Read Who Stole the American Dream? Online
Authors: Hedrick Smith
1
“The burden shift”
Metropolitan Life, “The MetLife Study of the American Dream,” January 25, 2007.
2
“More and more economic risk”
Hacker,
Great Risk Shift
, xv–xvi.
3
“One Recession, Two Americas”
Paul Taylor and Rich Morin, Pew Research
Center, “One Recession, Two Americas,” September 24, 2010,
http://www.pewsocialtrends.org
.
4
Survey documented a class split
Ibid. Among other findings: 43 percent had been unemployed at some point; 35 percent had serious difficulty paying their rent or their mortgage.
5
The fault lines
Ibid.
6
“The single most common word”
Pew Research Center, “Public Looks Back at Worst Decade in 50 Years,” December 21, 2009,
http://www.pewresearch.org
.
7
The numbers describe the damage
“Household Wealth Falls by Trillions,”
The New York Times
, March 13, 2009.
8
The Misery Index tracked
Edward Hyman’s Misery Index, cited in Phillips,
Wealth and Democracy
, 133.
9
So pervasive
U.S. Bureau of Labor Statistics, “National Compensation Survey: Employee Benefits in Private Industry,” March 2006,
http://www.bls.gov/ncs/ebs/sp/ebsm0004.pd
.
10
Four of whose owners
“The Forbes 400: The Richest People in America,” net worth calculated September 2011, accessed January 26, 2012,
http://www.forbes.com
.
11
To roll back health care
Steven Greenhouse and Reed Abelson, “Wal-Mart Cuts Some Health Care Benefits,”
The New York Times
, October 20, 2011.
12
“The truth is”
Excerpt of interview of Jon Lehman for the
Frontline
program “Is Wal-Mart Good for America?,” July 16, 2004.
http://www.pbs.org/frontline./frontline
.
13
Wal-Mart reported
Michael Barbaro, “Wal-Mart Says More than Half Its Workers Have Its Health Insurance,”
The New York Times
, January 23, 2008.
14
“Another example of corporations”
Greenhouse and Abelson, “Wal-Mart Cuts.”
15
Costco, a big-box retail rival
John Matthews, Costco senior vice president for human resources and risk management, interview with Owen Smith, January 26, 2012; James Flanigan, “Costco Sees Value in Higher Pay,”
Los Angeles Times
, February 15, 2004; Ann Zimmerman, “Costco’s Dilemma: Be Kind to Its Workers, or Wall Street?”
The Wall Street Journal
, March 26, 2004.
16
“We try to provide”
“CEO Interview: Costco’s Jim Sinegal,”
FastCompany
, November 1, 2008,
www.fastcompany.com/magazine/130/thinking-outside-the-big-box.html
.
17
Sinegal consistently took
R. J. Hottovy, “Morningstar’s 2011 CEO of the Year Redefined Retail,”
Morningstar
, January 4, 2012.
18
Costco has outperformed Wal-Mart
Ibid.
19
The switch offered big savings
Brooks Hamilton, interview, December 8, 2010. Hamilton, a corporate pension consultant, based his calculations on Labor Department figures.
20
“[The] pension has been a drag”
Jeffrey Immelt, GE Annual Outlook Investors Meeting, transcript, December 14, 2010,
http://www.ge.com
.
21
Pension plans were moneymakers
Ellen E. Schultz,
Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers
(New York: Portfolio/Penguin, 2011), 9.
22
“Many, like Verizon”
Ibid., 3–25.
23
“This fundamental transformation”
Hacker,
Great Risk Shift
, ix–x.
24
“The burden shift has turned”
Metropolitan Life, “The MetLife Study of the American Dream,” January 25, 2007.
25
“Having an impact”
Ibid.
26
Two-thirds said they had not
Ibid.
27
Two years later
Ibid. MetLife’s nationwide survey found 68 percent said they had not achieved the American Dream; 48 percent of baby boomers and older (over forty-two) said they did not expect to achieve the American Dream. See also “The 2009 MetLife Study of the American Dream.”
28
Personal bankruptcies soared
American Bankruptcy Institute, Annual Business and Non-Business Filings by Year (1980–2009),
http://www.abiworld.org
.
29
“Bankruptcy has become deeply entrenched”
Warren and Tyagi,
Two-Income Trap
, 6.
30
Families go over the financial cliff
Board of Governors of the Federal Reserve System, Federal Reserve Statistical Release Z. 1,
Flow of Funds Accounts of the United States
, table L,100, September 16, 2011,
http://www.federalreserve.gov
; Federal Reserve Statistical Release G. 19,
Consumer Credit
, October 7, 2011,
http://www.federalreserve.gov
.
