Jul 9 2012
Summer 2009. Unemployment is soaring. Across America, millions of terrified people are facing foreclosure and getting kicked to the curb. Meanwhile in sunny California, the hotel-heiress Paris Hilton is investing $350,000 of her $100 million fortune in a two-story house for her dogs. A Pepto Bismol-colored replica of Paris’ own Beverly Hills home, the backyard doghouse provides her precious pooches with two floors of luxury living, complete with abundant closet space and central air.
By the standards of America’s rich these days, Paris’ dogs are roughing it. In a 2006 article, Vanity Fair’s Nina Munk described the luxe residences of America’s new financial elite. Compared with the 2,405 square feet of the average new American home, the abodes of Greenwich Connecticut hedge-fund managers clock in at 15,000 square feet, about the size of a typical industrial warehouse. Many come with pool houses of over 3,000 square feet.
Steven Cohen of SAC Capital is a typical product of the New Gilded Age. He paid $14.8 million for his Greenwich home, which he stuffed with a personal art collection that boasts Van Gogh’s Peasant Woman Against a Background of Wheat (priced at $100 million); Gauguin’s Bathers ($50 million); a Jackson Pollock drip painting (also $50 million); and Andy Warhol’s Superman ($75 million). Not satisfied, Cohen spent millions renovating and expanding, adding a massage room, exercise and media rooms, a full-size indoor basketball court, an enclosed swimming pool, a hairdressing salon, and a 6,734-square-foot ice-skating rink. The rink, of course, needs a Zamboni ice-resurfacer which Cohen houses in a 720-square-foot shingle cottage. Munk quotes a visitor to the estate who assured her, “You’d be happy to live in the Zamboni house.”
So would some of the over 650,000 Americans sleeping in shelters or under highway overpasses.
By the time it was finished, Cohen’s house had swelled to 32,000 square feet, the size of the Taj Mahal. Even at Taj prices, cost mattered little to a man whose net worth is estimated by the Wall Street Journal at $8 billion — with an income in 2010 of over $1 billion. Cohen’s payday is impressive, but by no means unique. In 2005, the 25 hedge-fund managers averaged $363 million. In cash. Paul Krugman observes that these 25 were paid three times as much as New York City’s 80,000 public school teachers combined. And because their pay is taxed as capital gains rather than salary, the teachers paid a higher tax rate!
Back in the 18th century, Alexis de Tocqueville called America the “best poor man’s country.” He believed that “equality of conditions” was the basic fact of life for Americans. How far we’ve come! Since then, the main benefits of economic growth have gone to the wealthy, including the Robber Barons of the Gilded Age whom Theodore Roosevelt condemned as “malefactors of great wealth” living at the expense of working people. By the 1920s, a fifth of American income and wealth went to the richest 1 percenters whose Newport mansions were that period’s Greenwich homes. President Franklin Roosevelt blamed these “economic royalists” for the crash of ’29. Their recklessness had undermined the stability of banks and other financial institutions, and the gross misdistribution of income reduced effective demand for products and employment by limiting the purchasing power for the great bulk of the population.