OK. So here's the deal with this blog. It's really long. But here's what happened. I get this email from a friend of mine that had this interesting article from the Observer about wealth inequity in the USA. Very good article, so I reposted it below.
But then this guy replies all with a bunch of tired right-wing libertarian spin and mythology that I felt the need to reply to, so I did. But unlike the right wing guy (whose name I've withheld, unless I screwed up) I didn't just pop off a bunch of stereotypes from the top of my head, I actually researched and worked hard on my response, and since such things always seem wasted on the bullet-point bought and paid for patriots on the right, I thought I'd post it here too for posterity.
It's really a long read, so make sure you have nothing to do for a while, but I think some of the points are overdue to be made, so I hope somebody enjoys them.
Here's the original emailed article:
Subject: Welcome to Richistan, USAUnbelievable as "Buffet" said he paid only 17.7% income tax while his secretary paid 30%.Published on Sunday, July 22, 2007 by the Observer/UKWelcome to Richistan, USA
The American Dream of riches for all is turning into a nightmare of inequality. But a backlash is brewing.by Paul Harris
NEW YORK - On the surface, Mark Cain works for a time-share company. Members pay a one-off sum to join and an annual fee. They then get to book holiday time in various destinations around the globe.
But Solstice clients are not ordinary people. They are America's super-rich and a brief glance at its operations reveal the vast and still widening gulf between them and the rest of America.
Solstice has only about 80 members. Platinum membership costs them $875,000 to join and then a $42,000 annual fee. In return they get access to 10 homes from London to California and a private yacht in the Caribbean, all fully staffed with cooks, cleaners and 'lifestyle managers' ready to satisfy any whim from helicopter-skiing to audiences with local celebrities. As the firm's marketing manager, Cain knows what Solstice's clientèle want. 'We are trying to feed and manage this insatiable appetite for luxury,' Cain said with pride.
America's super-rich have returned to the days of the Roaring Twenties. As the rest of the country struggles to get by, a huge bubble of multi-millionaires lives almost in a parallel world. The rich now live in their own world of private education, private health care and gated mansions. They have their own schools and their own banks. They even travel apart - creating a booming industry of private jets and yachts. Their world now has a name, thanks to a new book by Wall Street Journal reporter Robert Frank which has dubbed it 'Richistan'. There every dream can come true. But for the American Dream itself - which promises everyone can join the elite - the emergence of Richistan is a mixed blessing. 'We in America are heading towards 'developing nation' levels of inequality. We would become like Brazil. What does that say about us? What does that say about America?' Frank said.
In 1985 there were just 13 US billionaires. Now there are more than 1,000. In 2005 the US saw 227,000 new millionaires being created. One survey showed that the wealth of all US millionaires was $30 trillion, more than the GDPs of China, Japan, Brazil, Russia and the EU combined.
The rich have now created their own economy for their needs, at a time when the average worker's wage rises will merely match inflation and where 36 million people live below the poverty line. In Richistan sums of money are rendered almost meaningless because of their size. It also has other names. There is the 'Platinum Triangle' used to describe the slice of Beverly Hills where many houses go for above $10m. Then there is the Jewel Coast, used to describe the strip of Madison Avenue in Manhattan where boutique jewellery stories have sprung up to cater for the new riches' needs. Or it exists in the MetCircle society, a Manhattan club open only to those whose net worth is at least $100m.
The reason behind the sudden wealth boom is, according to some experts, the convergence of a new technology - the internet and other computing advances - with fluid and speculative markets. It was the same in the late 19th century when the original Gilded Age of conspicuous wealth and deep poverty was spawned by railways and the industrial age. At the same time government has helped by doling out corporate tax breaks. In the Fifties the proportion of federal income from company taxes was 33 per cent, by 2003 it was just 7.4 percent. Some 82 of America's largest companies paid no tax at all in at least one of the first three years of the administration of President George W Bush.
But who are the new rich? Some of the names are familiar, Microsoft tycoon Bill Gates and savvy stock investor Warren Buffett. But most are unknown, often springing from the secretive world of financial hedge funds. Men like James Simons, who took home compensation of $1.7bn last year. Last year the 25 top earning hedge fund bankers in the US earned an average of $570m each. The average US household income is $50,000.
