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Commentary & Opinion
Wed October 31, 2012
Michael Meeropol: Pity the poor billionaire
Have you ever heard of Leon Cooperman? He is a billionaire whose 1500 word letter of complaint to President Obama has made him the darling of the top one tenth of one percent. In the NEW YORKER’s October 8 issue he is profiled in a fascinating article that quotes from his letter.
I am reprinting the entire letter with my comments interspersed:
It is with a great sense of disappointment that I write this. Like many others, I hoped that your election would bring a salutary change of direction to the country, despite what more than a few feared was an overly aggressive social agenda. And I cannot credibly blame you for the economic mess that you inherited, even if the policy response on your watch has been profligate and largely ineffectual. (You did not, after all, invent TARP.) I understand that when surrounded by cries of "the end of the world as we know it is nigh", even the strongest of minds may have a tendency to shoot first and aim later in a well-intended effort to stave off the predicted apocalypse.
Did Cooperman oppose TARP? I personally signed a petition asking Congress to reject it – I wanted the big banks to fail. (I hoped that smaller banks would fill the gap and that the FED would buy commercial paper to keep the wheels of commerce turning.) But I wonder if Cooperman’s hedge fund would have survived the collapse of all the big banks.
What is galling about Cooperman’s assertion is that he calls Obama’s policy response “profligate and largely ineffectual.” These words contradict each other. Either the spending was “profligate” (too much) or “ineffectual” (too little). In fact it was partially successful but, yes, way too small. Check out a very careful analysis by Christina Romer in the October 20, 2012 NY Times. (“Economic View: The Fiscal Stimulus, Flawed but Valuable.”) In it, Dr. Romer argues that Obama’s Recovery Act that, “…at its peak, the act raised employment by about 1 million to 3 1/2 million jobs, compared with what would have happened without it.” To the Mitt Romney’s of today who accuse Obama of not getting us back to the level of unemployment that existed the day he took office (7.6%), Dr. Romer suggests the following analogy: “think of someone who’s been in a terrible accident and has massive internal bleeding. After lifesaving surgery, the patient still feels rotten. But we shouldn’t conclude from this lingering pain that the surgery was useless — because without it, the patient would have died.”
But what I can justifiably hold you accountable for is your and your minions' role in setting the tenor of the rancorous debate now roiling us that smacks of what so many have characterized as "class warfare".
Here as in many other places in this letter, I find myself scratching my head and asking, “What planet does this guy live on?” Obama has presided over a complete recovery for the super-rich of society. He has not moved to nationalize any of the big banks, nor has he attempted to break them up into smaller entities. He has not succeeded in ending the Bush tax cuts for the super-rich. He has not expended a penny of political capital to make it easier for workers to organize unions (despite a campaign promise to do so.) When state governments in the mid-west passed legislation to virtually destroy public sector unions, Obama was silent and never lifted a finger to support those workers. It appears that Obama has said a few things that “insult” the super-rich – as when he thought it unconscionable for Wall Street firms to take bail-out money and then shower lavish bonuses on themselves. His tax policy was well known before the 2008 election. He promised to raise taxes on the super-rich back to Clinton era rates. Under Ronald Reagan from 1981 to 1986, the top rate was 50%. Is the Clinton era 39.6% “class warfare”?
Whether this reflects your principled belief that the eternal divide between the haves and have-nots is at the root of all the evils that afflict our society or just a cynical, populist appeal to his base by a president struggling in the polls is of little importance. What does matter is that the divisive, polarizing tone of your rhetoric is cleaving a widening gulf, at this point as much visceral as philosophical, between the downtrodden and those best positioned to help them. It is a gulf that is at once counterproductive and freighted with dangerous historical precedents. And it is an approach to governing that owes more to desperate demagoguery than your Administration should feel comfortable with.
I would like to see any evidence of “desperate demagoguery” on the part of Obama. Yes, the Occupy Wall Street movement makes the argument that the super-rich have too much power and wealth and need to be curbed. Obama has kept that movement at arm’s length – and members of that movement have not moved to endorse Obama, either.
Just to be clear, while I have been richly rewarded by a life of hard work (and a great deal of luck); I was not to-the-manor-born.
I am glad to see Cooperman admit that he owes his wealth to luck. Too many very rich people believe they deserve all the credit for their success – yet most wealth is based on inheritance or luck. (Professional athletes and entertainers are obviously exceptions – as are brain surgeons or best-selling authors.)
My father was a plumber who practiced his trade in the South Bronx after he and my mother emigrated from Poland. I was the first member of my family to earn a college degree. I benefited from both a good public education system (P.S. 75, Morris High School and Hunter College, all in the Bronx) and my parents' constant prodding. When I joined Goldman Sachs following graduation from Columbia University's business school, I had no money in the bank, a negative net worth, a National Defense Education Act student loan to repay, and a six-month-old child (not to mention his mother, my wife of now 47 years) to support.
That NDEA student loan came courtesy of the taxpayers as did his degree from Hunter College.
