No. of Recommendations: 8
http://finance.yahoo.com/news/richest-400-people-america-got...

We all know this stuff......but we dont all have the history at our finger tips in concise report......

capital gains under Clinton and even more so under W. have left a few hundred folks making money is massive amounts without really producing anything.......

....and yes it is costing you......and the nation......

something to chew on: if my water bill is $100 per quarter, and the bill is doubled for the sake of argument next quarter......just because someone powerful at the water company knew I could not go elsewhere for water......if my job and wages are the same as always.....have I lost out on the deal? and if so how many times over have I lost out on the deal???

real wages have not gone up in forty years now.....in fact they have fallen....and so has the nation.....

Dave
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No. of Recommendations: 18
real wages have not gone up in forty years now.....in fact they have fallen....and so has the nation....

Inevitable as we moved to a global economy. The rest of the world can't come up to our standard of living. There just aren't enough resources. So our standard of living needed to decline.
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Inevitable as we moved to a global economy. The rest of the world can't come up to our standard of living. There just aren't enough resources. So our standard of living needed to decline.


Ralph,

that is only a partial explanation.

too much borrowing in the private sector is more to the point. We entered the part of the cycle where people fold on their debts. India and China have next to nothing to do with that. And yet the Americans are generally still far wealthier.

Years ago I got a phone call from a local news paper to respond to the changes brought on by a local ordinance. I said as a sales person sales were better and I exaggerated my numbers a bit. It was a hardware store I was working in and the competition was around the corner. The competition kind of waffled their chance to say anything.

The phone call was very brief. I knocked on my boss's door the moment it was over and got the flack. I had not put on one of the owners, who was I? Then I got the a pearl of wisdom, 'when you deal with the press treat them as if they are mushrooms, keep them in the dark and feed them bull....."

Global competition is way over done. It sounds good as you lay off people.....sort of.....but major corporations would be automating either way. Global competition is somewhere between cliche and reality.

Poor decisions in America and the EU are more to the point.

What Jeff was speaking about last night on a different thread, the zero sum game is the problem. We are not putting in place policies of growth. When the game in town is growth that is fairly additive such as in the 1990s, we hear about the positives of globalization such as specializing of our resources and manpower which leads to higher wages.

Dave
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No. of Recommendations: 98
rubber: real wages have not gone up in forty years now, in fact they have fallen, and so has the nation

US real wages have been stagnant since 1970, but productivity has risen steadily since 1950.

Graph: krugman.blogs.nytimes.com/2012/07/18/compensation-too/

The difference was pocketed by those with non-wage income -- hence the remarkable growth of income and wealth among the richest 1% since 1970.

Figure 1 in this article: www.asanet.org/journals/ASR/Oct12ASRFeature.pdf

As this graph shows, the richest 1% of Americans have now matched the heights of excess last seen in the Roaring Twenties.

rharmelink: Inevitable as we moved to a global economy. The rest of the world can't come up to our standard of living. There just aren't enough resources. So our standard of living needed to decline.

Nuts. There was absolutely nothing inevitable about this development, and it has nothing to do with globalization. Germany, for example, faced exactly the same climate of globalization, without the stagnation of real wages.

Graph: www.diw.de/documents/publikationen/73/diw_01.c.342371.de/diw...

During this period of fierce globalization, real wages in Germany tracked the growth of German productivity up until about 2000.

IMHO, it is no coincidence that (a) Germany maintains a very high marginal tax rate on those with high income, (b) Germany requires large corporations to have employee representation on their boards of directors, (c) Germany has poured national resources into maintaining the competitivity of its heavy industries. Germany has remained one of the world's largest industrial exporters, in the teeth of competition from low-wage countries, by pursuing what some would call socialist policies (these steps are but the faintest shadow of traditional socialism).

Wikipedia on the German policy of mitbestimmung: en.wikipedia.org/wiki/Co-determination

Here is an interesting analysis of macroeconomic trends in Europe since 1995, with many graphs (note: PIB = GDP): cib.natixis.com/flushdoc.aspx?id=56607

In essence, the author (Patrick Altus) is blaming excess savings rather than globalization. For the French-impaired, here is a translation of the conclusions:

Summary explanation of the profound disturbances:

The increase in private saving rates in the world and weakening demand led countries to implement corrective economic policies:

--- monetary policy was very expansionary in the United States and Japan to compensate for low wages due to the deformation of revenue sharing;
--- monetary policy was very expansionary in the Euro Zone (excluding Germany) to compensate for the weakness of domestic demand;
--- there was an expansionary monetary policy in emerging markets that caused an undervaluation of the currency and offset weak demand (with excess savings) by the growth of exports;
--- overall, there were expansionary economic policies to compensate for the high propensity to save in emerging countries and oil exporters.

These corrective policies are the cause of disturbances (excess liquidity, excess public debt), and these will not disappear until the excess savings of the world disappears.


Loren
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No. of Recommendations: 34
real wages have not gone up in forty years now.....in fact they have fallen....and so has the nation....

Inevitable as we moved to a global economy. The rest of the world can't come up to our standard of living. There just aren't enough resources. So our standard of living needed to decline.


But GDP in the US is going up. There IS more being produced in the US. The problem is the distribution - all the growth is accruing to the top earners and to capital, not to the lower half or the lower two-third of the labor structure.
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The problem is the distribution - all the growth is accruing to the top earners and to capital, not to the lower half or the lower two-third of the labor structure.

