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The “Occupy Wall Street” Protest Vents Anger that “A Few Prosper, Billions Suffer”

“How do we pick ourselves up when Wall St.’s stealing our bootstraps?”

“We are not leaving. Not while the richest 1% own 75% of the USA’s wealth. “

These were some of the hand-written signs at the ongoing “Occupy Wall Street” demonstration in front of and around the New York Stock Exchange as it entered its second week of daily protests. The stated mission of “Occupy Wall Street,”according to its website, is

“to flood into lower Manhattan, set up beds, kitchens, peaceful barricades and occupy Wall Street for a few months. Like our brothers and sisters in Egypt, Greece, Spain and Iceland, we plan to use the revolutionary Arab Spring tactic of mass occupation to restore democracy in America.

“Occupy Wall Street is a leaderless resistance movement with people of many colors, genders and political persuasions. The one thing we all have in common is that We Are The 99% that will no longer tolerate the greed and corruption of the 1%.”

On Saturday, September 24, about 80 people were arrested during the demonstration, mostly for blocking traffic and disorderly conduct, according to the police. The protestors vow to stay for months, camping on the streets and in the parks.

Does this demonstration signify a shift in the mood of the public? A few weeks ago, Great Britain was shocked by several nights of rioting and looking in London and several other cities. Is that going to happen here? During the current “Occupy Wall Street” events, or at some other venue in the future?

The U.S. has been going through a wrenching amount of pain from unemployment, reduced income, and home foreclosures, resulting in an overall massive downshift in expectations. Millions of families have lost large portions of their wealth, in residential real estate and retirement funds. This loss of wealth has been hugely disproportionately felt by Blacks and Hispanics, who in the last four years since the housing crash have lost jsut about all the wealth gains they had made in the previous quarter century.

The unemployment rate for 18-to-24 year olds in general, as of July 2011, was 18.1%, while for Hispanics it was 20.1%, and for Blacks 31.0%. From another, probably more revealing, perspective, “[t]his year, the share of young people [in this age group] who were employed in July was 48.8 percent, the lowest July rate on record for the series, which began in 1948,” according to the U.S. Bureau of Labor Statistics.

From my perspective in the trenches helping clients every day, I’m not at all surprised that some people are feeling like it’s time to “man the barricades.” Seems to me that the youth in particular have been rather quiet, staying in school longer to avoid the job market and to try to position themselves better for it–all the while racking up anxiety-producing levels of student loans. They are living much longer than expected with their parents, probably by the millions. Their frustrations will only increase if the economy does not find room for them.

The signs point to more demonstrations ahead.


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Luxury Sales–Some Very Tangible Evidence of the Widening Income Gap

Luxury Sales—Some Very Tangible Evidence of the Widening Income Gap

Rich Americans are buying again. The rest of us—not so much. The difference between the sales figures at luxury stores versus middle- and low-end ones is stark evidence showing who has been coming out of the Great Recession doing pretty well and those who have not.

An article in the business section of the New York Times a couple of weeks ago made the point that “the retail economy is locked on two tracks: one for businesses that cater to the well-to-do, and the other for everyone else.”

On the low-to-medium end, retailers such as Target and JC Penney posted modest single-digit gains for sales in July compared to a year ago, while others such as Kohl’s actually had lower sales this July than last. On the higher end, it seems like the more luxury-oriented to store, the better the improvement in sales. Nordstrom sales were up 6.6% this July, Neiman Marcus up 7.7%, and Saks Fifth Avenue up a whopping 15.6%.

The article I referred to above points out some ways that retailers see what’s going on inside the wallets of their customers, particularly the low- to average-income shopper. They see a pronounced dip in sales in the weeks or days before shoppers’ paydays. People have less discretionary income, and tend to be living paycheck to paycheck.  And instead of buying clothing and other seasonal items as much for upcoming seasons, more people tend more to buy only what they need when they need it. This also enables them to take advantage of seasonal sales. In turn these retailers have to cut their prices to bring in shoppers, which lowers their gross receipts.

In contrast, luxury stores are now able to sell much more of their merchandise without discount, and have even been able to increase their prices. According to Saks Fifth Avenue’s chief executive Stephen Sadove, “There’s a dramatic decline in the amount of promotions in the luxury sector — we’re seeing higher levels of full-priced selling than we saw prerecession.” Example: their Christian Louboutin “Bianca” platform pumps just about sold out, at full price, for $775 a pair. And while three years ago his store’s most expensive Louboutin suede boots cost $1,575, the top of the line  version now sells for $2,495.

But before we get out our pitchforks to storm the gated mansions of the wealthy, here’s a bit of reality to chew on: “the top 5 percent of income earners accounts for about one-third of spending, and the top 20 percent accounts for close to 60 percent of spending,” said Mark Zandi, chief economist of Moody’s Analytics. “That was key to why we suffered such a bad recession — their spending fell very sharply.”

Sounds like we need the wealthy to continue their spending.

It sure doesn’t feel like it, especially during this maddeningly slow “recovery,” but it’s true: we’re all in this together.

 

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Bill Gates and Warren Buffett Want Higher Taxes for Themselves

 The two richest people in America think they are under-taxed. Do they know what they are talking about?

I noticed on the latest list of the country’s wealthiest that Bill Gates and Warren Buffett are #1 and #2. They both have been publicly arguing in favor of increased taxes for themselves and their very rich colleagues. Whether this is good policy is a matter of intense political debate. It’s a particularly important one considering what the country just went through a couple of weeks ago with the exhausting debt-ceiling battle. A central part of its last-minute compromise was to hand over responsibility for finding $1.5 trillion cuts in federal spending to a 12-person super-committee of U.S. Senators and Representatives. And to do so by the day before Thanksgiving.

With this timing clearly in mind, Warren Buffett wrote an op-ed column in last Sunday’s New York Times titled “Stop Coddling the Super-Rich.”

He makes two primary arguments:

1. The rich currently pay less in taxes as a percent of their income than the middle class:

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

… .  It’s nice to have friends in high places.

… .

The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.

2. Refuting the “job-killing” argument of fiscal conservatives, Buffett says that he and his fellow investors aren’t affected by higher tax rates :

I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

Buffett closes his piece by asking for an immediate higher income tax rate for those making more than $1 million, and an even higher rate for those making more than $10 million. He concludes:

My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.

 

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