Liberals in the city of Portland Oregon have put their foot down against income inequality.
The “Orecrats” are not going after CEOs, but rather corporations that have CEO salaries the “Orecrats” deem excessive.
The tax penalty on corporations is as much as 25%.
Please consider Portland Adopts Surcharge on C.E.O. Pay in Move vs. Income Inequality.
Moving to address income inequality on a local level, the City Council in Portland, Ore., voted on Wednesday to impose a surtax on companies whose chief executives earn more than 100 times the median pay of their rank-and-file workers.
The surcharge, which Portland officials said is the first in the nation linked to chief executives’ pay, would be added to the city’s business tax for those companies that exceed the pay threshold. Currently, roughly 550 companies that generate significant income on sales in Portland pay the business tax.
Under the new rule, companies must pay an additional 10 percent in taxes if their chief executives receive compensation greater than 100 times the median pay of all their employees. Companies with pay ratios greater than 250 times the median will face a 25 percent surcharge.
The tax will take effect next year, after the Securities and Exchange Commission begins to require public companies to calculate and disclose how their chief executives’ compensation compares with their workers’ median pay. The S.E.C. rule was required under the Dodd-Frank legislation enacted in 2010.
Thomas Piketty, a professor at the Paris School of Economics and an authority on income inequality who wrote “Capital in the Twenty-First Century,” said he favored the Portland tax as a first step.
“This is certainly part of the solution,” Mr. Piketty wrote in an email, “but the tax surcharge needs to be large enough; the threshold ‘100 times’ should be substantially lowered.”
Another supporter of the tax is Charlie Hales, the mayor of Portland.
“Income inequality is real, it is a national problem and the federal government isn’t doing anything about it,” Mr. Hales, a Democrat, said in a telephone interview. “We have a habit of trying things in Portland; maybe they’re not perfect at the first iteration. But local action replicated around the country can start to make a difference.”
Mr. Hales, who did not seek re-election, will leave office at the end of the month.
Attacking Symptoms
Portland attacks the symptom of the problem, not the problem. The Portland legislation may even enhance the problem.
If possible, CEO’s will take stock options and bonuses to escape the rule. If this idea catches on (and most economically foolish ideas promoted by the Left do catch on) corporations will reduce hiring and expansion plans.
Economic illiterate of the day, Thomas Piketty, says “the threshold ‘100 times’ should be substantially lowered.”
It would behoove Piketty to think about what the real problem is, instead of attacking symptoms of the problem.
The problem is not CEO pay. The problem is a Fed hell-bent on promoting inflation in a deflationary world. Combine that with financial repression tactics of central banks that have negative interest rates on 75% of the world’s bonds.
The Fed explicitly targeted asset prices and bailed out the banks at taxpayer expense. Congress passed scores of “affordable housing programs” that benefited homebuilder CEOs more than anyone else.
The Fed has a very Asymmetric Policy of ignoring asset bubbles then bailing out the corporations involved in them.
In September, I noted Federal Reserve Vice-Chairman Stanley Fischer Admits Fed Sponsors Wealth Inequality.
Fisher stated negative rates “seem to work” while admitting they are bad for savers but they “typically they go along with quite decent equity prices.”
Expert Opinions
Economic illiterates like Piketty, deemed an “expert” on income inequality by fellow economic illiterate writers at the New York Times, attack symptoms of the problem, not the problem.
In a foolish attempt to defeat routine consumer price deflation, the Fed has sponsored yet another asset bubble that will bring about damaging asset bubble bust and credit deflation. The BIS would agree.
For discussion, please see Historical Perspective on CPI Deflations: How Damaging are They?
Mike “Mish” Shedlock
When I worked for Exxon in the ’70’s and ’80’s the CEO made 8 times my pay – and he was happy. He also had stock options, granted on the same formulas as my own. It was after the 401k laws and the expansion of “mutual funds” took the stock voting out of the hands of everyday investing people that the CEO pay exploded – topped ONLY by the very income of the “fund managers” that vote the shares!
And guess who directs your 401k money to the designated “mutual funds”? The corporation for whom you work gives you your “selections”. It is all a rigged game, with those at the top rewarding themselves and NEVER getting punished for fouling up.
