It’s encouraging that Colin Kaepernick’s refusing to stand during the playing of the national anthem at a pre-season game has found many who salute his action, in opposition to the automatic outrage of those who believe singing the
anthem, pledging allegiance, stickering their vehicles with yellow ribbons and flying the flag on holidays are what constitute patriotism.

His protest, objecting against a country “that oppresses black people and people of color”, was an outsized act of courage by the San Francisco 49ers quarterback for having done so before a stadium of spectators, probably leading to season-long hostility from “fans”, and possibly a hefty fine and/or suspension by the NFL for this act of heresy. But supporters spoke out, notably Kareem Abdul-Jabbar in a Washington Post essay.

His demurral was for a specific reason, but it brings up wider issues, such as why we are so accepting of coerced speech in this land that so celebrates free speech. It is coerced speech for those attending that game and every game when we are expected to stand and sing the anthem (or pretend to) or endure the disapproving frowns and glares of those around us — or of a whole stadium of people in the case of Kaepernick if he intends to sit out a season full of anthems.

And for that matter, why the linkage between the anthem and sports events? Are sports our most patriotic moment? The anthem, along with those of other countries, is fitting when winners mount the podium at the Olympics to receive their medals, and before matches at the Euro and World Cup, because there the athletes and teams represent their nations, but why at football and baseball games where it is only cities or colleges competing against each other? This peculiar practice is worthy of a conspiracy theory: is there a secret government beyond the one we know that values the herding together of thousands into stadiums as the perfect opportunity to keep the people in line, calling all to rise from their seats and place their hand s over their hearts to re-affirm their fealty to the nation or else be shamed by those around them? Would you believe that how we are supposed to behave when the anthem is played is in the U.S. Code?

Doubtless many in those crowds think that precede our public rituals with the “Stars Spangled Banner” must be prescribed by the Constitution. In fact, it only became the nation’s anthem in 1931. It began as a poem by lawyer Francis Scott Key written two years after watching the bombardment of Fort McHenry in Baltimore Harbor in 1812 when we were at war again with the British. It was later set to a song, originally written for a British social club, that had become popular in the United States. What is startling, as brought to light by this piece by Jon Schwarz at The Intercept, is that, seemingly unwittingly, Kaepernick chose the anthem as the perfect agency for his protest about oppression of blacks. The article is titled “Colin Kaepernick Is Righter Than You Know: The National Anthem Is a Celebration of Slavery”.

The British had been recruiting escaped American slaves into their ranks. With their numbers added to 20,000 British troops “Mr. Madison will be hurled from his throne”, read the orders from the Royal Navy’s Admiral Sir George Cockburn, which commanded…

“Let the landings you make be more for the protection of the desertion of the Black Population than with a view to any other advantage.”

Schwarz informs us that Key’s poem is four verses long. We only sing the first. The third verse ends with:

No refuge could save the hireling and slave
From the terror of flight or the gloom of the grave,
And the star-spangled banner in triumph doth wave
O’er the land of the free and the home of the brave.

Schwarz then writes,

“So when Key penned ‘No refuge could save the hireling and slave / From the terror of flight or the gloom of the grave,’ he was taking great satisfaction in the death of slaves who’d freed themselves. His perspective may have been affected by the fact he owned several slaves himself.”

Kaepernick later told the AP that he did know of the verse before the game. Apart from athletes who agree with him, his statements have launched a following such as #VeteransForKaepernick of military members and vets disgusted by the phony patriotism of Americans, only 1% of whom serve.

oaths and pledges

We once dealt with a related topic in these pages having to do with coerced speech as when the government requires a job applicant to swear out an oath of secrecy on joining agencies such as the NSA, and the clash of obligations that occurs when, once inside those cloistered walls, violations of laws and the Constitution are discovered. That article, found here, was titled “Snowden, Manning & the Entrapment of Oaths”. It spoke of loyalty oaths in general, the dangerous purges of the “McCarthy era”, and the need for an “eternal vigilance” against such instruments of intimidation as a means of controlling the people.

In that category is the controversy that has long swirled about the Pledge of Allegiance. It, too, has become a topic in the news, presumably inspired by the Kaeernick episode, with the spreading of a false rumor that President Obama has banned its use in schools.

