After huddling with his economic team at Camp David this month, President Bush emerged from a meeting and, flanked by advisers — including the secretaries of labor, commerce and the Treasury — announced to reporters, “Things are good for American workers.”
The comment is preposterous. As The Times’s Steven Greenhouse and David Leonhardt reported yesterday [F6 note -- the post to which this post is a reply], the economic expansion that began in late 2001 is on track to become the first since World War II that fails to offer a sustained lift to the real wages of most American workers. Although the nation’s economy has grown and productivity has been strong, American employees have not shared in the wealth they’ve helped to create. Wages and salaries now make up the lowest proportion of the economy since the government began keeping records in 1947, while corporate profits have climbed to their highest share since the 1960’s.
Until recently, the decline in real wages has been masked in large part by the housing boom that allowed many Americans to borrow and spend, even as their pay was squeezed. But now the housing market is flagging and with it, the Bush-era economy — without American workers having ever experienced a period of solid prosperity.
Unfortunately, there’s little likelihood of meaningful improvement anytime soon. When Mr. Bush and his advisers are not insisting that everything is fine, they’re promising more high-end tax cuts as a cure-all, or painting the problem as one of impersonal market forces for which there are no government solutions.
Those are not the paths out of the predicament. Just the opposite, they are approaches that have contributed to it.
Some Americans Lack Food, but USDA Won't Call Them Hungry
By Elizabeth Williamson Washington Post Staff Writer Thursday, November 16, 2006; Page A01
The U.S. government has vowed that Americans will never be hungry again. But they may experience "very low food security."
Every year, the Agriculture Department issues a report that measures Americans' access to food, and it has consistently used the word "hunger" to describe those who can least afford to put food on the table. But not this year.
Mark Nord, the lead author of the report, said "hungry" is "not a scientifically accurate term for the specific phenomenon being measured in the food security survey." Nord, a USDA sociologist, said, "We don't have a measure of that condition."
The USDA said that 12 percent of Americans -- 35 million people -- could not put food on the table at least part of last year. Eleven million of them reported going hungry at times. Beginning this year, the USDA has determined "very low food security" to be a more scientifically palatable description for that group.
The United States has set a goal of reducing the proportion of food-insecure households to 6 percent or less by 2010, or half the 1995 level, but it is proving difficult. The number of hungriest Americans has risen over the past five years. Last year, the total share of food-insecure households stood at 11 percent.
Less vexing has been the effort to fix the way hunger is described. Three years ago, the USDA asked the Committee on National Statistics of the National Academies "to ensure that the measurement methods USDA uses to assess households' access -- or lack of access -- to adequate food and the language used to describe those conditions are conceptually and operationally sound."
Among several recommendations, the panel suggested that the USDA scrap the word hunger, which "should refer to a potential consequence of food insecurity that, because of prolonged, involuntary lack of food, results in discomfort, illness, weakness, or pain that goes beyond the usual uneasy sensation."
To measure hunger, the USDA determined, the government would have to ask individual people whether "lack of eating led to these more severe conditions," as opposed to asking who can afford to keep food in the house, Nord said.
It is not likely that USDA economists will tackle measuring individual hunger. "Hunger is clearly an important issue," Nord said. "But lacking a widespread consensus on what the word 'hunger' should refer to, it's difficult for research to shed meaningful light on it."
Anti-hunger advocates say the new words sugarcoat a national shame. "The proposal to remove the word 'hunger' from our official reports is a huge disservice to the millions of Americans who struggle daily to feed themselves and their families," said David Beckmann, president of Bread for the World, an anti-hunger advocacy group. "We . . . cannot hide the reality of hunger among our citizens."
In assembling its report, the USDA divides Americans into groups with "food security" and those with "food insecurity," who cannot always afford to keep food on the table. Under the old lexicon, that group -- 11 percent of American households last year -- was categorized into "food insecurity without hunger," meaning people who ate, though sometimes not well, and "food insecurity with hunger," for those who sometimes had no food.
That last group now forms the category "very low food security," described as experiencing "multiple indications of disrupted eating patterns and reduced food intake." Slightly better-off people who aren't always sure where their next meal is coming from are labeled "low food security."
That 35 million people in this wealthy nation feel insecure about their next meal can be hard to believe, even in the highest circles. In 1999, Texas Gov. George W. Bush, then running for president, said he thought the annual USDA report -- which consistently finds his home state one of the hungriest in the nation -- was fabricated.
"I'm sure there are some people in my state who are hungry," Bush said. "I don't believe 5 percent are hungry."
Bush said he believed that the statistics were aimed at his candidacy. "Yeah, I'm surprised a report floats out of Washington when I'm running a presidential campaign," he said.
The agency usually releases the report in the fall, for reasons that "have nothing to do with politics," Nord said.
This year, when the report failed to appear in October as it usually does, Democrats accused the Bush administration of delaying its release until after the midterm elections. Nord denied the contention, saying, "This is a schedule that was set several months ago."
