Thursday, July 23, 2009

Top 1% Receive One-Third Of All Pay In The U.S., But Congress Is Still Afraid Of A Surtax

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Pat Garofalo
July 21,2009 - ThinkProgress.org

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The New York Times reported today that Democratic leaders, "bowing to unease among lawmakers and governors in their own party," are reconsidering the House Ways and Means committee's proposal to implement a surtax on the richest one percent of Americans as a way of financing a portion of health care reform.

There has indeed been a lot of pushback against the surtax proposal, which prompted Speaker of the House Nancy Pelosi (D-CA) to suggest that only households making more than $1 million should be subject to it, instead of the graduated scale starting at $350,000 that Ways and Means proposed.

But those feeling squeamish about the tax should take a look at this analysis in the Wall Street Journal, which shows how big a slice of the income pie the rich are currently receiving:

Executives and other highly compensated employees now receive more than one-third of all pay in the U.S., according to a Wall Street Journal analysis of Social Security Administration data — without counting billions of dollars more in pay that remains off federal radar screens that measure wages and salaries. Highly paid employees received nearly $2.1 trillion of the $6.4 trillion in total U.S. pay in 2007, the latest figures available. The compensation numbers don't include incentive stock options, unexercised stock options, unvested restricted stock units and certain benefits.

In the five years ending in 2007, earnings for American workers rose 24 percent, while the highest-paid saw a 48 percent increase. So as Kevin Drum noted, "in other words, the executives got a 48% increase, the rest of us got approximately nothing, and it all averaged out to 24%." And to top it all off, median pay raises for this year and next are set to be the lowest in decades.

Income growth in America for the last few decades has been overwhelmingly concentrated at the top. Between 1979 and 2006, the inflation-adjusted after-tax income of the richest 1 PERCENT of households increased by 256 percent, compared to 21 percent for families in the middle income quintile. According to the Center on Budget and Policy Priorities, households in that richest one percent "had $617 billion more income in 2006 (or $656 billion more if measured in 2009 dollars) than they would have had if the 1979 income distribution still prevailed."

Increasing taxes on this small percentage of people — who have done very well for a very long time — would raise revenue to put toward health reform, which is the single biggest problem for America's bottom line. As Sen. Bernie Sanders (I-VT) said, "it certainly is okay for me to tell my friends on Wall Street, who just got a bonus of $600,000, they're going to pay more in taxes so we can lower health care costs in America."

TOON

Sorta nice but also creepy and disturbing.

In a trend so rich in weirdness it deserves a John Prine song, D.C. lobbyists are hiring homeless people to stand in line for them in order to get coveted seats at key hearings. The practice – complete with a website – gives money and stature to people who desperately need it, while using them to facilitate policies that often work against their interests.

"I'm a part of something today and I'm very happy about that," says Williams Howard Johnson Jr., in line since midnight for a 10 a.m. climate-change bill hearing.

- Common Dreams

Morgan Stanley Sets Aside 72% of Revenue for Employees’ Pay

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Christine Harper
July 22, 2009 - Bloomberg

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Morgan Stanley set aside 72 percent of its second-quarter revenue for compensation and benefits, more than Goldman Sachs Group Inc. or JPMorgan Chase & Co., amid a "war for talent" with rivals that generate more money.

"It was a very good quarter to be a Morgan Stanley employee," said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. "I'm not so sure it was so good to be a Morgan Stanley shareholder."

The average ratio of compensation to revenue at securities firms this decade has been about 48 percent, Hintz said, calling Morgan Stanley's figure "pretty extraordinary." Chief Executive Officer John Mack, 64, is under pressure to increase pay after Goldman Sachs set aside a record $11.4 billion for salaries, benefits and bonuses in the first half and JPMorgan Chase & Co. boosted investment-bank compensation by 37 percent.

First-half compensation expenses at Morgan Stanley, the biggest U.S. brokerage, dropped 14 percent to $5.91 billion as revenue plunged 40 percent. (See table, below.) The firm reported a second-quarter loss from continuing operations of $159 million that was bigger than analysts estimated. Goldman Sachs last week posted record earnings of $3.44 billion.

"The war for talent seems to be as hot as ever, I'm not sure that's sustainable," Colm Kelleher, Morgan Stanley's chief financial officer, said in an interview today.

The number of employees rose to 62,215 at the end of June, which included 20,004 people from the company's new Morgan Stanley Smith Barney retail brokerage joint venture with Citigroup Inc.

Repaying TARP

Morgan Stanley last month repaid $10 billion to the U.S. government plus dividends to shake off restrictions on the size of bonuses it can award.