Originally created in the late 1800s for school children to recite only on Columbus Day, it became an every day indoctrination in schools around the country, and long ago migrated into adult organizations where those who believe that freedom of speech also means the freedom not to speak find it an insidious example of coerced speech. Like the anthem, it explicitly forces groups to demonstrate loyalty else be viewed as unpatriotic pariahs by those assembled, those who likely have never given a thought to just why they should be made to swear loyalty out loud and in front of everyone.

The further argument against is that loyalty pledges do not belong in this country; they are more typically a feature of totalitarian regimes
such as Nazi Germany. (Indeed, before it was changed in 1942, the practice was to extend the right arm while reciting the pledge, as seen in this photo of American school children — the same salute as accompanies “Heil Hitler!”.)

On the board of a homeowners’ association, this writer was outvoted by the rest who wanted to begin every monthly meeting with the pledge. The relevance of the pledge for a homeowner organization was never considered, and doubly absurd for there always being so few attending. The board was apparently worried that residents’ loyalty to country lapsed across each 30-day interval and they therefore needed to be stood up monthly to renew their vows to the flag.

futility

There have been many cases down the years objecting to the pledge. At the onset of World War II, the Supreme Court allowed public schools to demand that children recite the pledge, rejecting the complaint of the Jehovah’s Witnesses that it violated their prohibitions against idolatry (in retaliation for their audacity, mobs burned their places of worship and schools expelled their children). That was then reversed in 1943 when Justices Hugo Black and William Douglas said the American war effort did not “depend on compelling little children to participate in a ceremony which ends in nothing for them but a fear of spiritual condemnation”. One of the Court’s finest jurists, Robert Jackson, who would go on to serve as the chief United States prosecutor at the Nuremberg Trials, wrote in his majority opinion that:

“If there is any fixed star in our constitutional constellation, it is that no official, high or petty, can prescribe what shall be orthodox in politics, nationalism, religion, or other matters of opinion or force citizens to confess by word or act their faith therein.”

Cases multiplied after the insertion of the words “under God” by Congress in 1954, the most recent in 2014 in New Jersey. That’s the principal basis for complaint since: the injection of religion into public schools by the inclusion of those words in violation of the First Amendment’s prohibition of establishing religion. The courts have essentially punted by saying students are free not to say those two words or to not take part in the pledge altogether. Civics courses have apparently vanished from the American school curriculum, but kiddies, you will go on daily pledging yourselves to the state.

Donald Trump has hit upon a powerful campaign strategy no one else thought of. In his inconsistencies, his contradictory pronouncements, his saying one
If we double the debt, we can just print money, like some countries.
thing one moment and denying it the next, people can fasten on whatever strikes a chord in them and discard the rest. “That’s the real Donald Trump”, they seem to say when they hear something that resonates in their life. “He doesn’t really mean the other thing he said”.

How else to explain their voting for a candidate who last fall said, “Our wages are too high”, that they need to be lowered to compete with other countries, and then denied that he said it. And doesn’t he intend to use tariffs to eliminate competition anyway?

And why else would his followers pay no attention to a tax plan that would raise the lowest tax rate rate of 10% to 12%? That’s a 20% increase that his lowest-income adherents certainly can’t afford.

And why cheer a candidate who said said in a Bloomberg interview a year ago , “I want to lower taxes for people that are making a lot of money that need incentives”.

opening gambit

His first plan was to reduce the top income tax rate from 39.6% to 25%, cut the capital gains tax from 23.8% to 15%, and do away with the estate tax (“death tax” he now calls it, per Republican vernacular) altogether — a trifecta of enormous benefit to him and his family, first and foremost.

But self-serving did not bother his loyal flock because the plan would also exempt each person’s first $25,000, or each married couple’s first $50,000 from any income tax. That would be 33 million additional households in 2017 paying no income tax, bringing the total from 44% under current law to 63%. Remember a few years ago the Republican outrage that 47% pay no taxes (said Fox News always, ignoring payroll taxes), or, to be correct, no income tax?

