’ offshore profits at all. At its core, a territorial tax system makes the deferral loophole permanent. This globalization allows corporations to hide their wealth in tax havens and shell companies. While paying no tax at all in 2010, GE, citing merely one example of corporate tax “fairness,” paid an average of just one-eighth of a percent in taxes between 2002 and 2011. In response to these astonishing statistics, GE CEO Jeff Immelt termed the US tax system, “old, complex, and uncompetitive.” Immelt since he took over as GE’s CEO, the company’s stock lost 50 percent of its value, and GE had closed thirty-one factories and laid off nineteen thousand workers. For this dazzling performance, Immelt earned over $12 million a year. Forbes magazine ranked Immelt as the fourth worst CEO in America in its May 2012 issue.

While millions of Americans have lost their homes and were financially devastated by the 2007/2008 recession, the wealthy continue to be rescued from their own mistakes, time and time again. When individual Americans experience a terrible financial setback, they are told it’s their own fault and to try harder and pull up their bootstraps. Helping them somehow is a handout, the rich resent giving. But when the wealthiest groups in our society—the big banks, General Motors, etc.—make bad decisions and should ostensibly suffer the consequences, they aren’t penalized at all. Only a few relatively small fry—loan officers and the like—were ever prosecuted for crimes related to the 2008 financial crash.  only one banker—the Egyptian-born Kareem Serageldin—was ever sent to jail for the 2008 financial crisis. Despite that even the judge admitted that others at Credit Suisse were guiltier and that Serageldin was merely “a small piece of an overall evil climate within the bank and with many other banks,” he nevertheless sentenced him to thirty months behind bars. The overall lack of prosecutions related to the worst banking crisis in American history reflected a disturbing trend. From 1995–1997, the percentage of federal white-collar prosecutions was 17.6 percent. In the period from 2010–2012 however, this figure dipped to only 9.4 percent. As multiple sources within the banking industry told the New York Times, federal authorities appeared to lack the courage to go after powerful corporate figures, part of an overall change within the Justice Department of seeking settlements in lieu of prison sentences.

The banks bailed out by the government certainly didn’t stop lavishing excessive benefits on their top executives. Lloyd C. Blankfein, CEO of Goldman Sachs, was given over $70 million in total compensation in 2008, despite his company having been gifted $10 billion in the bailout. J. P. Morgan Chase’s James S. Dimon earned nearly $28 million, while his company had taken $25 billion from the taxpayers. The list goes on, as huge conglomerates such as American Express, Bank of America, and Capital One bestowed millions on their CEOs, only months after begging for handouts from the unwashed masses who were struggling to make ends meet, and to whom were still being told to sacrifice for the good of the country. All told, nine banks that begged the struggling taxpayers to bail them out awarded cumulative bonuses of nearly $33 billion in that same year of 2008, including $1 million each to some five thousand employees. Exposing the lie that these economic excesses are connected to the ironclad manifestations of an all-knowing marketplace, six of the nine banks paid out more in bonuses than they earned in profit.  Citigroup, which received about 25 percent of the bailout money going to the nine banks, bestowed an incredible $98.9 million in compensation on Andrew Hall, head of their energy-trading unit Phibro LLC, which dwarfed the $38 million they paid CEO Vikram Pandit in 2008.

According to the Bloomberg Billionaires Index, the wealthy saw their net worth jump by $52.4 billion in 2013. On July 21, 2016, Bloomberg would recount how Amazon founder Jeff Bezos had surpassed Warren Buffet as the third richest person in the world, thanks to a tidy increase of $5.4 billion in his personal fortune in 2016. Meanwhile, the vast majority of workers, who desperately need a significant pay raise, are simply not getting one.

The wealthiest people in our society don’t appear to be improving any lives but their own, and they don’t seem to have special qualities or skills that explain why they’re being compensated so much more extravagantly than the rest of us. Warren Buffet, like so many very wealthy people, made his fortune with investments. Multi-billionaire Mexican Carlos Slim Helú is another whose occupation is investor. When we examine any list of the richest Americans, we find names such as notorious corporate raider Carl Icahn, whose more polite title is investor, George Soros, who is yet another investor, hedge fund managers John Paulson and James Simons, and plenty of financiers, bond mavens, chairmen, and others with predictable titles that assure us, whatever they do, they aren’t positively impacting the lives of the bulk of humanity. 

