A MAXIMUM WAGE? ON SEPTEMBER 11, 2002, exactly one year after history’s most deadly assault on American civilians, a distinguished gentleman stepped to a simple podium at the front of Trinity Church, a grand old edifice that sits along New York’s fabled Wall Street. The gentleman, William J. McDonough, would be the fea- tured speaker in a ceremony to commemorate the tragedy that had shaken New York and the world. McDonough had not been a 9/11 rescue worker, nor a near victim, and his remarks would not speak directly to the horror and heroism of that awful day. McDonough, the president of the Federal Reserve Bank of New York, would note instead the challenges ahead, the need to rally the wounded, to comfort the grieving, to rebuild the city, all endeavors that require us, at a basic moral level, to love each other as we would have others love us. “Loving our neighbor as ourselves,” the New York Fed president would then contend, “requires that the remaining imperfections in our democracy be cor- rected.” 1 McDonough asked his Trinity Church listeners to devote their attention to one imperfection “in particular”: the gap between America’s most privileged and everyone else. Two decades ago, he observed, top American corporate executives earned forty-two times more than average production workers. Today’s top executives, he pointed out, earn over four hundred times the income of average workers. “I am old enough to have known both the CEOs of 20 years ago and those of today,” McDonough told the memorial assemblage. “I can assure you that we CEOs of today are not 10 times better than those of 20 years ago.” The vast increases in executive compensation over recent years, McDonough continued, have been “terribly bad social policy and perhaps even bad morals.” Amid gaps as wide as these, he noted, how can the privileged pur- port to be loving thy neighbor as thyself? “Is not my fellow worker,” McDonough wondered, “my neighbor?” Those of us who lead “lives of great comfort and success,” the New York Fed president would go on, need to acknowledge that “our good fortune” has “very little to do with our own virtue.” We have been lucky, he added. We have had fine genes, good health, loving parents, great teachers —“any and all of these 479 Originally published in Greed and Good: Understanding and Overcoming the Inequality That Limits Our Lives by Sam Pizzigati (Apex Press/Rowman & Littlefield, 2004). For more, see Inequality.org. 480 Greed and Good got us where we are.” Yes, McDonough noted, a market economy does require that some people “be rewarded more than others.” But, he appealed, “should there not be both economic and moral limitations on the gap created by the market-driven reward system?” America’s economy, McDonough concluded, does need limits. Business leaders, he advised, “should simply reach the conclusion that executive pay is excessive and adjust it to more reasonable and justifiable levels.” In Trinity Church, on that day of commemoration, William J. McDonough did not speak on behalf of his fellow movers and shakers in American business. These movers and shakers do not share, not in public at least, McDonough’s conviction that market-driven rewards can be economically and morally unjus- tifiable. But McDonough did give voice, on that solemn day in Trinity Church, to many millions of other Americans, fellow citizens who share his revulsion at our nation’s “recent explosion of claimed privilege,” and who believe, with him, that we must regain our “moral balance.” These millions of Americans are ready — and willing — to limit “the gap created by the market-driven reward system.” But they don’t know how. Maybe these pages can help. AMERICA’S BUSINESS LEADERS, William J. McDonough believes, have a moral responsibility to end compensation excess. If society appeals to this moral responsibility, he also believes, business leaders will see the light and take steps to limit the gaps that divide us. Society, in other words, need not legislate spe- cific limits on excessive incomes. We can trust those who sit in executive suites to do, eventually, the right thing. The market, McDonough has faith, will in the end produce just outcomes. Most Americans, over the last century, have not shared this faith. The mar- ketplace, we concluded long ago, cannot separate right from wrong, cannot guarantee fairness and justice. Markets, experience had taught us, mix the weak and the strong. Without limits in place, the strong define what “fairness” should be — on wages and everything else — and then impose their decision. We Americans did not want to live in that world. We insisted instead on new rules for the economy. We demanded legal protections for workers, for