I had a successful, near-25-year run at Goldman, which I left 20 years ago to start a private investment firm. As a result of my good fortune, I have been able to give away to those less blessed far more than I have spent on myself and my family over a lifetime, and last year I subscribed to Warren Buffett's Giving Pledge to ensure that my money, properly stewarded, continues to do some good after I'm gone.
My story is anything but unique. I know many people who are similarly situated, by both humble family history and hard-won accomplishment, whose greatest joy in life is to use their resources to sustain their communities. Some have achieved a level of wealth where philanthropy is no longer a by-product of their work but its primary impetus. This is as it should be. We feel privileged to be in a position to give back, and we do. My parents would have expected nothing less of me.
I am not, by training or disposition, a policy wonk, polemicist or pamphleteer. I confess admiration for those who, with greater clarity of expression and command of the relevant statistical details, make these same points with more eloquence and authoritativeness than I can hope to muster. For recent examples, I would point you to "Hunting the Rich" (Leaders, The Economist, September 24, 2011), "The Divider vs. the Thinker" (Peggy Noonan, The Wall Street Journal, October 29, 2011), "Wall Street Occupiers Misdirect Anger" (Christine Todd Whitman, Bloomberg, October 31, 2011), and "Beyond Occupy" (Bill Keller, The New York Times, October 31, 2011) - all, if you haven't read them, making estimable work of the subject.
MEEROPOL: Peggy Noonan and Christine Todd Whitman are hardly disinterested observers “calling it as they see it.” They are political operatives spouting a party line.
But as a taxpaying businessman with a weekly payroll to meet and more than a passing familiarity with the ways of both Wall Street and Washington, I do feel justified in asking you: is the tone of the current debate really constructive?
He should be asking this of the Republicans who from the moment Obama was sworn in, played the obstruction and demonization game to the hilt.
People of differing political persuasions can (and do) reasonably argue about whether, and how high, tax rates should be hiked for upper-income earners; whether the Bush-era tax cuts should be extended or permitted to expire, and for whom; whether various deductions and exclusions under the federal tax code that benefit principally the wealthy and multinational corporations should be curtailed or eliminated; whether unemployment benefits and the payroll tax cut should be extended; whether the burdens of paying for the nation's bloated entitlement programs are being fairly spread around,
Note the words “bloated entitlement programs” --- this states a conclusion that we spend too much on entitlements. Many would argue that our problem is we spend too little – that our social safety net is woefully inadequate to our needs as a nation.
and whether those programs themselves should be reconfigured in light of current and projected budgetary constraints; whether financial institutions deemed "too big to fail" should be serially bailed out or broken up first, like an earlier era's trusts, because they pose a systemic risk and their size benefits no one but their owners; whether the solution to what ails us as a nation is an amalgam of more regulation, wealth redistribution, and a greater concentration of power in a central government that has proven no more (I'm being charitable here) adept than the private sector in reining in the excesses that brought us to this pass - the list goes on and on, and the dialectic is admirably American. Even though, as a high-income taxpayer, I might be considered one of its targets, I find this reassessment of so many entrenched economic premises healthy and long overdue. Anyone who could survey today's challenging fiscal landscape, with an un- and underemployment rate of nearly 20 percent and roughly 40 percent of the country on public assistance, and not acknowledge an imperative for change is either heartless, brainless, or running for office on a very parochial agenda. And if I end up paying more taxes as a result, so be it. The alternatives are all worse.
Why is this addressed to Obama? He tried to get Republican compromises on every one of these points and he was obstructed at every point. Republicans have acted as if they wanted the economy to fail so that Obama would be perceived as a failure so he would be a one-term President. They opposed every important piece of legislation – even after all sorts of Republican ideas (like the individual mandate in Obamacare) were incorporated into them.
But what I do find objectionable is the highly politicized idiom in which this debate is being conducted. Now, I am not naive. I understand that in today's America, this is how the business of governing typically gets done - a situation that, given the gravity of our problems, is as deplorable as it is seemingly ineluctable. But as President first and foremost and leader of your party second, you should endeavor to rise above the partisan fray and raise the level of discourse to one that is both more civil and more conciliatory, that seeks collaboration over confrontation. That is what "leading by example" means to most people.
Capitalism is not the source of our problems, as an economy or as a society, and capitalists are not the scourge that they are too often made out to be.
Capitalism in its current American version is indeed the source of our problems. Check out the book by Judge Richard Posner – a well-known conservative theorist who virtually created the field of Law and Economics. (A Failure of Capitalism: The Crisis of 2008 and the Descent into Depression.) Starting in the Reagan era, inequality has grown to frightening proportions – My commentaries have often featured the work of Emanuel Saez from Berkeley California. Check out the p. 9 diagram in the following link: http://elsa.berkeley.edu/~saez/saez-UStopincomes-2010.pdf. The inequality has created seriously sluggish growth fueled by a mountain of debt. (Check out Fred Magdoff and Michael Yates, The ABC’s of the Economic Crisis.). The backlash of the Occupy movement rightly blames the system for the crisis. Individual capitalists need to be part of the solution if they do not want to remain part of the problem. Fighting against increased financial regulation, a higher minimum wage, union rights for workers, higher taxes on millionaires and billionaires, and supporting a free-for-all in the political arena where money can speak as loudly as the billionaire wants it too is definitely class warfare – waged by the super-rich against the rest of us.
