0:00:34 > 0:00:41This stretch of Park Avenue on the Upper East Side of Manhattan
0:00:41 > 0:00:44is the wealthiest neighbourhood in New York City.
0:00:44 > 0:00:48This is where the people at the top of the ladder live.
0:00:48 > 0:00:52The upper crust. The ultra rich.
0:00:54 > 0:00:57But this street is about a lot more than money.
0:00:57 > 0:01:00It's about political power.
0:01:00 > 0:01:04The rich here haven't just used their money to buy fancy cars,
0:01:04 > 0:01:06private jets and mansions.
0:01:06 > 0:01:09They've also used it to rig the game in their favour.
0:01:09 > 0:01:13Over the last 30 years, they've enjoyed unprecedented
0:01:13 > 0:01:18prosperity from a system that they increasingly control.
0:01:20 > 0:01:23But if you head north for about ten minutes, this Park Avenue
0:01:23 > 0:01:26comes to an end at the Harlem River.
0:01:26 > 0:01:31On the other side of the water, there is another Park Avenue.
0:01:31 > 0:01:33This is the South Bronx,
0:01:33 > 0:01:36home to America's poorest congressional district.
0:01:36 > 0:01:40There are 700,000 people in this district.
0:01:40 > 0:01:43Almost 40% of them live in poverty,
0:01:43 > 0:01:45making less than 40 dollars a day.
0:01:47 > 0:01:50From here, the last 30 years have looked very different than
0:01:50 > 0:01:53the view from Manhattan's Park Avenue.
0:01:53 > 0:01:55People here have seen their wages fall
0:01:55 > 0:01:59and the cost of almost everything else go through the roof.
0:01:59 > 0:02:01They've lost their jobs in the recession
0:02:01 > 0:02:04caused by bankers across the river.
0:02:04 > 0:02:08They've watched their children struggle in failing schools.
0:02:08 > 0:02:11And they've ended up even worse off than they were a generation ago.
0:02:13 > 0:02:16But America is still a land of opportunity, isn't it?
0:02:16 > 0:02:18A place where anyone can make it to the top
0:02:18 > 0:02:22if they are willing to work hard and set their sights high.
0:02:22 > 0:02:25That's what makes this country great.
0:02:25 > 0:02:27Isn't that what we tell ourselves?
0:02:28 > 0:02:32But in today's America, what are the chances that someone who starts
0:02:32 > 0:02:36- their life on- this- Park Avenue will end up living on- this- Park Avenue?
0:02:51 > 0:02:55Let's imagine that you're invited to a game of Monopoly.
0:02:55 > 0:02:58And you arrive at this game to find out that all of the properties
0:02:58 > 0:03:02have been divided up, all of the money has already been handed out,
0:03:02 > 0:03:03but you're told,
0:03:03 > 0:03:05"Hey, go ahead and sit down.
0:03:05 > 0:03:06"Play the game.
0:03:06 > 0:03:10"We're going to give you a chance to play just like everyone else."
0:03:13 > 0:03:16There are some in society that have a lot of access, a lot of
0:03:16 > 0:03:21social mobility, a lot of resources to do the things that they want.
0:03:21 > 0:03:24As opposed to other people who are more disadvantaged,
0:03:24 > 0:03:27more underprivileged, don't have the same levels of resources.
0:03:27 > 0:03:30Paul Piff is a social psychologist at
0:03:30 > 0:03:32the University of California, Berkeley,
0:03:32 > 0:03:34who studies the psychology of wealth
0:03:34 > 0:03:37and the consequences of inequality in our society.
0:03:37 > 0:03:41We came upon an experiment he conducted that caught our interest.
0:03:47 > 0:03:49Oh, yeah.
0:03:49 > 0:03:52Monopoly first became a hit during the Great Depression.
0:03:52 > 0:03:56It's a game of ruthless, dog-eat-dog capitalism.
0:03:56 > 0:04:00True to the American Dream, everyone has an equal opportunity, starting
0:04:00 > 0:04:04with the same amount of money and the same chance to succeed.
0:04:04 > 0:04:06Winning is a mix of luck and skill.
0:04:06 > 0:04:08For his experiment,
0:04:08 > 0:04:13Piff rigged the game by giving one player a huge advantage.
0:04:13 > 0:04:15So there are two players, they don't know each other.
0:04:15 > 0:04:19You flip a coin to determine your position. So it's random.
0:04:19 > 0:04:23Almost like your emergence into the world is random.
0:04:23 > 0:04:26Whether you land in this family or this other family.
0:04:26 > 0:04:28If you were the rich person you got a lot more money.
0:04:28 > 0:04:30You got two times as much money.