And, the result -- the AVERAGE standard of living went down. Or, maybe a better measure would be the median.

It's not the top earners that are competing with the global lower labor costs.
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A possible reason that "top earners and capital" are getting more of the economic pie is that they have increased their productivity faster than the lower 2/3 of the income structure.
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Inevitable as we moved to a global economy. The rest of the world can't come up to our standard of living. There just aren't enough resources. So our standard of living needed to decline.

Was it also inevitable that the ratio of CEO compensation to worker compensation go from 25x to 500x?
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No. of Recommendations: 25
A possible reason that "top earners and capital" are getting more of the economic pie is that they have increased their productivity faster than the lower 2/3 of the income structure.

How would you measure that? If corporations are more productive, how do you parse the productivity gains between the CEOs vs workforce? I'm pretty sure the corporation could not be productive without the workforce.
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No. of Recommendations: 75
CEOs get bonuses and raises when their companies LOSE money for crissakes.

Moreover, there is no "productivity" involved in owning something which has a value that has gone up. The Capital Gain is the sacred domain of the wealthy and a privileged (tax wise) way of making money.

The only way to prevent the rich getting richer and the poor poorer in a free-market system with debt-backed money is to have a strongly progressive tax system.

This has been under attack since at least the fairy-tale 1980's and we know which side has won most of the battles, you can see it in the results. People who WORK get nothing, people who OWN get a massive increase.

If you think something is wrong with that arrangement you are branded a socialist/communist. The religion of free market fundamentalism will brook no dissent.

Even though there is darned little evidence to support any of its assertions.
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No. of Recommendations: 122
Mauser: A possible reason that "top earners and capital" are getting more of the economic pie is that they have increased their productivity faster than the lower 2/3 of the income structure.

Heh. That, of course, is the argument made by every executive compensation committee, in defence of their decisions. In the US, these compensation committees are appointed by the Chairman/CEO, producing an obvious conflict of interest. This is the essence of corporate corruption.

Similar arguments for astronomical compensation have been made by kings, emperors, and tyrants since the beginning of time.

I have noticed a certain tendency among some of the wealthy (and wannabes) to ascribe their wealth to their remarkable productivity, talent, and brains. Perhaps this belief helps them to sleep at night.

Loren
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A possible reason that "top earners and capital" are getting more of the economic pie is that they have increased their productivity faster than the lower 2/3 of the income structure.

How would you measure that? If corporations are more productive, how do you parse the productivity gains between the CEOs vs workforce? I'm pretty sure the corporation could not be productive without the workforce.


In business as in battle leadership is vital and good leadership is indispensable. I. e. buying the right equipment for the workforce at the right time, marketing strategies and other decisions that can't be left to the shop foreman.

And when leadership fails NEW leadership (not a new workforce) is brought in to turn things around.

Here's a list of some of the better known ones remember there are thousands of lessor known leaders out there.

http://money.msn.com/investing/10-ceos-who-turned-things-aro...
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No. of Recommendations: 52
These corrective policies are the cause of disturbances (excess liquidity, excess public debt), and these will not disappear until the excess savings of the world disappears.

If the banks and the bondholders had been allowed to suffer the losses they bargained for when they made subprime mortgages without proper underwriting - and if the derivatives holders had been allowed to suffer the resulting collapse of their manufactured house of cards, a good bit of the excess savings would have disappeared and equilibrium could have been made more achievable.

In other words, bailouts to undeserving, negligent banks and investors - effective privatization of gains and socialization of losses - has allowed the massive disequilibrium and malinvestment to continue and to grow.

Politicians and the Federal Reserve have buried everyone alive - that is, everyone except those who deserved to be buried.

Capitalism is the only real remedy to malinvestment. Unfortunately, we don't have a capitalist system. We have an oligarchy of bankers, bondholders, politicians and CEOs.
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Was it also inevitable that the ratio of CEO compensation to worker compensation go from 25x to 500x?

As companies get larger and larger, and average worker skills lessen, there would be such a trend. If one company buys out three others, should the new CEO salary be the sum of the four companies' CEOs? Three CEOs have become obsolete.

Wouldn't the same ratio be true within employees, based on skills? For example, football or basketball players versus ticket sellers or concession workers, where specialized skills are compared to more commonly available skills (although I had a clerk the other day that couldn't add 9 and 4 in her head)?

How can workers earn much if they can be easily replaced with robots (or outsourced)? Have you seen the new robotic warehouses that Amazon can use? I have a friend who just got a minimum wage job at one warehouse, as a runner. How long until one of the Kiva robots replace him?

http://www.youtube.com/watch?v=6KRjuuEVEZs

As one commenter says: "all your? jobs are belong to us".
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As companies get larger and larger, and average worker skills lessen, there would be such a trend.

Really? Do you have any documentation that average worker skills lessen. That seems in complete contradiction to everything I have read and experienced in recent years as companies demand more and more employee training.

And as those companies get larger, so have the number of executives. The number of direct reports for the CEO has not changed.

Plus, you have the problem that CEO compensation has risen dramatically even as companies have spun off divisions and shrunk in size and even when the companies have lost money.

It sounds like you are trying to rationalize a trend by making up excuses for the ultra-wealthy elite. What would motivate someone to be a lackey for an arrogant, poor performing privileged class?
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No. of Recommendations: 50
And when leadership fails NEW leadership (not a new workforce) is brought in to turn things around.

Here's a list of some of the better known ones remember there are thousands of lessor known leaders out there.


