Press Room

Harvard economists Carmen Reinhart and Kenneth Rogoff don’t make smash records. They write learned economic papers that make champions of austerity happy — and help smash the life prospects of average working families.

. . . These politicians . . . need "evidence" they can use . . . to show the general public that "austerity serves the general good and not just the rich."

Three years ago, Harvard’s Reinhart and Rogoff supplied that "evidence," via an academic paper that purported to show a grave danger whenever government debt hits 90 percent of Gross Domestic Product.

. . . We have still another indication that inequality corrupts every corner of contemporary societies, even our ivory towers.

SARAH ANDERSON: It creates this perverse incentive. What it means is, the more these corporations pay their CEOs, the lower their tax burden, and that just contributes to our national debt.

Under the U.S. tax code, you're only supposed to be able to deduct from corporate income taxes $1 million per executive, for executive pay. Beyond that, it's considered not a reasonable business expense. The problem is, there's this huge loophole, and that is, you can deduct unlimited amounts, as long as the pay is performance-based, and when they made that tax reform, it opened the door for massive payouts of stock options and performance bonuses, anything they could call "performance-based", then was fully deductibe.

And it's really part of the reason why we've seen this explosion of CEO pay in the past couple of decades . . . And so, it is outrageous and . . . these guys are out there telling the rest of us that we need to tighten our belts, we really need to cut back on earned benefit programs like Social Security and Medicare . . . and yet they haven't taken a lot at the many ways that these corporations that they're running have been contributing to the deficit by taking advantage of these outrageous loopholes.

SCOTT HARRIS: What kinds of Congressional action would be necessary to prevent these companies from having taxpayers subsidize what many would label as obscene CEO pay by some of these major corporations?

SARAH ANDERSON: It's a very simple fix. As I mentioned, there is a cap on the deductability of payments that companies make for executive compensation: it's set at a million dollars -- except there's this huge loophole for performance pay. And so if we got rid of that loophole, that would at least be one step towards ensuring that ordinary taxpayers are not subsdizing this runaway CEO pay.