0:04:30 > 0:04:36When you pass Go, you collect 200, you would get to roll both dice
0:04:36 > 0:04:38so you are allowed to move around the board quicker.
0:04:43 > 0:04:45Now, if you are on the low end,
0:04:45 > 0:04:47we really hit you hard.
0:04:47 > 0:04:49You got half the money,
0:04:49 > 0:04:52when you passed Go, you collected half the salary,
0:04:54 > 0:04:56You only got to roll one die, so you're
0:04:56 > 0:04:59moving around the board very, very slowly as the other person is
0:04:59 > 0:05:03just whizzing around you, collecting 200 dollars every couple of turns.
0:05:07 > 0:05:09Even in a game that's openly rigged,
0:05:09 > 0:05:12the rich players inevitably exhibit a sense of entitlement.
0:05:13 > 0:05:16They gobble up more of the carefully placed pretzels.
0:05:17 > 0:05:20They come to believe that they deserve to win.
0:05:23 > 0:05:27And they showed no concern for the misfortune of the poor players,
0:05:27 > 0:05:28even though the poor players
0:05:28 > 0:05:31don't stand the slightest chance of winning.
0:05:33 > 0:05:35The idea of the American dream
0:05:35 > 0:05:38is that everyone's got an equal opportunity.
0:05:38 > 0:05:40You've just got to decide to play.
0:05:40 > 0:05:44But in fact, there are large groups of people
0:05:44 > 0:05:48that experience the game as unfair.
0:05:48 > 0:05:53The opportunity's not there. All the rules have been decided.
0:05:53 > 0:05:55The property's already been bought up
0:05:55 > 0:05:57and the money is already in the hands of the other players.
0:05:59 > 0:06:02Woo! You rebound. Wo Ho! Oh!
0:06:02 > 0:06:03I'm Michael Jordan.
0:06:03 > 0:06:06- I'm Kobe.- I'm Ray Allen!
0:06:06 > 0:06:09Almost all families start out with wanting the same things
0:06:09 > 0:06:11for their children.
0:06:11 > 0:06:12They want them to be safe.
0:06:12 > 0:06:13They want them to be happy
0:06:13 > 0:06:16and they want them to be successful and healthy.
0:06:16 > 0:06:23But even before birth, so many kids start that race behind.
0:06:23 > 0:06:26They come into a neighbourhood that's unsafe.
0:06:28 > 0:06:31Maybe they are in an overcrowded apartment.
0:06:31 > 0:06:33They don't have healthy nutrition.
0:06:33 > 0:06:36They might have medical issues that aren't being addressed.
0:06:36 > 0:06:38I would say their number one challenge is just
0:06:38 > 0:06:40a lack of opportunities in general.
0:06:42 > 0:06:46In parts of the South Bronx, unemployment has reached 19%,
0:06:46 > 0:06:49and many families struggle just to put food on the table.
0:06:51 > 0:06:52Pastor Colin Dunkley
0:06:52 > 0:06:56and his wife, April, run a food pantry in the South Bronx.
0:06:56 > 0:06:59It feeds about 200 struggling families every week.
0:06:59 > 0:07:01I like helping people.
0:07:01 > 0:07:02I like serving the people.
0:07:02 > 0:07:04I like helping the people.
0:07:04 > 0:07:07If there's something we can do to bless them
0:07:07 > 0:07:08that's what we're going to do.
0:07:08 > 0:07:11You typically get the vegetables in the can, beans in the can,
0:07:11 > 0:07:13bags of rice.
0:07:13 > 0:07:16Sometimes we get the get the little sippy Capri Sun juices.
0:07:16 > 0:07:18We'll put those in the bag for the kids.
0:07:18 > 0:07:22But they don't have nearly enough to meet the demand.
0:07:22 > 0:07:25When we visited, they ran out of food in 15 minutes.
0:07:25 > 0:07:28No more comida! Nada! No more!
0:07:28 > 0:07:30There is no more food at this time.
0:07:30 > 0:07:33You can come back next Monday at 2 o'clock.
0:07:34 > 0:07:37That's it, Mommy, that's it. No, sir, I'm sorry.
0:07:37 > 0:07:38No more.
0:07:40 > 0:07:45It is very, very hard to pull yourself out of extreme
0:07:45 > 0:07:46poverty in the United States.
0:07:46 > 0:07:48It almost never happens.
0:07:48 > 0:07:52This runs completely counter to what people's notion of America
0:07:52 > 0:07:54has been for a very long time.
0:07:54 > 0:07:57We think of ourselves as the land of opportunity.
0:07:57 > 0:07:59Mobility in the United States
0:07:59 > 0:08:03lags most other advanced industrial democracies.
