It's a Halloween miracle: A member of the 1 percent is fighting for the rest of us, and probably spooking the hell out of his own kind.
Wealthy people need to stop whining about the taxes they pay, realize their success is mostly dumb luck and pay even higher taxes to help the less fortunate, Bill Gross, the billionaire founder and chief investment officer of Pacific Investment Management Co., wrote to his wealthy investors on Thursday.
"Having gotten rich at the expense of labor, the guilt sets in and I begin to feel sorry for the less well-off," Gross writes in his latest monthly missive, entitled "Scrooge McDucks," posted on the website of PIMCO, the world's biggest bond fund. His letters are usually colorful and sometimes self-critical. But this one is notable for its direct mockery of his own wealthy peers and clients:
Admit that you, and I and others in the magnificent '1%' grew up in a gilded age of credit, where those who borrowed money or charged fees on expanding financial assets had a much better chance of making it to the big tent than those who used their hands for a living.
But Gross is not just assuaging his personal guilt by penning a cri de wallet: He suggests the soaring income inequality of the past few decades is a serious problem for the entire U.S. economy:
Developed economies work best when inequality of incomes are at a minimum. Right now, the U.S. ranks 16th on a Gini coefficient for developed countries, barely ahead of Spain and Greece. By reducing the 20% of national income that “golden scrooges” now earn, by implementing more equitable tax reform that equalizes capital gains, carried interest and nominal income tax rates, we might move up the list to challenge more productive economies such as Germany and Canada.
He joins another billionaire, America's grandfatherly mascot of capitalism, Warren Buffett, in calling for higher taxes on the wealthy:
I would ask the Scrooge McDucks of the world who so vehemently criticize what they consider to be counterproductive, even crippling taxation of the wealthy in the midst of historically high corporate profits and personal income, to consider this: Instead of approaching the tax reform argument from the standpoint of what an enormous percentage of the overall income taxes the top 1% pay, consider how much of the national income you’ve been privileged to make.
Reading like a white paper from a lefty think tank, Gross notes that the 1 percent now take up 20 percent of U.S. income, up from 10 percent in the 1970s -- a fact he attributes at least partly to the massive tax cuts for the wealthy enacted by Presidents Ronald Reagan and George W. Bush.
Gross also points out that the wealthy have gotten all of the benefit of the explosive rise of the financial sector over the past several decades, along with a 30-year decline in interest rates. Together, these two factors lined the pockets of the wealthy, but left everybody else behind (emphasis added):
Yes I know many of you money people worked hard as did I, and you survived and prospered where others did not. A fair economic system should always allow for an opportunity to succeed. Congratulations. Smoke that cigar, enjoy that Chateau Lafite 1989. But (mostly you guys) acknowledge your good fortune at having been born in the ‘40s, ‘50s or ‘60s, entering the male-dominated workforce 25 years later, and having had the privilege of riding a credit wave and a credit boom for the past three decades. You did not, as President Obama averred, “build that,” you did not create that wave. You rode it. And now it’s time to kick out and share some of your good fortune by paying higher taxes or reforming them to favor economic growth and labor, as opposed to corporate profits and individual gazillions.
Did you catch that poke at Republicans, who essentially themed their entire 2012 convention around mocking Obama for saying "you didn't build that"? Obama and Gross probably meant slightly different things, but both caused monocles to pop from wealthy eye sockets all around the country.
But Gross has not yet begun to poke! He also jabs at financial muckraker Carl Icahn, who lately has been agitating for Apple to pay its shareholders a bigger dividend. Gross recently got into a Twitter war with Icahn over this, suggesting Icahn's time might be better spent in philanthropy than corporate shakedowns. Gross takes the fight several steps further in his letter, suggesting the Icahns of the world are part of our economy's bigger problem:
If X can’t grow revenues any more, if X company’s stock has only gone up because of expense cutting and stock buybacks, what does that say about the U.S. or many other global economies? Has our prosperity been based on money printing, credit expansion and cost cutting, instead of honest-to-goodness investment in the real economy?
In a past life I made a lot of fun of Gross for bad calls he made. But I'm glad to say that, if this bond-fund thing doesn't work out for him (hint: it's working out just fine), I'm pretty sure he's HuffPost material.
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