And yet there are even more examples of executives who shed divisions, shrank companies, failed to turn profit, and still got increased compensation. Remember, since the 60's the CEO/worker compensation ratio has gone from about 25 to 500. That didn't happen because of 10 CEOs who may have done a good job.

Also, I have to wonder what your views are on unions. So many of the privileged class apologists are quick to blame unions for earnings failures, yet it is the same group of executives who negotiated union contracts that they are so quick to give all credit to when the company shows any success. It is this "blame the workers" and "reward the management" attitude that has led to the huge CEO/worker compensation ratio and the growing gap between the ultra-wealthy and working class.

Your claim that NEW leadership and not a new workforce is always the method to turn things around is also not completely true. Companies often shut doors in one city only to open a new plant somewhere else. Outsourcing and off-shoring are both examples of blaming and replacing the workforce in an attempt turn things around.
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US real wages have been stagnant since 1970, but productivity has risen steadily since 1950.

Graph: krugman.blogs.nytimes.com/2012/07/18/compensation-too/


One problem when you cite a blog from someone who isn't exactly noted for his intellectual honesty is that the information becomes a bit tough to decipher. The graph looks pretty and everything but is it telling the whole story?

For instance, what, exactly, does "compensation" include? Does it include the increase in payroll taxes payed by employers, which increased considerably after 1970? What does it mean with regards to health care costs, which apparently are deflated by something called a “medical index,” which I’m assuming means that it’s ignoring increased costs paid by employers for health insurance. That might be legitimate if the ultimate product hadn’t changed except for its cost, but that doesn’t strike me as a valid argument.
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Really? Do you have any documentation that average worker skills lessen. That seems in complete contradiction to everything I have read and experienced in recent years as companies demand more and more employee training.

Supply and demand would indicate that salaries for those jobs should be very good, if the available employee pool is small.

But I was referring to how we've gone to an economy with a lot of minimum wage service-type jobs. Those that can't be outsourced because they need to be near the customer.

If you take the bonuses away from a CEO and distribute it to the employees, how much would it benefit the average employee? $10, $20, $100? For example, if you take away the total annual compensation of McDonald's CEO ($8.8 million) and divided it up among the 420K employees, they would each get just over $20. For Walmart, it would be $8. Whoopee!

IMO, the bad aspect is that it used to be that the CEO came up through the ranks. Now they are professional managers of a generic company, and may not even KNOW the details of the day to day things the business does.
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I notice that no one suggests taking the largess away from the officers and distributing it to the owners/stockholders of the corporation.

Is this a knitting society or an investors group?

:-)

**** Not Signed ****
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I notice that no one suggests taking the largess away from the officers and distributing it to the owners/stockholders of the corporation.

Let's see...

Walmart has 3.3B shares of stock. Total compensation for its key executives is nearly $60M. Each shareholder would get about $0.02. They could raise the annual dividend from $1.59 to $1.61.

http://insiders.morningstar.com/trading/executive-compensati...
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No. of Recommendations: 52
If you take the bonuses away from a CEO and distribute it to the employees, how much would it benefit the average employee? $10, $20, $100?

That's not the point. The point is that if we had a meritocracy . . . if performance paid . . . then workers and CEOs should both benefit from improved productivity. The fact that this is not the case, indicates that we don't have a meritocracy. Hard work and performance is not what pays. And because we no longer reward based on merit, then we don't get it - not at the top and not among workers.

If the system isn't at least a little bit fair, then cheating is a better strategy than playing fair. CEO's don't bother to try to figure out what is best for the corporation, they figure out what is best for them. Who cares if we post corporate profits as long as I get my multi-million dollar bonus? And I can get that by stuffing the board with loyalists and rewarding them well for rewarding me well.

As a worker, why should I work hard? It doesn't pay. Look, the corporation lost money and the CEO still made out like a bandit while my group exceeded our goals and we got a 1% raise. And I can never work my way into that position even if I can do the job better because I don't belong to the right country club and didn't get my education from the right pedigree school.
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Unless you are interested in METAR snark and technical discussion verging on satire, you are advised to Skip to this labelling line further down the post:

THE POINT of this POST, a STORY

+++++++++++++++++++++++++++++

Snark and technical rubbish section

Ooohh boy!

A rare and magnificently scrupulously true-to-both-letter-and-spirit of METAR's "no-politics rules" METAR discussion of an emotionally difficult but important Political-economical subject, as this one truly is.

AND

Enjoying the discussants' ability to skate gracefully and informatively on very thin ice as I enjoy still more that this seems to bring out a special politesse on the board, almost like a festival table setting of fine silver and ironed white linen, all lit by candles, so rare and so enjoyable and old-fashion and civil.


*************


The technical macro-economic concept economic rents: income resulting from persons and/or institutions taking "economic returns from economic activity" above what would be their "normal levels" idealizing from economic activity in an "information-transparent, regulations neutral and equitable, non-oligarchical competitive market" as originally defined by Adam Smith; technically, returns "in excess of the resource owners' opportunity cost." [Robert Tollison as referenced in Wikipedia]

From an "economic rents" POV the more common discussions on the board simply assume large scale rent-taking, and we disagree most about the relative level of that taking by governments vs. private rentiers.

The data so far assembled on the thread [Well Worth Reviewing before addressing these issues, great stuff!] seem to me to provide an overwhelming case that we have a powerful and growing rentier class.

