Frozen Assets

The New York Times included a special “Wealth” section for the 1% in today’s print edition, including articles such as:

  • Parceling Out a Nest Egg, Without Emptying It (raising the issue of how much of the $5.12 million exemption on gift taxes can you exploit on your nest egg of $10 million but less than $40m; “nice calculations to have to make, but that does not make them any less stressful for the people making them.”);
  • A Guiding Hand for Bequests, Beyond the Grave (discussing how one might, for example, satisfy both a second spouse and children from a previous marriage with a “QTIP” — qualified terminable interest property trust);
  • Courting the Next Generation of the Rich (discussing the “exploding” popularity of “programs for the next generation of wealth holders” on topics such as financial literacy, prenuptial agreements and managing family dynamics).

Diego Rivera
Frozen Assets (1931)
Fresco on reinforced cement in a galvanized-steel framework
94 1/8 x 74 3/16″ (239 x 188.5 cm)

NYT: The Rich Get Even Richer

The New York Times printed an op-ed today by a “longtime Wall Street executive” drawning on work by French economists Thomas Piketty and Emmanuel Saez analyzing U.S. tax returns:

NEW statistics show an ever-more-startling divergence between the fortunes of the wealthy and everybody else — and the desperate need to address this wrenching problem. Even in a country that sometimes seems inured to income inequality, these takeaways are truly stunning.

In 2010, as the nation continued to recover from the recession, a dizzying 93 percent of the additional income created in the country that year, compared to 2009 — $288 billion — went to the top 1 percent of taxpayers, those with at least $352,000 in income. That delivered an average single-year pay increase of 11.6 percent to each of these households.

Still more astonishing was the extent to which the super rich got rich faster than the merely rich. In 2010, 37 percent of these additional earnings went to just the top 0.01 percent, a teaspoon-size collection of about 15,000 households with average incomes of $23.8 million. These fortunate few saw their incomes rise by 21.5 percent.

The bottom 99 percent received a microscopic $80 increase in pay per person in 2010, after adjusting for inflation. The top 1 percent, whose average income is $1,019,089, had an 11.6 percent increase in income.

Steven Rattner, Op-Ed, The Rich Get Even Richer, N.Y. Times, Mar. 26, 2012, at A27.

And the Business section reported a few days earlier that, although “Americans have never been too worried about the income gap,” now “tolerance for a widening income gap may be ebbing.” Eduardo Porter, Inequality Undermines Democracy, N.Y. Times, Mar. 21, 2012, at B1. The article also notes that when “inequality becomes very acute, it breeds resentment and political instability, eroding the legitimacy of democratic institutions.” Indeed, as Gar Alperovitz has pointed out

repeated studies have shown the majority of Americans know full well that something challenging and fundamental is going on with “democracy”: Four out of five in a recent assessment judged that “[g]overnment leaders say and do anything to get elected, then do whatever they want.” Another study found that seven out of ten felt that “people like me have almost no say in the political system.”

Gar Alpervitz, American Beyond Capitalism 1 (2005) (arguing for democratization of the economic system through varying forms of ownership such as co-ops, worker-owned businesses, community land trusts, and other social enterprises).

NYT: Immigrant Crackdowns Turn Into Big Business

The New York Times has a front-page feature on how the US, Britain and Australia have looked to “a handful of [private] multinational security companies,” primarily GEO Group, Serco and G4S, have turned expanded immigration detention policies in all three countries “into a growing global industry.” Nina Bernstein, Getting Tough On Immigrants To Turn a Profit, N.Y. Times, Sept. 29, 2011, at A1:

Some of the companies are huge — one is among the largest private employers in the world — and they say they are meeting demand faster and less expensively than the public sector could.

But the ballooning of privatized detention has been accompanied by scathing inspection reports, lawsuits and the documentation of widespread abuse and neglect, sometimes lethal. Human rights groups say detention has neither worked as a deterrent nor speeded deportation, as governments contend, and some worry about the creation of a “detention-industrial complex” with a momentum of its own.

… In the United States — with almost 400,000 annual detentions in 2010, up from 280,000 in 2005 — private companies now control nearly half of all detention beds, compared with only 8 percent in state and federal prisons, according to government figures. In Britain, 7 of 11 detention centers and most short-term holding places for immigrants are run by for-profit contractors.

… Companies often say that losing a contract is the ultimate accountability.