Bill Gates’s Microsoft was primarily known for creating an operating system with numerous flaws, charging excessive prices for all the unnecessary upgrades and new versions, and engaging in monopolistic practices. In 2014 Gates wrote, “By almost any measure, the world is better than it has ever been.” Well, it’s certainly become a better place for him. Apple founder Steve Jobs would declare that Gates had “shamelessly ripped off other people’s ideas.” Jobs had a right to feel that way; most people think that Microsoft stole many essential features from Apple. Of course, many believe that Jobs himself stole from Xerox.  Like almost all modern corporate leaders, Jobs used cheap migrant labor in foreign countries to build his iPhones. Both Herbert Hovenkamp, a law professor at the University of Iowa, and Bill Black, author of The Best Way to Rob a Bank is to Own One, referred succinctly to Jobs as “a walking antitrust violation.” Walter Isaacson, author of a biography on Jobs, declared that the founder of Apple “always believed that the rules that applied to ordinary people didn’t apply to him.” 

If it could be demonstrated that either Gates or Jobs had single-­handedly invented the personal computer, they might indeed be worth their fortunes. By any definition, that clearly isn’t the case. We hear regular, nonsensical references in the mainstream media about the difficulty of finding suitable executive talent and thus the need to compensate them extravagantly in order to beat the competition. It is never explained just what talent one requires to be an executive in a large corporation. One can’t quantify this kind of talent in any measurable way, the way one can assess the skills of an athlete, a musician, or an artist. Many powerful corporate leaders attain their positions in the most traditional manner, through simple nepotism. Sam Walton’s children, for example, exhibited no talent whatsoever in inheriting their father’s fortune. The Koch brothers inherited an oil refinery firm from their father. Fidelity’s Abigail Johnson is merely continuing the family tradition of running the company her grandfather established. Donald Trump began life as the son of a multimillionaire, which made the arduous climb to billionaire a bit easier. 

 “You didn’t build that,” Barack Obama once said.  Senator Elizabeth Warren echoed Obama’s comments, saying, “There is nobody in this country who got rich on his own.”  Chrystia Freeland, in her 2012 book Plutocrats: The Rise of the New Global Super Rich and the Fall of Everyone Else, explored the attitudes of these unfathomably wealthy people. She found that each of them felt strongly that they’d earned their great wealth. Just as unanimously, though, they all thought that at least some of their billionaire brethren hadn’t earned theirs. 

Bill Gates did not come from a “middle-class” family; his parents were quite wealthy, and his father was on the board of Planned Parenthood. Warren Buffet’s climb up the corporate ladder was undoubtedly aided by the fact he was the son of a United States congressman. Nike founder and chairman Philip Knight’s father was a newspaper publisher. Hedge fund magnate James H. Simons grew up the son of a factory owner. Any present-day Rockefeller, Rothschild, Carnegie, Mellon, Morgan, etc. invariably succeeded because of their names and their inherited wealth, while Facebook cofounders Mark Zuckerberg, Dustin Moskovitz, Eduaro Salverin, Chris Hughes, and Justin Rosenstein all came from wealthy families and met at the ultimate breeding ground for the elite, Harvard University. Horatio Alger stories, if they ever existed to any great degree, are clearly a thing of the past. Amazon founder Jeff Bezos spent much of his childhood on a 25,000-acre Texas ranch with his maternal grandfather, who was a regional director of the US Atomic Energy Commission. Liliane Bettencourt, presently estimated to be worth more than $33 billion, earned her riches by inheriting L’Oreal, one of the world’s biggest companies, from her father. Google founder Larry Page’s father Carl was a pioneer in computer science and artificial intelligence. Forest Mars Jr., worth some $21 billion, achieved his success through inheriting the giant candy company from his father, who had inherited it from his grandfather. His siblings, John and Jacqueline, are also worth $21 billion each. They mirror the work ethic of Sam Walton’s children, yet undoubtedly many Americans, from all income levels, would argue that they earned this incredible wealth.

According to the Credit Suisse Global Wealth Databook, 75.4 percent of all wealth in the United States belongs to the richest 10 percent of the people. Comparable nations (none of them as bad as the United States) in terms of wealth disparity include Chile, Indonesia, and South Africa. The bottom 90 percent of American citizens own only 24.6 percent of the aggregate wealth, while the norm for developed countries is around 40 percent. Meanwhile, under Obama, who was often accused of being a socialist, the wealthiest 1 percent of Americans received 95 percent of the income gains during the alleged economic “recovery.” 

 During his 2016 presidential run, Bernie Sanders made statements such as “something is profoundly wrong when the twenty richest people in our country own more wealth than the bottom half of the American population—150 million people.” FactCheck.org claimed that the situation for the 40 percent at the bottom of the ladder has grown even more dismal, declaring that by early 2016, they actually had a combined negative financial worth. Every statistic on income and wealth disparity supports the notions of Ferdinand Lundberg, who postulated in his 1937 book America’s Sixty Families that, “The United States is owned and dominated today by a hierarchy of the richest families, buttressed by no more than 90 families of lesser wealth.”

