Saturday, April 30, 2005

CEO Pay Soared in 2004 as U.S. Economy Stumbled


CEO pay continues to soar into the stratosphere, while wages for the average American worker stagnate.
Forbes magazine reports that the CEOs of America's 500 biggest companies received an aggregate 54 percent pay raise last year. As a group, their total compensation totaled $5.1 billion (compared with $3.3 billion in fiscal 2003).

Conservatives, no doubt, would argue that under America's free market system, these chief executives "earned" their pay. But did they?

Forbes, a publication not exactly considered to be in the progressive camp, seems to think otherwise.
The magazine says some CEOs "did so bad they should have paid their shareholders."

Take Peter Cartwright of Calpine, a maker of gas-fired power plants. Forbes reports that Calpine's average annual return to shareholders over the past six years has been minus 7 percent. During the same period, Cartwright pocketed an average annual $13 million.

America's CEOs are by far the highest paid CEOs of any nation on earth. Which begs a question: why?

The U.S. economy isn't exactly stellar at the moment. In fact, an increasing number of commentators warn that America's economy is facing a major crisis.

Our exploding fiscal and trade deficits are the highest that any developed nation has ever seen. America's once-vaunted manufacturing base has been hollowed out. And the dollar continues to crumble in value.

Exploding CEO pay is a relatively recent phenomenon in U.S. history. For example, in the 1960s, the average CEO earned around 40 times what the rank-and-file workers earned. Today the average CEO makes over 500 times what the average worker earns. And the gap continues to widen, year by year.

Like a magician pulling a rabbit out of a hat, conservatives are constantly coming up with reasons to justify soaring CEO pay. Here are three of my favorites:

CEOs create jobs. They create shareholder value. They have supposedly made the U.S. economy the strongest and most competitive in the world.

First of all, let's take a look at jobs. The past few years haven't exactly been a boon to job seekers in the U.S. Fewer and fewer jobs are being created these days. And the jobs that do exist are paying less and offer increasingly meager benefits. And American employees work the longest hours in the industrialized world, as author Juliet Schor pointed out in her book, The Overworked American.

Now, consider the issue of "shareholder value." The past few years haven't exactly been stellar for the stock market. But even the CEOs who preside over companies with sinking share value continue to pocket huge compensation packages.

Last, but not least: let's take a look at America's "competitiveness" these days.

A recurring mantra with America's mainstream and business press is that the U.S. is the most "competitive" economy in the world. A casual look at America's current trade figures, though, explodes this myth.

The fact is, America has the largest trade deficits of any First World nation in history. It seems to me that the U.S. has a difficult time these days creating products that other nations want to buy. Meanwhile, Americans line up to buy products from countries like Germany (which exceeds even China as the world's largest exporter) and Japan---despite the fact that average wages in those two countries are now higher than U.S. wage levels.

If U.S. corporations are really that "competitive" these days, it seems strange to me that America's CEOs seem to have a tough time making ends meet without corporate welfare.

Take Wal-Mart for example. The world's largest corporation (with over $286 billion in annual sales) cost American taxpayers over $1.5 billion in 2004, according to

If you want to get an idea of how out-of-control soaring CEO pay has gotten, it's important to look at the CEO pay of America's automakers. To me, Detroit sums up many of the major problems that America's economy as a whole faces these days.

Detroit's CEOs have long pocketed by far the highest compensation levels of any auto executives in the world.

This shouldn't really be surprising: American CEOs in general have long raked in vastly higher pay packages than their overseas counterparts. U.S. CEOs make, on average, 22 times what their counterparts make in Japan and 17 times what their counterparts earn in Europe.

If pay is somehow tied to performance, then you'd think that America's automakers are the world's most competitive, correct?

If so, you'd be wrong. Detroit, in fact, has been steadily losing market share to foreign automakers for the past five decades. And the blame for this can be laid squarely on the shoulders of Detroit's CEOs, who've made one stupid decision after another for decades. One recent example: Detroit's decision to stake everything on gas-guzzling SUVs, while the Japanese were busy perfecting hybrid technology. (Hybrids are currently by far the auto industry's hottest segment).