Idiots! Is this what an overpriced education gives us, total idiots! People will vote with their feet and their tax base will disappear! Then they can have try to tax what is left! Guess what they will collect nothing! The escape from Chicago is gaining momentum and Portland will be inline with the rest of the liberal sanctuary cities. Wait till Trump cuts their funding for being a sanctuary city! Almost 10,000 high paying taxpayers leaving California a month, being replaced with Illegals going onto the dole. I will be moving as soon as my last child graduates! Even the green companies that were formed and started in CA are leaving! I am a green company and I have to follow my suppliers that moved to Texas, etc. Go Moon Beam Brown, you now have a super majority of Democraps that will lead this state to zero! You might as well hand the keys to the State to Mexico and avoid the headaches! If George Carlin was alive today he would know what down the tubes really means!
Hear, hear! Corporate governance is a joke. The mutual funds don’t even have to tell their clients how they vote. Much data has been published showing the complete lack of, or even negative, correlation between CEO salaries and corporate performance. Chasing huge salaries makes CEOs do some really stupid things, like dumb mergers and stock buy backs at market highs.
Exactly. Supply and demand is the cause of pay inequality. It HAS NOTHING to do with fed policy. Mish says that without giving a single reason.
Shareholders are powerless because they are too fragmented. Employees are powerless because there are too many people looking for jobs, and companies can flood the market with foreigners.
Exactly. Supply and demand is the cause of pay inequality. It HAS NOTHING to do with fed policy. Mish says that without giving a single reason.
I have explained my reasons a dozens time. But I should not have to. Obviously you cannot either read or think so here it is again.
The fed inflated financial assets. The stock-holders and bondholders – the already wealthy and the asset-holders benefited the most. CEOs get paid on performance, including stock options. So yes the Fed (central banks sponsored these bubbles, and sponsored CEO pay and benefits). A former Fed president even admitted that. Even Bernanke spoke of the value of inflating the stock market.
So what is it about this that I have not explained and you do not understand?
What you say is true, Mich. But didn’t CEO pay start to really take off ca. 1980? I don’t doubt the economic policies of Reagan and Clinton helped things along but I doubt that the bubbles blown by the Fed translated into CEO salaries, although of course it certainly helped payments based on stocks/bubbles.
Robert Reich, whom as you know was Clinton’s secretary of labor, and as far as I can tell a jerk and a communist, but who still has some valid insights despite that, pointed out recently that if the income distribution today was what it was in 1975 the median household income would be $95K per year, almost double what it is now. It boggles the mind to think of what sort of place the US would be if that were the case. There would be taxes for schools, clean energy, regular Joes could have a decent life, etc. etc.
To me, Reich’s observation indicates that there are deep systematic problems with the economy and I find it hard to believe you can lay all of it at the door of the Fed. Obviously, automation has eliminated many jobs, but somehow China is able to deal with that, they’re building bullet trains and skyscrapers, while the metro in Washington DC is falling apart and killing passengers and workers.
I have to believe that if we fixed the trade imbalance (read, bringing manufacturing jobs back to the US) we’d do more or less as well as China, who is going to eat us for lunch in a few decades the way things are going.
“So yes the Fed (central banks sponsored these bubbles, and sponsored CEO pay and benefits). A former Fed president even admitted that.”
You are saying the fed admitted that they created bubbles for the purpose of increasing CEO pay?
Show us where they said that.
Exec pay is often related to stock market performance, but those compensation rules are set by the board. It can only be changed by corporate governance. When stock prices went down or stagnated, boards found other ways to compensate their execs.
You are saying the fed admitted that they created bubbles for the purpose of increasing CEO pay. Show us where they said that.
One more idiotic reply like that and I will delete your asinine comments before I bother to read them.
Please show me where I said what you said I said.
I’m glad I live in Idaho.
So, Oregon wants to drive corporations out. What’s the big deal if they do?
You serious Carl? “””Corporations””” are just a subset of businesses…What’s the big deal if a lot of businesses leave? Less jobs? Less productivity? Less prosperity?
Don’t get me wrong, I’m not for the sludgy brew of cronyism masquerading as capitalism that we’ve been conditioned to accept, but that doesn’t mean that business is not at the root of the vast majority of human productivity, without which we’d be pretty damn poor.
Piketty should be imprisoned.
I’m glad I live in Florida. 🙂
Where do they suggest that they want to attack the policies of the Fed or consumer inflation? They want to attack income inequality which is what their new tax may do. Since top management and their boards are generally “highly paid fishing buddies”, they want to limit abuses in corporate pay and the negative policies it contributes to.