"If it's seen that Goldman's the place where you're going to get compensated, that's obviously going to lead to some type of a talent drain at some point," said Ben Wallace, an analyst at Grimes & Co. in Westborough, Massachusetts, which manages $750 million in assets. "Morgan Stanley's big challenge, whether it's compensation or risk or earnings outlooks, is going to be differentiating themselves from Goldman Sachs."

Last year Morgan Stanley slashed compensation costs by 26 percent, including a 50 percent average reduction in bonuses for all employees except for financial advisers, as the firm's revenue tumbled 12 percent. The firm also changed pay practices so it can recoup a portion of employees' cash bonuses if problems arise in subsequent years.

This year, as competition for workers increased, Morgan Stanley raised base salaries for top executives to make up for a decline in bonuses.

Six Months

In the second quarter, Morgan Stanley's compensation expense of $3.88 billion was 72 percent of the quarter's $5.41 billion of revenue. For the first six months of the year, the firm's $5.91 billion expense was 71 percent of the $8.36 billion of revenue.

Goldman Sachs's first-half expenses for pay were up 33 percent from a year earlier and was enough to give each worker at Goldman Sachs $386,429 for the period. Goldman set aside 49 percent of revenue in the first six months of the year for salaries, benefits and bonuses.

JPMorgan Chase & Co. set aside $6.01 billion in the first half for investment bank employees' compensation, up 37 percent from a year earlier, even as the number of people employed at the investment bank fell 30 percent. The division's compensation makes up 38 percent of the revenue it generated in the six-month period, down from 51 percent in the same period a year earlier.

Investment banks have traditionally awarded a large portion of employees' compensation in the form of year-end bonuses tied to the performance of the firm and the individual. The more senior an employee, the bigger percentage of their pay typically comes in the form of the year-end bonus. Payments are often made in restricted stock that can't be cashed out for several years.

The following table compares revenue, compensation and employee numbers at Morgan Stanley, Goldman Sachs and JPMorgan Chase's investment bank in the first half:


First-Half Revenue, Compensation and Head Count:

               Revenue       Comp       Employees Comp/Employee

Morgan Stanley $8.36 bln     $5.91 bln  62,215*   $95,009

Goldman Sachs  $23.2 bln     $11.4 bln  29,400    $386,429

JPMorgan
Investment
Bank           $15,672 bln   $6.01 bln  25,783    $232,983

*Includes 20,004 employees related to the Morgan Stanley Smith
Barney joint venture with Citigroup Inc.

Source: Company reports.

US Withheld Data on Risks of Distracted Driving

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Matt Richtel
July 21, 2009 - The New York Times

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In 2003, researchers at a federal agency proposed a long-term study of 10,000 drivers to assess the safety risk posed by cellphone use behind the wheel.

They sought the study based on evidence that such multitasking was a serious and growing threat on America's roadways.

But such an ambitious study never happened. And the researchers' agency, the National Highway Traffic Safety Administration, decided not to make public hundreds of pages of research and warnings about the use of phones by drivers - in part, officials say, because of concerns about angering Congress.

On Tuesday, the full body of research is being made public for the first time by two consumer advocacy groups, which filed a Freedom of Information Act lawsuit for the documents. The Center for Auto Safety and Public Citizen provided a copy to The New York Times, which is publishing the documents on its Web site.

In interviews, the officials who withheld the research offered their fullest explanation to date.

The former head of the highway safety agency said he was urged to withhold the research to avoid antagonizing members of Congress who had warned the agency to stick to its mission of gathering safety data but not to lobby states.

Critics say that rationale and the failure of the Transportation Department, which oversees the highway agency, to more vigorously pursue distracted driving has cost lives and allowed to blossom a culture of behind-the-wheel multitasking.

"We're looking at a problem that could be as bad as drunk driving, and the government has covered it up," said Clarence Ditlow, director of the Center for Auto Safety.

The group petitioned for the information after The Los Angeles Times wrote about the research last year. Mother Jones later published additional details.

The highway safety researchers estimated that cellphone use by drivers caused around 955 fatalities and 240,000 accidents over all in 2002.

The researchers also shelved a draft letter they had prepared for Transportation Secretary Norman Y. Mineta to send, warning states that hands-free laws might not solve the problem.

That letter said that hands-free headsets did not eliminate the serious accident risk. The reason: a cellphone conversation itself, not just holding the phone, takes drivers' focus off the road, studies showed.

The research mirrors other studies about the dangers of multitasking behind the wheel. Research shows that motorists talking on a phone are four times as likely to crash as other drivers, and are as likely to cause an accident as someone with a .08 blood alcohol content.