Detroit CEOs have long complained that "it's not their fault" and have offered up one excuse after another as to why America's car companies are losing market share. My favorite excuse of theirs is that foreign automakers' workers earn less than their America counterparts (an excuse that the U.S. mainstream and business media has never bothered to challenge).

A quick look at the numbers explodes this lie. The fact is, automaker employees in both Japan and Germany earn higher salaries than U.S. automaker workers do these days. Japan's wages run 30 to 40 percent higher than Detroit's wages. And German automakers workers earn around $49/hour on average versus $39/hour for Detroit's workers.

Although U.S. automaker workers earn less than their foreign counterparts, Detroit CEOs make vastly higher pay packages than their counterparts do in Germany or Japan.

This vast gulf was vividly demonstrated in 1998 when German automaker Daimler-Benz took over U.S. automaker Chrysler. As it turned out, the CEO of Daimler-Benz, Jurgen Schrempp, was earning a pay package that was less than one-tenth of the pay package of Chrysler CEO Robert Eaton.

One might think, given the gigantic pay packages of America's CEOs these days, that being a chief executive is a demanding job. It seems to me that the opposite is true. CEOs seem to do little more these days than bitch and moan and offer up excuses for their companies' declining fortunes. There are always plenty of handy scapegoats around. Unions. Democrats. "Excessive" red tape and regulations. Lower wages overseas. Ad nauseam.

It seems to me that, far from having a difficult job, America's CEOs actually have one of the easiest jobs in the world these days. When things aren't going well, simply blame others for your mistakes (shades of the Bush White House here). And, if that doesn't work, simply ask for another round of corporate welfare from the government.

Saturday, April 23, 2005

Time Magazine's GOP-Friendly Bias Nothing New


Outraged progressive commentators across the Web are asking their visitors to cancel their subscriptions to Time magazine in the aftermath of that magazine's puff piece on fascist nutcase Ann Coulter.

The Time April 25 cover story offended progressives (and, for that matter, all sane Americans) with writer John Cloud's contention that he "didn't find many outright Coulter errors."
This, despite the fact that Coulter's vicious hatemongering is absolutely smothered with blatant lies that have been extensively documented in print media and across the Web.

While many progressives are angered by this whole episode, I think it's actually good news for American public discourse.

I think it's great that progressives are finally starting to see Time magazine for what it really is. A jingoistic, right-leaning, anti-union, business-friendly publication that masquerades as "unbiased" serious journalism. A magazine that gave acres of coverage to the partisan witchhunt against Clinton and then snoozed through critical stories like GOP's stealing of the 2000 election and the disenfranchisement of Ohio voters in 2004.

There are those of us who've been shouting from the rooftops for years that Time leans Republican. Now, it appears the Left will finally take notice. And hopefully, more than a few progressives will cancel their subscriptions.

To get an understanding of Time magazine's conservative leanings, it's important to take a look at the magazine's history, which has always been steadily pro-business and pro-GOP since launching in 1923.

Before that, founders Henry Luce and Briton Hadden were noted for having turned their college paper (the Yale Daily News) into a "propagandist sheet promoting intense patriotism" during World War I (according to "The People's Almanac" by David Wallechinsky and Irving Wallace).

"The People's Almanac" documents Time magazine's historically conservative bias, including the magazine's take on events when the U.S. was in the grip of hard times during the 1930s economic meltdown:

"The Depression would go away if one worked and prayed hard enough, and if some people starved, well, it was pretty much their own fault. Luce never had any sympathy for losers."

Time later propagandized for the U.S. to enter World War II, "The People's Almanac" notes. But not for the purpose of saving democracy, or the British, but to establish American dominance in the world:

This was to be, Luce said, the "American Century." America must take charge of the world because no one else was worthy. Military supremacy was essential.

Time magazine's pro-GOP leanings continued after the war, "The People's Almanac" notes. "By 1950 Time had become almost the house organ of the Republican party."

Despite Time magazine's historically pro-Republican leanings, I'm a bit baffled as to why it would dignify human filth like Coulter. I suppose it all comes down to profit. After all, the mainstream media's embrace of "unbiased" news has really always been about profit.