0:08:04 > 0:08:09When I was growing up, the image of America, the self-image,
0:08:09 > 0:08:12was of a vast, middle class country.
0:08:14 > 0:08:19Of course, there was a small rich group and there were some poor,
0:08:19 > 0:08:23but America prided itself and understood that its health
0:08:23 > 0:08:26was because of a vast middle class.
0:08:26 > 0:08:29We're not that kind of society any more.
0:08:29 > 0:08:32There's always been a gap between the wealthiest in our society
0:08:32 > 0:08:38and everyone else, but in the last 30 years something changed.
0:08:38 > 0:08:41That gap became the Grand Canyon.
0:08:44 > 0:08:47The incomes of people at the lower end stagnated.
0:08:48 > 0:08:52And a disproportionate amount of
0:08:52 > 0:08:55the growth in the economy has accrued to those at the upper end.
0:08:55 > 0:08:57This is what America's economic pie
0:08:57 > 0:08:58looked like in the decades
0:08:58 > 0:09:00after World War II.
0:09:00 > 0:09:02Income gains shared by everyone,
0:09:02 > 0:09:03with big portions
0:09:03 > 0:09:05going to average Americans.
0:09:06 > 0:09:09But since the late 1970s,
0:09:09 > 0:09:12the bottom 90% have seen their share
0:09:12 > 0:09:16completely devoured by the top 1%.
0:09:16 > 0:09:20The wealthy are getting an enormous percentage of all of the gains
0:09:20 > 0:09:22in the entire economy.
0:09:22 > 0:09:24When I talk about the wealthy I'm talking about,
0:09:24 > 0:09:26like, in the thousands of people.
0:09:26 > 0:09:29Thousands might be overstating it.
0:09:29 > 0:09:34As of 2010, only 400 of the richest Americans controlled more wealth
0:09:34 > 0:09:38than the bottom half of American households.
0:09:38 > 0:09:40That's 150 million people.
0:09:41 > 0:09:45The question is, what are the people at the top going to do with
0:09:45 > 0:09:47all that money?
0:09:47 > 0:09:54There is a little, tiny group and it's probably 1% of the 1%.
0:09:54 > 0:09:58Those people are concentrated in a very small number of places.
0:09:58 > 0:10:02New York has been one of those places since the early 19th century.
0:10:02 > 0:10:08It has been a world city with world-class fortunes
0:10:08 > 0:10:14and it has been a magnet for people who live in the 1% of the 1%.
0:10:17 > 0:10:19I was in a taxi going down Fifth Avenue
0:10:19 > 0:10:22looking for the richest apartment building in New York,
0:10:22 > 0:10:27and there were about ten buildings that were on the initial list.
0:10:27 > 0:10:31740 Park became the epicentre of the people who ruled the world.
0:10:31 > 0:10:35Truly the masters of the universe. They all lived at 740 Park.
0:11:04 > 0:11:07It was known before my book as the Rockefeller Building but in fact
0:11:07 > 0:11:11Rockefeller was not one of the original people in the building.
0:11:11 > 0:11:13It was built by Jackie Kennedy's grandfather,
0:11:13 > 0:11:18James T Lee, in a consortium with a group of the people who were
0:11:18 > 0:11:23considered to be responsible for the market crash of 1929
0:11:23 > 0:11:25and the depression that followed.
0:11:25 > 0:11:28And then it became kind of the Standard Oil building.
0:11:28 > 0:11:31It was the building where lots of Standard Oil executives
0:11:31 > 0:11:32and their friends all lived.
0:11:32 > 0:11:37It was truly considered the holy grail for a certain kind
0:11:37 > 0:11:39of wealthy New Yorker.
0:11:39 > 0:11:43Now, the largest category in 740 Park are hedge fund guys,
0:11:43 > 0:11:46and they're the people with the most money now.
0:11:46 > 0:11:49They are the equivalent of the oil people from the '30s.
0:11:49 > 0:11:52These guys rule the world, you know.
0:11:52 > 0:11:55They are multi-billionaires of,
0:11:55 > 0:11:58CEOs of the major corporations in the world.
0:11:58 > 0:12:01This doorman once worked at 740 Park Avenue.
0:12:01 > 0:12:03He agreed to be interviewed,
0:12:03 > 0:12:06under the condition that we hide his face and alter his voice.
0:12:08 > 0:12:13To work at 740 you really need to know somebody within the business.
0:12:13 > 0:12:16You know, you're working at the top building in the world.
0:12:16 > 0:12:19It's only 31 units, it's not a lot of residents,
0:12:19 > 0:12:21but they're high-tempered and, you know,
0:12:21 > 0:12:23you have to have a thick skin to work there.