It is such men - and they are usually men - who feed the outlandish luxury goods economy of Richistan. It is they who are responsible for the rebirth of the butler industry, which was all but dead in the Seventies and is now facing a shortage of trained staff. So keen is the demand that many can expect to earn a six-figure salary when they graduate from booming butler schools.
Then there is the runaway feeder-industry of luxury consumer items. The new ultra rich turn up their noses at Rolexes; the sought-after brand is Franck Muller, which sells a high-end timepiece for $736,000. Or try a Mont Blanc pen, encrusted in jewels, for $700,000. Louis Vuitton's most exclusive handbag sells for $42,000. Only 24 were ever made and none ever touched a shelf as all were pre-sold to Richistani clients.
In places such as Manhattan and Los Angeles, restaurants and bars outdo themselves in excess. New York's Algonquin Hotel has a $10,000 'martini on a rock' (it comes with a diamond at the bottom of the glass). City eateries sell burgers for more than $50. One offers a $1,000 omelet. In Los Angeles there is a craze for Bling mineral water - at $90 a bottle.
Then there are the boats. The private yacht industry in America has been caught in an arms race of size and luxuriousness. So far, there has been a clear winner: Oracle-founder Larry Ellison's 450ft water palace, the Rising Sun. More than 80 rooms on five stories and a landing craft that carries a Jeep, a basketball court doubling as a helipad and a fully-equipped cinema.
Now an Oregon-based company is taking things further: private submarines. An estimated 100 or so private subs are now drifting around the world's oceans. Then there are the rockets - several notable billionaires are now leading the way in private exploration of space. One of them is Robert Bigelow who has ploughed $500m into trying to build an inflatable space hotel. A miniature prototype model was successfully launched and tested last month. In a scene that perhaps James Bond would find familiar, armed guards now patrol the fences of Bigelow Aerospace's headquarters wearing badges decorated with an alien as their corporate logo.
But this is not just a world of riches gone mad that the rest of America can ignore. The growth of such a large super-rich class, coupled with a deepening poverty in many communities, is starting to tear at the fabric of society. Even some of the most wealthy - like Gates and Buffett - have spoken openly of the needs to address the massive 'inequality gap' that they have come to exemplify. In effect, some of the very richest Americans are calling for themselves to be taxed. In a speech last month Buffett - the third richest man in the world - pointed out that his tax rate was 17.7 per cent of his income while his secretary was taxed at 30 per cent. 'Many of the new super-rich are looking long term at the world and they see a collapsing US education system and health-care system and the disappearance of the middle class and they realize: this is bad for everybody,' said Frank.
Defenders of low tax for the very rich point to the theory of trickledown economics - the spending power of the rich benefiting the poor. But while the super-rich have boomed, the earning power of the average and poor citizen has not nearly matched the performance of the elite. In 2005 the top one per cent of earners in the US gained 14 per cent in income in real terms, while the rest of the country gained less than one per cent. The situation is especially bad for the severely poor - those living at half the poverty level - whose numbers are at a 32-year high. The rich are getting richer but are not bringing everyone else with them. 'If you look at the impact of the last 20 years it seems pretty clear that trickledown just does not work,' said Paul Buchheit, economics professor at Chicago's Harold Washington College.
There are some signs of a change in attitude. Recent huge Wall Street flotations such as the listing of private equity giants like Blackstone have created a push in Congress for taxes on the instant billionaires they have created. Scandals of excess such as Enron and WorldCom and the trial of Conrad Black have been high-profile. But few politicians, needing campaign cash from new millionaires, will get far preaching higher tax. Calls for more equality tend to have come from men like Buffett and Gates whose fortunes are so enormous that a little extra tax would make no difference. Bush has pushed to phase out taxes like the estate tax, which benefit only the rich. 'I don't see it changing. No matter what administration is in power,' said Buchheit.
But many think it must change. To a large degree, the debate over the booming lives of the super-rich is an argument about the American soul. It is a country that has always worshiped wealth, where the creation of a fortune was seen as virtuous and a source of pride.
But now that huge wealth has started to squeeze the 'middle class' out of existence, leaving the haves and have-nots in very separate worlds. It is possible that political will may develop to address the problem or that the problem will correct itself. The notorious end of the Gilded Age came in the panic of 1893 that sank America into depression.
Frank believes the signs of a coming storm are there. 'The trick is to spot when prosperity turns to excess,' he said. 'When a large amount of people make a lot money very quickly it's a sign you are near the top of the market.'
In a world of mega-yachts, private submarines and space hotels, that peak might be close at hand. And it's a long way down.
Billionaire's row
- There are 7.5 million households in America worth up to $10m. A further two million are worth $10m-$100m and thousands are worth more than $100m.
- There is now a two-year waiting list for 200ft yachts. If put end to end, the boats on that list, which cost $50m each, would be 15 miles long.
- Sebonack Golf Club in the Hamptons, Long Island, charges $650,000 for membership. That doesn't include the $12,000 annual dues, or tips for caddies.
- Google founders Sergey Brin and Larry Page have a private Boeing 767.
- John D. Rockefeller was America's first billionaire. Adjusted for inflation, he had $14bn - less than the net worth of each of Sam Walton's five children today. There were 13 US billionaires in 1985. Now there are more than 1,000. There are as many millionaires in North Carolina as in India.
- 'Affluent' is Richistani for 'not really rich'. According to Frank, you need about $10m to be considered entry-level rich.
© Guardian News and Media Limited 2007
That is a pretty interesting story Jeff.
A lot of bitching, no suggestions on how to improve the lot of others,
So what is the point other then sour grapes?
Shall we assure no new wealthy people by taking them out of the country?
Is this the day before the fall of Rome?
I personally know one man who has two jet planes.
He owns Godwin Pumps of America, about a $200,000,000.00 a year company.
We are a distributor of his.
Started it with his dad 31 years ago.
Two man operation, now multinational, privately owned by John, and only John.
Taxing him or his company into the cheep seats won't help anyone.
He works about 70 hours a week 52 weeks a year.
So maybe its ok for guy's like him to be rich, just the investment bankers should be hosed by the taxes, right? So who makes the choice as to who gets hosed and who doesn't"?
Let the wealthy have their cash.
Sending them off shore won't help us.
Maybe a lesson on work ethics would help some of those bitching about the more wealthy people in the country.
As a member of a family business, I can tell you that the Government gets an a lot of cash from us. That is great and as it should be.
Kind of makes me sad, that there are those who would tell me that if I really bust my ass and make it really big, that I should give it all away.
The inheritance tax is a swell topic too.
Lets see? I work my ass off, I croke, I give it to the government, The family and employees can go suck ass. Let some one else develop a new business and tax stream. The Government will benefit from my death, and perhaps those who stayed home and watched the "Price is Right" while I worked my self to death, will also benefit. As for my kids, who have worked since before they were even legally allowed to, well, their related to me, so they can suck the same hind titty.
Remember the Beetles left England in the '60's , (Listen to the words to the TAX MAN.).
So what is the author saying?
Kill the rich?
Eat the Rich?
Stop the wealthy?
Stop the boat builders?
Stop the watch builders?
Everyone should make the same?
Everyone should pay the same?
I don't want to live in a socialist society, let alone a communist one.
What I do know is that some of their facts are shit, go to the NY times and check out JD Rockefeller, adjusted for inflation he is at $192 Billion net worth.
Except for those who were born into it, the rest of the new wealthy must have surely created their wealth through some sort of commerce.
And here's my researched response. (Lots of work just to get to there. Thanks for sticking with this!)
Since by your own words you say that you missed the point of this article, I feel the need to point it out more specifically. Apologies for taking so long to post this response, but fact-checking is time consuming.
In short, the article points out that the gap in incomes is increasing in America, with much more wealth in fewer hands. The gap pointed out is not the gap between rich and poor, but the gap between the extremely rich and the middle class. In an already divided society, this is not a positive thing for reasons I will elucidate below.
Your reply contains numerous factual, logical and spelling errors which I feel the need to also point out, as they repeat several oft-quoted "facts" about our society that simply aren't true.
I've made comments point by point, in red. Please read on.