“We are acutely aware of our responsibilities and are committed to the humane, fair and decent treatment of all those in our care,” a Serco spokesman said in an e-mail. “We will continue to work with our customers around the world and seek to improve the services we provide for them.”

But lost detention contracts are rare and easily replaced in this fast-growing business. Serco’s $10 billion portfolio includes many other businesses, from air traffic control and visa processing in the United States, to nuclear weapons maintenance, video surveillance and welfare-to-work programs in Britain, where it also operates several prisons and two “immigration removal centers.”

“If one area or territory slows down, we can move where the growth is,” Christopher Hyman, Serco’s chief executive, told investors last year, after reporting a 35 percent increase in profits. This spring, Serco reported a 13 percent profit rise.

Its rival G4S delivers cash to banks on most continents, runs airport security in 80 countries and has 1,500 employees in immigration enforcement in Britain, the Netherlands and the United States, where its services include escorting illegal border-crossers back to Mexico for the Department of Homeland Security.

NYT: Parents’ Minor Marijuana Arrests Lead to Child Neglect Cases

The New York Times reports today that “[h]undreds of New Yorkers who have been caught with small amounts of marijuana, or who have simply admitted to using it, have become ensnared in civil child neglect cases in recent years, though they did not face even the least of criminal charges, according to city records and defense lawyers. A small number of parents in these cases have even lost custody of their children.” Mosi Secret, No Cause for Marijuana Case, But Enough for Child Neglect, N.Y. Times, Aug. 18, 2011, at A1:

The police found about 10 grams of marijuana, or about a third of an ounce, when they searched Penelope Harris’s apartment in the Bronx last year. The amount was below the legal threshold for even a misdemeanor, and prosecutors declined to charge her. But Ms. Harris, a mother whose son and niece were home when she was briefly in custody, could hardly rest easy.

The police had reported her arrest to the state’s child welfare hot line, and city caseworkers quickly arrived and took the children away.

Her son, then 10, spent more than a week in foster care. Her niece, who was 8 and living with her as a foster child, was placed in another home and not returned by the foster care agency for more than a year. Ms. Harris, 31, had to weather a lengthy child neglect inquiry, though she had no criminal record and had never before been investigated by the child welfare authorities, Ms. Harris and her lawyer said.

“I felt like less of a parent, like I had failed my children,” Ms. Harris said. “It tore me up.”

The article also reports that marijuana is “the most common illicit drug in New York City: 730,000 people, or 12 percent of people age 12 and older, use the drug at least once annually, according to city health data…. Over all, the rate of marijuana use among whites is twice as high as among blacks and Hispanics in the city, the data show, but defense lawyers said these cases were rarely if ever filed against white parents.”


Lissette Gutierrez chose a pair of $1,495 Louis Vuitton shoes at Bergdorf Goodman in Manhattan.

Correction: A picture caption on Thursday with an article about a recent increase in the sale of luxury goods misidentified the brand of shoes that a shopper, Lissette Gutierrez, planned to try on at Bergdorf Goodman in Manhattan. The $1,495 shoes are Christian Louboutin, not Louis Vuitton.

NYT: Last Days, Perhaps, for Group That Sued for Poor School Districts

Missed this article a couple months ago from the NYT City Room blog (6/8/2011):

After a series of setbacks, the Campaign for Fiscal Equity, the advocacy organization whose victory in a historic lawsuit brought billions of additional dollars to poor school districts in New York State, has run out of money to sustain itself, the organization said.

The organization’s last remaining employee, Helaine K. Doran, will leave the group’s Lower Manhattan office this month and, essentially, lock the door behind her.

While its future is not yet certain, the president of its board of directors, Luis Miranda, said on Tuesday that the group was in talks to merge with the New Jersey-based Education Law Center, which two weeks ago won a $500 million judgment in its own long-standing school-financing litigation, known as the Abbott case.

