Alls or Nothings

The U.S. class divide deepens under Bush

Silja J.A. Talvi

While pundits expressed shock at the fate of the poorest inhabitants in Katrina’s wake, the U.S. class divide is not breaking news. But several new studies reveal the chasm separating those living in abject poverty from those with unimaginable fortunes is growing fast.

Big earners were the focus of Executive Excess 2005,” a study published in September by the Institute for Policy Studies and United for a Fair Economy. The study found that the ratio between CEO and worker pay now stands at 431-to-1. In real numbers, this adds up to $11.8 million in earnings for the average CEO compared to $27,460 for the average worker.

The most significant revelation of Executive Excess” concerned the growth in profits by companies involved in providing services, goods and military expertise” to the U.S. wars in Iraq and Afghanistan. Since 9/11, CEOs heading defense contractor firms have seen their pay increase by 200 percent. 

Among them is David H. Brooks, CEO of DHB Industries, which manufactures bulletproof vests. While 5,000 of DHB’s vests have already been recalled by the Marines, Brooks pocketed $70 million last year, in addition to selling company stock worth $186 million.

Halliburton, which holds 52 percent of Defense Department contracts in Iraq, has been among the biggest beneficiaries of the war in Iraq, earning $10.7 billion since 2004, despite internal Pentagon audits that indicated that hundreds of millions were being overcharged, mishandled or misused by Halliburton subsidiary KBR. 

After Katrina, Halliburton’s profit margin will increase significantly, as the company has already picked up repair contracts worth hundreds of millions – and is poised to receive even more. (Joe Albaugh, the director of FEMA for the first two years of the Bush administration, is now a key lobbyist for KBR.) That’s good news to Halliburton CEO David Lesar, who saw his pay increase to $11.4 million in 2004, up from $4.2 million in 2003

It seems particularly unjust to see executives profiting personally from the horrors of war,” says Sarah Anderson, co-author of the report.

While the money rolls in for Lesar and other war profiteers, the war’s cost to American citizens has surpassed that of the Vietnam War, according to The Iraq Quagmire,” a study by the Institute for Policy Studies. The study finds that each U.S. citizen has paid $727 to support the war in Iraq. The average monthly cost of the war in Iraq stands at $5.6 billion, compared with the monthly price tag of $5.1 billion (adjusted for inflation) during the Vietnam War. 

Other industries are raking it in as well. Overall, CEO pay has increased exponentially over the past 15 years –the cumulative pay of the 10 highest paid CEOs alone has totaled more than $11.7 billion. The report’s authors conferred a special CEO Hall of Shame” award on Citigroup’s Sandy Weill, who has earned more than $1.1 billion since 1990.

Low worker pay, poorly funded pension plans and skillful tax dodging have allowed these companies to reap huge profits. Forty-six large corporations paid no federal income taxes in 2003, despite earning a collective $30 billion in profits. The CEOs of those 46 companies that skirted federal taxes (led by the pharmaceutical-giant Pfizer) earned an average annual salary of $12.6 million.

Meanwhile, according to the latest Census Bureau data, the percentage of Americans living in poverty now stands at 12.7 percent, the high point of a steady four-year increase. From 2003 to 2004 alone, the number of people living in poverty increased by 1.1 million to 37 million. And, as critics of the Census Bureau’s approach to poverty data collection point out, the number is likely conservative because the figures do not account for regional differences in housing costs – nor are they adjusted for the rising costs of childcare and health care.

American women and children have fared the worst over the last four years. During that time the number of children living in extreme poverty – defined as living with an annual income of below $7,610 for a family of three – has increased by 20 percent to reach a high of 5.6 million. 

Nationwide the poverty rate for adult women stands at 12.7 percent (compared with 9.3 percent for men). Overall, the number of poor women increased for the fourth year in a row to 20.6 million. Even women with regular employment are doing worse – real median earnings for working women fell from $22,595 to $22,224 in 2004.

Joan Entmacher, of the National Women’s Law Center, says, The new Census data show that for most women and their families, there is no economic recovery.”

Silja J.A. Talvi, a senior editor at In These Times, is an investigative journalist and essayist with credits in many dozens of newspapers and magazines nationwide, including The Nation, Salon, Santa Fe Reporter, Utne, and the Christian Science Monitor.
Brandon Johnson
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