31
“I was pretty much borrowing”
Pam Scholl, interview, December 29, 2011.
32
“We have gone from”
Robert Lawless, testimony before U.S. Senate Committee on Judiciary, December 4, 2008,
http://www.judiciary.senate.gov/pdf/08-12-04LawlessTestimony.pdf
. Also see Federal Reserve Statistical Release G. 19,
Consumer Credit;
and Federal Reserve Statistical Release Z.1.
33
“Just a generation ago”
Warren and Tyagi,
Two-Income Trap
, 127.
34
“The single biggest determinant”
Lawless, interview, November 3, 2010.
35
“That really opened the floodgates”
Ibid.
36
“If they make the minimum”
Excerpt of interview of Shailesh Mehta for the
Frontline
program “The Card Game,” November 24, 2009.
http://www.pbs.org/frontline./frontline
.
37
“More than 75 percent”
Warren and Tyagi,
Two-Income Trap
, 131, 139–140.
38
Credit card companies blanketed the nation
Ibid., 130.
39
“High-income deadbeats”
Lawless, interview, November 3, 2010.
40
Bankruptcies were back over 2 million
Bankruptcy Data Project, Harvard University, accessed February 24, 2011,
http://bdp.law.harvard.edu
. For 2009, the figure was 1,950,492; and for 2010, it was 2,094,623.
41
“Functioned like a barricade”
Robert M. Lawless, Angela K. Littwin, Katherine M. Porter, et al., “Did Bankruptcy Reform Fail? An Empirical
Study of Consumer Debtors,”
American Bankruptcy Law Journal
82 (October 15, 2008).
42
“The families in bankruptcy”
Ibid.
1
The economics “of the 1%”
Joseph E. Stiglitz, “Inequality: Of the 1%, by the 1%, for the 1%,”
Vanity Fair
, May 2011.
2
“The fact is”
Michael Abramowitz and Lori Montgomery, “Bush Addresses Income Inequality,”
The Washington Post
, February 1, 2007.
3
“By 2004, the richest 1 percent”
Robert Frank,
Richistan: A Journey Through the American Wealth Boom and the Lives of the New Rich
(New York: Crown Publishing Group, 2007), 3.
4
“It is absolutely excessive”
Matthew Symonds, “Absolutely Excessive,”
Vanity Fair
, October 2005.
5
WELCOME TO THE PLUTONOMY MACHINE
Citigroup, “Plutonomy: Buying Luxury, Explaining Global Imbalances,” October 16, 2005.
6
“The rich now dominate”
Citigroup, “Revisiting Plutonomy: The Rich Getting Richer,” March 6, 2006,
http://www.ifg.org
.
7
A wealthy American plutocracy
Paul Krugman, “Graduates Versus Oligarchs,”
The New York Times
, February 27, 2006; Stiglitz, “Inequality.”
8
“The top 1% alone control”
David Hirschman, “The New Wave of Affluence,”
Advertising Age
, May 23, 2011; David Hirschman, “On the Road to Riches,” May 22, 2011,
Ad Age
blogs,
http://adage.com
.
9
Luxury goods were selling
Stephanie Clifford, “Even Marked Up, Luxury Goods Fly off Shelves,”
The New York Times
, August 4, 2011.
10
Most people estimated
Benjamin I. Page and Lawrence R. Jacobs,
Class War? What Americans Really Think About Economic Inequality
(Chicago: University of Chicago Press, 2009); Inequality Survey, 37–38, pay data cited from
simplyhired.com
, November 8, 2007, and Corporate Library Survey reported at
aflcio.org/corporatewatch/paywatch
.
11
Eleven different polls
Page and Jacobs,
Class War?
, 41.
12
Jack-and-the-Beanstalk growth
Benjamin M. Friedman,
The Moral Consequences of Economic Growth
(New York: Alfred A. Knopf, 2005), 116–120; Paul Krugman, “The Third Depression,”
The New York Times
, June 27, 2010.
13
This small elite
Emmanuel Saez, “Striking It Richer: The Evolution of Top Incomes in the United States,” July 17, 2010.
14
Incomes over $352,000
Emmanuel Saez, “Striking It Richer: The Evolution of Top Incomes in the United States” (updated with 2009 and 2010 estimates), March 2, 2012. The calculations of Emmanuel Saez and Thomas Piketty cited throughout this book are based on salary, bonuses, and capital gains income—all inclusive. See also Shaila Dewan and Robert Gebeloff, “One Percent, Many Variations,”
The New York Times
, January 15, 2012. The
Times
noted there were various ways of calculating income and reported that
the Federal Reserve’s Survey of Consumer Finances set the cutoff for the top 1 percent at $690,000 in 2007, the latest year for which Federal Reserve data is available. Economists at the Tax Policy Center and other institutions have developed figures close to $600,000.