Offshoring U.S. Patients No Cure For Ailing Healthcare System
by Diane M. Grassi November 16, 2006 at 16:52:54
For several years now, American healthcare consumers, including many from other western industrialized nations, have heard about elective surgeries being performed in lesser-developed nations and due to cost and denial of coverage by health insurance providers have opted to go there. However, surgeries in the past were truly elective and not medically necessary procedures that largely consisted of face-lifts, tummy tucks and gastric bypasses for cosmetic purposes.
But just in the past two years, American patients are being wooed to make decisions on serious medically necessary surgeries due to their fears of excessive healthcare costs. And the decision involves traveling abroad primarily to India and Thailand in order to receive such hospital care which they require.
For those self-insured, underinsured, or not insured at all, the desperation of receiving medical care without sacrificing homes or assets in the process is plausible, since costs of similar procedures in South Asia range from 75% - 80% less than in the United States. But now U.S. based corporations have entered the arena as well by encouraging employees to go to India and Thailand via cash incentives, free airfare and hotel stays with no co-pays due on the final bill.
Yet, just as with any large purchase consumers must look beyond the fancy advertisements and read the fine print with a Buyer Beware mentality. Americans have become quite adept at learning what to look for when dealing with car dealerships when purchasing an automobile and with computer retailers when purchasing a new computer. But it has taken many years to educate consumers as to their rights and protections under the law and what to do when something does go wrong.
The term "medical tourism" has been inaccurately applied to what is essentially the offshoring of patients of the U.S. healthcare system to foreign countries, in order to appeal to potential customers who are really medical patients. The term was invented by the media and it stuck and is now being used as a marketing tool. Deceptive in its concept, it is an implication that a patient can go sightseeing before or after a serious hospital procedure in that foreign country. But for those who are more scrupulous it remains difficult to get the necessary information needed to make a reasoned decision on whether to have surgery performed, let alone halfway around the world.
There are now organizations being touted as medical tourism agencies that have cropped up throughout the U.S. in order to facilitate such care overseas for individual patients as well as to serve as a clearinghouse for corporations wishing to outsource their employees' healthcare with them in tow. These groups include MedSolution, GlobalChoice Healthcare, IndUShealth, Planet Healthcare and Med Retreat, to name just a few.
And with more and more corporations adding select foreign hospitals as Preferred Providers to their employees' health insurance plans, medical tourism companies handle the paperwork and travel arrangements for their employees. Other countries of destination include Costa Rica, the Dominican Republic, the Philippines, Panama, Mexico, China, Malaysia, Singapore, Turkey and South Africa.
However, it is at this point that the patient needs to start their own due diligence. There is usually a requirement by most U.S. healthcare insurance providers for patients to get second opinions for most complicated surgeries in the U.S., but not so for offshore surgeries. And the list of surgeries which are being sent offshore are indeed medically necessary but confusingly being reported to the media as elective. But you can determine for yourself whether or not the following are elective procedures: cardiac bypass, cardiac stent implantation, cardiac angioplasty, knee replacement, hip replacement, mastectomy, hysterectomy, chemotherapy, eye surgery, vascular surgery, among others.
And as the medical tourism agency is only an intermediary between the client and the hospital as well as between hotels and airlines they do not provide any liability in the event that there is a medical complication or there is a mishap at the destination hospital. Furthermore, there are fees which could arise not documented by an employer nor agency which could require additional expenses upon the patient's arrival. And as a conduit between patient and hospital, the medical tourism business remains an unregulated industry in the U.S., without licensing requirements and with most managed by non-medical personnel.
Similarly, and unbeknownst to most U.S. patients is that the healthcare industry in India is highly unregulated. It was only in 2006 that regulations regarding the medical device industry, which includes surgical devices such as cardiac stents and orthopedic implants for use in hip and knee replacements, was mandated. Such call for regulation from the Drug Controller General of India (DCGI) only came about as the result of discovered defective drug eluting cardiac stents in 2004. And although hospitals have the option of applying for accreditation through the Joint International Commission established in 1999, a subsidiary of the Joint Commission on Accreditation of Healthcare Organizations, used for hospitals in the U.S., there is no such requirement to do so.
As of 2006 there are five hospitals in India which have JCI accreditation, renewable every three years. They include the three facilities of the Apollo Hospital group, the Shruff Eye Hospital and the Wockhardt Hospital. The Bumrungrad International in Bangkok is Thailand's sole JCI hospital. Singapore has over a dozen JCI hospitals however, and the Philippines has one. But the JCI accreditation only applies primarily to hospital management which although includes procedures to reduce risk of infection and disease and to ensure patient safety, it has no jurisdiction over the actual physicians performing surgical procedures.
The patient is provided limited information other than an introductory phone call to the intended physician and having medical records electronically sent to the doctor or hospital via the internet by the medical tourism agency. The patient has a choice of physicians, but unlike in the U.S. where there is easy access to a doctor's medical status by medical boards and organizations, other than knowing whether the doctor may have practiced medicine in the U.S., there is little information to come by. Without standardized protocols it is difficult for the patient to make a correct assessment.