2 cents of my own:

Regarding the claimed (almost universally!, but nevertheless scarcely & wonderfully!), and therefore, (equitable because necessary for some [let us for non-vagueness' sake say] Pareto-optimal criteria), that certain Expensive Qualities of the USA's management and plutocratic groupings and classes (groups and persons frequently too rich to care or otherwise exempt from costs and rules that handicap the rest of society, especially as regards banking and investment, legal representation, and political leverage.

End of Snark and technical rubbish section


THE POINT of this POST, a STORY

Valery Gergiev, Musical Director of the Moscow Philharmonic and one of the great conductors of our time, in teaching Conducting Masterclasses, often confronts students by forcing them to stop conducting and simply to stand still, listening while the orchestra play "undirected", the players co-ordinating and collaborating producing results that are usually Spectacular.

His point: most conducting is a rubbish public relations skam played out in public for chumps. Real conducting is a much more humble experience.

My point:

The German, Canadian, and Norwegian management experience shows what Gergiev urges on his students, and the results show. What is true for conductors is too often true of our executive and "investment" rentier class, both persons and institutions, skams for dupes, and the American people are the dupes.

david fb
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What is true for conductors is too often true of our executive and "investment" rentier class, both persons and institutions, skams for dupes, and the American people are the dupes.

david fb



Oh My!!!

I recently mentioned the Mark Carney gets all sorts of plaudits for running a highly regulated banking system with a long tradition of conservative operations without tripping over his feet or tongue too badly. Along come the Brits figuring they have a star and offer him a multiple of his salary to move to jolly old Britain.

This is not to take anything away from Carney who has certainly earned his spurs at the FSB and his various other careers but I don't think his replacement will find himself having to make major changes to fix a non-existent mess?


Tim

Note: Pointing out a list of ten highly paid CEOs who turned things around would imply that at least ten previous highly paid CEOs screwed them up in the first place?
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If the banks and the bondholders had been allowed to suffer the losses they bargained for when they made subprime mortgages without proper underwriting - and if the derivatives holders had been allowed to suffer the resulting collapse of their manufactured house of cards, a good bit of the excess savings would have disappeared and equilibrium could have been made more achievable.

Ah yes, the Andrew Mellon theory of what to do in a financial panic.

liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people."

Punish everyone! Let the system collapse! That'll show them.

Also, when your child runs in front of a speeding car, do not try to stop him. He cannot learn unless he personally experiences the consequences of his actions.
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No. of Recommendations: 33
Also, when your child runs in front of a speeding car, do not try to stop him. He cannot learn unless he personally experiences the consequences of his actions.

Goofy,

My comment was in response to a post regarding the problems created by a savings glut (which encouraged malinvestment). I merely suggested what I view as the most equitable way to destroy a good part of the malinvested savings glut was to allow the parties to suffer the consequences of their malinvestment. That would have been much more "fair" than transferring the consequences to innocents.

Extending your analogy, my point is this: we are dealing with two children, not one: a cautious child (responsible savers) and and a careless child (irresponsible banks and bond investors).

Gutting capitalism and intentionally destroying the future spending value of currencies by undermining the risk/reward-risk/loss paradigm (via bailouts, ZIRP and QE) is the equivalent of pushing one's cautious child in front of the car, seeking to sacrifice one child to save the other.

The sad thing is, attempts to save the careless child by pushing the cautious child in front of the car merely slows down the car, but will not save the irresponsible child in the end.

In the end, you'll end up with two dead children instead of one (albeit in slow motion).

;-)
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capital gains under Clinton and even more so under W. have left a few hundred folks making money is massive amounts without really producing anything.......

Steve Jobs did not produce anything?
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Steve Jobs did not produce anything?

Logical fallacy. Just because there are a few how create wealth, this does not make false the general statement.

I added up the incomes of the CEO's of the top SP 500 and the top 50 hedge fund managers. The real money was being made by the Hedge Fund managers. These Hedge Fund managers tend to not build businesses, rather they accumulate wealth.

Cheers
Qazulight
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how the rich make their money
============================

Why they steal it from and on the backs of the poor silly. This goes without saying on this board. I guess the choir needs to hear feedback from the echo chamber god.
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"Logical fallacy. Just because there are a few how create wealth, this does not make false the general statement.

I added up the incomes of the CEO's of the top SP 500 and the top 50 hedge fund managers. The real money was being made by the Hedge Fund managers. These Hedge Fund managers tend to not build businesses, rather they accumulate wealth. "

Really? In the same two-paragraph post you cite the "logical fallacy" of equating how a few create wealth versus a general statement, and then out of the other side of your mouth you immediately cite how 50 individuals earned their income as evidence of the general statement? Watch out for the plank in your own eye there, brother.
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I added up the incomes of the CEO's of the top SP 500 and the top 50 hedge fund managers. The real money was being made by the Hedge Fund managers. These Hedge Fund managers tend to not build businesses, rather they accumulate wealth. "

Really? In the same two-paragraph post you cite the "logical fallacy" of equating how a few create wealth versus a general statement, and then out of the other side of your mouth you immediately cite how 50 individuals earned their income as evidence of the general statement? Watch out for the plank in your own eye there, brother.


Sorry, bad writing.

I did not mean to imply that Hedge Fund managers created wealth. No they accumulated wealth through financial manipulation, while a few entrepreneurs created wealth.

Cheers
Qazulight
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Hey, if we'd followed the Mellon theory we'd have avoided the current crisis. We'd still be in the 1929 crisis.
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In business as in battle leadership is vital and good leadership is indispensable. I. e. buying the right equipment for the workforce at the right time, marketing strategies and other decisions that can't be left to the shop foreman.

And when leadership fails NEW leadership (not a new workforce) is brought in to turn things around.


Can you say Hostess?
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The religion of free market fundamentalism will brook no dissent.

THe holy shrine for this religion is a the corner of Wall and Broad, NYC NY.

Their high holiday is Property Rights Sunday.
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capital gains under Clinton and even more so under W. have left a few hundred folks making money is massive amounts without really producing anything.......

Steve Jobs did not produce anything?


doubtit,

you are making my point for me even if I did not spell it out for you.....Jobs invested time and effort into his company....my comments were on how the capital gains tax rates allowed people besides Jobs to be making money in hedge funds and NOT invest the time money or effort into their companies......

Dave
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doubtit says

Steve Jobs did not produce anything?

I'd have been very content if Steve Jobs had received all the golden parachute money given to John Sculley, Michael Spindler, and Gil Amelio. I'd have let him and Larry Ellison share all the compensation given to Carly Fiorina while we're at it. And let's put Jerry Yang's and Carol Bartz's compensation in escrow in case Melissa Mayer manages to save Yahoo.

More generally, I have no real problem with lavish rewards given to company officers who produce extraordinary gains. It's the lavish rewards given to the turkeys and losers: first to hire them from other companies they have failed at, then to keep them in office as they drive a company into the ground, and finally to get rid of them. If you average it all out, I think the result is that the average CEO or senior VP gets paid a helluva lot more then he/she is worth.
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hey people....time for forward thinking......for this nation...and by extension the globe.....

We need business leaders and in particular the owners to see results out of investing in their business as opposed to investing with hedge fund managers......simple....

Dave
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We need business leaders and in particular the owners to see results out of investing in their business as opposed to investing with hedge fund managers......simple....

The obvious way to do that is to stop the tax code preference for financial speculation over productive work. If the long term cap gains rate was the same as earned income, people might be more interested in working for a paycheck, rather than going to the casino with stock options.

Steve
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The obvious way to do that is to stop the tax code preference for financial speculation over productive work. If the long term cap gains rate was the same as earned income, people might be more interested in working for a paycheck, rather than going to the casino with stock options.

Steve

Steve,

in effect they are doing this now.

income taxes on the wealthy have been documented to be around AN EFFECTIVE RATE of 20%......this includes capital gains rates of course......

I have just combed through the news and found nothing so far on where the new long term capital gains rate is......on millionaires.....so I am missing that info.....but it should have gone up to 20%......

what the press is dissing are the extension of new expense write offs for businesses in this act......which of course is the great thing about this act.....it should make doing business and expensing items more attractive than hedge funds......too some degree.....

Of course the press reports the good as bad.....no thought involved....

Steve we should not and can not raise capital gains through the roof now.....if we do ten years from now and fifteen years from now we would have those bullets to use on inflation.....borrowing by a much wealthier middle class some fifteen years from now will cause inflation.....raising the capital gains rates substantially at that time will cut it down......

Dave
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"I have noticed a certain tendency among some of the wealthy (and wannabes) to ascribe their wealth to their remarkable productivity, talent, and brains."

Hard work will get you everywhere.
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Punish everyone! Let the system collapse! That'll show them.


You're right, let's not punish any creditors, that would send shockwaves through the system.

Likewise, locking up some of the perpetrators would send the wrong message and might disturb fragile markets (Martha and Bernie are as much as they can take). After all, while the FBI has reported widespread mortgage fraud as early as 2004, we cannot prove that all industry insiders knew about it at the time, right?

Also, nationalising the worst of the evildoer corporations involved, and forcing them to adjust their business model should remain a taboo. Yeah, the Brits may be able to do it, but this is the US.



Also, when your child runs in front of a speeding car, do not try to stop him. He cannot learn unless he personally experiences the consequences of his actions.

Surely you wouldn't compare a child to serious market players kicking around billions of dollars every day? On second thought...
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I have noticed a certain tendency among some of the wealthy (and wannabes) to ascribe their wealth to their remarkable productivity, talent, and brains. Perhaps this belief helps them to sleep at night.

Loren


As a CPA for 40+ years I have some ideas about the rich.

MR D. came to USA in 1940 with $8 - Worked hard as electrician and saved half of what he made

Another client drove junk cars and bought farmland near metro areas with his "car payment." (what if U drove junk cars and invested in S&P 500 with your "car payent for 40 years? You'd have some $)

Fire fighter built house on his "days off"

After WWII, marine with $1000 started a constuction company.

Doctor bought farm in 1950 for $20K sold for $++ million

Etc
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Was it also inevitable that the ratio of CEO compensation to worker compensation go from 25x to 500x?
================================================

Yep.
Same thing for sports stars, movie stars, and rock stars. For instance, until the 1970s, NFL player salaries were so small that they had to have other jobs during the off season.

The earnings of these stars should be tied to ticket prices, or capped, or their tax rates increased.
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The earnings of these stars should be tied to ticket prices, or capped, or their tax rates increased.

Not unless you want to cap the owner's profits as well.

I always have to laff when I hear team owners crying that they "need a salary cap on the players", to protect the owners from hurting their own pockets by bidding player pay up.

My hunch is "star" pay is just a symptom of our bread and circuses culture. Movie "stars" have enjoyed great wealth for a century. Millionare sports "stars" are more recent.

Money Well Spent?The professional sports industry is one of the fastest growing industries in the United States. In 2005, Street & Smith?s Sports Business Journal estimated the sports business industry to be $213 billion...In comparison, this number is more than twice the size of the U.S. auto industry and seven times the size of the movie industry.

http://www.writework.com/essay/money-well-spent-analysis-if-...

Professional Sports: The Opiate of the Masses

Why not use that time more wisely? Spend it with your family or be productive. If we spent as much time and energy on things that bear real life weight instead of wasting it on professional sports, we could really make a difference in people’s lives – including our own.


http://clubthrifty.com/professional-sports/

Steve
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As a CPA for 40+ years I have some ideas about the rich.
MR D. came to USA in 1940 with $8 - Worked hard as electrician and saved half of what he made
Another client drove junk cars and bought farmland near metro areas with his "car payment." (what if U drove junk cars and invested in S&P 500 with your "car payent for 40 years? You'd have some $)
Fire fighter built house on his "days off"
After WWII, marine with $1000 started a constuction company.
Doctor bought farm in 1950 for $20K sold for $++ million


Doubit,

You're talking about what I have called the "merely rich" or the "working wealthy" - also known as "The Millionaire Next Door."

These folks are not the problem - they are the solution. Jeff would call them "middle class" as they would have been known in the past - and I would suggest they are actually "upper middle class."

Unfortunately, these same "upper middle class" folks are the ones that the oligarchy (primarily politicians and bankers) have decided to punish with higher taxes, means testing so as to defeat their claims to Social Security and other programs they have funded, and are in fact the "responsible savers" (children, according to Goofyhoofy) that Ben Bernanke has decided to push in front of the car crash in an effort to save the irresponsible bankers, politicians and bondholders - to be sacrificed on the cross of Zero Interest Rates and massive debt encouraged by Quantitative Easing and other Federal Reserve bailout and profligacy programs.

The "Chauffeur Class" - the truly rich, world-class wealthy, mega-wealthy CEOs, incestuous public company board members, bond titans, Wall Streeters, Hedge Fund types and idle heirs/heiresses will always find ways to insulate themselves from the pain to be borne by the rest.

And to make things worse, these very upper middle class folks (the working wealthy) are the ones that the non-income-taxpaying public (the "envious class") harbors antipathy for - since these upper middle class folks are the ones who park their Mercedes Benzes and Lexuses (Lexi?) next to them in the local supermarket where they do their own shopping. In other words, the envious class directs their ire at those "richer than me" folks that they see around them. This is truly one of the saddest things about modern society.

The "Chauffeured Class" are able to avoid rubbing elbows with the envious class altogether by cloistering themselves in Upper East Side co-ops, Knob Hill townhouses, and gated enclaves, enjoying the services of drivers, personal shoppers, charter jets, helicopters, nannies and an army of professionals standing at the ready to ensure that their charges never have to sully themselves with the envious class (or even the merely rich "upper middle class" folks).

Thus, the envious class doesn't even know the Chauffeured Class exists - except to the extent that such rarified individuals happen to be movie stars or professional athletes.

In short, the folks you have described (most of whom are highly productive - end up being the scapegoats for both the Chauffered Class and the Envious Class.

The media and the politicians, which both are controlled by and appear to exist for the protection of, the Chauffeured Class, enjoys and encourages this scapegoating.

Thus it has ever been and thus it will ever be.

The late social scientist Robert Michels - correctly, IMHO, pointed out that most systems tend toward oligarchy:

Robert Michels believed that any political system eventually evolves into an oligarchy. He called this the iron law of oligarchy. According to this school of thought, many modern democracies should be considered as oligarchies. In these systems, actual differences between viable political rivals are small, the oligarchic elite impose strict limits on what constitutes an acceptable and respectable political position, and politicians' careers depend heavily on unelected economic and media elites. Thus the popular phrase: there is only one political party, the incumbent party.

http://en.wikipedia.org/wiki/Oligarchy
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I always have to laff when I hear team owners crying that they "need a salary cap on the players", to protect the owners from hurting their own pockets by bidding player pay up.

I thought it was to keep the teams more competitive. The owners' profits depend quite a bit on television, advertising, and licensing revenues, which can vary significantly by location. If there were no cap at all, one of the owners could practically buy a winning team every year, if they so desired.

Millionare sports "stars" are more recent.

And pretty much only temporary. Supposedly:

-- 78% of former NFL players are under financial stress within 2 years of retirement
-- 60% of former NBA players are under financial stress within 5 years of retirement

http://www.forbes.com/sites/timmaurer/2012/10/05/mo-money-mo...
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You're talking about what I have called the "merely rich" or the "working wealthy" - also known as "The Millionaire Next Door."

The "Chauffeur Class" - the truly rich, world-class wealthy, mega-wealthy CEOs, incestuous public company board members, bond titans, Wall Streeters, Hedge Fund types and idle heirs/heiresses will always find ways to insulate themselves from the pain to be borne by the rest.

The late social scientist Robert Michels - correctly, IMHO, pointed out that most systems tend toward oligarchy:

======================================================

There was an article a few years back that analyzed the Forbes 400. It is surprising how the majority of them did not inherit their wealth. In fact, at least 3/4ths could be described as your "working wealthy." They had become rich in their lifetimes due to their efforts (and their employees of course, many of who also became very wealthy with stock options). We are talking about the Bill Gates, Steve Jobs, Warren Buffetts, Sam Waltons, and hundreds of lesser names on the list. There are very few Rockefellers, DuPonts, Fords, or other inherited wealthy. Most of the Forbes 400 were wealth creators for society. Also, let's not forget that the Carnegie Foundation, Ford Foundation, Rockefeller Foundation, and other foundations are giving back much more to society than their namesake's ever amassed in their own lifetimes, and Warren Buffett has donated more to society than the other top ten largest foundations put together.
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...the Bill Gates, Steve Jobs, Warren Buffetts, Sam Waltons, and hundreds of lesser names on the list...

OK. I give in. The Chauffeured Class truly deserves its spoils and its bought-and-paid-for political/media/banker protection.

However, might I add that you have described the "Billionaires Next Door" - not the "Millionaires Next Door."

There is an ever-so-subtle difference (having something to do with lobbyists, consultants, and most of all, zeroes in net worth).

;-)
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I thought it was to keep the teams more competitive.

Doesn't that make your BS-O-Meter peg? According to Wiki, the NFL has had a cap since 94. Here's the Pat's record post cap:

2001–2007 NFL 3 (2001, 2003, 2004) Appearances in five Super Bowls in eleven years; six AFC Championship Game appearances in eleven years; five AFC East division titles in six years, winnings streaks of 18 and 21 straight games, first perfect regular season in 35 years but lost to the New York Giants in the Super Bowl XLII (first undefeated regular season in salary cap era); second team to win three Super Bowls over a 4-year period

http://en.wikipedia.org/wiki/History_of_National_Football_Le...

Meanwhile, before the cap, Green Bay, with a teeming 306,000 people in the greater metro area, had this record in the 60s:

1961–1967 NFL 5 (1961, 1962, 1965, 1966, 1967) Five NFL Championships in seven years including Super Bowl I and II (World Championship Games); Three straight NFL Championships (second time)

If you can see an elimination of dominance due to the cap, and a "level playing field" between large and small markets, you have better eyesight than I.

The salary cap is nothing more than the "owner profit enhancement act" by allowing collusion to suppress player pay. It's like all the manufacturing companies in the country combining to beat worker pay down to what the schlockiest shop in the country is willing to pay, and offering up the excuse of "we don't want to steal all SchlockCo's employees"

Steve
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IMO, the bad aspect is that it used to be that the CEO came up through the ranks. Now they are professional managers of a generic company, and may not even KNOW the details of the day to day things the business does.

Something I came across one time:

It's easy to make good decisions given sufficient information.

A good manager can make good decisions given inadequate information.

A perfect manager can operate in perfect ignorance.
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And when leadership fails NEW leadership (not a new workforce) is brought in to turn things around.

Here's a list of some of the better known ones remember there are thousands of lessor known leaders out there.

And yet there are even more examples of executives who shed divisions, shrank companies, failed to turn profit, and still got increased compensation.


Really? Link please.

Also, I have to wonder what your views are on unions. So many of the privileged class apologists are quick to blame unions for earnings failures,

Wow! lots of assumptions there. I'll have to remember to remind the checkout clerk of my privileged class apologist status the next time I'm at Walmart.

As to my views on unions. Unions were at one time VERY necessary. Today not so much as the specter of union recruiters and organizers haunts CEO's and middle managers alike.

I've belonged to unions both because it was required to get the job (stuck in my craw) and once I joined (even though the union shop steward told me I didn't have to in order to file a complaint) because I thought/think it was the right thing to do if I was going to avail myself of the union's services.

And I've walked a picket line (didn't do any good, the company just picked up and moved to another town).

So don't presume to lecture me about unions.

Your claim that NEW leadership and not a new workforce is always the method to turn things around is also not completely true. Companies often shut doors in one city only to open a new plant somewhere else. Outsourcing and off-shoring are both examples of blaming and replacing the workforce in an attempt turn things around.

*I* didn't claim that "NEW leadership and not a new workforce is always the method to turn things around"

As you kind'a sort'a point out, unions are often a factor in management's decision to outsource or move offshore entirely.

Detroit today seems like a good example of what happens when unions get too greedy.

See also US shoe and garment manufacturing.

http://www.youtube.com/watch?v=sSbmJb8dHMY
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OK. I give in. The Chauffeured Class truly deserves its spoils and its bought-and-paid-for political/media/banker protection.

However, might I add that you have described the "Billionaires Next Door" - not the "Millionaires Next Door."

There is an ever-so-subtle difference (having something to do with lobbyists, consultants, and most of all, zeroes in net worth).

;-)
======================================================

This Chauffered Class, I am guessing, is actually very small in numbers compared with the Millionaire/Billionaire self made working rich. In fact, the Financial Sector is only half the size it was in 2008 before the crash, and it is still downsizing and de-leveraging. On the other hand, the US is still the #1 exporter of manufactured goods in the world. Why don't we also hate the owners of these companies?

Where is the influence located now? In Washington. Nine of the top 13 richest counties are in the DC area:

https://en.wikipedia.org/wiki/List_of_highest-income_countie...

I have a feeling that this fixation on the super rich has more to do with the trendiness of Class Warfare as exemplified by OWS and Matt Taibbi.
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Was it also inevitable that the ratio of CEO compensation to worker compensation go from 25x to 500x?
==========================================

Yes, it was completely inevitable.

First, ask the question, did this only happen in the US? No, it is a worldwide phenomena.

Why did it happen everywhere? Easy: globalization.

500 divided by 25 equals 20. So the ratio of CEO compensation to worker pay increased 20 times since about 1970.

During this time, world trade also increased by a factor of at least 20. The market caps of the big multinational companies increased by over 100 times! (I am just making these numbers up to illustrate a point).

This globalization reason would be easy to prove. Let's say the CEO of Proctor & Gamble earned $20 million last year. We could cut his pay or replace him and pay only $1 million. All higher level execs would have similar pay cuts, so we save maybe $500 million/year in total executive pay.

So now, P&G is more profitable, so they are able to lower their prices, and capture more market share, and therefor become even more profitable, in a never ending virtuous circle.

If this solution worked, guess what, someone would be doing it. But it doesn't work, because world class competition requires world class talent to run it.

(It is just like the gender pay gap myth. If it really existed, some company somewhere would fire all the men and hire only women, pay them less, and have an advantage over the competition. So, despite our desire to find a victim, we are forced to look elsewhere as to why there is a discrepancy.)
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Namkato - I beg to differ. The gender gap exists. all but one of my managers were women and I paid them more than other firms paid men. This gave me an advantage over my competition because women are smarter, tougher and better looking than men.

Jeff
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Most of the richest Americans (Forbes 400) actually got that way by doing some sort of work. That doesn't mean they are not part of the Chauffeured Class. And of course they have wives and children who are part of that class too.
Actually I'm more concerned about the rest of the Ruling Elite. You won't see many of them at your neighborhood Kroger either.
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Most of the richest Americans (Forbes 400) actually got that way by doing some sort of work. That doesn't mean they are not part of the Chauffeured Class. And of course they have wives and children who are part of that class too.

Just as a note, here, you have just assumed that all the wealthy folks are male. That's no longer completely true. There are 45 women on the Forbes 400. Seven of them, plus a few others who worked with their husbands, made their money themselves.

Actually I'm more concerned about the rest of the Ruling Elite. You won't see many of them at your neighborhood Kroger either.

I saw the Chief Justice at my local pizza restaurant not so long ago, a place that is moderate in price and tends to run out of wine and desserts early in the evening. The "Ruling Elite" may walk the halls of power, but they make enough money to have pizza with the rest of the bureaucrats.

See http://usgovinfo.about.com/od/governmentjobs/a/Annual-Salari... for rates of pay of Executive Branch Executives.

It is worth noting that, by themselves, NONE of our leaders make enough money to be in the top 2% of salary earners in the United States. Many of them come from families with money, made their money before they entered politics, or have spouses who have high incomes. But it is quite likely that you would see a member of the Ruling Elite in Kroger, if there were any Krogers in the DC area. (Giant, Safety, Harris Teeter, Whole Foods, and Shoppers Food Warehouse are the ones I can think of at the moment.)

Alternatively, please compare these salaries to the executives of any company you own. I think you will see a huge and bizarre imbalance.

ThyPeace, only knows he was there because someone else recognized him. I'm oblivious to that stuff because I don't watch TV, so never know what anyone actually looks like.
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Namkato - I beg to differ. The gender gap exists. all but one of my managers were women and I paid them more than other firms paid men. This gave me an advantage over my competition because women are smarter, tougher and better looking than men.

Jeff
=========================================

I would just point out that, with anecdotal evidence, the sample size is just too small to make a definitive conclusion.

Did your women managers have families?

The gender gap exists because many women interrupt their careers to have children. Men with career interruptions also commonly experience reduced pay for the remainder of their careers.

Professional women, more and more, are choosing to remain childless. Women now far outnumber men in college graduation rates, 55% to 45%. Girls do much better than boys in school. So the idea that the pay differential is due to discrimination is unfounded.

The majority of women (meaning over half) will always at some point have at least one child. Women will always have an unequal burden compared with men in raising that child, after all, the rate of single mother households is increasing, not decreasing. That unequal burden will always, statistically speaking, reduce that parent's ability to compete in the job marketplace with another person, male or female, that does not have a child. A childless person can devote herself 100% to her career. For a parent to do so would cause untold emotional conflict to both parent and child.
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Most were single or had retired from their first career (they had been home moms, but their kids were old enough to have flown the coop), but two of them were married with kids.

Jeff
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doubtit,

you are talking about upward mobility not super wealthy folks.......there is a rather small difference of tens of millions into hundreds of millions of dollars.....usually inherited.......

Dave
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How interesting. I read ThyPeace's comment and my first reaction was "Huh, I would never have included the members of the Supreme Court in the category of Ruling Elite. They are just completely different animals, not even in the same weight class."

And then I realized how strange it is to think the Supreme Court has nothing to do with the "rules" of this country....

MegHammond <shaking off the cognitive dissonance>
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.......there is a rather small difference of tens of millions into hundreds of millions of dollars.....usually inherited.......

Revealed: How Al Gore pushed through Current TV sale to Al Jazeera before fiscal cliff deadline - to ensure he saved himself $5m in tax

Liberal hero and arch-environmentalist Al Gore tried to save himself a $5 million higher tax bill by rushing through the sale of Current TV before the U.S. fell off the fiscal cliff on December 31st

The former vice president had been hoping to sell his television network to Arab news giant Al Jazeera before the end of 2012 so that his $100 million payout wouldn't be affected by the tax increases approved by Congress and signed by the president after frantic negotiations on Tuesday.

Unfortunately for Gore, 64, the $500 million sale of the struggling channel did not go through until January 2nd and therefore will be subject to the five percent increase in Capital Gains Tax to 20 percent that came into effect in 2013.

Read more: http://www.dailymail.co.uk/news/article-2256682/Al-Gore-sold...
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