Greed and Good

Why Aren’t Americans Happy
July 26, 2004

The past 30 years have seen tremendous growth in the United States in productivity and wealth, and yet we don’t all seem very appreciative. In fact, as Yale political scientist Robert Lane has documented, surveys have found Americans’ assessment of their level of happiness declining significantly. The same is not the case in other developed countries.

The United States contains less than 5 percent of the world’s population and spends 42 percent of the world’s health care expenses, and yet Americans are less healthy than the residents of nearly every other wealthy nation and a few poor ones as well, as documented by Dr. Stephen Bezruchka of the University of Washington.

What’s going on? We spend more on criminal justice and have more crime. How can that be? We’re richer and have more poverty. Why is that?

Sam Pizzigati, author of a new book called “Greed and Good,” thinks he has both an answer and a solution to these and several other riddles. Pizzigati focuses on the extreme increase in inequality that the United States has seen over the past generation. The Federal Reserve Board has documented gains by America’s wealthiest 1 percent of more than $2 trillion more than everyone in America’s bottom 90 percent combined. We are now the most unequal wealthy nation on earth and have reversed the relationship we had to Europe when the founders of this country rejected aristocracy. Today Europeans come to the United States to marvel at the excesses of wealth beside shameful poverty.

Many of us would like to lift up those at the bottom. Few of us want to bring down those at the top. Pizzigati argues that you cannot do one without the other, because the super wealthy will always have the political power to avoid contributing to bringing the bottom up. This will leave it to the middle class to assist those less fortunate even as their own situations are slipping and their concept of success — based on the lifestyles of the CEO-barons — is being driven further out of reach. The middle class won’t want to do this, and instead will support policies that benefit the super wealthy.

But the existence of the super wealthy, Pizzigati argues, has a long list of negative impacts on all of our lives. Get rid of vast concentrations of wealth, and all sorts of things happen, including lower murder rates, lower blood pressure, and lower housing prices. Or so says the extensively documented research gathered together in “Greed and Good”.

Take the few points I mentioned above: happiness, health, and crime. Research suggests that when people see their situations improving over time and when they see their situations as acceptable by the standard of those around them, they tend to be happy. We had this in the 1950s and 1960s, a period when working families prospered and income over $200,000 was taxed at roughly 90 percent.

Developed societies with the healthiest and longest living people, extensive research shows, are not those with the highest average wealth, but those with the greatest equality of wealth. Explanations for this fact vary from consideration of the levels of stress caused by economic insecurity, to the focusing of health care on plastic surgery and other luxuries at the expense of treatment of actual illnesses.

Research also shows that a country’s murder rate varies with its inequality, not its overall wealth or its criminal justice spending.

Pizzigati proposes a new system of income tax that would lower taxes on 99 percent of Americans and allow the wealthiest 1 percent to lower their taxes by lobbying to raise the minimum wage.

Pizzigati calls his proposal the Ten Times Rule. It would work as follows. If your household brought in less than the income of two full-time minimum wage workers, you would pay no income tax. Above that level you would pay 1 percent. Above twice the minimum wage you would pay 2 percent. And so on up to 10 percent. Any income above 10 times the minimum would be taxed at 100 percent.

This would mean significantly lower taxes on 99 percent of us. It would also mean an economy focused on products for a once-again expanding middle class, rather than our new aristocracy. It would mean a country without what Senator John Edwards has called the two Americas.

The Ten Times Rule
July 27, 2004

It’s difficult to summarize a truly important book without sounding like a nutcase. An ideal review would consist of two words: Read it. For example, what would you say if out of the blue I claimed that a piece of federal legislation simple enough to fit on one page and capable of being passed by Congress in the not too distant future could accomplish all of the following?

” Drastically simplify our income tax system.
” Make professional sports more enjoyable to watch.
” Halt destruction of the environment.
” Lengthen Americans’ life spans and otherwise significantly improve our health.
” Substantially lower or eliminate income taxes on 99 percent of Americans.
” Reduce violent crime.
” Make most Americans measurably happier.
” Reform a variety of professions, including those of lawyers, accountants, and doctors.
” Reduce the number of commercials on television.
” Increase participation in our democracy.
” Increase contributions to useful charities.
” Restore the popularity of bowling leagues.
” Reduce war mongering and war profiteering.
” Make our work more rewarding.
” Improve the quality of our schools.
” Reverse the skyward climb of housing prices.
” Direct the focus of American manufacturers and retailers to products for the middle class, rather than upper-end luxury items.
” Reform the media.
” Reduce commuting times, traffic, and road rage.
” Stimulate an artistic renaissance.
” Encourage talented young people to work as teachers and public servants.
” Lift millions of families out of poverty.
” And turn the wealthiest Americans into the most passionate advocates for raising the minimum wage.

What would you say? Would you say the leaded water in D.C. was going to my brain or the absurdity of watching working people support George W. Bush had finally pushed me over the edge?

If someone told me all of that stuff, I’d say I needed it all spelled out in detail and explained to me in 552 pages or so of clear text. Or I would if I hadn’t just read “Greed and Good: Understanding and Overcoming the Inequality that Limits Our Lives” by Sam Pizzigati.