When decisions on a patient's health is driven primarily by cost it can impair the decision making process. There is little argument that healthcare costs in the U.S. are bankrupting corporations and labor unions and deceleration of escalation is nary in sight. With the healthcare industry being 15% of the U.S. Gross Domestic Product and having risen in cost 75% for employers and 143% for employees since the year 2000, the system is broken. High malpractice insurance fees required by both employers and physicians, hospital deregulation and class action medical litigations have only exacerbated the problem.
Such high medical costs will only encourage limited access to healthcare for the middle class and ultimately result in less preventative care costing taxpayers more in the long run. The problem is not the medical care in the U.S., still considered the best in the world, but its delivery system. It is when Medicare and the health insurance providers became the decision makers and took that power away from the physicians that the system began to unravel. Added to that is the lack of restraint of costs by the pharmaceutical industry which charges U.S. patients more for its own medications than any other country in the world.
But as expensive as healthcare is in the U.S., there are legal and safety issues which are part of the American fabric which Americans very much take for granted yet expect but are not present in the undeveloped world. For example, there are few regulatory bodies such as the Centers for Disease Control, the Food and Drug Administration, the Federal Trade Commission, various medical boards, consumer protection laws, available legal experts and the court system. All serve as a net of safeguards offering remedies. But unlike a car purchase, medical care is a complicated undertaking in which there are no guarantees, yet there are areas of compliance which must be maintained.
Once the patient is in a foreign country there is little protection for redress and once that patient leaves the country should they need follow-up care such as therapy or if complications arise even during travel, they must seek medical care in the U.S. Secondarily, if the procedure is performed overseas, insurance providers or Medicare may not honor the additional required care in the U.S. Still, patients may decide to take the risks in addition to the inherent risks of any surgery, but should not be coerced into uninformed choices in order for their employer to save costs under the guise that they are helping to reduce the costs of U.S. healthcare in the long run.
In July 2006 the U.S. Senate Committee on Aging held a hearing called "The Globalization of Healthcare: Can Medical Tourism Reduce Healthcare Costs?" Its goal was to address the subject of medical tourism, its growth, safety of patients and possible regulation of the industry itself. Its Committee Chairman, Senator Gordon H. Smith, has asked that several federal agencies such as the Department of Health and Human Services, the Department of Commerce and the Department of State create an interagency task force necessary for lawmakers to reach informed decisions that healthcare consumers themselves cannot accurately make at this juncture regarding offshoring their medical care.
And among the labor unions, the United Steelworkers Union (USW) has publicly weighed in on this issue when it learned one of its union members, employed by Blue Ridge Paper Products, was going to be sent to India for gall bladder surgery simultaneously with shoulder surgery. Leo W. Gerard, USW International President, fired off a complaint dated September 11, 2006 to Congress by contacting the following committees: the House Committee on Education and the Workforce, the House Committee on Energy and Commerce, the House Committee on Ways and Means, the Senate Committee on Finance, and the Senate Committee on Health, Education, Labor and Pensions.
The goal is not necessarily to create more legislation but to establish guidelines. Perhaps Mr. Gerard puts it best when he states, "The right to safe, secure and dependable health care in one's own country should not be surrendered for any reason-certainly not to fatten the profit margins of corporate investors." He also contends to the Congress that "We remain steadfast in our commitment to rebuild a domestic healthcare system."
Let us hope that our government and healthcare providers can likewise make such a commitment by investing in the health and welfare of the American people.
Diane M. Grassi is an independent columnist, reporting and writing commentary on new events of the day with honest and often politically incorrect assessments. An eclectic thinker, she demands her readers to reflect on their own thoughts from a new perspective. Agree with her or not, Diane will have you coming back to note her opinions, and if at best she wakes you up, then her goal will have been accomplished. Featured with the online publications: New Media Journal.us; American Chronicle; Mich News.com; Opinions Editorials; The Conservative Voice; Las Vegas Penny Press; Sierra Times amongst others. Also regular columnist on Major League Baseball and a featured online columnist with The Diamond Angle Baseball Ezine and Sports-Central.org. Ms. Grassi may contacted at: dgrassi@cox.net
Sarah Clark stood in front of Goldman Sachs’ headquarters on Wednesday passing out marketing vouchers for a charter plane service. Marko Georgiev for The New York Times
By JENNY ANDERSON Published: December 25, 2006
It’s a brisk Wednesday morning in the windy caverns of Wall Street and Sarah Clark’s toes are cold.
Dressed in a purple flight attendant outfit, Ms. Clark, a 26-year-old model, is trying to entice recent bonus recipients at Goldman Sachs into using a charter plane service, handing out $1,000 discount coupons to people in front of the investment bank’s Broad Street headquarters.
“Where am I going?” asks one man, heading toward the Goldman building. “It’s your own private jet,” says Ms. Clark with a smile. “You can go wherever you like.”
For Wall Street’s elite, the sky may well be the limit.
In recent weeks, immense riches have been rained upon the top bankers and traders. After a year of record profits, investment houses like Goldman Sachs, Lehman Brothers and Morgan Stanley are awarding bonuses as high as $60 million. And a select group of hedge fund managers and private equity executives may be taking home even more.
That is serious money. And the serious luxury goods markets are feeling the impact.
Miller Motorcars, in Greenwich, Conn., is fielding more requests for the $250,000 Ferrari 599 GTB Fiorano than it can possibly fill. One real estate broker laments a dearth of listings for two clients trying to spend $20 million on Manhattan properties. Financiers already comfortably settled in multimillion-dollar apartments and town houses are buying $5 million apartments for their children. Vacation homes, usually bought and sold in the spring, are now hot this winter, including ones in private resorts like the Yellowstone Club in Montana near Yellowstone National Park.
“Last year, everybody bought Ducatis,” said one investment banker, referring to the Italian motorcycle. “This year it’s vacations. I’m on my way to St. Barts,” he said, en route to the airport. Like most bankers, he spoke on the condition that he not be identified, because he was not authorized to talk to a reporter by his company.
The 2006 bonus gold rush has re-energized some luxury markets. The Manhattan real estate market, for example, had softened; sales of apartments fell 17 percent in the third quarter this year compared with a year ago, according to the Corcoran Group.
Then came bonus day. Last week, Michele Kleier, president of Gumley Haft Kleier, received a call from a hedge fund manager in his late 30s. He had spent $6 million on an apartment two years ago and, with his bonus, wanted to upgrade. His new price range? “Not more than $20 million.”
Ed Petrie, a broker at Sotheby’s in East Hampton, N.Y., is now fielding two bids for $8 million to $10 million properties in exclusive Georgica Pond — properties that have been on the market since the spring. “The fall was relatively slow and then suddenly, with news on bonuses, there has been quite a bit of activity,” he said.
Many brokers noticed not just the bonus effect, but the bonus-anticipation effect. Buyers who sat on the sidelines in 2006, waiting for real estate prices to come down, saw news of outsized bonuses and started signing deals to pre-empt any price increase driven by new Wall Street payouts.
“Part of our recent increase in sales activity has been buyers not in financial services trying to beat the bonus rush,” said James Lansill, senior managing director at the Corcoran Sunshine Marketing Group.
Once the bonus rush started, Mr. Lansill witnessed a trend he had never seen in his 14 years in the business: people who had signed contracts for apartments under construction 5 to 6 months ago were doubling the size of the properties they were purchasing.
In the last three weeks, the Corcoran Sunshine Marketing group sold the last four apartments in the Richard Meier apartments at 165 Charles Street in Greenwich Village. The last one to go: a two-bedroom, two-bathroom apartment with 2,350 square feet that sold for just under $7 million.
Patricia Warburg Cliff, senior vice president and director for European sales at the Corcoran Group, said that until recently, 2006 had been characterized by calmer, more informed buyers. “Now there’s a feeling, ‘I need to sign because I don’t want it snatched away,’ ” she said.
Adding to the spending spree is a rash of young hedge fund analysts, first big bonus checks in hand, scooping up the $2 million to $3 million starter apartments (most popular features: glass walls, marble bathrooms and kitchens — likely to go unused — with top-flight appliances).
“We love hedge funds, they are our favorite people” Ms. Kleier said. “They don’t feel like the money is real and they don’t mind spending it — they don’t mind going up by $500,000 or $1 million increments.”
Hedge fund analysts are not the only ones celebrating bonus season. Private equity firms like the Blackstone Group and Kohlberg Kravis & Roberts helped fuel a record deal-making year.
Private equity’s deal-making has trickled down to Wall Street in two ways. For one, the banks served as advisers on the deals and financed them, raking in enormous fees. (Kohlberg Kravis is said to pay more than $700 million a year in fees to the Street.)
But bankers also see a pay effect: top executives insist they must pay up because of the danger that their best dealmakers could leave for higher-paying private equity firms or other hedge funds considered more flexible and fun.
Those young, single hedge fund managers are bringing holiday cheer to car dealerships as well. This year, drama surrounds the very limited production of the Ferrari 599 GTB Fiorano, a car with 612 horsepower that can go from zero to 60 miles an hour in 3.6 seconds. “It is the most sought-after car ever made,” said Richard Koppelman, president of Miller Motorcars. With a waiting list of 50, Mr. Koppelman expects to get only one.
Who will be the lucky customer? “It’s very difficult,” he said. “We try to take care of our best clients.”
Private planes, or shares of them, are also on the rise, with demand for charter planes at one company up 40 percent to 50 percent among financial services executives. “There is a noticeable difference this year compared to the past, especially in the financial sector,” said Jeffrey Menaged, founder and head of Chief Executive Air, the company that hired Ms. Clark for the day. A typical price for a charter flight is $30,000.
