This Week

The world's top two experts on income distribution in the United States have some new insights to share. You'll find highlights from their new data in this week's Too Much.

Also this week: We had to wait almost five years, but we finally have evidence that exposes some of the most outrageously avaricious acts that have ever been plotted in an executive suite. More below.

Greed at a Glance: What Would Princess Grace Say?

The “Big Island” of Hawaii, the Pacific Business News reports, is emerging as a hot new “enclave of the superrich.” One yardstick of that emergence: a 71 percent increase, since 2001, in private jet traffic to the Big Island's Kona airport. At one point late last year, the airport ran out of private jet parking room. Pilots had to drop off their well-heeled passengers at Kona, then fly to Maui or Oahu to park. Local caterers are cheering the deep-pocket upsurge. They charge an average $100 for every entrée they deliver to a private jet, versus just $10 for regular commercial flight meals . . .

Halfway around the world, in the storybook principality of Monaco, still another super-rich enclave is booming. Monaco's many attractions include a zero percent tax on dividend income, a thoughtful gesture that now has over 650 executives from British corporations commuting to London from lavish new residences along the Mediterranean. Well-appointed apartments in Monaco typically go for $5.5 million to $18.5 million each. Among Monaco's more “colorful” commuters: the Candy Brothers, Nicholas and Christian, who collected just under $15 million in dividends last year, notes the Guardian, “developing luxury London flat interiors for Russian oligarchs.”

Why have American politics become “so contentious, so uncivil, and so stalemated”? Princeton political scientist Nolan McCarty, co-author of of the new Polarized America: The Dance of Ideology and Unequal Riches, blames America's rising economic inequality. Political polarization, he notes, started increasing in the 1970s, as growing gaps in income and wealth began steadily eating away at “people’s sense of shared fate.” In that environment, the muscle of “new, wealthier voters gave an impetus to a set of policy priorities — lower taxes, a more libertarian set of economic prescriptions — that reinforced inequality.” In effect, the economic policies that Republicans had “lost elections on in the ’60s” became winners “in the ’70s and ’80s with the support of this new wealthier vote.”

A dozen years ago, with the fall of apartheid, polarization appeared to be fading in South Africa. But today South Africa may be the world's most economically polarized nation. Fifteen percent of the nation's 47 million people, the Eighty20 think tank noted last week, now live on less than $1 a day. Meanwhile, the number of South Africans with at least $1 million in wealth, above the value of their home, jumped 15.9 percent last year, to about 43,000. Only 1 percent of South Africans currently earn over $51,000 a year, points out Neva Makgetla, an economist with South Africa's Cosatu labor federation. That's apparently enough to make a big success out of the new Aston Martin dealership in Johannesburg's Sandton suburb. In just six months, the dealer has moved 40 cars at from $213,000 to $497,000 each. Observes Cosatu's Makgetla: “People at the top seem easily to lose track of the reality of low pay for most workers.”

How much wealth does any one person really need? Exactly $2.16 million. That's how much you need this year in stocks and bonds, says Dallas Morning News business writer Scott Burns, to be able “to quit working and live off investment income” — and comfortably so, at a level higher than 75 percent of America's income-earners. The total Burns has calculated for what he calls his Take-This-Job-and-Shove-It portfolio will yield $63,559 in 2006, just enough to enter the year's top 25 percent of incomes. These dollars, Burns admits, won't get you far in Palm Springs or Jackson Hole. But $63,559, he adds, ought to be enough to “feel plush in places that still lack BMW dealerships and don't yet have 12 varieties of goat cheese in the local supermarket.”

9/11 and the Ultimate Corporate Greed Grab

The last few months haven’t been particularly kind to companies that play little greedy games with executive stock options.

First came, this past spring, a string of revelations about “backdating” stock options. Major U.S. corporations — as many as 2,000 of them, according to news reports — had been, in effect, helping their top execs buy company shares at an old “rock-bottom price” after the price had already risen.

Then came the revelations about companies that were “spring loading” stock option grants, waiting for announcements of good news they knew would “bump up market price” on their shares, then handing executives suitcases full of options a day or two before the announcement.

Now, thanks to brilliant gumshoe work from a trio of Wall Street Journal reporters, we have what has to be the ultimate in obnoxious option greed.

Scores of American corporations, in the weeks right after 9/11, apparently gamed — and exploited — this horrible tragedy’s impact to give their top executives a cheap headstart to stock option riches.

Here’s what happened.

After 9/11, stock trading in New York shut down instantly and didn’t reopen until a week later, on September 17. Share prices, once Wall Street reopened, proceeded to tank, dropping 14 percent, “the worst full week for the Dow Jones Industrial Average since Germany invaded France in May 1940.”

And what did America’s corporate movers and shakers see in this carnage? A once-in-a-lifetime opportunity for a quick-and-easy stock option killing.

According to the Wall Street Journal, 91 corporations that don’t normally grant executives stock options in September rushed to hand out options between September 17, 2001 and the end of that month.

Each of these option grants gave executives the right to buy company stock, at some future date, at a deflated, post-9/11 share price.

Among the sterling corporate citizens that saw fit to take time out, in the sad days after 9/11, to feather the nests of their top executives: Home Depot, Black & Decker, UnitedHealth Group, and Merrill Lynch.

We have more, including a look at the rationale that's supposed to make exploiting 9/11 — for personal enrichment — all okay.

Slicing America's Income Pie, Ever More Unequally

America's super-rich — the nation's richest 0.01 percent — are now collecting a larger share of the nation's income than the nation's very richest have collected in any year since 1929.

In 2004, notes a new analysis of the most current IRS data, Americans in the top one-hundredth of 1 percent took in 287 times what would have been their share of the nation's income if all that income had been divided equally.

In 1929, just before the Great Depression, the richest one-hundredth of 1 percent took in 301 times more than their equal share.

What happened to the income share of the nation's very richest between 1929 and 2004? In the half century after 1929, the share of America's annual income going to the very rich dropped steadily.

These rich would capture their smallest 20th century share of the nation's income in 1973. In that year, the nation's richest 0.01 percent only collected 50 times more than their equal share.

But that ratio would soon start rising, hitting 98 times in 1984, 173 times in 1994, and the most recent figure, 287 times, in 2004.

All these income share figures, from new work just released by economists Emmanuel Saez and Thomas Piketty, don't count income from capital gains — the proceeds from the sale of stocks and other forms of property.

What happens when capital gains are factored in? The gap grows even wider, according to supplemental data that Saez and Piketty also provide. In 2004, with capital gains, the richest one-hundredth of 1 percent took in 4.25 percent of the nation's income, or 425 times their equal share.

America's entire richest 1 percent took in nearly 20 percent of the nation's income in 2004, including capital gains. That share — 19.47 percent, to be exact — more than doubled the 9.12 percent share of the nation's income the richest 1 percent held thirty years ago, in 1974.

Emmanuel Saez, from the University of California at Berkeley, and the Paris-based Thomas Piketty have made all their new data available online.

Stat of the Week: Chomping on the Fruits of Growth

In 2004, notes economist Paul Krugman, the U.S. economy grew by 4.2 percent. Who benefited? In 2004, the most current year with numbers fully available, the income of the richest 1 percent of Americans, not even counting profits from capital gains, “surged by almost 12.5 percent” at the same time average incomes for “the bottom 99 percent of the population rose only 1.5 percent.”

Quote of the Week: How To Beget a Plutocracy

“Democracies, to flourish, need an environment in which people sense that there is opportunity for all, and in which a plutocracy does not totally run the show.”

Providence Journal, editorial, Taxes and Spending, July 18, 2006

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