0:12:23 > 0:12:26You're going to be dealing with detestable people
0:12:26 > 0:12:29and you're going to be dealing with billionaires.
0:12:29 > 0:12:32You need to know everything about the residents -
0:12:32 > 0:12:37what time they wake up to go down to Wall Street, whose car is which,
0:12:37 > 0:12:39who likes to get their own door,
0:12:39 > 0:12:42who gets in the passenger seat, who gets in the back seat.
0:12:42 > 0:12:46You know, these things don't seem like a big thing to me and you,
0:12:46 > 0:12:50but even a minor mishap, and you'll be fired straight away.
0:12:52 > 0:12:55Who are some of the key tenants in the building now?
0:12:55 > 0:12:58You've got John Thain,
0:12:58 > 0:13:02the CEO who presided over the downfall of Merrill Lynch.
0:13:02 > 0:13:05Ezra Merkin, who was the feeder to Bernie Madoff.
0:13:05 > 0:13:09David Koch, who is the richest person in the building.
0:13:09 > 0:13:11And, of course, Steve Schwarzman,
0:13:11 > 0:13:15the poster child of capitalistic greed in the last 10 years.
0:13:15 > 0:13:18Billionaire Stephen Schwarzman, one of the kings of private equity,
0:13:18 > 0:13:22lives in 740 Park's most extravagant apartment.
0:13:22 > 0:13:25Schwarzman was a managing director at Lehman Bothers
0:13:25 > 0:13:28before co-founding the Blackstone Group.
0:13:28 > 0:13:30He is one of the most prominent CEOs
0:13:30 > 0:13:34when it comes to lobbying for tax policies that favour the ultra rich.
0:13:36 > 0:13:38He was a strange guy, Mr Schwarzman.
0:13:38 > 0:13:40Thank you for the opportunity to address
0:13:40 > 0:13:45the 66th annual Alfred E Smith Memorial Foundation Dinner.
0:13:45 > 0:13:48We call it Occupy Waldorf.
0:13:49 > 0:13:53He seemed to be out of the public eye,
0:13:53 > 0:13:58but then these little spurts, where he'd have his 60th birthday party,
0:13:58 > 0:14:02he had Rod Stewart play and it was all over the papers.
0:14:02 > 0:14:05And he had a replica of his apartment built in this hotel
0:14:05 > 0:14:08and it was just completely ridiculous.
0:14:08 > 0:14:10He'd have his annual Christmas party
0:14:10 > 0:14:12and he'd have 25 Christmas trees come in,
0:14:12 > 0:14:14these massive Christmas trees.
0:14:14 > 0:14:16- 25 Christmas trees?- Yeah.
0:14:16 > 0:14:18I mean every room would get a Christmas tree
0:14:18 > 0:14:20and be fully decorated.
0:14:20 > 0:14:24Steve Schwarzman lives in the apartment that had previously been
0:14:24 > 0:14:26owned by John D Rockefeller, Jr.
0:14:26 > 0:14:29It's a sprawling apartment. It's 37 rooms.
0:14:29 > 0:14:33Lavish beyond your wildest imagining.
0:14:33 > 0:14:3620,000 square feet.
0:14:36 > 0:14:40Schwarzman paid just under 30 million for this apartment.
0:14:40 > 0:14:45Pocket change for a Wall Street tycoon worth over five billion.
0:14:45 > 0:14:50If a few people do really well, why is that such a big deal?
0:14:50 > 0:14:52Isn't that just proof of the American dream, you work hard,
0:14:52 > 0:14:53and you're successful?
0:14:53 > 0:14:58We as a society have very complex views about economic inequality.
0:14:58 > 0:15:00Americans are not of the view
0:15:00 > 0:15:04that all inequalities of wealth or income are unjust.
0:15:04 > 0:15:06In fact, they think if you work harder,
0:15:06 > 0:15:09if you seize opportunities, then you should be able to get ahead.
0:15:09 > 0:15:13Jacob Hacker is a political scientist at Yale, and the co-author
0:15:13 > 0:15:17of Winner-Take-All Politics, which argues that this extraordinary
0:15:17 > 0:15:21accumulation of wealth at the top isn't just about hard work.
0:15:21 > 0:15:24It's about the wealthy interests using the political system to
0:15:24 > 0:15:26rig the rules in their favour.
0:15:26 > 0:15:30There's been a reinforcing cycle. Those at the top have done well.
0:15:30 > 0:15:34They've invested in policies that are favourable to them,
0:15:34 > 0:15:36and they've done even better,
0:15:36 > 0:15:38and then they've churned a lot of that money back into politics.