Sales of “jet cards,” a sort of debit card for private flying, increase during bonus season, Mr. Menaged said, as executives lock in last year’s gains with guaranteed comfort for the new year.
Exotic destinations are also being pitched to the Wall Street ultrarich. Unlimited Speed started Victory Lane in November, a 3,000-acre development in Georgia for motor racing aficionados. Along with a 4.5 mile racetrack, the development also has a 1,600-acre nature preserve, equestrian facilities, a golf course and spa. It already has 27 reservations, a quarter of them coming from Wall Street, said Andrew Goggin, president of Unlimited Speed.
Not everyone on Wall Street is getting multimillion-dollar bonuses. The average managing director — who stands at the top of Wall Street’s hierarchical food chain, but far from rock-star status — will be getting $1 million to $3 million, which will likely be stashed in savings as memories of the 2001 bear market remain fresh.
“I’m putting it in the bank because I know next year I could be out of a job,” said one managing director at a leading bank.
For hedge fund traders and managers, markets were rough in the spring and summer, and some did not make gains until stocks rallied this fall.
“It was a terrible year,” said one young hedge fund professional. “I am going to the movies with my bonus. By myself."
At cocktail parties, comparisons to 1999 abound. That year marked the height of the technology boom and the eve of a painful crash. “It feels a little bit like the top,” said another banker.
The morning Goldman Sachs announced record fourth-quarter and 2006 earnings, Lloyd C. Blankfein, chairman and chief executive, implored his employees — many whom would directly benefit from the bountiful earnings — to avoid excess.
“As stewards of the firm’s reputation, I ask each of you to remember that our actions — inside and outside of the office — reflect on Goldman Sachs. Even a perception of arrogance hurts all of us,” he said in a voice mail sent to the entire firm.
Back handing out vouchers in front of Goldman, Ms. Clark wondered why there weren’t more people coming to work during the early hours.
Then, at 7:30 a.m., a black Mercedes pulled up, depositing Mr. Blankfein in front of Ms. Clark. The night before, he had been awarded a $53.4 million bonus.
She offered him a voucher. “How are you?” he said, smiling quickly but refusing the voucher.
It’s the season for charitable giving. And far too many Americans, particularly children, need that charity.
Scenes of a devastated New Orleans reminded us that many of our fellow citizens remain poor, four decades after L.B.J. declared war on poverty. But I’m not sure whether people understand how little progress we’ve made. In 1969, fewer than one in every seven American children lived below the poverty line. Last year, although the country was far wealthier, more than one in every six American children were poor.
And there’s no excuse for our lack of progress. Just look at what the British government has accomplished over the last decade.
Although Tony Blair has been President Bush’s obedient manservant when it comes to Iraq, Mr. Blair’s domestic policies are nothing like Mr. Bush’s. Where Mr. Bush has sought to privatize the social safety net, Mr. Blair’s Labor government has defended and strengthened it. Where Mr. Bush and his allies accuse anyone who mentions income distribution of “class warfare,” the Blair government has made a major effort to reverse the surge in inequality and poverty that took place during the Thatcher years.
And Britain’s poverty rate, if measured American-style — that is, in terms of a fixed poverty line, not a moving target that rises as the nation grows richer — has been cut in half since Labor came to power in 1997.
Britain’s war on poverty has been led by Gordon Brown, the chancellor of the exchequer and Mr. Blair’s heir apparent. There’s nothing exotic about his policies, many of which are inspired by American models. But in Britain, these policies are carried out with much more determination.
For example, Britain didn’t have a minimum wage until 1999 — but at current exchange rates Britain’s minimum wage rate is now about twice as high as ours. Britain’s child benefit is more generous than America’s child tax credit, and it’s available to everyone, even those too poor to pay income taxes. Britain’s tax credit for low-wage workers is similar to the U.S. earned-income tax credit, but substantially larger.
And don’t forget that Britain’s universal health care system ensures that no one has to fear going without medical care or being bankrupted by doctors’ bills.
The Blair government hasn’t achieved all its domestic goals. Income inequality has been stabilized but not substantially reduced: as in America, the richest 1 percent have pulled away from everyone else, though not to the same extent. The decline in child poverty, though impressive, has fallen short of the government’s ambitious goals. And the government’s policies don’t seem to have helped a persistent underclass of the very poor.
But there’s no denying that the Blair government has done a lot for Britain’s have-nots. Modern Britain isn’t paradise on earth, but the Blair government has ensured that substantially fewer people are living in economic hell. Providing a strong social safety net requires a higher overall rate of taxation than Americans are accustomed to, but Britain’s tax burden hasn’t undermined the economy’s growth.
What are the lessons to be learned from across the pond?