In September of last year, the Tax Foundation knew enough of Trump’s tax plan — a plan that would also cut the corporate tax rate from 35% to 15% — to estimate that it would reduce federal revenue by $12 trillion over a decade, causing massive deficits. The foundation is a conservative group, like a Russian who once said about a noted Communist theorist, “he sees so far ahead that what he predicts hasn’t even happened yet”, it assumes tax cuts will lead to growth, but even so, the foundation could only factor growth as reducing the shortfall from $12 trillion to $10.1 trillion. And they reminded us that deficit-financed tax cuts tend to boost interest rates, which would be likely to offset that growth.

Trump laid out his economic plan in greater detail just before Christmas. The Tax Policy Center at Brookings said it “would reduce federal revenues by $9.5 trillion over its first decade” and that was before accounting for added interest on the debt. Trump said his plan would somehow be revenue neutral.

“Don’t believe the phony claim that it will cost $10 trillion over a decade”, said two op-ed contributors at the Wall Street Journal who had signed on as Trump advisers, one a restaurant chain CEO somehow expert in macroeconomics, the other Stephen Moore, an economist for whom reality has made little inroads, has always believe that cutting taxes will reduce the deficit, and who has a history of inventing numbers to fit his arguments.

art of the deal

But what does it matter if the debt balloons. In May, Trump mused that he might reduce the national debt by persuading creditors to accept less than full payment. “First of all, you never have to default because you print the money“. He told the cable network CNBC, “I would borrow, knowing that if the economy crashed, you could make a deal.” He added, “And if the economy was good, it was good. So, therefore, you can’t lose.”

Trump might be interested to learn that most of the debt is borrowed from Americans, not the foreigners he probably assumes, so, whether making a deal or printing extra money, he would be short-changing us.

Met with horror, two days later he said he wouldn’t try to alter the terms of the nation’s $19 trillion debt, an obligation which he called “absolutely sacred”, leaving his followers once again to read themselves into whichever scenario they preferred.

takeover

In early August Trump backed away from his own plan and adopted the Republican Party’s plan, pretty much hewing to what House Speaker Paul Ryan has put forth every year. Trump’s plan vanished from his website.

Did any of his supporters notice that his huge exemptions from any income tax on the first $25,000 (single) and $50,000 ( married) had vanished? Better to change the subject with a trip to meet Mexican President Nieto and a speech on his return that assured his base that he’s for certain going to build that wall.

Under the revised plan, Trump raised the maximum income tax rate for individuals from 25% to 33%. That was hardly enough to roll back the 10-years of deficits of Trump’s original plan, and it led Moody Analytics to issue a report that said his tax plan, coupled with his curtailment of trade, would lead to a prolonged recession and job losses of 3.5 million that would “fall hardest on low- and middle-income workers”, said the Journal. “The U.S. economy will be more isolated and diminished”, said Moody’s. The report’s lead author, economist Mark Zandi, is a Democrat, the paper pointed out, but three other Moody’s economists also worked on the analysis.

Clinton called Trump’s plan “reckless and wrongheaded”, said it would “bankrupt” the country. “Of course, Donald himself would get a huge tax cut from his own plan. But we don’t know exactly how much because he won’t release his tax returns”.

But the faithful hear none of that. They listen to Trump say that his tax plan would cost him a fortune. Why? He points to his intention of closing the “carried interest” loophole that allows hedge fund operators and real estate moguls such as himself to be taxed at the lower capital gains rate even for income that does not derive from their own money invested at risk. Trump has said that paying so little — currently 23.8% rather than a top rate of 39.6% — is “getting away with murder”. It’s “outrageous” how little tax some very rich people pay, he says.

That pleases his fans in the bleachers, but it hid his brashest pitch yet. A number of business structures allow proceeds to pass through to their owners, where they are taxed at personal income rates rather than the corporate rate of 35%. The Tax Foundation estimated that 60% of all business income stems from such forms, whether Subchapter S corporations, limited liability corporations (LLCs), or partnerships. Now that his plan would drop the corporate tax rate from 35% to 15%, Trump says why not sort out that business income apart from an individual’s personal income and tax it at the 15% business rate?