0:15:42 > 0:15:45We sought out the poster child for political corruption,
0:15:45 > 0:15:48former lobbyist Jack Abramoff.
0:15:48 > 0:15:50Having pled guilty to charges
0:15:50 > 0:15:53including conspiracy to bribe public officials,
0:15:53 > 0:15:56Abramoff spent nearly four years in federal prison.
0:15:56 > 0:16:00Now released, he is touring the country, trying to promote reform.
0:16:01 > 0:16:04I wish I could tell you that in the midst of all of my lobbying
0:16:04 > 0:16:07activity I came to an epiphany, but I didn't.
0:16:07 > 0:16:11It, unfortunately for me, required my demise.
0:16:11 > 0:16:14Jack Abramoff has pled guilty to federal corruption charges.
0:16:14 > 0:16:16But eventually,
0:16:16 > 0:16:20I decided to look honestly at the past activities I had engaged in.
0:16:20 > 0:16:24I also systemically looked at the overall picture.
0:16:24 > 0:16:28And realised that the system itself was really badly in disrepair.
0:16:28 > 0:16:33The lobbyists will bring in the exact draft of what they want
0:16:33 > 0:16:37because they want to make sure it is exactly what they need.
0:16:37 > 0:16:39You know, the staff are busy, the congressman busy,
0:16:39 > 0:16:44and so they, frequently in the past, and still, avail themselves of
0:16:44 > 0:16:49the services, let's call them, of the lobbyists to write these bills.
0:16:49 > 0:16:53Now as a lobbyist, what was your leverage in terms of getting
0:16:53 > 0:16:55members to sponsor the bills that you had written?
0:16:55 > 0:16:58A lobbyist needs to get to the decision maker, the congressman
0:16:58 > 0:17:04and the staff, and that involves, unfortunately, financial conveyances.
0:17:07 > 0:17:11One of the dirty little secrets in Washington today is how much
0:17:11 > 0:17:14time members of the House and Senate spend every week,
0:17:14 > 0:17:17not just in the elections season, but all the time, year-round,
0:17:17 > 0:17:21on the telephone, asking people for money.
0:17:21 > 0:17:24It's begging for money. It's a sad spectacle.
0:17:24 > 0:17:27When you have campaigns that are costing tens of millions
0:17:27 > 0:17:31of dollars, the people who have the money want something back.
0:17:31 > 0:17:34Money is being used to buy results. That is the problem.
0:17:34 > 0:17:37That's how I used money. I know what I was doing.
0:17:37 > 0:17:40Washington is almost owned
0:17:40 > 0:17:44and operated by the US corporate sector at this point.
0:17:44 > 0:17:49There are so many billions of dollars of spending on lobbying,
0:17:49 > 0:17:53there are so many lobbyists that are in the room, writing the regs,
0:17:53 > 0:17:55writing the laws right now,
0:17:55 > 0:17:58there is so much financing of political campaigns,
0:17:58 > 0:18:01there are so many bought politicians.
0:18:02 > 0:18:03Our civics books tell us that
0:18:03 > 0:18:06the President is the most powerful person in the world
0:18:06 > 0:18:09and that special interests must go to Washington
0:18:09 > 0:18:10to petition the government.
0:18:10 > 0:18:13But when it comes time to raise money,
0:18:13 > 0:18:18our presidents go hat in hand to the people who really have the power.
0:18:18 > 0:18:23In 2007, President George W Bush made a pilgrimage
0:18:23 > 0:18:24to Steve Schwarzman's apartment
0:18:24 > 0:18:27to ask for money for the Republican National Committee.
0:18:27 > 0:18:32The secret service were coming for, I would say, three to four months
0:18:32 > 0:18:33before the actual visit.
0:18:33 > 0:18:36And they would come every week just to check up,
0:18:36 > 0:18:39look around the building. They did background checks on us, for sure.
0:18:39 > 0:18:42They had the sharp shooters out.
0:18:42 > 0:18:45They brought Mr Bush to Mr Schwarzman's apartment.
0:18:45 > 0:18:49He spent maybe 15 minutes, out, and that's it.
0:18:54 > 0:18:57Why did John Dillinger rob banks? That's where the money is.
0:18:57 > 0:19:01Well, 740 Park is where the money is and in this day and age,
0:19:01 > 0:19:05any candidate who didn't go to 740 Park would probably be foolish.
0:19:05 > 0:19:07I'm Mitt Romney, I believe in America
0:19:07 > 0:19:12and I'm running for President of the United States.