If you claim to be unbiased, then, in theory this will increase readership and boost your profits. It sounds like a plausible theory on paper. But the fact is, I think this approach has finally caught up with America's mainstream press.

Big Media's credibility is lower than ever these days. The Right has long condemned the media for a supposed "liberal" bias. And now the Left is also starting to catch on that Big Media is not to be trusted.

The bottom line is that the corporate media titans these days are dinosaurs and headed for extinction. With the rise of the Internet, the media is splintering into thousands of independent voices, that corporate America (much to its horror) cannot control. Across the Web, tens of thousands of online publications are emerging and few of them make any ridiculous pretense at "non-partisanship."

Time shot itself in the foot with the Coulter fiasco. And Big Media's loss is a big plus for all of us who believe in putting the truth (and people) before profits.

Tuesday, April 19, 2005

New Pope's Homeland Could Teach GOP a Thing or Two About Christian Values


I'm not sure I have an opinion on the selection of Joseph Ratzinger as the new pope. But I do have an opinion about the pope's homeland, Germany.

Germany is not a perfect nation by any means. And it has a horrific past. But I think in the overall balance of things, Germany is a more Christian nation than the U.S. is today. This, despite the fact that the overwhelming majority of Germans (like most Europeans) are secular, and don't attend church.

How can this possibly be, you might be asking? Well, first of all, I should explain what I mean by "Christian."

A big part of the problem I've always had with the Christian religion is not the teachings of Christ (most of which I wholeheartedly agree with). It's "Christians" themselves.

At least here in the U.S., Christianity has been twisted, perverted and distorted by Bible-thumping fundamentalists (who ironically seem to be completely ignorant of the Bible's contents).

I've never understood why the Republicans, of all people, have long been identified as the party somehow closest to Christian values and morals. I'm not sure what Bible these people are referring to. A great deal of what animates them seems to consist of issues that aren't even mentioned in the Scriptures.

Abortion, for one thing. "Christians" will rant and rave all day about this topic---which is odd, because abortion is not mentioned once in the Bible.

What's equally strange is that when I read the Bible (particularly the words of Christ himself), I find myself in total agreement---and I'm a diehard progressive.

I agree with the Bible verse, Mark 10:21. This is a verse that describes what happens when a wealthy man approaches Christ and asks him what he must do to "inherit eternal life."

Christ responds, "You lack one thing; go, sell what you have, and give to the poor, and you will have treasure in heaven."

Note that Christ does not say that one must sell one's possessions and give to the poor in order to simply be a "good Christian." Instead, he says we must do this if we want to go to heaven, period.

This is one of those Bible verses you'll never, ever hear Republicans mention. Instead, Republicans are always busy digging deep into the Old Testament (which, incidentally, Christ said his own words replaced) and finding obscure verses to support their views on issues like homosexuality. Never mind the fact that the Old Testament is FULL of bizarre stories and teachings that I'm not sure that anyone today really fathoms. I mean, how about the verse that says that a man who has damaged testicles may not enter a temple to worship?

Christ spent a lot of his ministry speaking harshly of the wealthy. In fact, he only has kind words for two groups of people: children and the poor.

Which brings me back to my original topic. Germany is a country that has policies that send shivers down the spine (or lack thereof) of Republicans. For one thing, Germany has an extensive social welfare system and a huge array of programs to help poor and lower-income people that would simply be inconceivable in the U.S. As a result, the sort of wretched, bottom-of-the-barrel poverty that is widespread in the U.S. is simply unheard of in Germany (and, indeed, most European nations).

One in every five children in America lives in poverty. The comparable figure for Germany is less than one-tenth the U.S. rate. Given Christ's views on the poor and children, I'd suspect that if Jesus returned today, he would look more favorably on Germany than the U.S.

Surprisingly, for a nation that has the third-largest economy in the world, Germany doesn't get a lot of detailed coverage in the U.S. media. Most Americans are pretty ignorant about what goes on there. What's more, the U.S. media's coverage of German affairs tends to be highly distorted and often flat-out wrong.