consumers, for the environment. In 1938, in one early rule-making triumph, we established a national minimum wage, a mandatory floor under wages. A floor under wages made sense in the 1930s. That floor makes equal sense today. Markets simply cannot be trusted to determine how much constitutes too little. But what about too much? Can any marketplace where some have far more power than others be trusted to determine at what point rewards become excessive? If the strong, in the absence of limits, have the power to deny mini- mal wage decency to the weak, don’t they also have the power to exceed decen- cy for themselves, to accumulate income and wealth at inappropriate levels? Over recent decades, with income and wealth concentrating at unprecedented rates, this thought has troubled more than a few observers. A MAXIMUM WAGE? 481 “Something seems wrong to me,” as Lynn Shellenberger, a Minnesota com- munity activist, noted deep in the boom years, “when we have a minimum wage and not a maximum wage for executives who make so much money.”2 “Why have a floor,” asked St. Louis Post-Dispatch columnist Bill McClellan about the same time, “and not a ceiling?”3 The notion of a maximum wage, a national income cap, actually first sur- faced in the original Gilded Age. Back in 1880, amid the starkest inequality America had up until then ever seen, moral philosopher Felix Adler called for “an income tax graduated up to 100 percent on all income above that needed to supply all the comforts and refinements of life.”4 Adler, the founder of the Ethical Culture movement, would be a leading crusader for social justice in New York and the nation for the next fifty years. A young Franklin D. Roosevelt may have heard him speak, or read his work. In any case, as we have seen, FDR would propose his own maximum, a 100 percent tax on all income over $25,000. Roosevelt, the greatest politician of his time, would prove unable to assem- ble much of a political coalition behind his income cap proposal. His allies like- ly saw FDR’s “supertax” as a politically impractical declaration of war against the rich, a war that Roosevelt could not win. If income were capped at FDR’s $25,000, after all, the wealthy would have felt themselves locked in place, fis- cally frozen, left with no prospect of improving their material well-being. In that situation, the wealthy would have had but one choice: to battle against Roosevelt’s cap by any means fair or foul. No cap would have been able to with- stand their subsequent pressure. But suppose FDR had proposed a cap, a maximum allowable income, not fixed at a particular dollar amount. Suppose FDR had asked Congress to set this cap, this maximum, not as a set amount, but as a multiple of the nation’s minimum wage. If that approach had been proposed and adopted, if we had an income ceiling tied to an income floor, a maximum tied to a minimum, then the wealthy, to increase their earnings, would not have had to subvert or side- step the 100 percent tax. They would have needed only to convince Congress to raise the minimum wage. By working to help others, they would have helped themselves. America’s income tax system, if all this had taken place, would have become reciprocal, not just progressive. Wealthy people, by playing within this tax system’s rules, would have been able to see their own individual income sta- tus improve. Systems where all people can see themselves benefiting, at some level, are systems that can stand the test of time. An approach to leveling down that com- bined both progressivity and reciprocity just might have a fighting chance. IF WE WERE, AS A SOCIETY, TO ACCEPT THIS NOTION that a maximum linked to a minimum might indeed help us, in James Madison’s words, to “reduce extreme wealth towards a state of mediocrity, and raise extreme indigence 482 Greed and Good toward a state of comfort,” we would immediately face an obvious question. How wide a gap between top and bottom makes sense? How much income is enough? How much is too much? Many economic analysts deem these questions inherently silly. As a society, they note, we cannot agree on what works of art ought to be labeled obscene. How could we possibly agree on the level of income we ought to label as obscenely excessive? “Obscene,” pay expert Graef Crystal has quipped, “is $1,000 more than I am making.”5 But some denizens of the business world have been willing to take a stab at defining too much. In 1998, Fortune magazine asked a sampling of people in and around American business to pinpoint where they believe excess begins. The answers, predictably, varied.6 “Above $5 million I have serious questions,” the Harvard Business School’s Howard Stevenson responded.