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How progressive a President could Barack Obama be? Could he be as transformational as Franklin Roosevelt, whose dozen White House years downsized America’s rich and helped usher onto the global stage the first mass middle class in world history? Or would any Obama years more likely end up, as Bill Clinton’s did, as a timid intermission between two plutocrat-friendly acts of conservative Republican dominance?

Austan Goolsbee, outside Obama himself, just might have more of an impact on the answer than any other individual in the Obama camp. Goolsbee, a 39-year-old University of Chicago business prof, has emerged as Obama’s top economic adviser.

With Senator Obama closing in on the Democratic nomination — and the U.S. economy tottering on the brink of big-time trouble — progressive analysts have begun looking Goolsbee’s way. And many don’t particularly like what they see.

Are these analysts seeing clearly? Or might Goolsbee, the odds-on choice to chair the Council of Economic Advisers in an Obama administration, actually nudge public policy in a decent direction? In this week’s Too Much: more on the perspectives and potential of Barack Obama’s go-to guy on economics.

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Jamie Johnson, a 29-year-old heir to the Johnson & Johnson fortune, can’t walk into a social event anymore, the Wall Street Journal reports, without his wealthy friends getting extremely nervous. What has Johnson done? Rob a buddy's trust fund? Worse. Johnson has directed two feature films that publicly discuss the wealth of the wealthy. His first film, the 2003 Born Rich, showcased the often empty lives of his young rich contemporaries. His new The One Percent, currently airing on Cinemax TV, explores how the wealthy are using their fortunes “to restructure the economy, lower their taxes, cut social programs for the middle and lower classes, and amass ever more wealth.”

Putting on the Ritz is costing a bit more these days. The Ritz-Carlton luxury hotel empire, Travel & Tourism News reported last week, has spent $360 million on renovations the last two years — and hundreds of millions more building brand new luxury units all over the world. In the new Jakarta Ritz-Carlton, guest rooms all sport sunken marble baths, 300-thread count linens, and two flat-screens, one 46-incher for dozing off and a 17-inch model for keeping up-to-date in the bathroom. The rack rate on the Jakarta hotel’s presidential suite: over $6,200 per night. In Indonesia overall, notes the United Nations Development Program, 52.4 percent of the population lives on less than $2 a day . . .

Veteran CEO pay critic Graef Crystal is predicting that “CEO pay may become a bigger issue in the 2008 presidential campaign than anyone imagined.” Only a few companies have so far released executive pay data for 2007, but some trends are already surfacing. Crystal’s exhibit A: Tyco International, the New Jersey conglomerate that lost $1.7 billion last year. Amid that carnage, Tyco CEO Edward Breen saw no change in his $1.6 million base salary. But the rest of his 2007 pay package, Crystal points out, soared, starting with a doubling of his annual cash bonus to $3.2 million. In all, Breen took home $33.3 million last year . . .

Between 2001 and 2006, Blackwater USA collected $594 million in federal contracts for private security services rendered in Iraq and assorted other global hotspots. Last October, at a congressional oversight hearing, Blackwater CEO Erik Prince refused to reveal how much he was personally pocketing in compensation from the ample company profits those federal contracts made possible. Last week, Congress held another hearing, this time on legislation that would require privately held companies like Blackwater to disclose the same basic executive pay data that publicly traded companies must reveal. The Bush administration’s top procurement official testified against this proposed new standard. Requiring such disclosure, the admistration’s Paul Denett warned, “would likely have a chilling effect on contractor participation in federal acquisition.”

Could U.S. health care be even more of a mess than average Americans think? Robert Riggs at Dallas TV station KTVT thinks so. One of the city’s top tax-exempt hospitals, Riggs reports, is routinely giving charity cases the cold shoulder while maintaining an “A list” of rich Texans who get special red-carpet treatment. Among the swells on the UT Southwestern hospital “special assistance” list: hedge fund king T. Boone Pickens. Kern Wildenthal, the hospital’s $1.2 million-a-year president, works hard to keep ultra-affluents happy. He has shelled out, KTVT notes, $160,000 for luxury gift wines. Meanwhile, the Robert Wood Johnson Foundation last week released a study that details how America's “poor and middle class are so much less healthy than those above them on the economic ladder.” The Foundation is launching a commission “to find out why even Americans with good health insurance have poorer health than people in other countries.” The new Robert Wood Johnson study suggests inequality as one key factor. Observes the report: “The incomes of the wealthiest 20 percent of Americans have increased dramatically, while the rest of the population has experienced little improvement in income.”