Pizzigati, like many of us, is disturbed by the recent rise of inequality in America. But Pizzigati, unlike most of us, does not believe it is possible to correct this new inequality only by bringing the bottom up. He makes a case for the impossibility of bringing the bottom up without bringing the top down. One reason this is very difficult to do, Pizzigati argues, is that the super wealthy will always have the political power to avoid contributing to bringing the bottom up. This will leave it to the middle class to assist those less fortunate even as their own situations are slipping and their concept of success — based on the lifestyles of the CEO-barons — is being driven further out of reach. The middle class won’t want to do this, and instead will support policies that benefit the super wealthy. But the existence of the super wealthy, Pizzigati argues, is to blame for a long list of negative impacts on all of our lives. Get rid of vast concentrations of wealth, and all sorts of things happen, including lower murder rates, lower blood pressure, and lower housing prices. Or so says the extensively documented research gathered together in this book.

Pizzigati notes that Franklin Roosevelt once proposed a 100 percent tax on incomes over $25,000 (about $300,000 in today’s money). Eventually Congress set a 94 percent tax rate on incomes over $200,000, a rate that was kept near 90 percent during the two most prosperous decades for working families that America has seen. But this stiff tax on excessive income was limiting to those whose passion in life is increasing their income. They had to evade it or eliminate it, and they did both.

But what if the wealthiest Americans were able to raise the limit on their income by raising the minimum wage? The minimum wage is currently $5.15. In the past it’s reached as high as $8.50 in today’s inflation-adjusted terms, and done so without any negative impact on our economy. What greed head wouldn’t lobby Congress to restore a buck or two to the minimum wage if it meant an extra $100K to himself?

Pizzigati calls his proposal the Ten Times Rule. It would work as follows. Any household that earned more than 10 times two full-time minimum wage incomes ($214,000 in 2003) would pay a 10 percent income tax on that amount and a 100 percent tax on anything above that. This would have resulted in 2003 in an 82 percent tax on the average top 1 percent of households and an 11 percent tax on the average next 4 percent of households.

Under the ten times rule, if you had income five times the minimum you would pay 5 percent income tax, if your income was twice the minimum wage you would pay 2 percent, etc., and if you earned exactly the minimum you would pay 1 percent.

In 2003, the average income for the 80th to 95th percentile would have resulted in a 4 percent income tax. The second most affluent 20 percent of Americans would have paid 2 percent. The next 40 percent of Americans would have paid 1 percent, and the bottom 20 percent would have paid no income tax at all.

That’s all very well, you may say, but what about all those wild claims I made up above? The short answer is: read this book. Pizzigati details these claims and spends even more time replying to likely counterarguments. I’ll touch on a few to whet your appetite.

The first claim, that this plan would drastically simplify our income tax system, should be clear. Pizzigati rather hesitantly suggests the possibility of including one loophole in his new system (for investment in state and local bonds). But this is clearly a mistake. Once you have one loophole, you have 300-400 Congress Members asking why you shouldn’t have two or perhaps merely three. The appeal of this new income tax system would depend on its simplicity and fairness. If you earned 8 times the minimum wage, you would pay an 8 percent income tax. Period. If you wanted to increase your after-tax income, you would need to lobby for an increase in the minimum wage. And if eliminating huge concentrations of wealth had all the other positive imacts that Pizzigati predicts, then I expect state and local public resources will make out fine.

The second claim, that this would make professional sports more enjoyable to watch, is based in part on studies of what inequality in athletes’ incomes has done to sports. For one thing, studies have found that the greater the inequality in paychecks on a team, the worse the team’s record, no matter how many overpaid superstars they have. In addition, because team owners have pursued wealthy fans and built new stadiums at taxpayer expense loaded with luxury boxes, while jacking up the prices of ordinary tickets, most fans are now limited to watching sports on TV. But that experience is controlled by the greed of television executives. In order to fit in more commercials, the National Football League now allows the game clock to run in more situations. Better fewer plays than fewer commercials! And in many cases, games (and commercials) are only shown on a cable station that’s not free either. Fans have begun getting angry rather than disappointed when their teams lose, and attendance has been falling. Multi-millionaire players who hold out for more, owners who threaten to take the team to another city, $1,000 courtside tickets: these are the joys of being a sports fan today. But what would happen if it made more economic sense for the owners to cater to a growing middle class rather than to the wealthiest among us? How would teams perform if the shortstop throwing the ball over to first weren’t making 2 percent of the first baseman’s salary?

These are the type of questions raised in this book. Inequality, Pizzigati shows, is not just tangentially related to the problem of poverty or what we used to consider the shame of allowing poverty to exist amidst wealth. Inequality is a problem in and of itself. Developed societies with the healthiest and longest living people, extensive research shows, are not those with the highest average wealth, but those with the greatest equality of wealth. Explanations for this fact vary from consideration of the levels of stress caused by economic insecurity, to the focusing of health care on plastic surgery and other luxuries at the expense of a focus on the treatment of actual illnesses.

Americans’ opinions of their own happiness and well being declined significantly during the 1980s and 1990s. Research suggests that when people see their situations improving over time and when they see their situations as acceptable by the standard of those around them, they tend to be happy. We do not have this in America. Unlike other industrialized countries, we’ve grown much more unequal and much more unhappy. We thus have the phenomenon of experiencing what Wall Street and our media call economic recoveries while the vast majority of Americans remain mysteriously unappreciative.

A ten times rule could change this. Pizzigati urges the labor movement and the living wage movement to advance the ten times rule in limited ways and to build support for its adoption nationally. Were Congress ever to pass it, perhaps not the whole list of pleasant results that I began with would come to be, but one thing we would not have anymore would be what Senator John Edwards calls the two Americas.

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