0:19:12 > 0:19:15- NEWSREADER:- Romney has a private meeting on Park Avenue
0:19:15 > 0:19:18with prominent CEOs eager for change in Washington.
0:19:18 > 0:19:21Mitt Romney went to kiss Mr Schwarzman's ring
0:19:21 > 0:19:23and meet some of his friends
0:19:23 > 0:19:24and no doubt collect a few cheques.
0:19:24 > 0:19:27What makes him good for the country?
0:19:27 > 0:19:32Mitt, he's a natural leader, and he's accessible.
0:19:32 > 0:19:34He listens to what you say.
0:19:34 > 0:19:36And what are you telling him about what needs to be done?
0:19:36 > 0:19:41Uh, well, we had a nice meeting about three weeks ago for an hour
0:19:41 > 0:19:45and what I tell him stays with me, but uh...
0:19:45 > 0:19:47OK, fair enough.
0:19:47 > 0:19:49..I'm not shy.
0:19:49 > 0:19:52They can influence the writing of laws, the implementation
0:19:52 > 0:19:56of regulation, the degree to which the tax code tilts towards business
0:19:56 > 0:20:00and those at the top versus ordinary working Americans.
0:20:00 > 0:20:03A perfect example of the influence that a small group of billionaires
0:20:03 > 0:20:07can have on the government is something in the tax code
0:20:07 > 0:20:09called the carried interest provision.
0:20:09 > 0:20:10It allows hedge fund
0:20:10 > 0:20:13and private equity managers like Steve Schwarzman to pay
0:20:13 > 0:20:17a 15% tax rate on their income, even though, unlike
0:20:17 > 0:20:21normal capital gains, they're not required to risk their own money.
0:20:21 > 0:20:24When it's explained to people, they think it's crazy.
0:20:24 > 0:20:28The most highly paid financial executives get taxed at a rate
0:20:28 > 0:20:32lower than your mom and pop grocery.
0:20:32 > 0:20:33It is in the tax code
0:20:33 > 0:20:39because of the incredibly effective lobbying of the financial industry.
0:20:39 > 0:20:42OK, it was a question about carried interest being
0:20:42 > 0:20:45taxed at a lower rate.
0:20:45 > 0:20:50We sort of look at this as a, as sort of an issue that's
0:20:50 > 0:20:56now in the political world, and it will be solved in that world.
0:20:56 > 0:20:58We don't have much of a say in that.
0:20:58 > 0:21:00Schwarzman went to Capitol Hill yesterday
0:21:00 > 0:21:04and stood outside the Senate chamber lobbying senators.
0:21:04 > 0:21:07Schwarzman was there to fight against higher taxes
0:21:07 > 0:21:08on so-called carried interest.
0:21:08 > 0:21:12From 2006 on, every Democratic leader, and President,
0:21:12 > 0:21:14in the case of President Obama,
0:21:14 > 0:21:17has said, "We're going to get rid of this."
0:21:17 > 0:21:20Let's ask hedge fund managers to stop paying taxes
0:21:20 > 0:21:23that are lower on their rates than their secretaries.
0:21:23 > 0:21:26And then magically it manages to survive.
0:21:26 > 0:21:28Before you know it, the congressional session has ended
0:21:28 > 0:21:30and, "Oh my God, we ran out of time.
0:21:30 > 0:21:32"We didn't get to it, we'll do it next time."
0:21:32 > 0:21:33It appears the Democrats
0:21:33 > 0:21:36have completed their takeover of Capitol Hill.
0:21:36 > 0:21:38Even when Democrats controlled both houses of Congress,
0:21:38 > 0:21:41they couldn't close the carried interest loophole.
0:21:41 > 0:21:43The question is why?
0:21:43 > 0:21:46It passed the House, twice!
0:21:46 > 0:21:48But in the Senate,
0:21:48 > 0:21:51the hedge funds had a pal in Charles Schumer of New York.
0:21:51 > 0:21:54The senator from Wall Street, as he was known for many years.
0:21:54 > 0:21:58Charles Schumer is one of the most powerful senators in the country
0:21:58 > 0:22:01and has raised more campaign money from the financial industry
0:22:01 > 0:22:04than any other Democrat currently serving in Congress.
0:22:04 > 0:22:08Schumer became famous for his ability to gain Wall Street dollars.
0:22:08 > 0:22:11That's why he was elevated within the Democratic leadership.
0:22:11 > 0:22:13It was because he was such an effective fundraiser.
0:22:13 > 0:22:16Schumer in that period was the chairman
0:22:16 > 0:22:19of the Senate Democratic campaign committee,
0:22:19 > 0:22:21which, you've got to give the guy credit,
0:22:21 > 0:22:24he turned this into an absolute money machine.