If they want to “attack income inequality,” they need to work on what causes income inequality. Which has exactly nothing to do with business sales taxes in one tiny market.
Income inequality growth is caused overwhelmingly by financialization and it’s handmaidens regulation and legal complexification. There is no “other way” to tackle it, than “attacking” that triumvirate, no matter how good this childish nonsense may make the gaggle of well indoctrinated, generally well connected ignoramuses that comprise this Portland lot feel.
All this kind of nonsense does, is allow less than literates to feel they are “doing something”, while in reality simply making the problem worse than it already is. The latter, by forcing companies to hire more counsel to figure out how to comply with the mandate. Counsel who are guaranteed not to be in the low income category. But counsel which, of course and always, are equally guaranteed to be very close and supportive of those cooking up this drivel. Wonder why?
Over time, as costs for nonessentials, like above counsel, comprise a greater and greater share of total costs for US companies, the kind of companies that would bid up the price for manufacturing labor will simply flag out. Leaving destitution behind. But wealthier and more influential lawyers, though. Which, as always with every law, is the whole point.
“For every thousand hacking at the branches, there is one striking the root.” — H. D. Thoreau
http://www.strike-the-root.org
I like this idea. Can’t really follow Mish’s reasoning on how grotesque CEO pay imbalances are caused by the fed. Overall income inequality maybe, but this is something beyond that.
Agreed, struck me the same way. Income inequality has been part of the fabric of human society for as long as there have been spoils to divide. Thousands of years, at least. Income inequality long predates the FED, and is a consequence of human nature not the FED. A lot of things to dislike about the FED, but the FED’s contribution to income inequality is a subjective perception, ideological with no quantitative substantiation whatsoever. All this inequality bitching is just Marxist materialism, and I do not buy into it for an instant. People today in the USA have a higher standard of living, even at the lowest rungs, compared to their counterparts in any era in history in the past several thousand years.
The real problem is that people unthinkingly accept the notion that inequality is bad.
The test would be if income inequality was less prior to creation of the Fed. I think Mish would have a difficult time showing that. So I think this is more of an ideology thing.
“Income inequality has been part of the fabric of human society for as long as there have been spoils to divide. Thousands of years, at least. Income inequality long predates the FED”
That is because there has never been income equality. The ditch digger is never going to be paid the same as the movie star.
Not true.
As recently as 1980 the bottom 90% made more than the top 10%.
http://www.forbes.com/sites/louiswoodhill/2013/03/28/the-mystery-of-income-inequality-broken-down-to-one-simple-chart/#9a4f1074f484
You should not like this idea if you read this blog. Pleas go back to the Washington post where you can recommend raising the minimum wage to end income inequality
This is great.
It gives the vague possibility that the moron liberals will learn a little about cause and effect.
Mish,
Sadly I live in the suburbs of this POS city, I suppose much like you feel living in a state with a city named Chicago.
Sounds like Portland is trying to out do Chicago in how many businesses they can run out of town.
I foresee some large corporate office buildings becoming available to lease or buy in Portland pretty soon.
Well, try The Road to Ruin by Jim Rickards and FINALLY understand what the hell is
going on. Absolutely YES, there should be a CAP on ALL remunerations of CEOs.
Let’s finally stop crony capitalism and their lackeys, the politicians and judges.
Bankers should be #1, hedge fund CEOs, #2, and time to get the Fed to FORESEE the gigantic bubbles in stocks, housing, bonds, credit, etc., NOT AFTER they burst. But they and the SEC, etc, are in the pockets of the global elites (see Rickards for this. Try his Chp 4 on the 1998 LTCM crisis and realize most do not know anything about what really happened–I dare you to read in-depth!. Ken
And for relaxation try this drone video:https://www.youtube.com/watch?v=lw3wTnpt6wY&authuser=0
I do not mind paying a CEO “massive” amounts if the person is worth it.
But back to this topic, why is a government entity in a position to do this?
It would serve Portland right if all the profitable businesses in Portland left.
Its up to the shareholders of a company to determine pay packages. But then again thats under capitalism. Under Socialism, Portland is rip roaring ready to go.