As a group, we employ many millions of taxpaying people, pay their salaries, provide them with healthcare coverage, start new companies, found new industries, create new products, fill store shelves at Christmas, and keep the wheels of commerce and progress (and indeed of government, by generating the income whose taxation funds it) moving. To frame the debate as one of rich-and-entitled versus poor-and-dispossessed is to both miss the point and further inflame an already incendiary environment. It is also a naked, political pander to some of the basest human emotions - a strategy, as history teaches, that never ends well for anyone but totalitarians and anarchists.
When Franklin Roosevelt used the same political strategy he saved American capitalism and American democracy. There were many in the US who wanted to emulate Mussolini’s Italy or Stalin’s USSR (and later Hitler’s Germany). Though many capitalists detested Roosevelt, some (like Joseph P. Kennedy, the father of the President and Senators) saw Roosevelt’s policy as the way to save their privileged positions – even as they had to give up some of their wealth. Roosevelt’s reforms did curb the power of big business and reduce income inequality. They also paved the way for the extraordinary prosperity after World War II. Unions, social security, the minimum wage and government responsibility to create “high employment” were all the result of Roosevelt’s New Deal. He had sold that New Deal with anti-business rhetoric which won him the enmity of many very rich people (whose anger he “welcomed”) and the strong support of the vast majority of the population.
With due respect, Mr. President, it's time for you to throttle-down the partisan rhetoric and appeal to people's better instincts, not their worst. Rather than assume that the wealthy are a monolithic, selfish and unfeeling lot who must be subjugated by the force of the state, set a tone that encourages people of good will to meet in the middle.
Cooperman and I just don’t live in the same country. Obama did all that – it was the Republicans and the Tea Party fringe that demonized Obama from the start.
When you were a community organizer in Chicago, you learned the art of waging a guerrilla campaign against a far superior force. But you've graduated from that milieu and now help to set the agenda for that superior force.
MEEROPOL: Actually, the Obama Administration has proved that in the post-Citizen’s United era, Corporate America has the “superior force.”
You might do well at this point to eschew the polarizing vernacular of political militancy and become the transcendent leader you were elected to be. You are likely to be far more effective, and history is likely to treat you far more kindly for it.
END OF LETTER.
In the New Yorker article, Cooperman is quoted:
“Our problem frankly is as long as the President remains anti-wealth, anti-business, anti-energy, anti-private-aviation, he will never get the business community behind him.
MEEROPOL: The anti-private aviation reference is telling. He is miffed that Obama talks about ending the tax deduction for corporate jets. (So Cooperman is admitting that without that tax subsidy, no corporation would buy a jet to play with??)
The problem and the complication is the forty or fifty percent of the country on the dole that support him.
NOTE here the echo of Mitt Romney’s so-called “mistake” when he attacked the 47% who are allegedly dependent on government in the famous secretly recorded tape.
These super rich people actually believe that stuff.
What is going on with Cooperman, Romney and other whining billionaires?
I think these folks must in their heart of hearts know that they are billionaires not because they have done anything particularly valuable and useful for society but because they have been lucky (as Cooperman admitted).
So they not only want the money but they are so insecure they want the rest of us to praise them as they rake it in.
These insecure billionaires claim that they themselves created the successful businesses that they profit from. The fact that they had essential help from workers, long gone inventors and discoverers, government public works, a police force and courts is ignored.
This reminds me of a great poem by Berthold Brecht—A Worker Reads history
Who built the seven gates of Thebes?
The books are filled with names of kings.
Was it the kings who hauled the craggy blocks of stone?
And Babylon, so many times destroyed.
Who built the city up each time? In which of Lima's houses,
That city glittering with gold, lived those who built it?
In the evening when the Chinese wall was finished
Where did the masons go? Imperial Rome
Is full of arcs of triumph. Who reared them up? Over whom
Did the Caesars triumph? Byzantium lives in song.
Were all her dwellings palaces? And even in Atlantis of the legend
The night the seas rushed in,
The drowning men still bellowed for their slaves.
Young Alexander conquered India.
Caesar beat the Gauls.
Was there not even a cook in his army?
Phillip of Spain wept as his fleet
was sunk and destroyed. Were there no other tears?
Frederick the Great triumphed in the Seven Years War.
Who triumphed with him?
Each page a victory
At whose expense the victory ball?
Every ten years a great man,
Who paid the piper?
So many particulars.
So many questions.
In our society, there is much too much celebration of the top dogs who get most of the money and too much of the credit while virtually none of the credit and too little money goes to the unsung heroes who do the work.
Michael Meeropol is visiting professor of Economics at John Jay College of Criminal Justice of the City University of New York. He is the author of Surrender, How the Clinton Administration Completed the Reagan Revolution.
The views expressed by commentators are solely those of the authors. They do not reflect the views of this station or its management.