0:22:24 > 0:22:26Schumer helped the Democratic Party
0:22:26 > 0:22:29raise record amounts from Wall Street.
0:22:29 > 0:22:33And in June 2007, as the Senate was considering legislation to close
0:22:33 > 0:22:35the carried interest loophole,
0:22:35 > 0:22:37Schumer went on a fundraising frenzy.
0:22:37 > 0:22:40In that one month, he raised more than 1 million
0:22:40 > 0:22:44from hedge funds and private equity firms like Blackstone.
0:22:44 > 0:22:47The carried interest bill never saw the light of day.
0:22:47 > 0:22:50Schumer just buried the idea.
0:22:50 > 0:22:52It never came up for a vote in a committee
0:22:52 > 0:22:55or on the floor of the Senate. It just disappeared.
0:22:55 > 0:22:59And that, I think, is a perfect example of the way in which
0:22:59 > 0:23:02money talks in American politics today.
0:23:03 > 0:23:07And nobody's money talks louder than David Koch's.
0:23:07 > 0:23:12This right-wing oil tycoon with a fortune of 25 billion
0:23:12 > 0:23:15is the richest resident of 740 Park Avenue.
0:23:15 > 0:23:17David and his brother Charles run Koch Industries,
0:23:17 > 0:23:21one of the largest privately-owned companies in the world.
0:23:21 > 0:23:25They make things like Dixie Cups, Brawny paper towels, Lycra,
0:23:25 > 0:23:28and Stainmaster carpet.
0:23:28 > 0:23:31But their most profitable business is oil and gas, which helps
0:23:31 > 0:23:35Koch Industries bring in over 100 billion in annual revenues.
0:23:35 > 0:23:39Together, the Koch brothers may have spent more money to influence
0:23:39 > 0:23:42American politics than anyone else in the country.
0:23:42 > 0:23:45They basically are unprecedented.
0:23:45 > 0:23:47They influence American politics
0:23:47 > 0:23:50on a completely different dimension than anybody else.
0:23:50 > 0:23:52# The minute you walked in the joint
0:23:52 > 0:23:55# I could see you were a man of distinction
0:23:55 > 0:24:00# A real big spender... #
0:24:00 > 0:24:02Millions of dollars to Republican politicians.
0:24:02 > 0:24:04More than 15 million, for example,
0:24:04 > 0:24:05to lobby in Washington since 2006.
0:24:05 > 0:24:09# Good looking, so refined
0:24:09 > 0:24:13# Say wouldn't you like to know what's going on in my mind? #
0:24:13 > 0:24:16As much as 200 million of their own money this year to
0:24:16 > 0:24:17help defeat President Obama.
0:24:17 > 0:24:19# Hey big spender
0:24:22 > 0:24:26# Spend a little time with me. #
0:24:31 > 0:24:35In 1980, David Koch actually ran for Vice President
0:24:35 > 0:24:36on the libertarian ticket.
0:24:36 > 0:24:39They count on growing sympathy for their party's single goal -
0:24:39 > 0:24:41freedom from government.
0:24:41 > 0:24:44He did abysmally.
0:24:44 > 0:24:49The libertarian ticket got 1% of the vote in America in 1980.
0:24:49 > 0:24:51What they learned from that is that they had to figure out
0:24:51 > 0:24:55another way to get their ideas to become influential.
0:24:55 > 0:24:59So the Kochs decided to use their money to advance their agenda.
0:24:59 > 0:25:02They gave generously to political candidates,
0:25:02 > 0:25:05but, more importantly, they invested heavily in groups that could
0:25:05 > 0:25:09bring their anti-government ideas into the mainstream.
0:25:09 > 0:25:11The brothers gave millions to right-wing think tanks
0:25:11 > 0:25:15and Charles even founded one - the libertarian Cato Institute.
0:25:15 > 0:25:18Government's too big, and it's getting bigger,
0:25:18 > 0:25:20and we don't want to encourage bigger government.
0:25:20 > 0:25:23Take the keys to the liquor cabinet away from the alcoholics.
0:25:23 > 0:25:27The Kochs also wrote out enormous cheques to universities
0:25:27 > 0:25:30to support programmes that would promote deregulation
0:25:30 > 0:25:31and free market economics.
0:25:31 > 0:25:36Their free-market ideology, they argue, is just about principle.
0:25:36 > 0:25:38But there are many,
0:25:38 > 0:25:42many areas in which their business interests butt into regulations.
0:25:44 > 0:25:47Environmental regulations have been especially bad for the Kochs'
0:25:47 > 0:25:50bottom line, and they've been slapped with numerous fines
0:25:50 > 0:25:53from the Environmental Protection Agency.
