Let 'em Eat Cake (Part I)
by Gilles d'Aymery
October 3, 1999
Possibly the least reported legislation signed by President Clinton this past week was the salary increase for the members of Congress, Cabinet secretaries, top executives of the executive branch and, following the old saying that generosity starts with oneself, for both the Vice President and the President. The legislation was signed on September 29. The New York Times reported it in an 8-line AP news brief, buried on page A19. With the strike of his pen, President Clinton increased the salary of the president, starting in 2001, by a mere 100%, from $200,000 to $400,000 per year.
Not bad pocket money for a White House resident who gets the tab for his rent, living expenses, transportation, foreign travels, vacations and all, picked up by the tax payers! Irony aside, this increase brings the compensation of the nation's chief executive more in sync with the richest 1% of U.S. households, which averages over $500,000 a year in after-tax income.
The eulogists of free market and globalization will argue that it's only fair that our chief executive shares his part of the wealth he helped create. With greater wealth, they'll contend, there is a higher level of development that correlates with more democracy. Everybody wins. Whether it is trickle-down economy a la Reagan or Clintonite Third Way, we, as a whole, are the beneficiaries of this vast prosperity. The Democrats believe this, the Republicans believe this, and for the most part, the people, with the help of the pundits' daily pounding of the official line, believe this.
And for those who wonder why one would believe anything when one can doubt, there are the facts. And those facts were presented a month ago in an analysis of the Congressional Budget Office income figures for the past 22 years by the Center on Budget and Policy Priorities. The facts are that in 1999, four out of five U.S. households earn less than they did in 1977.
Here is the CBPP's table representing the growing income disparity in the USA:
|
Household Groups |
Share of | all income | $ Average of | After-tax income (e) | Change |
| 1977 | 1999 | 1977 | 1999 | ||
|
Lowest One-fifth |
5.7% | 4.2% | 10,000 | 8,800 | - 12% |
|
Next One-fifth |
11.5 | 9.7 | 22,100 | 20,000 | - 9.5 |
|
Middle One-fifth |
16.4 | 14.7 | 32,400 | 31,400 | - 3.1 |
|
Next One-fifth |
22.8 | 21.3 | 42,600 | 45,100 | + 5.9 |
|
Highest One-fifth |
44.2 | 50.4 | 74,000 | 102,300 | + 38.2 |
| ---- | |||||
|
The 1% highest Income |
7.3 | 12.9 | 234,700 | 515,600 | + 119.7 |
What do these figures mean? In short, they mean that sixty percent of the American people are worse off than they were 22 years ago and that close to seventy-two percent of all income is earned by forty percent of households. It also means that the wealthiest 2.7 million have as much to spend as the poorest 100 million.
The situation is worse when wealth, that is, the ownership of all assets, is compared. According to the State of Working America 1998-1999, ninety-five percent of the U.S. households experienced either flat or falling growth in wealth over the period 1983-1997. Over seventy percent of the entire wealth of this country is concentrated in less than ten percent of U.S. households.
When the ratio of CEO pay to factory worker pay is compared the trend is unsurprisingly similar. In 1965, the ratio was 44 -- that is to say a CEO was paid 44 times the pay of an average worker (source, Wall Street Journal, 04/11/96). In 1997, the ratio was 326 (source, Business Week, 04/20/99). A year later, in 1998, a U.S. CEO of the 365 largest companies made in average 419 times more than a worker.
Almost ninety percent of all stock and mutual funds are owned by the wealthiest 10% of the population. Same figures for the bond market...
And on, and on, and on.
The September 27 issue of Time Magazine has a special report on getting rich DOT com, where it dissects the sub-35 billionaires (people who become billionaires before age 35. This is the latest cool thing to achieve). In its June 14 issue, Newsweek ran an excerpt of the SILICON BOYS, a book by David Kaplan which started thus: "There's rich, there's filthy rich--and then there is Woodside." Woodside is a small town in the Bay Area, about 25 miles South of San Francisco, where many a Silicon Valley tycoon and Venture Capitalist has his -- and her -- multi-million dollar home, sweet home, nested in the idyllic wooded community. At the local store you can buy a $1,500 bottle of vinegar or an $18 per pound ostrich salami. A cheap property goes for $850,000, house included. Mr. Kaplan writes that were Woodside a nation, its 5,225 residents would rank among the world's 12 largest.
Woodside is bordered by colonies of both legal and illegal Mexican immigrants whose main occupation is to tend to the gardens of the wealthy, at $5.75 an hour -- the legal minimum wage (the minimum living wage is $7.15 an hour, allowing a family of four to live above the poverty line). A few miles away, on the other side of Highway 101, the main artery joining San Jose and San Francisco, people live in mobile homes, in trailer parks.
In the middle are the people who dream of Woodside and are three pay checks away from bankruptcy.
This is also an area that has more cops per capita than anywhere else in the nation. Fortress America in a microcosm...
In many ways, Woodside is to the USA what the USA is to the world, wealth surrounded by subservient poverty. Woodside has its cops, the USA has its armed forces.
Is our president worth $400,000? Is the party line believable? Is democracy strengthened?
We'll answer those questions in our next column.
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