Saturday, March 12, 2016

Gateway to Sources and Information About Income Inequality in the United States

Millions of Americans are working longer hours for lower wages, and yet almost all of the new income and wealth being created is going to the top one percent. While the top one percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. 
  Scholars, from the Nobel-Prize-winning Paul Krugman to the widely respected economist James Surowiecki, have been working to analyze these disparities. Americans are not generally aware of the extent of this income inequality. In most developed countries, there is a direct relationship between income inequality and the public's views about the need to address the issue – but not in America, where income inequality is worse but the concern is lower. The most commonly accepted measurement of income inequality, the Gini Index, ranks the United States sixth-worst among 173 nations. 

Private-equity companies are far more obviously connected to an undue concentration of wealth at the expense of workers and communities than are collateralized-debt obligations, which were at the core of our 2008 Great Recession. Within the one percent, there is a top one percent that consists disproportionately of private-equity and hedge-fund principals.


“In September [2007], [Bruce] Rosenblum testified before the House Ways and Means Committee. Rubenstein was his implicit subject: ‘The relentless media and political focus on a handful of highly successful founders of large private-equity firms ignores the fact that these individuals, like many other successful business founders, were not necessarily ‘rich’ when they started their businesses.’ Victor Fleischer testified at the same hearing. ‘The partnership-tax rules were designed with small business in mind, not billion-dollar investment funds,’ he said.”

Alec MacGillis, “The Billionaires’ Loophole,” New Yorker, March 14, 2016, pp: 64-73.


“During the same period [2007], Bruce Rosenblum, a managing director at the Carlyle [Group] who was then the chairman of the Private Equity Council, appeared before several congressional committees. He argued, among other things, that the industry served the economy by streamlining companies and producing investment gains for pension funds, and that raising taxes on private equity might prompt some firms to move abroad. Speaking before the Senate Finance Committee in July [2007], he challenged the notion that private-equity partners were not true entrepreneurs: ‘Is creating the next Google more important than an investment to strengthen iconic American brands such as Dunkin’ Donuts and Burger King?’”

Alec MacGillis, “The Billionaires’ Loophole,” New Yorker, March 14, 2016, pp: 64-73.


[In 2007 when Congress began to consider closing the ‘carried interest’ loophole] “the private-equity industry was ready. The biggest firms—Carlyle, Blackstone, Kohlberg Kravis Roberts, and Texas Pacific Group—coördinated operations through a trade association called the Private Equity Council, founded the year before. Together, the council and the individual companies retained twenty lobbying firms for the task. Blackstone spent $4.9 million on lobbying in 2007, working mainly with a team from Ogilvy Government Relations, led by Wayne Berman, a veteran Republican lobbyist. Carlyle also used Ogilvy, along with McKenna, Long & Aldridge, a smaller firm that generally lobbied Democrats.
“The private-equity lobby could expect strong Republican opposition to tax increases and, among most members of the Democratic House, reflexive support for the loophole-closure bill. But there was an opening when it came to one sliver of the Democratic caucus: Finance Committee members reluctant to raise taxes on big donors in the financial centers they represented. Private-equity lobbyists focussed on Chuck Schumer, of New York, and Maria Cantwell, of Washington. Schumer had strong ties to the industry; the private-equity firm Apollo was one of his biggest donors, not far behind Bank of America.”

Alec MacGillis, “The Billionaires’ Loophole,” New Yorker, March 14, 2016, pp: 64-73.

“In the summer of 2007, David Rubenstein went to Capitol Hill to appeal to the Democrats. He visited the Finance Committee offices, according to former staffers, and met with [Max] Baucus. Rubenstein’s familiarity with Capitol Hill provided what so many others tried to acquire by means of campaign contributions: he was on a first-name basis with dozens of members of Congress. One lobbyist who visited Capitol Hill with Rubenstein told me that he has a ‘policy focus. He’s very cerebral, and could make an argument and articulate it. He’s a salesman.’ [Stuart] Eizenstat [the former White House official] said, ‘He’s created a sort of halo effect wherever he goes.’”

Alec MacGillis, “The Billionaires’ Loophole,” New Yorker, March 14, 2016, pp: 64-73.


[In 2007] “As Barack Obama began campaigning in earnest for President, he seized on Wall Street reform as a way both to appeal to liberal values and to highlight Hillary Clinton’s ties to the financial industry. On September 17th, on the floor of the Nasdaq exchange, in New York, he declared that a ‘mentality has crept into certain corners of Washington and the business world that says, “What’s good for me is good enough. ” The next day, during a speech at the nonpartisan Tax Policy Center, in Washington, he said that the carried-interest loophole was contributing to economic inequality: ‘We’ve lost the balance between work and wealth.’”

Alec MacGillis, “The Billionaires’ Loophole,” New Yorker, March 14, 2016, pp: 64-73.

Hillary Clinton, the other senator from New York, then [2007] early in her first run for President, said that she supported closing the loophole. At a July campaign event in Keene, New Hampshire, she evoked Warren Buffett’s famous complaint that he is taxed at a lower rate than his secretary: ‘It offends our values as a nation when an investment manager making fifty million dollars can pay a lower tax rate on her earned income than a teacher making fifty thousand dollars pays on her income.’ Clinton, who had received almost thirteen million dollars in donations from Wall Street, her second-largest source after law firms, was not a co-sponsor of the Baucus-Grassley bill.

Alec MacGillis, “The Billionaires’ Loophole,” New Yorker, March 14, 2016, pp: 64-73.