CEOs are not only given wildly excessive salaries and “performance” bonuses; they are often given parting “gifts” that boggle the mind. ConocoPhillips CEO James Mulva, for example, was gifted an unbelievable $260 million from the company when he left them in June 2012. Evidently the $141 million total compensation package he’d accrued in 2011 wasn’t enough. Mulva’s package paled in comparison to the more than $417 million doled out to John Welch, in honor of his twenty-year tenure at General Electric. But perhaps Welch was deserving of such an honor, considering General Electric paid no taxes at all in 2010, according to the New York Times and numerous other mainstream media outlets. In 2015, Citizens for Tax Justice claimed that GE had again paid no taxes, along with fourteen other Fortune 500 companies. These lucrative deals, often called golden parachutes, are extended to overpaid executives even when they fail miserably at their jobs. The magazine Mother Jones calculated that the average golden parachute for these CEOs was an amount equal to forty-nine lifetimes’ worth of work for a median income employee. In the case of Welch, this would rise to 203 lifetimes’ worth of work.

Some executive pay rates are so astronomical that they defy belief. John Hammergren, CEO of drug giant McKesson, made $54.4 million in 2010. This works out to $210,000 a day, and that daily salary would be more than nearly 99 percent of Americans make annually ($250,000 a year is generally considered the basement level for the top One Percent). Health Care pays its executives extremely well, too, which goes a long way toward explaining the spiraling, out of control medical costs in this country. Anthem Blue Cross and Blue Shield paid CEO Larry Glasscock a $42.5 million bonus in 2004, which nicely dwarfed his $3.6 million compensation for the year. As an anonymous wit on a conspiracy forum noted in outrage over this, “At my former salary, I would have to work 1,214 years to make $42.5 million. That’s over twelve centuries.” To show just how rapidly, and drastically, the gap between upper management and workers is growing, during the 1980s, executives made about forty times what average workers did. By 2015, the ratio of CEO to worker pay was 204 to 1. During the Clinton years, the average pay for CEOs increased more than 400 percent.

 Angelo Mozilo was the co-founder and longtime CEO of Countrywide Financial. During one eight-year period alone, Mozilo earned $521.5 million from his company, according to compensation research firm Equilar. Mozilo became the first executive to be penalized for the losses incurred by millions of investors during the mortgage collapse when he agreed to settle with the Securities and Exchange Commission in a civil fraud case. Of the $67.5 million Mozilo was assessed, Countrywide agreed to pay $20 million as part of the indemnification agreement he had with the company. Mozilo, like many of the highest-paid corporate leaders, received innumerable, valuable perks along with his millions. For instance, his compensation package covered annual country club and golf course dues. Mozilo knew how to take care of his influential friends, too; Senator Christopher Dodd, for example, was given a $75,000 reduction in mortgage payments at below-­market interest rates, that in real terms worked out to be a sweetheart deal worth over a million dollars. Other luminaries who benefited financially from being “friends of Angelo” included members of Congress Kent Conrad and Barbara Boxer, as well as Nancy Pelosi’s son, Fannie Mae CEO Jim Johnson, and Democratic Party figures Richard Holbrooke and Donna Shalala.

 Congress, in 1993, capped the tax deductibility for executive pay at $1 million but still allowed US corporations to profit from deducting so-called performance-based pay, including stock options. Thanks to this provision, corporations regularly use these stock options to lower their taxes, making large executive bonuses in effect tax-free. The total yearly cost to taxpayers from all these shenanigans is some $7 billion, according to the Economic Policy Institute. The fast-food industry has been especially noteworthy in this regard; the Institute for Policy Studies found that fast-food CEOs had deducted about $183 million of this performance pay, which decreased their tax liability by $64 million over two years. These are the same folks who are claiming no one will be able to afford their putrid food if they were forced to pay their employees a living wage. McDonald’s CEO James Skinner, for example, received a performance bonus of $23 million in 2012, while David Novak, CEO of Yum! Brands (which includes Taco Bell and KFC), was given more than twice that amount, with a $48 million “performance” bonus.

During the 2013 holiday season, Walmart launched a canned-food drive for its own employees. Somehow, I don’t expect Sam Walton’s children to reexamine their priorities, despite all the attention and criticism this campaign received. No less ironic was the boast from Walmart’s CEO Bill Simon, the month before, during a presentation about the opportunities at his corporation, that 475,000 Walmart associates earned salaries of at least $25,000. There are about a million Walmart employees, so this means that less than half of them are paid even this kind of paltry salary. The Committee for Better Banks surveyed bank tellers in New York and found that 39 percent of them were on some form of public assistance, because their salaries were so low. By the end of 2012, the top ten CEOs each were making over $100 million a year. Facebook CEO Mark Zuckerberg led the way, with $2.28 billion. Almost all of Zuckerberg’s earnings came through stock options, which meant a very low tax bill.

Adapted from here 
http://www.alternet.org/comments/books/how-top-one-percent-have-rigged-economic-system#disqus_thread


0 comments: