NYT Invites You to Shed a Tear For the Super-Rich (While Reminding You How Much We Need Them)
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The relative struggles of the rich may elicit little sympathy from less well-off families who are dealing with the effects of the worst recession in a generation. But the change does raise several broader economic questions. Among them is whether harder times for the rich will ultimately benefit the middle class and the poor, given that the huge recent increase in top incomes coincided with slow income growth for almost every other group. In blunter terms, the question is whether the better metaphor for the economy is a rising tide that can lift all boats -- or a zero-sum game.
via "After a 30-Year Run, Rise of the Super-Rich Hits a Wall" -- NYTimes.com
In today's New York Times, David Leonhardt and Geraldine Fabrikant demonstrate that they have failed to learn the most basic lessons from the global financial disaster, primarily that a rising tide cannot lift the poor, particularly if they don't even have boats. The article is based on new data collected by CapGemini and Merrill Lynch Wealth Management which shows that the rich have become "poorer" over the last two years.
Of course, the rich's idea of "poor" isn't your idea of "poor." The Times offers the heartbreaking example of John McAfee, the man who figured out how to overcharge you for computer protection after another multi-billionaire, Bill Gates, invented an omnipresent virus magnet that sometimes operates as a software operating system. McAfee is also a victim of hard times, and is currently trying to make sense of a world in which he is only a multi-millionaire instead of the man who used to be worth $100 million.
The entire article may seem like a giant "fuck you" to the single mom working two jobs to pay for her kid's asthma medication, but the Times quickly rushes forth with an explanation for why we should all care about the uber-rich that would make Ronald Reagan proud. The rich provide for us, you guys. We need them. "Any major shift in the financial status of the rich could have big implications," Leonhardt and Fabrikant explain. "A drop in their income and wealth would complicate life for elite universities, museums and other institutions that received lavish donations in recent decades. Governments -- federal and state -- could struggle, too, because they rely heavily on the taxes paid by the affluent."
The initial weak explanation is depleted further by the article's own subsequent paragraphs (following a weird digressional journey through McAfee's pink hair and affinity for yoga). How, exactly, do the rich raise the tide for everyone else? The Times dodges the sticky details in favor of summarizing the market bubble disasters of the past few decades. One is left with the impression that the rich raise the tide by providing the temporary illusion of overall wealth long enough to line their own pockets, and then sprint away as the bubbles explode behind them like minefields.
But we need them. I know this because the article tells me this is true. And anyway, CEOs have learned to behave themselves because they ran out of money to steal. "Without a financial bubble, there will simply be less money available for Wall Street to pay itself or for corporate chief executives to pay themselves," Leonhardt and Fabrikant state, offering Goldman Sachs and JPMorgan as two (apparently serious) examples. The Times fails to report that Goldman Sachs announced in July that it would set aside nearly $11.4 billion from its profits to pay more bonuses.
(On behalf of the Times, I'll offer some full disclosure: Early this month, the Times confirmed it hired Goldman Sachs to help sell its Boston Globe and Worcester Telegram & Gazette newspapers, as well as their websites, in response to a heavy advertising downturn and the migration of readers to the internet.)
If Goldman continues to earn these levels of profits, its employees could each earn, on average, close to $770,000 this year, with senior executives and bankers being paid much more. That average compensation rivals incomes during the boom in 2007. Matt Taibbi reports in Rolling Stone that Goldman paid out $4.7 billion in bonuses and compensation in the first three months of this year, an 18 percent increase over the first quarter of 2008. The bank also raised $5 billion by issuing new shares almost immediately after releasing its firstquarter results meaning Goldman essentially "borrowed a $5 billion salary payout for its executives in the middle of the global economic crisis it helped cause, using halfbaked accounting to reel in investors, just months after receiving billions in a taxpayer bailout," writes Taibbi.
Yet, the Times seems to seriously believe that without the cover of a market bubble, these huge financial institutions will stop paying lavish bonuses to the employees and CEOs responsible for the Wall Street collapse on their own. So when can we expect this market-enforced fiscal meekness to kick in? No such deadline or "goal date" is provided.