On 7/23/07, Name Withheld < engineering@pacmachine.com > wrote:
That is a pretty interesting story Jeff.
Indeed. We're agreed on that.
A lot of bitching, no suggestions on how to improve the lot of others
It is not the job of newspaper reporters to solve the problems of the U.S. economy.
So what is the point other then sour grapes?
than To point out income disparity in the United States? Perhaps to start this conversation right here? Raising awareness of a problem is often the first step to solving it.
Shall we assure no new wealthy people by taking them out of the country?
I did not see a single reference in the article to that plan. Nor do I know of anyone who is taken remotely seriously who has suggested any such thing.
Is this the day before the fall of Rome?
Um, Rome fell in 476 CE. It was a corrupt, slave-owning non-democracy, so I dearly hope you're not comparing it to the United States of America.
I personally know one man who has two jet planes.
I know many families who live below the poverty line. 12 percent of all citizens in the US do, compared to 6.5 percent in France and 4 percent in Austria.
He owns Godwin Pumps of America, about a $200,000,000.00 a year company.
Good for him. The current poverty line is $20,650 for a family of four. 37 million people in this country live below it.
We are a distributor of his.
Started it with his dad 31 years ago.
Two man operation, now multinational, privately owned by John, and only John.
They sound like decent guys. The kind of guys who see the value of paying their fair share of taxes. The kind of guys who realize that with their wealth comes great privilege to be thankful for. The kind of guys who see that such wealth would be impossible to amass and maintain without the cops on the street, the teachers in the schools, the workers in their factories, the soldiers on our borders, the people who pick their food... In short, they realize, surely, that America is a team effort, and without all the role players in our society, such wealth could not exist.
Taxing him or his company into the cheep seats won't help anyone.
Cheap. Was that suggested? Or was the suggestion merely that he pay the same tax rate as his secretary? The same percentage as his custodian?
He works about 70 hours a week 52 weeks a year.
As do many people who make considerably less. The overwhelming majority of people on welfare work. The primary cause of poverty in America is not laziness or irresponsibility, but low wages.
So maybe its ok for guy's like him to be rich, just the investment bankers should be hosed by the taxes, right? So who makes the choice as to who gets hosed and who doesn't"?
Paying the same tax rate as others is not "getting hosed." It's called equality.
Wealth gives one more power, more rights, and more freedom than others in our society. I think it's good business to charge more for those who get more. If OJ were poor is he a free man today? If you want a better chance to skate on a murder conviction, I don't think paying a higher tax rate is too much to ask.
If anyone is getting "hosed" it's those who can't put their money into overseas accounts, those who don't have access to creative accountants, and those who can't be paid in stock rather than wages to defer paying any of it to the government. Take a look at IRS guidelines. The wealthy have numerous more options to avoid paying their fair share than the middle class or working poor have. And it is naive to think that they don't use them and use them regularly.
Let the wealthy have their cash.
By all means. The acquisition of wealth is the fuel our society runs on, but let's be fair about it. If the tax structure of the country isn't fair, then our society won't function properly. If Buffet's secretary is paying 30 percent, so should he. Perhaps more so, since he gains more from society than she does, and he won't feel the hit nearly as badly as she does.
Sending them off shore won't help us.
Again, no one has suggested this. This is the land of the free, and anyone who plays by the rules and is tolerant of democracy is more than welcome to stay.
But, quite frankly, (and this is purely my opinion) if someone is willing to renounce their American citizenship to save a few bucks, well, I don't care if they take the next boat out of here. Just provides more America for those of us real patriots who pay our taxes and have the good sense to realize that there's a fee for the privilege of living in the greatest country on earth. If you want to play at the country club, you have to pay your dues.
And while we're at it, let's stop rewarding tax cheating corporations. Halliburton is now headquartered in Dubai, yet they still get billions in US government contracts. Is that fair? Would it not be in the nation's better interest to give contracts to American companies who pay taxes?
Maybe a lesson on work ethics would help some of those bitching about the more wealthy people in the country.
A private in the US Army makes $15,612 per year. Lazy bastards.