I agree, there are CEOs who are worth every penny, and every million that they collect. So should their stockholders be punished by this tax? There are also far too many execs who are overpaid and for whatever reason the stockholders don’t turf them out or cut their pay. Perhaps the current system of exec appointments needs shaking up by the SEC or similar Federal body to make pruning exec deadwood easier and more transparent. Whatever applies it isn’t up to Portland to impose their socialist viewpoint.
With the Supreme Courts decision on the Citizen’s United case, I don’t think it is possible for the SEC to do anything about it anymore.
I’m in hopes it drives corporations completely out of Portland. That will teach these idiots at city hall a valuable lesson.
“Economic illiterates like Piketty, deemed an “expert” on income inequality by fellow economic illiterate writers at the New York Times, attack symptoms of the problem, not the problem.
In a foolish attempt to defeat routine consumer price deflation, the Fed has sponsored yet another asset bubble that will bring about damaging asset bubble bust and credit deflation. The BIS would agree.”
The BIS would agree, would they ?
YOU are as wanked as the morons in Oregon.
Here’s the PROBLEM….and the SOLUTION…..PURE & SIMPLE:
“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered…. I believe that banking institutions are more dangerous to our liberties than standing armies…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”
Thomas Jefferson
“Some people think that the Federal Reserve Banks United States are Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders. In that dark crew of financial pirates there are those who would cut a man’s throat to get a dollar out of his pocket; there are those who send money into states to buy votes to control our legislatures; there are those who maintain International propaganda for the purpose of deceiving us into granting of new concessions which will permit them to cover up their past misdeeds and set again in motion their gigantic train of crime.”
Congressman Louis T. McFadden – served as Chairman of the United States House Committee on Banking and Currency during the Sixty-sixth through Seventy-first Congresses, or 1920-1931
It’s true that this type of measure can eliminate income inequality. If a large number of corporations leave Oregon, and with them the high income jobs, there will be a lot more income equality, albeit a significantly lower average income.
Agreed, but not if other cities follow their lead. If the are the lone, loan voice, they will pay a price for making a stand. If only half a dozen sizable cities join them, the multiples of these pay packets will come under pressure.
@Sleekster:
Socialist drivel. Your “speculators and swindlers” are my entrepreneurs.
How about they pass a law that “public servants” – aka public union goons – make 60% of the AVERAGE private sector wages in their city.
And have a retirement system – aka 401k – equal to the AVERAGE private 401k plan of private sector worker in their city
And have benefits – aka medical – equal to a plan of the AVERAGE private sector worker in their city
The 60% makes up for the fact that public union goons are impossible to fire.
It is lopsided. There are cases in the UK where the income needed to be saved to achieve a Public Sector pension provision is no way possible for the average Private Sector worker and the average worker has to take market risk whereas the Civil Servant pay-out is guaranteed, no market risk.
The playing field should be levelled for all so the legislature has the same options as Private Sector employees so then they might just pass legislation that optimises the system for all.
Not a fair comparison. Public sector workers are generally unionized and pay union dues. Private sector workers hate unions and are happy with the lower income.
I seem to be trolling this morning.
“the Fed has sponsored yet another asset bubble that will bring about damaging asset bubble bust”
Seeing the market action yesterday it looks like the bubble seems to be only getting bubblier…
Despite all round criticism, that the major central bankers have kept the asset bubble show running for close to a decade now shows their resilience and their ability to thwart a bust (ask those shorts!). Only Japan has done better (but then Japan had a few tailwinds-globalization, china etc.).
The bust can now happen only if the central bankers cannot help it.
They should start with the governmental oligarchs in Oregon, like the senators and congresspeople, the governor, and lt. governor. Just so that they don’t appear to be hypocritical. Appearances are everything after all,
Portland could start with its sports teams and musicians passing through town, and slap them with a tax for making more than 10 times the amount of fast food workers. Make the pro basketball team equalize its salaries so that the stars make no more than 10 times the wages of the peanut vendor.
wish i had read that before i plagiarized you.
Now I wonder how this will all go over when the first CEO says bye-bye. If I was owner of a large company, that I built based on my ideas, my hard work, my risk of capital, and you told me I couldn’t pay myself my just reward, I’d be gone in a blink. I’d also make a lot of noise doing it. A $5,000,000 or so threshold, absurd.
So when POTUS Trump issues a executive order stopping implementation of this provision of DnF then what?