The three-person research team based the fatality and accident estimates on studies that quantified the risks of distracted driving, and an assumption that 6 percent of drivers were talking on the phone at a given time. That figure is roughly half what the Transportation Department assumes to be the case now.

More precise data does not exist because most police forces have not collected long-term data connecting cellphones to accidents. That is why the researchers called for the broader study with 10,000 or more drivers.

"We nevertheless have concluded that the use of cellphones while driving has contributed to an increasing number of crashes, injuries and fatalities," according to a "talking points" memo the researchers compiled in July 2003.

It added: "We therefore recommend that the drivers not use wireless communication devices, including text messaging systems, when driving, except in an emergency."

Dr. Jeffrey Runge, then the head of the highway safety agency, said he grudgingly decided not to publish the Mineta letter and policy recommendation because of larger political considerations.

At the time, Congress had warned the agency not to use its research to lobby states. Dr. Runge said transit officials told him he could jeopardize billions of dollars of its financing if Congress perceived the agency had crossed the line into lobbying.

The fate of the research was discussed during a high-level meeting at the transportation secretary's office. The meeting included Dr. Runge, several staff members with the highway safety agency and John Flaherty, Mr. Mineta's chief of staff.

Mr. Flaherty recalls that the group decided not to publish the research because the data was too inconclusive.

He recalled that Dr. Runge "indicated that the data was incomplete and there was going to be more research coming."

He recalled summing up his position as, the agency "should make a decision as to whether they wanted to wait for more data."

But Dr. Runge recalled feeling that the issue was dire and needed public attention. "I really wanted to send a letter to governors telling them not to give a pass to hands-free laws," said Dr. Runge, whose staff spent months preparing a binder of materials for their presentation.

His broader goal, he said, was to educate people about the dangers of distracted driving. "Based on the research, there was a possibility of this becoming a really big problem," he said.

But "my advisers upstairs said we should not poke a finger in the eye of the appropriations committee," he recalled.

He said Mr. Flaherty asked him, "Do we have enough evidence right now to not create enemies among all the stakeholders?"

Those stakeholders, Dr. Runge said, were the House Appropriations Committee and groups that might influence it, notably voters who multitask while driving and, to a much smaller degree, the cellphone industry.

Mr. Mineta, who left as transportation secretary in 2006, said he was unaware of the meeting.

"I don't think it ever got to my desk," he said of the research. Mr. Ditlow, from the Center for Auto Safety, said the officials' explanations for withholding the research raised concerns. He said the research did not constitute lobbying of states.

And he said it was consistent with the highway safety agency's research in other areas, like seat belts.

Mr. Ditlow said that putting fears of the House panel ahead of public safety was an abdication of the agency's responsibility.

"No public health and safety agency should allow its research to be suppressed for political reasons," he said. Doing so "will cause deaths and injuries on the highways."

State Senator Joe Simitian of California, who tried from 2001 to 2005 to pass a hands-free cellphone law over objections of the cellphone industry, said the unpublished research would have helped him convince his colleagues that cellphones cause serious - deadly - distraction.

"Years went by when lives could have been saved," said Mr. Simitian, who in 2006 finally pushed through a hands-free law that took effect last year.

The highway safety agency, rather than commissioning a study with 10,000 drivers, handled one involving 100 cars. That study, done with the Virginia Tech Transportation Institute, placed cameras inside cars to monitor drivers for more than a year.

It found that drivers using a hand-held device were at 1.3 times greater risk of a crash or near crash, and at three times the risk when dialing compared with other drivers.

Not all the research went unpublished. The safety agency put on its Web site an annotated bibliography of more than 150 scientific articles that showed how a cellphone conversation while driving taxes the brain's processing power, reducing reaction time. But the bibliography included only a list of the articles, not the one-page summaries of each one written by the researchers.

Chris Monk, who researched the bibliography for 18 months, said the exclusion of the summaries took the teeth out of the findings.

"It became almost laughable," Mr. Monk said. "What they wound up finally publishing was a stripped-out summary."

Mr. Monk and Mike Goodman, a division head at the safety agency who led the research project, theorize that the agency might have felt pressure from the cellphone industry. Mr. Goodman said the industry frequently checked in with him about the project and his progress. (He said the industry knew about the research because he had worked with it to gather some data).

But he could offer no proof of the industry's influence. Mr. Flaherty said he was not contacted or influenced by the industry.

The agency's current policy is that people should not use cellphones while driving. Rae Tyson, a spokesman for the agency, said it did not, and would not, publish the researchers' fatality estimates because they were not definitive enough.

He said the other research was compiled as background material for the agency, not for the public.

"There is no report to publish," he said.