Inequality
by the numbers

CEO pay:
the scorecard

Good reads
for your bookshelf

Quote of the Week

“You only learn who has been swimming naked when the tide goes out — and what we are witnessing at some of our largest financial institutions is an ugly sight.”
Warren Buffett, from his latest annual letter to the shareholders of Berkshire Hathaway, the investment company he chairs, February 29, 2008

New Wisdom
on Wealth

Tom Jacobs, Same Job, Different Pay, Miller-McCune Center for Research, Media and Public Policy. How income disparities within professions are rapidly rising — and nurturing dysfunctional behaviors.

The brief career of University of Chicago economist Austan Goolsbee appears to offer, at first glance, little reason for progressive optimism about economic policy in a Barack Obama White House. Goolsbee has defined himself as “a centrist market economist” — and everyone else seems to agree.

The Chicago Tribune, for instance, describes Goolsbee as a business prof “with centrist Democratic views” firmly “anchored in dominant market-oriented economic thought.”  U.S. News & World Report last month discussed how Obama “has surrounded himself with centrist economic advisers, like the frustratingly reasonable Austan Goolsbee.” Business Week has labeled Goolsbee the leader of a Obama brain trust packed with “generally careful technocrats.”

The thought of a centrist technocrat whispering sweet mainstream nothings into a President Obama’s ear has already begun generating waves of angst among veteran progressives. American Prospect editor Robert Kuttner, for one, considers Goolsbee and his fellow centrist advisers “free-market guys who want to use markets to somehow solve social problems, which is like squaring a circle.”

Much of what Goolsbee has written over recent years supplies ample fuel for such angst. One example: Last year, in a New York Times column, Goolsbee hailed subprime mortgages as a market innovation that can help people in need — and dismissed fears that unscrupulous lenders would ever exploit this innovation to “fool people into thinking they can afford homes that they cannot.”

Five months later, the Times would document that very exploitation, in a report that exposed how the nation’s top lender, Countrywide Financial, had been manipulating borrowers into “high-cost” loans that “made Countrywide executives among the highest paid in America.”

So do we have, in Austan Goolsbee, an academic unwise in the ways of the world whose eagerness to achieve change “through market-oriented policies” will lead a President Obama down some deadend primrose path?

Maybe not. Goolsbee may not be as excruciatingly centrist as his reputation suggests. In fact, on the central economic issue of our time — the unrelenting concentration of wealth at America’s economic summit — Goolsbee has often been downright good.

Over the past decade, as an academic and as a commentator, Goolsbee has repeatedly challenged America's reigning plutocrat mindset. He has helped unmask policy proposals that speed the accumulation of grand private fortunes. He has skewered research that purports to prove the rationality of these policies. He has even challenged the rationality of private grand fortunes themselves.

That challenge came last March in a Goolsbee column that went over the stats on philanthropic giving by America’s super-rich. The nation’s billionaires, he showed, “are accumulating money much faster than they are giving it away.”

Indeed, Goolsbee continued, the super-rich are accumulating money faster than they can ever possibly spend it. Case in point: Oracle software CEO Larry Ellison and his $16-billion personal fortune. Ellison must spend, Goolsbee calculated, over “$30 million a week — $183,000 an hour — on things that can’t be resold, like parties or meals, just to avoid increasing his wealth.”

Apologists for extreme inequality love to argue that any attempt to shave fortunes as whopping as Ellison’s — by upping tax rates on the rich — will always fail. Wealthy people taxed at high levels, the argument goes, will merely report less income. The government, as a result, will collect fewer overall tax dollars.

As proof, these apologists point to the 1993 federal legislation that raised the top income tax rate from 31 to 39.6 percent. Despite a growing economy, they note, taxpayers in America’s top brackets reported less income in 1993, after the tax increase, than they reported in 1992.