“If possible, CEO’s will take stock options and bonuses to escape the rule. ”
OR
There will no longer be a single CEO, but a corporate executive board that has at least 3 members. All members of the board will receive equal salaries and compensation.
They just climbed the Article 50 hump.
Not yet. It’s one more push but the Supreme Court has to rule in January and if it decides Parliament has to have a say then it’s still not guaranteed.
Interesting, the Nazgul are being despatched from Mordor to keep the client states in line at election time.
1) Schultz heading back to run for German leader in case Merkel falls over – EU insider.
2) Mogherini heading back to Italy with a chance of “installation” as Italian PM – EU insider.
(Her job is probably to ensure Italy reforms to get closer to banking union)
3) Verhofstadt liklely to run as Schulz replacement – EU insider, x-Belgium Prime Minister.
4) Paris is beefing up banking regulator as London Banks looking to move to Paris. Supposedly official.
5) All out work to prevent LePen getting anywhere near power in France.
The hope is that by the end of 2017 the storm will have blown over and they will have moved further forward with Federalisation and harmonization with pro-EU leaders in all main areas that can then get to work preventing dissension or expression of anti-EU/Euro sentiment that might lead to break-up of the project.
To me it’s looking more and more like an Empire in the making.
What is stopping corporations from ‘outsourcing’ lower paid jobs to contractors or temp agencies to push up median wages? For example, Intel does not need to own/run the manufacturing plant.
A multi-layered approach would definitely work.
Hi Mish, I think there’s a second element to the Fed which you miss:
1 – They actively promote bubbles in financial assets. This benefits the already wealthy. (we agree on that)
But I also think you fail to mention that:
2 – The Fed will not tolerate any sustained wage rises. The economy must be slowed down should ‘wage pressures’ arise. This punishes the poor.
So whilst I whole heartedly agree with you Fed policy is asymmetric, it’s not just that it benefits the wealthy through financial bubbles, it’s that they punish the poor with, essentially, wage caps.
Contrast wage caps for the poor with financial bubbles for the wealthy in which no high is too high. Yes exactly – vomit inducing.
Best regards,
On the general topic……..one thing Cameron was right about. Great building for the elite few.
This is new: http://www.euractiv.com/section/public-affairs/news/eu-leaders-to-cocoon-in-new-europa-building-starting-in-january/
Now consider, this is also what is happening once a month, look at the cost:
http://www.telegraph.co.uk/news/worldnews/europe/10565686/The-farce-of-the-EU-travelling-circus.html
I don’t think the new building stops the monthly decamp from occurring.
Now consider, would a good CEO, no matter how much paid relative to the median wage, allow this to occur?
Before ANY public sector involves itself in setting private sector pay differentials it should get it own house in order first.
Get this from the Telegraph, the new building symbolises JOY !!
“The EU unveiled its futuristic new 321-million-euro headquarters on Wednesday, saying it symbolised ‘joy’ at a time of rising populist anger against Brussels that helped lead to Brexit.”
http://www.telegraph.co.uk/news/2016/12/08/eu-unveils-new-300m-space-egg-hq-europa-brussels/
“The rear part of the Europa building consists of the old Residence Palace, a refurbished Art Deco block that has variously served as a government ministry and the Nazi headquarters during the German occupation of Belgium.”
How appropriate, Gestapo Headquarters, the True Heart of the EU. Maybe the architectural style should be called Totalitarian Modern.
The EU. An exceptionally incompetent, corrupt, repressive collection of elites that have a stratospheric skill of being able to piss money down the toilet Nothing will change. Unless the EU is broken up.
Their tyrannical insistence on obedience is even starting to make the ex-Eastern bloc countries worry. To mange that in less than 10 years, after these countries withstood 50+years under soviet tyranny really says something.
“The tax will take effect next year, after the Securities and Exchange Commission begins to require public companies to calculate and disclose how their chief executives’ compensation compares with their workers’ median pay. The S.E.C. rule was required under the Dodd-Frank legislation enacted in 2010.”
The real root of this, Dodd-Frank, which should be repealed and replaced. This is the handiwork of the Socialist Marxist Party that was in power in 2010. Who else but a Marxist or a proponent of the French Revolution and its cries for equality needs this calculation foisted upon them. Just too Totalitarian for my taste. These people just need to get into every orifice. Dodd-Frank clearly needs to be exterminated.