15
Made $1.35 trillion in 2007
Frank,
Richistan
, 3.
16
The top 1 percent garnered two-thirds
Saez, “Striking It Richer,”
Pathways Magazine
.
17
And this tiny group reaped 93 percent
Saez, “Striking It Richer,” update, March 2, 2012.
18
The top 0.01 percent
Ibid., figure 3.
19
$10 million a week
David Cay Johnston, “Scary New Wage Data,” October 24, 2010,
http://www.tax.com
.
20
Half a dozen hedge fund managers
“Pay of Hedge Fund Managers Roared Back Last Year,”
The New York Times
, April 1, 2010.
21
Paulson had already made nearly $4 billion
Gregory Zuckerman, “Trader Racks Up a Second Epic Gain,”
The Wall Street Journal
, January 28, 2011.
22
Translating these astounding numbers
Frank,
Richistan
, 3–12; see chart, 6.
23
Billionaireville
Frank,
Richistan, 11
–12.
24
The Walton family
Tony Judt,
Ill Fares the Land
(New York: Penguin Group, 2010), 14.
25
The super-rich and ultra-rich often compete
Frank,
Richistan
, 8–12.
26
Ever more expensive toys
Symonds, “Absolutely Excessive.”
27
When the rich build
Robert H. Frank, “Why 2 Paychecks Are Barely Enough,”
The New York Times
, Sunday Business, January 1, 2012.
28
“Income inequality is real”
Abramowitz and Montgomery, “Bush Addresses Income Inequality.”
29
America is now the most unequal
Will Hutton, “Log Cabin to White House? Not Any More,”
The Observer
, April 28, 2002,
http://www.observer.co.uk/comment/story/0,6903,706484,00.html
; Organisation for Economic Co-operation and Development, “Divided We Stand: Why Inequality Keeps Rising,”
An Overview of Growing Income Inequalities in OECD Countries: Main Findings
, accessed December 6, 2011,
http://www.oecd.org/dataoecd/40/12/49170449.pdf
.
30
“Those at the top”
Hacker and Pierson,
Winner-Take-All Politics
, 34–40.
31
The degree is not what explains that
Ibid., 35–38.
32
“The most telling fact”
Larry Mishel, interview, July 10, 2010.
33
“The U.S. tax code”
David Cay Johnston,
Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich—and Cheat Everybody Else
(New York: Penguin Group, 2003), 11.
34
As the tax code has been written
Thomas L. Hungerford, “An Analysis of the ‘Buffett Rule,’ ” Congressional Research Service, October 7, 2011,
fpc.state.gov
.
35
The key driver
U.S. Treasury Department, “Capital Gains and Taxes Paid
on Capital Gains for Returns with Positive Net Capital Gains, 1954–2008,”
http://www.ustreas.gov/offices/tax-policy/library/capgain1–2010.pdf
.
36
Garner roughly
half of all capital gains
Robert Lenzner, “The Top 0.1% of the Nation Earn Half of All Capital Gains,”
Forbes
, November 20, 2011.
37
“If you make money with money”
“Warren Buffett Tells Charlie Rose Why Congress Should Stop ‘Coddling’ the Super-Rich,” transcript, PBS,
Charlie Rose
, August 17, 2011,
http://www.cnbc.com
.
38
Personally, Buffett admitted
Ibid.; and Warren Buffett, “Stop Coddling the Rich,”
The New York Times
, August 14, 2011.
39
The Forbes 400 Richest Americans
Howard Zinn,
A People’s History of the United States, 1492–Present
(New York: HarperCollins, 1999), 580; see also Conor Dougherty, “Income Slides to 1996 Levels,”
The Wall Street Journal
, September 13, 2011; Census Bureau, “Income, Poverty, and Health Insurance Coverage in the United States: 2010.”
40
The Bush tax cuts
Internal Revenue Service, U.S. Individual Income Tax: Personal Exemptions and Lowest and Highest Bracket Tax Rates, and Tax Base for Regular Tax: Tax Years 1913–2008,
http://www.irs.gov/taxstats/article/0,,id=175910,00.html
.
41
The top 1 percent bracket reaped
Edmund L. Andrews, “Tax Cuts Offer Most for Very Rich, Study Says,”
The New York Times
, January 8, 2007; Field-house and Pollack, “Bush-Era Tax Cuts,” Economic Policy Institute, June 1, 2011; Thomas L. Hungerford, “Changes in the Distribution of Income Among Tax Filers Between 1996 and 2006: The Role of Labor Income, Capital Income, and Tax Policy,” Congressional Research Service, December 29, 2011,
fpc.state.gov
.