First, government truly can be a force for good. Decades of propaganda have conditioned many Americans to assume that government is always incompetent — and the current administration has done its best to turn that into a self-fulfilling prophecy. But the Blair years have shown that a government that seriously tries to reduce poverty can achieve a lot.
Second, it really helps to have politicians who are serious about governing, rather than devoting themselves entirely to amassing power and rewarding cronies.
While researching this article, I was startled by the sheer rationality of British policy discussion, as compared with the cynical posturing that passes for policy discourse in George Bush’s America. Instead of making grandiose promises that are quickly forgotten — like Mr. Bush’s promise of “bold action” to confront poverty after Hurricane Katrina — British Labor politicians propose specific policies with well-defined goals. And when actual results fall short of those goals, they face the facts rather than trying to suppress them and sliming the critics.
The moral of my Christmas story is that fighting poverty isn’t easy, but it can be done. Giving in to cynicism and accepting the persistence of widespread poverty even as the rich get ever richer is a choice that our politicians have made. And we should be ashamed of that choice.
WASHINGTON, Jan. 7 — Families earning more than $1 million a year saw their federal tax rates drop more sharply than any group in the country as a result of President Bush’s tax cuts, according to a new Congressional study.
The study, by the nonpartisan Congressional Budget Office, also shows that tax rates for middle-income earners edged up in 2004, the most recent year for which data was available, while rates for people at the very top continued to decline.
Based on an exhaustive analysis of tax records and census data, the study reinforced the sense that while Mr. Bush’s tax cuts reduced rates for people at every income level, they offered the biggest benefits by far to people at the very top — especially the top 1 percent of income earners.
Though tax cuts for the rich were bigger than those for other groups, the wealthiest families paid a bigger share of total taxes. That is because their incomes have climbed far more rapidly, and the gap between rich and poor has widened in the last several years.
The study offers ammunition to supporters and opponents of Mr. Bush’s tax cuts, which are all but certain to touch off a battle between the president and the Democrats who just took control of Congress.
Democratic leaders have taken pains to avoid an immediate fight over the tax cuts, most of which are scheduled to expire at the end of 2010. But Democrats are looking for ways to increase revenue well before then, in part because they want to spend more on education and energy without increasing the deficit.
Economists and tax analysts have long known that the biggest dollar value of Mr. Bush’s tax cuts goes to people at the very top income levels. One reason is that two of his signature measures, tax cuts on investment income and a steady reduction of estate taxes, overwhelmingly benefit the wealthiest households.
But the Congressional study offers additional insight because it incorporates information about what people paid in 2004, the first year in which taxpayers could take full advantage of the cuts on stock dividends and capital gains.
The study estimates that the effective federal income tax rate, which excludes payroll taxes for Social Security and Medicare[F6 note - see in particular http://www.investorshub.com/boards/read_msg.asp?message_id=2768626 ], declined modestly for people in the middle- and lower-income categories.
Families in the middle fifth of annual earnings, who had average incomes of $56,200 in 2004, saw their average effective tax rate edge down to 2.9 percent in 2004 from 5 percent in 2000. That translated to an average tax cut of $1,180 per household, but the tax rate actually increased slightly from 2003.
Tax cuts were much deeper, and affected far more money, for families in the highest income categories. Households in the top 1 percent of earnings, which had an average income of $1.25 million, saw their effective individual tax rates drop to 19.6 percent in 2004 from 24.2 percent in 2000. The rate cut was twice as deep as for middle-income families, and it translated to an average tax cut of almost $58,000.
In its report, the Congressional Budget Office estimated that the overall effective federal tax rate edged up to 20 percent in 2004, from 19.8 percent the year before.
But even with that increase, Americans faced lower tax rates than any time since 1979. If President Bush has his way, those rates could decline even more as the estate tax on inherited wealth is gradually phased out by the start of 2010.
Mr. Bush and his Republican allies in Congress want to permanently extend that tax cut and almost all of the others that Congress passed in his first term. The cost of doing that would be more than $1 trillion over the next decade, a cost that would hit the Treasury at the same time that the spending on old-age benefits for retiring baby boomers begins to soar.
The budget office offered little commentary on its new estimates, but many of its numbers spoke for themselves.
The report shows that a comparatively small number of very wealthy households account for a very big share of total tax payments, and their share increased in the first four years after Mr. Bush’s tax cuts.
The top 1 percent of income earners paid about 36.7 percent of federal income taxes and 25.3 percent of all federal taxes in 2004. The top 20 percent of income earners paid 67.1 percent of all federal taxes, up from 66.1 percent in 2000, according to the budget office.
By contrast, families in the bottom 40 percent of income earners, those with incomes below $36,300, typically paid no federal income tax and received money back from the government. That so-called negative income tax stemmed mainly from the earned-income tax credit, a program that benefits low-income parents who are employed.
Put another way: rich families were the undisputed winners from President Bush’s tax cuts, but people in the bottom half of the earnings scale were not paying much in taxes anyway.