The vast majority of U.S. media coverage about Germany these days seems to consist of gloom-and-doom stories that talk endlessly about Germany's economic woes. (Inevitably, these same stories always go on to say that Germany is working to abolish its generous social welfare programs and is embracing the U.S. model of rough-and-tumble capitalism).

The U.S. media's coverage of Germany is in fact highly flawed. Take, for example, Germany's economic problems. It's simply not true to say that Germany is in some sort of economic crisis. Germany does have a jobless rate higher than that of the U.S. But the fact is, this has little to do with any fundamental problems with the nation's economic system.

The fact is, Germany historically had an extremely low jobless rate for over half a century after World War II. It was only when reunification arrived that the nation's unemployment rate soared. When Germany reunited, the wealthy West went into the much poorer East Germany and shuttered thousands of inefficient state-owned businesses, which caused millions to lose their jobs.

For over a decade, Germany has been spending hundreds of billions of dollars modernizing the East and working to bring it up to the level of the West. It's been a painful, drawn-out process. But the U.S. media is simply not telling the truth when it repeatedly insists that Germany's current woes stem from some sort of fundamental structural flaws in its economic system (and that the nation must embrace the U.S. model).

Incidentally, there is more than meets the eye with Germany's jobless rate. For a start, being jobless in Germany isn't quite a disaster that it can be in the U.S. Germany, for example, has generous social welfare programs that make it possible to live relatively comfortably, even if one is jobless.

American economists and Republicans are always touting the U.S. economic system's "superiority" by pointing out that we have a low jobless rate. I find it interesting, though, that these pundits never mention that the U.S. has the largest prison population in the world, with over 2 million people behind bars. That's a vastly higher incarceration rate than Germany, by the way.

Germany is a country that gets endless grief from U.S. conservative pundits and economic commentators. The latter constantly deride Germany's "bloated and excessive" welfare and social programs. They also condemn the German economic system as being "shackled" by all kinds of supposedly unnecessary red tape and regulation.

Publications like "The Wall Street Journal" constantly criticize Germany as a sinking economic power whose only salvation is, of course, a hefty dose of American-style brutal dog-eat-dog capitalism. One recent editorial in the "Journal" confidently (and arrogantly) predicted that the latter will indeed eventually occur and that Germany's guaranteed 6-week paid vacations for all workers will be the sort of thing that German school children "read about in history books one day."

Frankly, I don't see any of this happening myself. The fact is, Germans (and Europeans in general) long ago took a good, hard look at the American economic model and rejected it. The whole idea that Germany is ready to embrace American style capitalism is a fantasy. And it certainly doesn't take into account the German people themselves who have shown (like other Europeans) that they won't hesitate to take to the streets and rally in massive protests to defend their hard-won rights.

But I think a more fundamental question is this: does Germany really need to change its system at all? And for that matter, is Germany really the economic basket case that is portrayed in the U.S. media?

The answer is: absolutely not. It's time to take a look at just how powerful the German economy is today.

For a start, Germany is the world's largest exporter. That's right: Germany exports more than even China does. In fact, Germany has been the world's top exporter for most of the past five decades.

It's remarkable that Germany, with less than one-third America's population, is able to out-export the U.S. But even this doesn't tell the full story. The fact is, Germany's exports by and large consist of highly-sophisticated, capital-intensive products, ranging from machine tools to advanced chemicals to automobiles. By contrast, America's export numbers these days are heavily padded by the simple raw commodities that comprise much of our exports: items like timber, agriculture products and iron ore. Ominously for America, the latter are the sort of exports that Third World nations have long been known for.

Nor is Germany particularly under threat from the rise of China (unlike the U.S., which is currently in the midst of a panic attack over China's growing flood of exports). The fact is, Germany, along with Japan, has long specialized in the sort of sophisticated, capital-intensive products that have enormous entry barriers to would-be competitors. In short, despite its rapid rise, China is a long, long ways away from producing anything on the level of, say, a Porsche sports car.

For all the talk about China's rise to prominence, the fact remains that that nation is still heavily dependent on advanced manufacturing powerhouses like Germany to supply it with the building blocks of industrialization, (like factory production equipment and machine tools). Despite the fact that it floods the U.S. with exports, China actually runs an overall trade deficit these days.