Public companies are government creations, if they want to live by the sword they’re going to get poked every now and then.
Awesome, next should be that no player for the Trailblazers gets payed more than 10 times the average fan.
“The problem is not CEO pay.” I beg to differ. It is most definitely the problem. Unfettered greed throughout corporate America is now a disease. Did the Fed cause these CEO’s to institute what are essentially accounting control frauds to enrich themselves? I don’t think so. These are policies put in place by real human beings acting out of self-interest. They do these things because they are allowed to get away with it. It’s the Gordon Gekko model of capitalism.
See ‘The Best Way To Rob A Bank Is To Own One’ William K. Black
If CEO pay was a problem, then the company would go broke. In any case, comparing CEO salary to median salary is idiotic. So the owner of a local flower shop should make the same as the CEO of FTD? If you must compare, compare CEO salary to gross revenue or maybe gross salary costs. Otherwise, you look like a clueless fool.
Simple solution will be CEO’s will not live in Oregon. I could care less what someone makes to be honest as this is just another move to grab money. This solves nothing as the local government starts to run good paying jobs out of Oregon and yes it will happen.
Income inequality is apart of human nature as those that excel make more then those with no high school education. Ever since humans started forming groups someone was in charge or made more then the others.
You just cannot make this stuff up anymore.
Also think of it in terms of market size. My Grandfather did business in NYC. My father did business throughout the U.S.. In 2016, you make an app and your market is several billion people.
Seems logical that, nowadays, any outlier is going to be of epic proportions.
1. Right that FED is a tool for asset bubbles.
2. Right that local theory of topping CEO salaries is dumb
3. Right that inequalities are growing.
4. Right that CEO salaries are symptons, not source of issues
A. Look at Gini coefficient
B. Think how global and easy it is to move assets from simple clicks
C. Look how strong the competition has been developing: now you compete against
And here come those unintended consequences politicians rarely think about…..
There are thousands and thousands of companies, large and small, public and private. There are not similar thousands and thousands of highly competent, superior CEO’s to march.And the reasons for all their individual compensation levels are too myriad to analyze. This issue is best left to the owners of those companies, who have actual skin in the game, to decide.
O/T.
ECB preparing more QE, for longer and will increase if picture deteriorates.
We have had minimum wage laws for some time. Now the government insists on as maximum wage as well? How about paying each according to the value they produce for the company and let nature take its course.
_aleph_
Do these people sit around and think of new ways to drive away business? Do they actually think that these businesses will not relocate elsewhere? Can the left not look at Illinois and other ruined economic zones based on similar policies and not question their logic? Can they not see SC policies which allow the state to explode economically?
Didn’t Trump promise to gut or repeal Frank-Dodd? Notice I use the original designation, which they changed because too many people were calling it what it really was, the Fr-odd bill. If the enabling legislation is repealed, the SEC no longer has the authority to collect the salary information. Problem solved.
I guess a Parisian academic (Picketty) and the Portland civil servants that wrote this law have a better understanding of what a company’s compensation policy should be than the people actually running the company do. Makes sense. Ugh. Goodbye jobs.
Nothing to see here. It’s just another money grab that’s all, using excessive salaries/compensations as an excuse.
“Thomas Piketty, a professor at the Paris School of Economics and an authority on income inequality who wrote “Capital in the Twenty-First Century,” said he favored the Portland tax as a first step.”
Thomas Piketty is not an authority on income inequality. Income equality does not even exist in the first place. Everyone would have to be paid $X an hour for income equality to exist. That has never happened in history. It never will.
Piketti’s President spends a huge amount of money a month on haircuts. Also Piketty’s President raised the top income tax to 75%, of which Piketty prefers 80%. Holland had to junk the tax hike as French businessmen started to move to Belgium in response. Piketty needs some remedial instruction on how economics really work. If i was in a position to grade him, Piletty would get an F.
“Portland attacks the symptom of the problem, not the problem. The Portland legislation may even enhance the problem.”
Politicians always attack a symptom as it gets them votes.
Latter the problem get worse or morphs into another problem and the cycle repeats.
The only solution is for voters to recycle politicians. The longer they hold office, the worse it gets as “public service” morphs into “private gain”.
There should be no pension plans linked to any elected office.