Copyright 2007 The New York Times Company (emphasis added)
By Stephen Foley in New York Published: 09 March 2007
The number of people entitled to call themselves billionaires has skyrocketed over the past year, concentrating a staggering $3.5 trillion (£1.8trillion) of wealth into the hands of 946 men and (occasionally) women.
According to Forbes magazine, for years the official arbiter of the fortunes of the super-rich, a heady cocktail of global economic growth and soaring asset prices has created 178 new billionaires in just 12 months.
"This is the richest year in human history," declared the magazine's founder, Steve Forbes. "The best way to create wealth is to have free markets and free people, and more and more of the world is realising it."
Entrepreneurs from China and other emerging markets have poured onto the annual list. India has overtaken Japan in terms of the number of billionaires, while Romania and Serbia have their first entrants this year.
China's Yan Cheung makes history as that country's richest person, with a fortune of $2.4bn from her paper manufacturing firm, and joins the very exclusive club of self-made women on the list. In all there are just 83 female billionaires around the world, worth a total of $310bn.
There is no change at the top of the list, although Carlos Slim Helú, the Mexican telecoms magnate, is closing in on Microsoft founder Bill Gates and his friend Warren Buffett. Slim's business empire has grown in value by $19bn in the past year, a feat unmatched by anyone in the past decade.
Buffett, whose investment firm Berkshire Hathaway has the most expensive shares in the world, may slip down the rankings in future years. He has agreed to give his fortune away - 5 per cent at a time - to Gates's charitable foundation, which tackles disease and poverty in the developing world.
In the main, the super-rich are getting richer at a faster and faster pace. Philip Green, who owns Topshop and Bhs, has lost his crown as the UK's leading billionaire, simply by dint of not increasing his wealth from $7bn in the past year.
He has been overtaken by the Duke of Westminster, whose central London properties have soared in value, boosting his worth from $6bn to $10bn.
But both men are eclipsed by two billionaires from overseas who have made the UK their home. The fortune of Indian-born steel magnate and Labour party donor Lakshmi Mittal - $32bn - puts him at number five in the world. Roman Abramovich, the Russian owner of Chelsea football club, slips from 11th to 16th in the rankings, despite increasing his oil industry fortune from $18.2bn to $18.7bn.
New British billionaires this year include two men who have floated their businesses on the London stock exchange: Mike Ashley, owner of the Sports World retail chain, and City fund manager Mark Coombs, who are worth $2bn apiece.
JK Rowling, the Harry Potter author, scrapes on to the list, making her the UK's sole female billionaire.
In the 20 years since it began compiling the list, Forbes said, "old world powers like Japan and Germany - and the billionaires who dominate their businesses - have given way to the latest global hotspots such as booming China, India and Russia. Yoshiaki Tsutsumi was the world's richest person in our inaugural year, but the Japanese land baron fell off the list this year."
The 'Forbes' top ten
1 Bill Gates, $56bn
United States
Age: 51
His stake in Microsoft, the company he founded in 1975, has kept him at the top of the Forbes list for 13 years.
2 Warren Buffett, $52bn
United States
Age: 76
The legendary investor, nicknamed the Oracle of Omaha, has started handing his wealth over to Bill Gates's charitable foundation.
3 Carlos Slim Helu, $49bn
Mexico
Age: 67
Latin America's most prominent businessman has a fortune based on the telecoms company Telmex, which he bought in 1990.
4 Ingvar Kamprad, $33bn
Sweden
Age 80
Founder of Ikea began by peddling pens and Christmas cards by bicycle.
5 Lakshmi Mittal, $32bn
India
Age: 56
Rajasthan-born but London-based steel magnate now controls 10 per cent of world steel production after winning a takeover battle for Arcelor last year
6 Sheldon Adelson, $26.5bn
United States
Age: 73
More than $10bn has been added to his fortune in the past year thanks to global expansion of a hotels and casinos empire based on the Las Vegas Sands.
7 Bernard Arnault, $26bn
France
Age: 58
Controls a luxury goods empire that includes the Louis Vuitton, Fendi, Christian Dior and Moet brands.
8 Amancio Ortega, $24bn
Spain
Age: 71
Creator of Zara, the cheap and cheerful fashion chain which now has 3,100 stores.
9 Li Ka-shing, $23bn
Hong Kong
Age: 78
There is barely an industry where he does not invest. He owns mobile phone companies, retailers, electricity suppliers and shipping firms.
10 David Thomson, $22bn
Canada
Age: 49
Inherited the family media empire that once included The Times. Focuses on specialist publications and information.
By Herbert Lash Reuters Friday, March 9, 2007; 12:39 AM
NEW YORK (Reuters) - The world's richest are getting younger and richer with more Russians and Indians cropping up among the 946 people on Forbes magazine's 2007 billionaires list unveiled on Thursday.
The number of billionaires is 19 percent higher than last year when there were 793, and their total net worth grew 35 percent [$900 billion] to $3.5 trillion, the magazine said.
