Where is the US economy headed?

@mysteryman,

Sure. The idea is that you can make a good living driving a truck. Someone else can make a great living by buying a lot of trucks, hiring a lot of drivers, and making a small return on each, but lots of money in total.

I used to work for a well servicing company that had somewhere around twenty heavy vehicles, and even more pickups. Net income ran less than 3%, usually much less. That was stil a lot of money, in spite of the risks involved.

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Okay, a good living vs. a great living, fine. But what about an amazing living? An unbelievable living? An astronomical living? And what about when the people making that money had NOTHING to do with setting the company up in the first place?

For example, the CEO of Starbucks. The guy was paid over $3000 an HOUR, every single hour, every day, last year. There are several other Starbucks executives who also earn thousands of dollars an hour, every hour of the day, all year. Starbucks typically pays their front-line people between $8-10 an hour - 350 to 400 times less than the top executive.

At what point does the difference become unreasonable? At what point does it become destructive to the company for the compensation to ALL be concentrated at the top?

Cycloptichorn

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@Cycloptichorn,

In the first place $6 million/year doesn't seem high for the CEO and founder of a company as large and successful as Starbucks.

In the second place, how would you go about limiting it without worse side effects than the primary ones about whiuch you are complaiuning. Remember that the growing prosperity of China is a direct result of the competitive inequality if finaly realized was a more effective stimulant to productivity than the socialism and central planning which caused so much suffering, poverty, and loss of freedom a generation ago.

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@georgeob1,

I've heard that a counter revolution is brewing.

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@Cycloptichorn,

Isn't OWS all about this inequality?

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Do the math again, George. He's making 26 million dollars a year, or so, NOT 6 million. Considering that figure is 24/7/365 (and he sure as hell isn't actually working all those hours, which is 4 times more hours a week than a barista works, he's actually getting around 1200, that's twelve hundred times, what one of his workers is getting. Considering that until about the time Ron Reagan changed us from the world's largest creditor nation into the world's largest debtor nation, a CEO's salary wass thought equitable if it was maybe 40 times that of the company's average worker, 1200 times that is pure greed. For the founder of a company, MAYBE. But that's not out of line for the average CEO who had no role in the founding of a company, but just comes along years later and plugs in. The CEO of the NYTimes just left with a leaving package of $26 million. The company during her tenure made a profit of $4 million. The upper 1% is in no way being paid equitably. As has been often remarked, their share of the pie has increased almost exponentially in the last thirty years, while everybody else's has held flat, or lost a little. The upper 1% sets the salaries and wages of the other 99%, and they've been keeping it all for themselves, while the 99% do the work.

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@georgeob1,

georgeob1 wrote:

In the first place $6 million/year doesn't seem high for the CEO and founder of a company as large and successful as Starbucks.

Do your math. 3k an hour, every hour, every day of the year is close to $25 million dollars.

... in fact, he made a lot more than that.

http://www.usatoday.com/money/companies/management/story/2012-01-26/starbucks-howard-schultz-compensation/52809496/1

Quote:

In the second place, how would you go about limiting it without worse side effects than the primary ones about whiuch you are complaiuning. Remember that the growing prosperity of China is a direct result of the competitive inequality if finaly realized was a more effective stimulant to productivity than the socialism and central planning which caused so much suffering, poverty, and loss of freedom a generation ago.

Yet another argument that is an appeal to extremes. Good ol' George.

I would limit it by allowing shareholders to set executive pay more directly - not 'compensation boards,' where the rich and well connected get people in their social and economic circles to continuously vote themselves higher and higher paychecks. I would also remove the cap on SS and Medicare taxes; this cap is directly responsible for pushing ever-larger amounts of pay above the cutoff lines, as it represents a tax savings for the companies involved.

In fact, Say-on-Pay is a big part of the Dodd-Frank bill. Just another reason for you to despise it; the idea that the owners of a company (the shareholders) would actually CONTROL the company is, I guess, anathema to the modern Conservative, who really just considers these people to be suckers who should keep their mouths shut and enjoy their returns, while the real businessmen quietly give each other raise after raise.

http://en.wikipedia.org/wiki/Say_on_pay

Cycloptichorn

1 Reply

@Cycloptichorn,

You're the one who quoted his hourly rate at $3,000. At 2,080 working hours/year without vacation or holidays that's about $6.25 million. Evidently you don't know much about pay structures, the normal way these things are expressed and the arithmetic involved.

Even with his $25 million pay package (which includes stock grants of variable worth) that's not bad for the guy who started the company and made it what it is (a very successful purveyor of overpriced coffee). His wealth didn't take anything out of your pocket, and the economic activity he created benefitted a lot of people. It's still a free country and people are free to enjoy the results of their work.