Upper-bracket taxable income, Goolsbee has countered, did drop off in 1993, but only because corporate execs, in 1992, had rushed to cash out stock option windfalls before the Clinton administration could raise tax rates. Taxable income did not disappear. Instead, this income merely showed up in a different year.

The taxable incomes of the rich, Goolsbee concluded after analyzing upper-bracket incomes throughout the 20th century, do not increase when tax rates become less progressive and do not diminish when tax rates become more progressive.

But government action in other spheres, Goolsbee would point out in 2004 as George W. Bush began maneuvering to privatize Social Security, can make an enormous impact on the size of rich people’s incomes. Privatizing Social Security, a Goolsbee analysis made plain, would shift $940 billion in financial fees into Wall Street pockets, creating “the largest windfall gain in American financial history.”

Goolsbee has, over recent years, explored multiple other aspects of the plutocrat agenda. He has shown how pharmaceutical and finance company execs are manipulating programs ostensibly designed to help consumers into subsidies that have taxpayers footing the bill for higher drug prices and investment fees.

And Goolsbee has also taken on one of the most basic plutocrat sacred cows, the notion that any Americans who work hard enough can work their way up to the top of the economic ladder. His work has explored how much sheer chance determines how economically fortunate individuals can go on to become.

In short, Goolsbee may be a centrist. But rich people don’t impress him. And their academic hired guns don’t impress him either. FDR and his economic advisers shared that same sort of skepticism about grand fortune. They also had something else: grand popular movements, out in the streets, demanding real progressive change.

Those movements turned skeptics about grand fortune into crusaders against it. That could happen again. In Austan Goolsbee, we’ll have a skeptic whispering in a President Obama’s ear. Now we just need a loud enough progressive movement.

Scott Hollenbeck and Maureen Keenan Kahr, Ninety Years of Individual Income and Tax Statistics, 1916-2005, Statistics of Income Bulletin, Winter 2008.

The first peace-time income tax in the United States went into effect in 1913. Three years later, the federal government started publishing income tax statistics, and the IRS now has 90 years worth of these numbers. To celebrate, the agency’s tax journal has just published a dry but still fascinating retrospective on U.S. tax statistic history.

Why fascinating? Taxes, this brief new history reminds us, reflect politics — or, to be more precise, the balance of political power. Take, for instance, the question of capital gains taxation.

Back in 1913, at the height of the reform-minded Progressive Era, income tax collectors didn’t distinguish between paycheck income and the income people realized from the sale of stocks, bonds, real estate, and other capital assets. A taxpayer with $50,000 in salary income paid the same tax as a Wall Street investor who cleared $50,000 buying and selling securities.

That would change. In 1921, with the Progressive Era over and Corporate America back in the saddle, capital gains income gained preferential treatment. That Wall Streeter would now pay less of his income in tax than a person who made the same income in salary.

Today, four generations later, we’re still stuck with a capital gains tax preference. Ordinary wage and salary income faces a tax that can go up to 35 percent. Income from the sale of a asset held at least a year faces, at most, a 15 percent tax.

In the more equal United States of the mid 20th century, this preferential treatment for capital gains didn’t raise much alarm, mainly because capital gains, as late as 1970, made up just 1.4 percent of the nation’s total income. The current share: 8.9 percent.

The bulk of today's capital gains income — and tax break benefit — is going to America’s most financially fortunate. In 2005, taxpayers who reported at least $1 million in income reaped 51.8 percent of the nation’s long-term capital gains income. These taxpayers made up all of 0.2 percent of the nation’s taxpaying public.

Interesting, isn’t it, what you can pick up from a little IRS history.

Stat of the Week

In 2005, 13,776 taxpayers reported over $10 million in income to the IRS. These taxpayers averaged $24.3 million each. Fifty years earlier, in 1955, after adjusting for inflation, less than 1,000 taxpayers reported incomes worth as much as $900,000. These taxpayers averaged just under $2 million in 2005 dollars.

Too Much is published by the Council on International and Public Affairs, a nonprofit research and education group founded in 1954. Office: Suite 3C, 777 United Nations Plaza, New York, NY 10017. E-mail: editor@toomuchonline.org.