Wealth distribution (or lack thereof)

I’ve been reading Elizabeth Warren’s new book “A Fighting Chance,” and I’m about to start Thomas Piketty’s “Capital in the Twenty-First Century,” so I’m getting a short course on the American financial system and income and wealth inequality.

Ezra Kline at Vox had a pretty good explainer on why income inequality isn’t as serious a problem as wealth inequality:

Then I remembered that back at the beginning of the year, the folks at Bloomberg News pointed out the latest developments in income inequality:

Even those with college degrees are having trouble keeping up …. While they earn more than those with less schooling, they’ve seen no real wage growth in recent years. The median income of men 25 years of age and older with a bachelor’s degree was $56,656 last year, 10 percent less than in 2007 after taking account of inflation, according to Census data.

“It’s very difficult for anyone middle-income and lower,” said Ryan Sekac, 26, a mechanical engineer in Westerly, Rhode Island. “There was a time when it was easier.”

It hard for people in the middle income and lower. But for the wealthy?

In the meantime, record-high stock prices are enriching wealthier Americans, exacerbating polarization and bringing income inequality to the political forefront. Even independent government agencies like the Securities and Exchange Commission and the Federal Reserve have been dragged into the debate. …

The richest 10 percent of Americans earned a larger share of income last year than at any time since 1917, according to Emmanuel Saez, an economist at the University of California at Berkeley. Those in the top one-tenth of income distribution made at least $146,000 in 2012, almost 12 times what those in the bottom tenth made, Census Bureau data show.

And just one more thing for people who are middle class and anti-union to get into their thick skulls:

The decline of unions — 11.3 percent of workers were represented in 2012 compared with 20.1 percent in 1983 — has advantaged bosses at the expense of their employees.

I should have studied economics back in college when I had the chance. There’s so much catching up to do.

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A racist NBA team owner hits the jackpot

BmZJSRQIYAADSwCYou know about Donald Sterling, right? The Los Angeles Clippers owner who chastised his mistress … (Can we call her a mistress? I mean, she wasn’t his wife. He’s ancient and she’s definitely old enough to be his great granddaughter. And every major media outlet describes her as “his girlfriend.”) … sorry, I got distracted. Who chastised his mistress … who’s half black and half hispanic … for taking pictures with black men and bringing black people to basketball games.

Because if you don’t want to be seen with black people, the first place you want to be at is a basketball game.

The tape, of course, is a tour de force on how to claim you’re not racist as you say the most racist things you can think of. Then when your mistress (girlfriend?) says you’re being racist, call her a racist.

Wow!

So the NBA today did this:

Los Angeles Clippers owner Donald Sterling was banned for life from the NBA, Commissioner Adam Silver announced Tuesday, because of an audio recording in which he made racially charged comments to his girlfriend.

Silver said he would urge the Board of Governors to force the sale of the team and fined Sterling $2.5 million, the maximum Silver can levy under the NBA constitution and bylaws. The money, the league announced, will be donated to anti-discrimination and tolerance organizations that will be jointly selected by the NBA and the Players Association.

Now let’s consider the real impact of this ruling.

Donald Sterling has to sell his team. He bought the team in 1981 for $12.5 million. The team is currently in the NBA playoffs.

Now, a bad NBA team was sold just a few days ago (via ESPN.com).

Longtime Milwaukee Bucks owner Herb Kohl announced Wednesday that he has reached an agreement to sell the team to hedge-fund billionaires Wesley Edens and Marc Lasry for about $550 million. The deal is subject to approval by the NBA and its board of governors.

In January, Forbes valued the Bucks at $405 million, last among the league’s 30 franchises.

Kohl, a longtime U.S. senator who bought the team for $18 million in 1985, made keeping it in Milwaukee a condition of the sale. It’s also believed Kohl, while relinquishing majority control, will retain a significant percentage of the team.

Los Angeles isn’t Milwaukee. It’s a major media market. And the Bucks aren’t in the playoffs. The Clippers are.

So current estimates are that the Clippers will sell for more than $1 billion. And that money goes to …

Donald Sterling.

He owns the team. He gets the paycheck.

I’m sure he’s in agony right now because the NBA won’t let him be involved in a sport that features a race of people he doesn’t want to associate with.

I think the Northwestern and Princeton professors in the news recently will agree that there is merit to living in an oligarchy. If you’re an oligarch.

Soaking the rich in France

 

Last week, the country that Republicans love to hate, France, did something to fight its economic problem that we in America are never going to do. French President François Hollande (a real Socialist, by the way) hit the rich with a huge tax increase.

Now, if you’re wealth in France, the top rate rate will hit 75%. Here in the U.S., we’re talking about an increase in the top rate for the wealthy to 40% from 35%.