Mish, the root problem isn’t asset bubbles. That is just another symptom. You also failed to tie how asset bubbles affect CEO pay (is the CEO an asset?). In any case, the root problem is a dishonest money supply where those at the bottom do not receive the buying power deserved by their labor and those at the top receive far more buying power than their true economic value add could ever justify. Trust me, if the CEOs had to be paid in real money like gold coins, their salaries would immediately drop back into line. Additionally, those doing needed low end work would receive subsistence level buying power in exchange for their labor because digging ditches and putting roofs on houses might not be glamorous but these tasks are far more essential to the economy than what is done by most CXOs (modern kings and dukes living fat off the labor of serfs created by their own acceptance of fake money as if it were real – self imposed economic slavery).
There is one and only one root cause of income inequality and that is a fake money supply consisting of fiat currency and fictional reserve banking with the latter being the worse of the two. Get rid of that and all these crazy imbalances would be rapidly corrected/deflated by the free market. Everything else is a symptom/noise.
I have explained this many times and in depth if you ever bothered to click on any of the links I provided. I gave a short synopsis a moment ago in reply to someone who said I never explained. But yes, Fractional reserve lending and no method of stopping the buildup of debt is the fundamental problem (which I have likely said at least 100 time) and I really do mean at least 100 times.
You do have one thing correct – CEO pay is a symptom of the problem, not the problem and I stated that as well, quite clearly in fact.
I have a headline in bold that reads Attacking Symptoms
“If possible, CEO’s will take stock options and bonuses to escape the rule.”
Not if the following from the quoted article is true:
“Under the new rule, companies must pay an additional 10 percent in taxes if their chief executives receive compensation greater than 100 times the median pay of all their employees.”
Compensation includes bonuses and stock options.
What they are addressing here is envy. This does not fix the problem at the worker level as the amount made by the CEOs of large corporations is a pittance compared to the cost of the entire employee base. Reducing their salaries will not allow for meaningful increases in the rank-and-file pay.
Let’s take Walmart, one of the favorite whipping boys, as an example. In 2016, total key executive compensation, not just the CEO, was $72.43 million dollars per Morningstar (http://insiders.morningstar.com/trading/executive-compensation.action?t=WMT®ion=USA&culture=en_US).
Note the following:
1) I am including ALL key executives, not just the CEO. CEO compensation was $19.81 million.
2) Compensation does not equal cash payout. Actual salary and bonus was $7.26 million. Over half of the compensation was in the form of restricted stock.
But in this analysis I am going to calculate as if they actually did receive $72.43 million in cash.
According to Walmart’s latest 10-K (https://www.sec.gov/Archives/edgar/data/104169/000010416916000079/wmtform10-kx1312016.htm) they have 2.3 million employees worldwide, with 1.5 million in the US.
I will make another assumption that only the US employees need to have a raise and that only 1 million out of 1.5 million will receive it.
If you took every penny of CEO compensation and assumed it was cash and gave it to those 1 million employees you would get a one-time boost in ANNUAL salary of $72.43 BEFORE income and payroll taxes. On a 20 hour work week with 50 weeks in a year that becomes just over 7 cents an hour. With more hours the rate drops even more.
WMT is just one example of many. It’s pretty much the case for any large company that is labor-intensive. The worker “livable pay” issue cannot be solved by sticking it to CEOs. It’s basically trying to feel better by pulling down someone else.
“If you took every penny of CEO compensation ”
Should have been “key exec compensation.”
I do not think anyone can argue that CEO pay has massively expanded since the 1980’s and the middle class has foundered since Nixon opened up China. The investment retirement game is rigged by those in power.
What I can never agree with is a Marxist solution to the problem. Portland, Seattle and the California coastal cities are infested with Marxist solutions to real problems and there is no end in sight.
Capital and people are flowing into these areas from around the world driving up costs to those who rent and those who own. Homelessness is reaching epic proportions and rents have as well. Wages are scaling down due to the massive influx of cheap workers coming in driving down wages across the board. Anyone arguing less was arguing that home prices would go up forever in 2007.
Now they want to drive out business who can make a deal with a city next door? They will be eating their cats and dogs and paying $200 for a dozen eggs soon enough.
A day of reckoning is coming but I do not know how that would play out.
Yes
And guess hat else happened with Nixon?
Here’s a hint – China had nothing to do with it.
Nixon closed the Gold window.
Look it up.