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Frank Bernheisel: The View From Here
Frank Bernheisel
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Frank Bernheisel
Posted 06.17.15
Just Outside Washington

FRANK BERNHEISEL

Inequality

The federal government of the United States is projected to be a $3.9 trillion operation in fiscal year 2016. This makes the Executive Branch of federal government the largest organization in the world with almost three million civilian employees; uniformed military are not included. Not counted as employees are the 10.5 million contractor employees that, according to Rep. Stephen Lynch (D-MA.), work for the federal government.

The CEO of this outfit, The President of the United States, is paid $400,000 per year, plus a place to live, free health care, and a $50,000 non-taxable expense allowance to assist in defraying expenses relating to or resulting from the discharge of his official duties.

For comparison, let's look at the ten largest private companies and their CEOs. The pay shown does not generally include the value of stock options and perks. These numbers are a bit rough, but they are close enough to make the point without detailed analyses of CEO pay packages.

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Rounding off the President's pay to $500,000 and comparing to CEO pay, we find that the CEO job at Walmart is valued at seventy times the President's job -- despite the fact that Walmart is one-tenth the size of the federal government and the CEO job at CVS is valued at twenty-four times the President's. CVS is essentially a bunch of drug stores. One might draw the conclusion that we (as in We The People) value the responsibility of ordering, stocking, and selling cheap goods from China and elsewhere more than making the decision whether or not we go to war.

I can just hear the outcry from the Right: "We all know that the federal government is badly run and rife with waste, fraud and abuse." Rather than resort to the New Yorker's automatic response: "What's amatter, you neva made a mistake," let's look at some examples of private sector bad management. Bad performance in the private sector is measured in billions and damages millions of people.

The Exxon Valdez oil spill in 1989. As of 2014 NOAA scientists reported that some species damaged by the spill seem to have recovered. Sea otter are the latest creature to return to pre-spill numbers. The herring have not, which has significantly damaged the fishing industry. Federal scientists estimate that between 16,000 and 21,000 gallons of oil remains on beaches in Prince William Sound and some of the oil does not appear to have biodegraded at all. Alaska state senator Berta Gardner (GOP) has urged Alaskan politicians to demand that the federal government force ExxonMobil to pay the final $92 million it still owes from the court settlement.

The General Motors bankruptcy in 2009. GM filed for Chapter 11 reorganization in the Manhattan federal bankruptcy court on June 1, 2009. The filing reported US$82.3 billion in assets and US$172.8 billion in debt. The company borrowed $33 billion from the U.S. Treasury to complete the process. As ranked by total assets, GM's bankruptcy marks one of the largest corporate Chapter 11 bankruptcies in U.S. history.

There are just too many examples of bad management including fraud to list but just a few more to jog our memories: Enron, Lehman Brothers, Washington Mutual and WorldCom.

The Big Ten are not the only companies with CEOs taking home millions. The three highest-paid CEOs in 2012 among stocks in the Standard & Poor's 500 were Facebook's Mark Zuckerberg with pay of $2.3 billion, Richard Kinder of Kinder Morgan at $1.1 billion and Mel Karmazin of Sirius XM Radio of $255.4 million, according to a USA TODAY.

Not only are the guys and gals that run the corporations taking a bigger slice of the pie than their responsibilities and achievements warrant, they are taking more every year and taking income away from the middle class. This is shown in graph of data compiled by Thomas Piketty and Emmanual Saez. Note the vertical axis of the graph is: Percent Income Share. This measure means that if the income share of the 1percent goes up, the rest of us -- the 99 percent -- get less. Piketty's book, Capital in the Twenty-First Century, where the data was published, has been subject to some criticism on methodology. However, the basic data have not been contested and a new book by Anthony Atkinson, Inequality: What Can Be Done? contends that the problem is even worse than Piketty laid out. Atkinson provides a chart very similar to Piketty and Saez.

chart

It gets worse. This is amply illustrated by the chart from Economic Policy Institute, which shows the "share of income from wealth". This is a chart of the capital gains income that is not included in Piketty and Saez's chart. The chart shows that the income from investment for the 1 percent only took a minor dip during the Great Recession and continued upward. So as the old New Yorker saying goes: "Them that's got, gets."

chart

We are being screwed; "nuf said?"

What is the solution?

The first step is to get rid of the political leaders -- you know the ones that make the laws -- who keep giving tax breaks to the wealthy and the corporations. The corporations and their CEO are not the "job creators" as these people claim. They are the "job killers."

Specifically, since 1990 they have moved jobs overseas and automated jobs out of existence. This may very well be the best way to manage businesses. However, it produces wreckage: unemployment, underemployment, and inequality. The tax structure can be used to clean up the wreckage; increase taxes on the wealthy and the corporations, and level the playing field.

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