Think about that. He would close the “carried interest” loophole’s 23.8% tax rate but treat all business income — carried interest included — at an even lower rate. “The pass-through exemption is a bad policy,” said Kyle Pomerleau, director of federal projects at the Tax Foundation. We would see a mad rush to channel personal income through phony companies to chase after that 15% rate. We would see federal tax revenue crash.

The Trump clan would do splendidly, though. He is user of the pass-through option on a colossal scale, identifying “564 separate business entities in his financial disclosure forms, most of them LLCs and partnerships”, The New York Times reported.

Yet miraculously, the foundation, which had predicted an apocalyptic $9.5 trillion shortfall before Trump announced his pass-through exemption, now thinks the Trump plan would only reduce revenue by $2.4 trillion across the next decade.

The Journal called it “progress” on taxes, but “he’ll have to be more specific about the deductions he would be willing to give up to finance his tax cut”, forgetting that Romney discovered that every deduction in the tax code wasn’t enough to pay for the 20% tax cut he promised in his 2012 campaign. No matter. “Growth would make up some of that $3 trillion”, whereas Hillary Clinton’s $1.3 trillion in tax increases would “yield less tax revenue” [!]. If tax cuts increase growth and therefore revenue according to the Republican canon, it follows that tax increases must reduce revenue, right?.

Clinton mocks the plan, concocted by a dozen affluent advisers, among them “six guys named Steve” (true). “He makes over-the-top promises that if people stick with him, trust him, listen to him, put their faith in him, he’ll deliver for them. He’ll make them wildly successful. And then everything falls apart, and people get hurt”.

The anger of the less-educated white males that Donald Trump has mined like a coal seam and brought to the surface is attributed mostly to
Clockwise from top left: Cook,
Ellison,Zaslav, Schwarzman

jobs lost to immigrants or shipped overseas. But it also results from years of public disgust over income inequality made so apparent by the multi-million dollar paychecks of corporate chieftains reported in the media. Those paychecks and the lavish bonuses paid to Wall Street “fat cats” are an in-the-face reminder that the system is rigged.

They see Tim Cook in 2011, in just his first year as Apple’s CEO, handed $376 million in stock and options. In 2012 Larry Ellison of Oracle was almost modest in comparison, taking top honors as highest paid with $96 million. He repeated in 2013 with $78.4 million (that’s $37,692 an hour). David Zaslav of Discovery Communications received total compensation worth $156 million 2014. Blackstone Group co-founder and CEO Stephen Schwarzman collected $799.2 million in 2015, up from about $689.3 million in 2014. It didn’t matter that the firm’s stock was battered last year.

And by the way, Cook just got another $135 million in stock.

Currently in the news, 93-year-old Sumner Redstone and his daughter finally wrested control of Viacom Inc. from CEO Philippe Daumon after a lengthy court battle. Since taking the top spot in 2006, the ousted Daumon has been paid on average $40 million a year to preside over the company’s rapid decline and will now receive a severance package of $72 million. That’s $72 million for doing nothing and simply going away. Giant severance giveaways have become commonplace.

Meanwhile, the U.S. Congress refuses to even consider raising the minimum wage from $7.25 an hour, even as inflation has cut that to $6.46 in buying power since the rate was last adjusted.

Huge income disparities stoke the anger of social injustice and eat away at the tenons that hold a democracy from coming apart. At one end is the $15.00 an hour minimum wage, which would make a tangible difference in people’s lives. At the other end, only a gesture in the so-called Dodd-Frank law that requires a public corporation to report the ratio of its chief executive’s pay to that of the company’s median worker. It has taken six years since the law’s passage for the sclerotic S.E.C. to come up with the rule for how the ratio is to be calculated — fought all along by business, feigning the overwhelming complexity of coming up with the (embarrassing) number from their fully computerized payrolls. And the law still doesn’t go into effect until next year.

In the meantime, we have only estimates. Back in the 1980s management guru Peter Drucker warned that a 20-1 multiple of CEO pay over the average worker was bad for morale, and that when the ratio was thought to be more like 40-1. Such innocent times. Today, depending on what is counted as compensation, the multiple is somewhere between 140-1 and 335-1.