The average billionaire's age fell by two years to 62, and 60 percent started with very little. Two-thirds of those on the list were richer, with net worth up for nearly everyone in the top 50.
"This is the richest year ever in human history," said Forbes Chief Executive Steve Forbes. "Never in history has there been such a notable advance."
Among those joining the list are Howard Schultz, the founder of Starbucks (SBUX.O), which pioneered the $3 cup of coffee, and former Walt Disney (DIS.N) boss Michael Eisner.
Microsoft Corp. (MSFT.O) Chairman Bill Gates was the richest man for the 13th straight year, with $56 billion, followed by Warren Buffett, chief executive of Berkshire Hathaway Inc. (BRKa.N), with $52 billion. Mexican telecoms tycoon Carlos Slim remained No. 3, with $49 billion.
Schultz is 840th on the list and worth $1.1 billion. Eisner is 891st and worth $1 billion.
In China, Yan Cheung, chairwoman of Nine Dragons Paper (2689.HK), made history as China's richest person and was one of three self-made women born in the communist country to debut this year. She is worth $2.4 billion and is 390th on the list.
RUSSIA'S STAR RISING
Russia climbed to No. 3 in country rankings with 53 billionaires, two less than Germany, which has long held the runner-up spot in the billionaire stakes behind the United States.
But the total worth of the Russians surpassed the Germans, at $282 billion versus $245 billion, Forbes said. The average age of Russia's billionaires was 46.
In Asia, India had the highest number of billionaires, overtaking Japan, which for two decades had held the region's top spot.
India had 36 billionaires worth a total $191 billion while Japan's 24 billionaires were worth $64 billion, the magazine said.
The wealth of Mexico's Slim increased by $19 billion, the biggest one-year advance in a decade. His wealth is equal to 6.3 percent of Mexican annual economic output, a comparison that would make Gates worth $784 billion, the magazine said.
Two newcomers climbed into the top 10. Spaniard Amancio Ortega of retailer Zara rose to No. 8 with $24 billion, and Canadian David Thomson and his family were at No. 10, replacing his father, the late media baron Kenneth Thomson.
There were 178 new billionaires and 53 nations were represented on the list. Of the 83 billionaire women, 10 were self-made, it said.
Spain added 10 new billionaires, nine of whom made fortunes in the country's booming real estate and construction business. Americans made up 44 percent of the world's billionaires, with 415, 55 of whom were new to the list.
FAST PACE
Google (GOOG.O) founders Larry Page and Sergey Brin are now worth $16.6 billion each, and the speed at which they amassed their fortune far is exceeding the pace of Gates, the magazine said. They both were ranked No. 26 on the list.
Back on the list were BET television network founder Robert Johnson and AOL's Stephen Case, in 840th place with $1.1 billion and 891st with $1 billion, respectively.
Japan's Yoshiaki Tsutsumi, the world's richest man in 1987, is no longer a billionaire, the magazine said.
Tsutsumi, the former chairman of Kokudo Corp., the core firm of regional railway operator Seibu Railway group, received a suspended prison sentence in October 2005 for falsifying financial statements and insider trading.
Computer maker Michael Dell and the heirs of Wal-Mart founder Sam Walton fell from the top 20. Dell was No. 30, worth $15.8 billion, and four Waltons were worth from $16.4 billion to $16.8 billion, ranking 23rd to 29th.
When questioned about the enormous income inequality in the United States, the cheerleaders of America’s unfettered markets counter that everybody has a shot at becoming rich here. The distribution of income might be skewed, but America’s economic mobility is second to none.
That image is wrong, and these days it abets far too many unfair policies, including cuts in essential programs like Head Start or Medicaid. The poor, we are told, can use their own bootstraps. President Bush got away with huge tax cuts for the rich in part because nonrich Americans, who make up most of the population, believe everybody has a chance of making it into the club. Unfortunately, the American dream is not that broadly accessible.
Recent research surveyed by the Organization for Economic Cooperation and Development, a governmental think tank for the rich nations, found that mobility in the United States is lower than in other industrial countries. One study found that mobility between generations — people doing better or worse than their parents — is weaker in America than in Denmark, Austria, Norway, Finland, Canada, Sweden, Germany, Spain and France. In America, there is more than a 40 percent chance that if a father is in the bottom fifth of the earnings’ distribution, his son will end up there, too. In Denmark, the equivalent odds are under 25 percent, and they are less than 30 percent in Britain.
America’s sluggish mobility is ultimately unsurprising. Wealthy parents not only pass on that wealth in inheritances, they can pay for better education, nutrition and health care for their children. The poor cannot afford this investment in their children’s development — and the government doesn’t provide nearly enough help. In a speech earlier this year, the Federal Reserve chairman, Ben Bernanke, argued that while the inequality of rewards fuels the economy by making people exert themselves, opportunity should be “as widely distributed and as equal as possible.” The problem is that the have-nots don’t have many opportunities either.
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