The ultra-wealthy aren't stretching away from the lazy. They're stretching away from the school teachers, custodians, cab drivers, policemen, and firemen. In short, they're stretching away from the hard-working folks who make this country go. The argument that work ethics are the reasons these people aren't mega-rich is an offensive one.
Perhaps the greatest misconception bandied about in this great country is that the poor are there because they are lazy. The truth, it seems, can not be repeated enough. THE MAJORITY OF POOR PEOPLE IN THIS COUNTRY WORK. Many work two or three part-time jobs. Work 70 hours at minimum wage, and you'll find your enthusiasm for free markets waning.
A few more facts. A majority of welfare families, fifty-six percent, get off welfare within 12 months. 70 percent pull themselves off the roles in under 2 years. 85 percent get off it within 4 years. Sounds pretty industrious to me. Just like a car accelerating , it takes more work to get from zero to thirty than to get from 30 to 60.
And to shine light on one more welfare myth, the average welfare family is exactly the same size as the average non-welfare family. So no, they aren't getting above the poverty line by simply having more children. Yes, there are too many children who need welfare, but 70% of them are in families of 2 kids or less.
As a member of a family business, I can tell you that the Government gets an a lot of cash from us. That is great and as it should be.
Actually, it's not as it should be, and here's another point you might be missing. Your family business is likely paying a greater share of the tax burden because so many giant corporations and billionaires aren't.
If you don't want to make it big, don't make it big.Kind of makes me sad, that there are those who would tell me that if I really bust my ass and make it really big, that I should give it all away.
People like... Jesus. But I digress. Good point. You should give up. Don't try to make it big. I'm sure somebody else will make it big for you, and you can look to them for a job.
But when and if you do make it big, clearly you won't have to "give it all away." If this were true, making it big would be a lot easier since no one would be trying, and judging by the long lines auditioning for American Idol, this isn't true. One reason that a graduated income tax works so well is that, when it comes down to it, people will gladly trade a higher tax bracket for the perks and power that go with being at the top of the pyramid. And if someone doesn't want to pay that higher percentage of taxes, somebody else will. That's pure capitalism. Supply and demand.
The inheritance tax is a swell topic too.
Personally, I'd rather talk about sports, but since you brought it up...
The Estate tax has been around since 1916 so has been in place through unprecedented economic growth. The theory behind it is to try to prevent certain families from perpetually dominating American wealth and power. It is an attempt to prevent a "ruling class" in America, as such a class is anathema to democracy. It is a very Jeffersonian idea that the "accident of one's birth" should not determine their standing in society, but rather their merit.
Has it succeeded? Certainly not, looking at the Kennedy's and Rockefellers and Bushes. But I have trouble completely condemning it. The fact that we have aristocratic families in America is due more to the fact that it's all too easy to get around the inheritance tax and always has been.
Lets see? I work my ass off, I croke, I give it to the government, The family and employees can go suck ass. Let some one else develop a new business and tax stream. The Government will benefit from my death, and perhaps those who stayed home and watched the "Price is Right" while I worked my self to death, will also benefit. As for my kids, who have worked since before they were even legally allowed to, well, their related to me, so they can suck the same hind titty.
Croak. Then you give a percentage to the government. You're exempt unless you're worth more than $2 million. And if you die after 2010, you'll pay nothing. It's already ending.
As for who benefits from your death, it's mainly the US Military, which accounts for about half of our current discretionary spending. (More on that anon) Welfare takes up about ONE PERCENT of the federal budget. One penny of every tax dollar. So it's very unfair to blame anyone watching the Price is Right. Less than $500 billion dollars was spent on the AFDC program (What most call "welfare") between 1964 and 1994. By comparison, 750 billion has already been spent in Iraq, and that figure will likely soon top $1 trillion.
Andrew Carnegie once said "I should rather leave my children a curse as the almighty dollar."
Well, there's really no danger of that. What we're actually leaving our children is a national debt now totaling more than 9 trillion dollars. Some perspective on that, if one were to pay a dollar every second, day and night, the debt (not counting interest) would be paid off in a mere 261,000 years. So whether our children pay the tax when we die, or through their lives, that money will have to come from somewhere.
Remember the Beetles left England in the '60's , (Listen to the words to the TAX MAN.).