Dodd Frank and the earlier Sarbanes Oxley bills have already significantly reduced the public capitalization of new enterprises, thereby depressing new economic activity at a time in which we sorely need it, both to reduce unemployment, and to pay the taxes needed to feed an over intrusive and voracious government.

Greed is universal, and that of the welfare chisler is no different morally from that of the CEO or a new NBA or NFL draftee, or the latest entertainment star.. I'll readily agree that after $25 million his basic wants have been fully met. However, forced redistribution of wealth has a pretty bad economic track record in history.

The real economic challenge facing the country is our need to better adapt to the economic challenge posed by the nations across Asia that have thrown off the socialism that kept them in backward poverty (and tyranny) for so long. Laborers and workers from India to Malaysia to Indonesia and China have bettered their lives by working in export manufacturing industries that have displaced their counterparts in this country. That's a good thing - not a bad one. To compete we need more new creative enterprises, more widespread technical education, and the will to find ways to produce more with less. For one who has no skills and doesn't make the effort, the competition has become a lot tougher. That's not the fault of any 1%.

I have finally figured out what you mean by the mantra "Appeal to Extremes" which you repeat with such tiresome frequency. It is your euphamism for an argument you don't like.

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@georgeob1,

georgeob1 wrote:

You're the one who quoted his hourly rate at $3,000. At 2,080 working hours/year without vacation or holidays that's about $6.25 million. Evidently you don't know much about pay structures, the normal way these things are expressed and the arithmetic involved.

I didn't say 'working hours.' I said every hour, every single day, all year. Please read what I say carefully. I fully understand how pay structures work, but was using a rhetorical device to point out just how much money these men earn.

Quote:

Even with his $25 million pay package (which includes stock grants of variable worth) that's not bad for the guy who started the company and made it what it is (a very successful purveyor of overpriced coffee). His wealth didn't take anything out of your pocket, and the economic activity he created benefitted a lot of people. It's still a free country and people are free to enjoy the results of their work.

This doesn't directly respond to my question: how much better off would his company be if the top executives didn't make so much money per year? How much more money would their shareholders receive in dividends? How much more could they pay their employees? How much could they drop the prices of their products, to further undercut their competition and maybe make their coffee not so overpriced - saving all their customers money? These are the pertinent questions regarding exaggerated executive pay - not some nebulous muttering about freedom.

Quote:

Dodd Frank and the earlier Sarbanes Oxley bills have already significantly reduced the public capitalization of new enterprises, thereby depressing new economic activity at a time in which we sorely need it, both to reduce unemployment, and to pay the taxes needed to feed an over intrusive and voracious government.

Do you have any evidence of this? I haven't seen any. Only a lot of assertion by right-wingers. Provide the evidence - if you can. I doubt you will.

Quote:

The real economic challenge facing the country is our need to better adapt to the economic challenge posed by the nations across Asia that have thrown off the socialism that kept them in backward poverty (and tyranny) for so long. Laborers and workers from India to Malaysia to Indonesia and China have bettered their lives by working in export manufacturing industries that have displaced their counterparts in this country. That's a good thing - not a bad one. To compete we need more new creative enterprises, more widespread technical education, and the will to find ways to produce more with less. For one who has no skills and doesn't make the effort, the competition has become a lot tougher. That's not the fault of any 1%.

I agree with this. But unrestrained greed doesn't help solve that problem either.

Care to comment on the Say-for-Pay requirements that are now part of our law? On how they could help restrain rampant corporate salaries for the top-end earners, and how this isn't a bad thing at all?

Quote:

I have finally figured out what you mean by the mantra "Appeal to Extremes" which you repeat with such tiresome frequency. It is your euphamism for an argument you don't like.

Nah, it's a very real thing. It means you exaggerate any argument YOU don't like, to make it sound ridiculous. Sort of like telling a thirsty man, 'yeah, well, if you had an ocean of water, you'd DROWN!' It's a logical fallacy and you commit it constantly.

I certainly didn't invent it. Look it up yourself -

http://commfaculty.fullerton.edu/rgass/fallacy3211.htm

It's only tiresome to you because you constantly use this logical fallacy in lieu of taking the time to build an actual, logically valid argument for your position. I can see how you don't like when people point it out, but neither I nor anyone else is here on A2K to coddle you. If you are too lazy to address what people actually say, you should expect to be criticized.

Cycloptichorn

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@georgeob1,

georgeob1 wrote:

In the first place $6 million/year doesn't seem high for the CEO and founder of a company as large and successful as Starbucks.