Since the Supreme Court’s decision in San Antonio Indep. School Dist. v. Rodriguez,1 advocates in 45 states have brought actions challenging school finance systems under their state constitutions with challengers prevailing in 26 of the 45 cases that resulted in a judicial decision.2 Overall though, “progress has been fitful, and the victories often short-lived and generally incomplete, and even after all these years of litigation unacceptable inequities remain the norm in the majority of states.”3 Even in New York, where the Court of Appeals affirmed that the state’s constitution requires that every public school child in the State of New York has a right to a “sound basic education” defined as “a meaningful high school education,”4 Michael Rebell, executive director of the Campaign for Fiscal Equity which brought the litigation in 1996, lamented: “We really came to the decision that if we could get a functioning lab in every school, decent class sizes, gym facilities, an adequate education in every school – to get there is such a huge battle. . . Maybe in 20 years, if we ever get that, somebody else can say that they want to go for equity. But that’s not our battle.”5

NYT: Corporate Taxes Enter Debt Debate

From the NYT Caucus blog:

The Obama administration is preparing to inject an unpredictable new variable into its economic policy clash with Republicans: a plan to overhaul corporate taxes.

Economic advisers have nearly completed the process initiated in January by the Treasury secretary, Timothy F. Geithner, at President Obama’s behest. That process, intended to make the United States more competitive internationally, has explored the willingness of business leaders to sacrifice loopholes in return for lowering the top corporate tax rate, currently 35 percent.

The approach officials are now discussing would drop the top rate as low as 26 percent, largely by curbing or eliminating tax breaks for depreciation and for domestic manufacturing.

… Balancing deficit concerns with its desire to improve relations with businesses, the Obama administration wants any corporate tax overhaul to be “revenue neutral” — that is, a new system should bring in no more or less money from businesses than the old one did. Thus some sectors with comparatively few major deductions could win big, including Wall Street. Others paying lower “effective rates,” like domestic manufacturers, could lose.

… Proposing to cut the top rate for corporations poses the risk of aggravating unease among Democrats as they negotiate with Republicans over spending cuts in the monuments of modern liberalism: Medicare, Medicaid and Social Security. The recent revelation that the nation’s largest corporation, General Electric, paid no federal tax for 2010 despite $14.2 billion in worldwide profits makes a business tax-rate reduction an even tougher sell.

NYT: President Heads to New York to Try to Thaw Wall Street Donors

It appears that we’re ‘getting back to the business of solving our problems and not sideshow and carnival barker distractions,’ according to Helene Cooper, Obama Heads to New York to Try to Thaw Donors From Wall Street, N.Y. Times, Apr. 28, 2011, at A16.

President Obama, seeking to mend fences with big New York donors to the Democratic Party, came to New York to headline three back-to-back fund-raisers on Wednesday night, casting his re-election campaign as the next step in the effort to speed up the economic recovery.

“People are worried about the future of the American dream,” Mr. Obama told some 60 donors who paid up to $35,800 a plate to be part of the first scheduled event, a dinner party with the president at the Manhattan home of Jon S. Corzine, the former governor of New Jersey.

… Democrats are hoping that Mr. Obama can make peace, somewhat at least, with Wall Street, where financiers have expressed increased alienation with the party and the White House after the oratorical pounding they have taken for their part in the financial crisis that began in 2008. Several hedge fund managers who supported Mr. Obama in 2008 now indicate that they will support the Republican Party in 2012.

Mr. Obama began his kiss-and-make-up effort at the home of Mr. Corzine, a former chairman and chief executive of Goldman Sachs. Mr. Corzine has deep ties to the financial services industry, and now heads MF Global, a financial services firm.

Democrats are hoping that Mr. Obama’s fund-raising efforts can top the $750 million he raised in the 2008 campaign, and possibly reach $1 billion.


"U.S. POSTS A GAIN. OF 216000 JOBS,. A LIFT FOR OBAMA. PRIVATE SECTOR ON RISE; As jobless rate falls to 8.8%, White House warns G.O.P." Oh wait...

The nation’s unemployment rate dipped slightly in March to 8.8 percent, as the economy added more than 200,000 jobs during the month.

But despite the improvement, a new report says millions of Americans are struggling to make ends meet, and we’re talking about people who have jobs.

A group called Wider Opportunities for Women (WOW) has developed a formula that suggests the average single worker needs to earn $30,012 a year – nearly twice the federal minimum wage – to cover basic expenses. Single parents require nearly twice the income ($57,756) to support two children, while dual-income households with children require $67,920.

American Shame

Charles M. Blow, Empire at the End of Decadence, N.Y. Times, Feb. 19, 2011, at A23.

America is great in many ways, but on a whole host of measures — some of which are shown in the accompanying chart — we have become the laggards of the industrialized world. Not only are we not No. 1 — “U.S.A.! U.S.A.!” — we are among the worst of the worst.