We know Mitt Romney and his wife paid an effective tax rate of 13.9% on their adjusted gross income in 2010. Their estimate is 15.4% for 2011. Can you imagine how they would melt down if their tax rate went to 75%?

For too long, the argument in this global economic disaster has been austerity: cutting government spending by reducing the public workforce and slashing social programs. The addendum to that has been that spending can be further stimulated by slashing the tax rates of the wealthy, hoping they’ll invest more in creating jobs.

So how has that been working for us?

In addition to hitting the rich, the French are going to cut government spending. There seems to be a certain fairness here. If one segment is suffering through an economic collapse, everyone should suffer.

It will be interesting to see how Hollande’s tactic works. Historically, the French have shown that they will go after the rich when the poor are suffering. But this isn’t the French Revolution. People aren’t losing their heads.

But if France comes out of its economic difficulties faster than other countries, it will be interesting to see what other nations follow suit.

I know we won’t in the U.S.

 

The message of the Occupy Wall Street protests

While police in various parts of the U.S. are pepper spraying 84-year-old women and using sound cannons designed for wartime combat on non-violent 99% protesters, here’s a video explainer on what the Occupy Wall Street protests are all about from the Guardian:

Is it really 99% v 1%? It has become the rallying cry of the Occupy Wall Street movement – and the Occupy protests around the world. But is it true?

This is the data behind this animation, produced by Guardian interactive designer Mariana Santos. And that data does show some people have done better out of America’s economic booms of the last 20 years than others – as this report from the Congressional Budget Office shows too.

When Americans are asked how US wealth is distributed, they think the very richest fifth should own up to 40% of the national wealth – and that includes 90% of Republicans surveyed. In fact, that richest group owns 85% of the nation’s wealth. Those surveyed also thought the bottom 120 million people should own around 10% of the national wealth. The reality: 0.3%

Go to the Guardian link for more details, including an interactive map of poverty levels in various states.

The super rich have feelings, too

Robert Frank at the Wall Street Journal took a look at a survey in the Atlantic magazine in which the super rich were asked how happy they were.

120 people with a net worth of $25 million or more–were asked to write responses to certain questions. Here are some of their responses.

ON ENVYING WEALTH. “If we can get people just a little bit more informed, so they know that getting the $20 million or $200 million won’t necessarily bring them all that they’d hoped for, then maybe they’d concentrate instead on things that would make the world a better place and could help to make them truly happy.”

“I feel extremely lucky, but it’s hard to get other, nonwealthy people to believe it’s not more significant than that. … The novelty of money has worn off.”

ON WHY THE POOR SHOULD BE HAPPY: “Nobody has the excuse of ‘lack of money’ for not being at peace and living in integrity,” writes one survey respondent of his family, with a touch of bitterness. “If they choose to live otherwise, that’s their business.”

ON LOVE: One mom writes that the men in her daughters’ lives could feel “powerless,” and that “their role as provider has been usurped.”

ON CHILDREN: Money “runs the danger of giving them a perverted view of the world.” Adds another: “Money could mess them up—give them a sense of entitlement, prevent them from developing a strong sense of empathy and compassion.”

“We try to get our kids to do chores,” one survey respondent complains, but it’s hard to get them to mow the lawn when “we have an almost full-time gardener.”

ON MEAN, RICH DADS: “I have grown up with a father who never wanted to give up control of his business but kept taunting me with the opportunity to step into his shoes.” His wife adds, “It has been difficult to feel financially independent when [my] spouse’s parents hold tight control over [our] children’s inheritance.”

WHY THE RICH AREN’T SMARTER: Other people “glorify wealth and think that it means that the wealthy are smarter, wiser, more ‘blessed’ or some other such crock.”

ON INHERITING: “Financial freedom can produce anxiety and hesitancy. In my own life, I have been intimidated about my abilities because I inherited money.”

ON LUCK: “I just happened to hit the jackpot by choosing to work for the right company at the right time. I have never thought that I in any way earned this amount of wealth. I’m just now feeling like I’m getting the hang of it.”

ON FRIENDS: “Wealth can be a barrier to connecting with other people,” writes the spouse of a tech wizard who cashed in to the tune of $80 million. “Not feeling you should share some of the stressors in your life (‘Yeah, wouldn’t I like to have your problems’), awkwardness re: who should pay at a restaurant.”

ON HATING THE HOLIDAYS: Robert A. Kenny, one of the study’s authors and partner at North Bridge Advisory Group, says the wealthy dread holidays “because they were always expected to give really good presents.”

There are all kinds of things I could say here, but I’m just exhausted by the disconnect.