I don't see how that addresses Cycloptichorn's point, which I take to be that pay differentials between CEOs in general and average workers in general have become absurd. If you say that Starbucks's CEO makes a normal amount for CEOs in general, Cyclo's proper answer is: Exactly! That's the problem!

georgeob1 wrote:

In the second place, how would you go about limiting it without worse side effects than the primary ones about whiuch you are complaiuning.

Cycloptichorn will no doubt offer his own answer, but as for myself, I wouldn't limit them. I would merely tax all income after the 1,000,000th annual dollar at the top of the Laffer curve. That would be about 70%, according to current research into the matter.

EDIT: I see he already has given his own answer. Somehow it didn't register when I wrote. Sorry.

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@Thomas,

Your answer is better!

Cycloptichorn

1 Reply

@Cycloptichorn,

What it seems like is that "rich people" don't have a clue as to the reasons why Romney is unable to connect with average middle class Americans. Romney talks about his wife who drives around two Cads, and he isn't going to apologize for making money. Nobody asked him to apologize for making money; where did he come up with such a foolish idea? He has left behind his common sense about "where he came from." He's now a smug rich person who doesn't have the sensitivity of a mouse. He wants to get rid of Plannned Parenthood; the very organization that provides health services to women who can't afford a private doctor or hospital.

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@Thomas,

I assume you mean a marginal Federal Tax rate of 70%. If so a millionaire living in California would also pay an additional 10.5 % state income tax plus whatever the take materializes from the evolving social security and medicare taxes on earned income, and you've got a marginal tax rate approaching 86%. I believe the primary effect of such taxes woold be the mass movement of high earners (and their companies) to Nevada (or at least the East shore of Lake Tahoe).

But wait - that is already happening !

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@georgeob1,

georgeob1 wrote:

I assume you mean a marginal Federal Tax rate of 70%. If so a Millionaire living in California would also pay an additional 10.5 % state income tax plus whatever the take materializes from the evolving social security and medicare taxes on earned income, and you've got a marginal tax rate approaching 86%. I believe the primary effect of such taxes woold be the mass movement of high earners (and their companies) to Nevada (or at least the East shore of Lake Tahoe).

Can't run from a federal tax. Unless you are talking about a mass exodus from America, and we both know that's not going to happen. We've had marginal rates higher than that before, and there was no exodus of either wealthy people or companies.

In fact - can you explain why that didn't happen in the 50's, when marginal rates were indeed at 70% and higher?

Cycloptichorn

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@georgeob1,

No, they wouldn't. All the top tech companies are in Northern California for good reason; all the talent is in this area. Apple Computer is building a new campus on an HP property not far from where we live; a high cost area because they know the talent is here. If they build in Nevada, they'll have an empty building.

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@cicerone imposter,

Have you been to Austin Texas lately ???

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@georgeob1,

No, but I plan to visit our son in the summer. However, I do know that Austin is also home to many high tech companies - including Apple. However, even DELL opened up offices here in Silicon Valley recently. Texas Instruments also has offices in Sunnyvale.

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@cicerone imposter,

Are you suggesting that Silicone Valley is forever and that the higher taxes and cost of employing people in California has had no effect on the state's economy or the willingness of businesses to locate here? Bechtel is now located in Gaithersburg MD; Chevron and Bank of America are long gone; the former industrial corridor in the southeast of the Bay area is long gone (remember NUMI Motors? ; then of course there is Solyndra and the new energy economy that will uplift us all)

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@georgeob1,

Have to agree with George here... The talent pool was once small, concentrated, but now.. Every kid who grew up in the last 20 years dreams of a gaming career. There's no reason why high tech jobs have to remain in one spot. With tax incentives and no real set up costs, aside from a few desk tops it is a pretty transient industry. Any school or district worth it's salt has competitive programs and students to spare. Hell, we've raised a generation of kids who haven't any idea of what life could be like unplugged. Silicon valley is now where ever the geniuses decide to live and play.

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@georgeob1,

(1) A mass migration of millionaires from California to Nevada would be bad for California and good for Nevada. I fail to see how it would make a difference to America as a whole.

(2) Apart from that, since a raise in the federal income tax would affect California and Nevada millionaires alike, I don't see how it would substantially affect migration patterns between the two states. As Cycloptichorn so concisely puts it, you can't run from a federal tax. At least not by running across state lines.

(3) I don't remember if the 70% referred to federal income taxes or the sum of all income taxes---federal, state, and local. But that's beside the point. The point is that income millionaires be taxed at the top of the Laffer curve on all income above the first million. Figuring out the optimal percentage is an empirical question, whose answer I'll leave to econometrists and their measurement. If the revenue-maximizing federal income tax rate turns out to be 55 percent rather than 70, that's alright with me.

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Where is the US economy headed?

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