42
Average income jump fivefold
Fieldhouse and Pollack, “Bush-Era Tax Cuts.”
43
At the other end
Dougherty, “Income Slides to 1996 Levels”; Census Bureau, “Income, Poverty, and Health Insurance Coverage in the United States: 2010.”
44
The middle-income tax cut
Andrews, “Tax Cuts Offer Most for Very Rich”; Fieldhouse and Pollack, “Bush-Era Tax Cuts.”
45
President Obama persuaded Congress
“Tax Deal Suggests New Path for Obama,”
The New York Times
, December 7, 2010; “Congress Sends $801 Billion Tax Cut Bill to Obama,”
The New York Times
, December 17, 2010.
46
In Arnold Toynbee’s terms
Toynbee,
Study of History
, vols. 7–10, 365–68.
47
When this happens
Toynbee,
Study of History
, vols. 1–6, 245–46.
48
His annual salary
Nace,
Gangs of America
, 180–81.
49
“Management does not go out ruthlessly”
John Kenneth Galbraith,
The New Industrial State
(New York: New American Library, 1968), 120–21.
50
“Greed, for lack of a better word”
Nace,
Gangs of America
, 180; Krugman,
Conscience of a Liberal
, 142; Reich,
Supercapitalism
, 108.
51
James Burke, CEO of Johnson & Johnson
Jim Collins, “The 10 Greatest
CEOs of All Time,”
Fortune
, July 21, 2003; James E. Burke, Harvard Business School Alumni Achievement Awards, accessed October 20, 2011,
http://www.alumni.hbs.edu
.
52
Burke lived
Johnson & Johnson, “Our Credo,” accessed October 20, 2011,
http://www.jnj.com
.
53
“In our culture”
“Kendrick B. Melrose: Caring About People: Employees and Customers,”
Ethix
, October 1, 2007,
http://ethix.org
; and Ken Melrose, “2005 Minnesota Business Hall of Fame,”
Twin Cities Business
, July 2005,
http://www.tcbmag.com
.
54
The top echelons of business
Jon Bakija, Adam Cole, and Bradley T. Heim, “Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data,” research paper (Bloomington: School of Public and Environmental Affairs, Indiana University, November 2010),
http://www.indiana.edu
.
55
Larry Ellison
Graef Crystal, “Larry Ellison Rides Again!”
Crystal Report on Executive Compensation
, July 13, 2009,
http://www.graefcrystal.com
.
56
A
Wall Street Journal
compilation
John S. Lublin and Scot Thurm, “Behind Soaring Executive Pay, Decades of Failed Restraints,”
The Wall Street Journal
, October 12, 2006. In his three big years, Weill was paid $230.5 million in 1997, $166.9 million in 1998, and $224.4 million in 2000.
57
The idea sprang
Michael C. Jensen and William H. Meckling, “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure,”
Journal of Financial Economics
3, no. 4 (October 1976): 305–60.
58
Jensen became its apostle
Michael C. Jensen and Kevin J. Murphy, “Performance Pay and Top-Management Incentives,”
Journal of Political Economy
98, no. 2 (April 1990): 225–64.
59
Perhaps unwittingly
John Cassidy, “The Greed Cycle,”
The New Yorker
, September 23, 2002.
60
“An orgy of self-enrichment”
Ibid.
61
“There was a sea change”
Stephen Young, interview, October 19, 2011.
62
Bob Nardelli, for one
“Home Depot’s Nardelli Ousted After Six-Year Tenure,” Bloomberg, January 3, 2007,
http://www.bloomberg.com
.
63
Probably the most egregiously distorted
Lucian A. Bebchuk, Alma Cohen, and Holger Spamann, “The Wages of Failure: Executive Compensation at Bear Stearns and Lehman 2000–2008,” Discussion Paper No. 657 (Cambridge, MA: John M. Olin Center for Law, Economics, and Business, Harvard University, February 2010).
64
Angelo Mozilo, CEO
Frank Ahrens, “Big Payday Awaits Chairman After Countrywide Sale,”
The Washington Post
, January 12, 2008.
65
The SEC found
Eric Dash, “Dodging Taxes Is a New Stock Options Scheme,”
The New York Times
, October 30, 2006; “Stock-Options Scandal Fugitive Puts Roots Down in Namibia,”
The Wall Street Journal
, November 17, 2006; “How Backdating Helped Executives Cut Their Taxes,”
The Wall Street Journal
, December 12, 2006.
66
Steve Jobs had been personally involved
“Jobs Helped Pick ‘Favorable’ Dates for Options Grants,”
The Wall Street Journal
, December 30, 2006; and
Alan Sipress, “Apple Chief Benefited from Options, Records Indicate,”
The Washington Post
, January 11, 2007.