Despite Germany's economic sophistication, many American commentors are always rambling on about how the U.S. is supposedly the world's "most competitive" nation. This makes me wonder what they could possibly mean by the word "competitive." The U.S. has the largest trade deficits of any nation in history. It seems to me that we're having a tough time making products that other nations wish to buy these days. So I really wonder how anyone could call us "competitive" at all.

Besides its export prowess, Germany shines in other ways as well these days. The nation has one of the world's strongest currencies in the Euro. And Germany is one of the largest capital exporters in the world (hardly the sign of a "weak" economy). Last but not least, the Germans are among the most highly paid workers in the world, (trailing only Switzerland).

Germany is also a vastly more egalitarian society than the U.S. The enormous (and growing) divide between rich and poor that plagues the U.S. simply doesn't exist in Germany. And Germany also gives a much higher percentage of its GNP to poor countries than the stingy U.S. does.

Let me see: an egalitarian nation that takes care of its poor people. A nation with generous social welfare programs. A nation that gives generously to poor countries. A nation that takes a leading role in world environmental issues and long ago abolished capital punishment.

Somehow, I get the feeling that if Christ returned today, he would look more favorably upon Germany than the U.S., a country that ignores its poor, lies to its people, embraces the death penalty, and celebrates gluttony and greed.

Friday, April 15, 2005

When Poor People Start Wishing They Were Rich


Tax season is here again. Would you like to know a sure-fire way of reducing your tax bill?

Simple. Become rich. The richer, the better.

Example: let's say your wealth puts you in the top 1/100th of 1 percent of all Americans. That's about 28,000 people in the U.S. These people, on average, make around $2 million every five days, which is what the average American earns over the course of a lifetime.

The tax burden for these super-rich people has been steadily falling for years. For example, in 1993, they paid 30 cents of every dollar into federal income tax. In 2000, that had fallen to 22 cents. Now, with the Bush tax cuts, it has fallen to 18 cents.

In his book Perfectly Legal, Pulitzer Prize-winning journalist David Cay Johnston details an outrageously unfair tax system that screws the poor and working class. It's a tax system that has been increasing shifting the burden away from the rich and onto lower-income tax payers for years, a phenomenon that's gotten little coverage in the mainstream media.

Not only do the rich avoid paying taxes, but they also usually avoid tax audits. Johnston points out that working class people are eight times more likely to face an audit than the wealthy.

Johnston is only one of a number of high-profile investigative journalists who've detailed America's unfair tax system over the years.

In 1994, Pulitzer Prize-winning journalists Donald Barlett and James Steele published an eye-opening account of America's unfair tax system in their book, America: Who Really Pays the Taxes?

Barlett and Steele painted a gloomy picture of a beleaguered middle- and working class that is soaking up more and more of the nation's tax burden. They also detail how the tax burden is quietly shifting in other ways.

For example, the tax burden in the U.S. over the years has been shifting from corporations to individual tax payers. In the 1950s, corporations paid around half of all taxes. Today, their burden has shrunk to less than 10 percent. In fact, today, 60 percent of all U.S. corporations pay zero income tax.

Johnston, Bartlett and Steele point out numerous cases in which wealthy individuals don't even bother to file a tax return.

Johnston cites the example of two billionaires, Alec and Jocelyn Wildenstein, who admitted under oath that for 30 years, they never even filed a tax return---and faced no consequences as a result.

In their book, Barlett and Steele point out that in 1989, there were 1,081 people earning over $200,000 who paid zero income tax. I would suspect that since Barlett and Steele's 1994 book was released that the number of wealthy tax avoiders has increased further still.

In the interviews they conducted to research their books, Barlett, Steele and Johnston describe ordinary tax payers' seething anger and frustration with the unfairness of the tax code.

Johnston, in particular, seems pessimistic that the U.S. tax system will ever be fixed. He considers open revolt and social disruption a possibility in the future.

For their part, Barlett and Steele, offer modest proposals for making the tax system more equitable, such as closing all loopholes. However, the odds of real change to make the tax system more fair in Bush's America seem remote indeed.