The published ratio will be inert; it triggers no changes. The Wall Street Journal‘s Holman Jenkins, an arch conservative who wants no such invasion of corporate privacy, calls the rule an “arbitrary and uninformative mathematical exercise of no value to investors” that is destined to have zero effect. Perhaps, except we can count on the media to publish rankings of which corporations and CEOs sport the most egregious ratios, much as the media now does with rankings of CEO compensation. Could public shaming have a tempering effect? Possibly. As word of the gluttony in the C-suite spreads among employees, will they ask themselves why work so hard, and will the demoralizing effect damage a corporation’s productivity? But given today’s staggering ratios and the reluctance of corporate leaders to take corrective action for the good of their companies, good luck with that.

superstars

The colossal take-home pay of CEOs has no shortage of admirers in the media. We regularly hear that the CEOs of major corporations are worth the big paychecks because they have to make the “tough decisions”. They face “the constant pressure…to adapt to increasingly dynamic markets in an increasingly global environment”, says Jenkins. Just why someone should be paid millions for making a decision goes unquestioned. In April, when Google’s chief executive, Sundar Pichai, was given a pay award that could come to $200 million, a columnist at The Economist argued if he makes decisions that add just 1% to the market capitalization of Alphabet, Google’s parent company, that would be a $5 billion gain to shareholders. This is a common “tough decision” argument. But will he make such a decision? And if he does and it results in a $5 billion loss, will he be charged a huge amount for his poor judgment? Of course not. So why only a huge upside?

Many business-school professors are on board with the superstar argument. Lesser executives can help a company prosper, but a great CEO is leagues beyond, and worth the millions, they contend. The size of the paycheck is immaterial. Just take the example of Steve Jobs and the unparalleled transformation he wrought at Apple; that’s the example they all quickly turn to. “Salary is moot if the chief executive is creating many multiples of their pay in shareholder value…Steve Jobs rescued Apple…when it was near bankruptcy, and turned it into one of the most valuable companies ever”, says this New York Times article. A Journal op-ed titled “Misguided Political Attacks on CEO Pay” (everything is political, of course) says, “The achievements of…Jobs help[s] explain why CEO pay is so high”.

Except the rest are not Steve Jobs and so many of them fail. Having to resort to the most unique case (what others are there?) voids their general argument.

Besides, high pay does not necessarily pay off. A 2014 study from the University of Utah found that “The more CEOs are paid, the worse the firm does over the next three years, as far as stock performance and even accounting performance”.

Most objectionable is that one would assume from the apologists for stratospheric pay that the corporate chieftains who made that “tough decision” went on to do it all; that it wasn’t the legions of employees who went to work every day following through on developing whatever was decided — developing a new product line or starting a new division or managing a post-merger integration; that they weren’t the ones who actually did the work of making it happen.

At least a great many corporations have tied pay to performance in their employment contracts, so huge payouts are becoming less automatic. But this, too, shows the same mentality; that it is the CEO who does all the performing. All those who work the company every day apparently have nothing to do with it. No performance pay scales for them.

wolves at the door

The big corporations have no choice other than to pay extravagantly, goes a standard argument. There is vigorous competition for top talent. Whopping pay packages are needed to keep prized executives from jumping ship. Except the Conference Board, a research outfit, found in a study of the S&P 500 across the years 2001 to 2014 that most CEOs — presumably offered bigger paychecks elsewhere in keeping with the vigorous competition claim — nevertheless stayed home. The average tenure was nine years and almost half of those who did leave their companies did so for retirement.

What is clear is that the cult of CEOs is protected by a trove of such fables to excuse their outlandish pay and the insupportable rise we see in this chart from The Economist.
CEO pay had soared over 1200% by 2011 while the value of the 500 companies they ran rose less than 500% and median household income flatlined across the entire 40-year period. Are CEOs today that much better? You know the answer.

high maintenance, layers deep

The median CEO pay package of the top 200 American companies last year was just shy of $20 million, with $8.7 million at the median taking the form of stock grants and options. That cost is an expense that reduces profit and therefore taxes paid to federal and state governments. The paychecks are ultimately paid by shareholders, whether in cash or in dilution.