Beatles. Unless the insect left England. It's a play on the word beat. Get it?
As for Ringo, no one has ever cared about Ringo.
So what is the author saying?
Kill the rich?
Those words are not used in the article.
Eat the Rich?
Also not used.
Stop the wealthy?
Control F is a cool function on many web browsers. It allows you to find any occurrence of a word or phrase on an entire web page. A quick control F of this page shows that those three words were first, and only used in your reply.
Stop the boat builders?
See note above.
Stop the watch builders?
Again, only you seem to be saying that.
Everyone should make the same?
This smacks to me of a "straw man argument." You create a straw man, put words in their mouth, then shoot down those words.
Everyone should pay the same?
I don't want to live in a socialist society, let alone a communist one.
I am not a socialist, nor a communist, and I would abhor America slipping into such a state, which is precisely why these income disparities must be kept in check.
Nothing causes revolution like massive income disparity. A certain amount of equality is necessary not only to make society properly function, but also to keep it from falling apart. Think of the Romanov's in Russia or Louis XVI in France. Such decadence while others suffered brought down their governments. Closer to home, riots in Watts, and Detroit stemmed from perceived unfairness, not because of too much equality.
Reform is needed to SAVE capitalism, not destroy it. Watching Paris Hilton throw million dollar parties while folks who actually serve a function in our society scrimp to send kids to college does nothing to strengthen the social fabric of our land. Dividing into two Americas, one for the rich and one for the rest, seems to be the direction we are heading and a form of capitalism that can not last.
What I do know is that some of their facts are shit, go to the NY times and check out JD Rockefeller, adjusted for inflation he is at $192 Billion net worth.
Having fact checked this response, this bears out. The author was careless with this particular side note.
Except for those who were born into it, the rest of the new wealthy must have surely created their wealth through some sort of commerce.
If someone makes a bundle, they should pay their fair share and be allowed to live their life. If they chose to piss away their cash on hundred thousand dollar pens, then so be it, I am sure someone down the food chain will be happy to make the pens and sell them to the rich.
The point is not that wealth buys you a better pen.
Wealth buys political office. Wealth gives unfettered access to the corridors of power. Wealth gives greater power of speech. In short, wealth distorts the democratic ideal of "one man one vote." 5 corporations now control 90% of the media. There are now 68 lobbyists for every member of congress.
There are 435 members of the House and Senate. 123 of them made a million dollars or more last year. 43% of new congressmen are millionaires, compared to 1% of society. Is this an accurate slice of the American public? 60 million dollars to run for the Senate in New Jersey last go around by ONE SIDE.
That's not right. If we truly are to live in a democracy, the people in power should better reflect the demographics of the nation, seats in the halls of power should be much more attainable to those from working and middle class backgrounds, and our government needs to tax its people and spend its revenues more rationally and humanely. We need to live up to the American ideal of democracy. We can do better. That's what the article was about.
The only thing is.... Must successful people aren't stupid.
True. And most (not must) poor and middle class people aren't either. But not enough people of any class are aware of how inequitable our current situation is. That's what the point of the article is.
Greed cuts two ways. It drives our economy, but it can also be very destructive. I hope I've pointed out that greed, right now, is much more part of the problem, than it is the solution.
Kids go hungry in this land of ours every day. In the wealthiest country in the world, that shouldn't be. And $100,000 pens in the face of that point out the distorted priorities of our nation.
And lastly, since you want solutions, real quick, how about we start spending more on getting the 12 million kids in America growing up in poverty out of it by reapportioning some of the bloated defense department budget. (We'll still spend easily 5 times more on defense than any other country in the world.) Let's raise the federal minimum wage so that multi-state corporations can't get around paying it. Let's stop slashing tax rates for the top one percent of this country as if they are the ones suffering. Let's admit that trickle-down economics has never and does not now freakin' work. And most importantly, let's make ourselves AWARE of the real facts of wealth distribution in this nation, and put an end to the myths about rich and poor that serve no function in our discourse.
Thanks. I apologize for being so brief.
--winlar
And that's it. So far no response. The right are so often silent when hit with facts. but I'll keep you posted if there are more replies.