And so are the never mentioned pay of the tier of executives one step down the pyramid whose hiring bonuses, pay and severance pay packages are ratcheted upwards along with the boss to keep them happy.

And then there are the directors. Their role is to look after the interests of shareholders, but the CEOs have a heavy hand in their selection, which makes for boards appreciative of the CEOs who burnished their résumés and fattened their incomes. Handsome compensation arrangements encourage board members to ally with CEOs and vote for their continuance in the job. Median compensation for board members was $263,500 in 2015 at the largest 500 companies. Excluding CEOs who sit on boards, that’s a 50% increase since 2006. They, too, are paid about half in stock options. Nevertheless, the pay — which can be as much as the $594,000 paid to each Goldman Sachs Director (mostly in restricted shares) — is extravagant for what a The Wall Street Journal article estimates involves five hours a week and and USA Today says is an average of only eight meetings a year.

(It needs be said that if the corporation’s stock price drops over time, the options for both the CEO, his lieutenants and the directors end up worthless. However, the frequent practice is to cancel the original options and replace them with new ones at the now lower stock price. That amounts to a reward for failing, it also needs to be said).

Beyond pay packages, corporate CEOs of the top 100 corporations have retirement accounts equal in value to the entire retirement savings of 41% of American families. Their customized plans provide sizable payments for the rest of their lives even though the rest of the company’s employees may have no pension plan at all.

hold up

CEOs helping themselves to runaway pay packages; the unseen commensurately fattened pay they in turn award to the next next level of executives; the generous payout to directors — all of it insulated from shareholder action by the impracticality of mounting a challenge makes it possible for these cabals to take from shareholders at will, with neither permission nor repercussion. Tantamount to theft, the gaping income disparity to which this contributes between the 1% and the rest has created a broad and unhealthy rift in what Americans think of their country, a towering resentment that society has been rigged by an élite that is taking it all for themselves, holding down the 99%.

The one public body that is in a position to demand change — the stockholders — doesn’t seem to care. They ignore CEO looting as long as the share price is going up. Dodd-Frank instituted a “say-on-pay” rule that gives investors in public companies a vote every three years on executive pay, but the vote is non-binding. Just another gesture. Since 2013, British investors have that same law, but theirs is binding. So is a Swiss law, with jail terms for execs who flout it.

Not even the big fund managers show much interest in using their large stock holdings to coerce companies to reign in executive pay. The Shareholder Forum, a research group aligned with investor interests, found that a median level of 94.9% of them supported proposed or existing pay levels at the Standard & Poor’s 500 companies. This is not surprising; a given fund holds positions in dozens of companies. How can they spend the time and money to turn activist on so many fronts?

government takeover

That leaves governmental action as the only force for change. The tax code offers possibilities. Corporations could be denied deducting as an expense all compensation, no matter its form, paid to any executive that exceeds a certain ratio to that paid the median employee. That would increase taxable profit which might put pressure on management. The ratio could be tightened year-to-year. A second, still higher ratio could be set; public corporations paying in excess of that second ratio could be fined for looting shareholder property. Because that’s what they’re doing.

How about a federal law that caps top executives’ pay to a maximum ratio? If they want to earn more, they would need to raise the pay of the rest of the company’s employees to increase the median amount enough to reduce the ratio below the cap to allow higher pay. That very proposition was put to the Swiss in 2013 — a law that would have held executive pay to no more than 12 times what the lowest employee earns on the principle that no one should earn more in a month than someone earns in a year. The referendum was soundly defeated, but with 38% in favor. Might it have passed had the ratio not been so severe? The Swiss did ban signing bonuses and golden parachutes. They were outraged that the departing chairman and CEO of drug giant Novartis had demanded a severance payout of $78 million.

No such problem here for Mr. Daumon.

Those reading this who are indoctrinated in unfettered, laissez-faire, free-market capitalism have probably recoiled in disbelief at any such idea, but that says ideology is so embedded that consideration of any new ideas meant to cure a serious societal problem is banned from discussion.

That sounds like one of our political parties that wants to keep society structured just the way it is — at risk of the structure itself.