0:25:53 > 0:25:56We are talking about millions of gallons of crude oil being
0:25:56 > 0:25:58released into the environment.
0:25:58 > 0:26:02In 2000, Koch Industries had to pay a 30 million fine
0:26:02 > 0:26:05for its role in over 300 oil spills.
0:26:05 > 0:26:06At the time,
0:26:06 > 0:26:10it was the largest civil penalty in the EPA's history.
0:26:10 > 0:26:13When you make businesses less competitive because they are
0:26:13 > 0:26:16having to deal with regulations from the Environmental Protection Agency
0:26:16 > 0:26:19and other unelected bureaucracies, instead of creating jobs
0:26:19 > 0:26:22and instead of being able to compete with our foreign competitors,
0:26:22 > 0:26:23we know it kills jobs.
0:26:23 > 0:26:28This is Tim Phillips, the head of the Koch brothers' latest venture,
0:26:28 > 0:26:30Americans For Prosperity.
0:26:30 > 0:26:33We're genuinely fighting to preserve and expand economic freedom,
0:26:33 > 0:26:36which we believe is the best way to give folks
0:26:36 > 0:26:39from every walk of life prosperity and a shot at a better life.
0:26:39 > 0:26:42Through Americans For Prosperity, the Kochs have provided
0:26:42 > 0:26:45tremendous financial backing to the Tea Party movement,
0:26:45 > 0:26:49by organising rallies and protests, flying in big name guest speakers.
0:26:49 > 0:26:52Don't tax us any more.
0:26:52 > 0:26:54And flooding the airwaves with advertising.
0:26:54 > 0:26:57Wasteful spending must stop.
0:26:57 > 0:27:00Go to spendingcrisis.org to make your voice heard.
0:27:00 > 0:27:03People were looking at the Tea Party movement
0:27:03 > 0:27:05as this sort of spontaneous combustion,
0:27:05 > 0:27:11this grassroots thing that just exploded, and what it really was,
0:27:11 > 0:27:17was something that was being fed by libertarian billionaires.
0:27:17 > 0:27:20We want the maximum freedom to launch businesses,
0:27:20 > 0:27:25create opportunity, and expand prosperity.
0:27:25 > 0:27:30We desire a tax code that does not punish hard work or crush
0:27:30 > 0:27:34the entrepreneurial spirit that makes America unique in the world.
0:27:37 > 0:27:40They have this ideology of the free market
0:27:40 > 0:27:45and how making money equals freedom and if you listen
0:27:45 > 0:27:48to the Tea Party rhetoric, you hear exactly the same phrases.
0:27:48 > 0:27:53Our side, the side you're on today, is the side, frankly, of freedom.
0:27:53 > 0:27:55CHEERING
0:27:55 > 0:27:58They're chanting "Liberty!" and chanting "No more taxes!"
0:27:58 > 0:28:02Freedom, liberty, and people waking up to the fact that this
0:28:02 > 0:28:04is our country and it's up to us to take it back.
0:28:04 > 0:28:07Our rights are being taken away. Little by little.
0:28:07 > 0:28:11But what kind of freedom is Americans For Prosperity
0:28:11 > 0:28:13talking about?
0:28:13 > 0:28:15Is it freedom for everyone?
0:28:15 > 0:28:18Or just for billionaires who want freedom from taxes,
0:28:18 > 0:28:19the freedom to pollute,
0:28:19 > 0:28:23and freedom from any responsibility to the rest of society?
0:28:24 > 0:28:28To answer that question, just go to one of their rallies,
0:28:28 > 0:28:31where you're likely to see signs promoting a once-discredited
0:28:31 > 0:28:35philosopher and novelist who's recently found a new audience.
0:28:40 > 0:28:43Here in the United States, perhaps the most challenging
0:28:43 > 0:28:47and unusual new philosophy has been forged by a novelist - Ayn Rand.
0:28:48 > 0:28:52Ms Rand's point of view is still comparatively unknown in America
0:28:52 > 0:28:56but if it ever did take hold, it would revolutionise our lives.
0:28:56 > 0:29:00I am opposed to all forms of control.
0:29:00 > 0:29:05I am for an absolute, laissez-faire, free, unregulated economy.
0:29:05 > 0:29:09Ayn Rand wrote a series of novels that have become
0:29:09 > 0:29:12a kind of touchstone for contemporary Republican politicians,
0:29:12 > 0:29:14most notably, Atlas Shrugged.
0:29:14 > 0:29:17There's Atlas. He holds the world on his shoulders.
0:29:17 > 0:29:19What if Atlas shrugged?
0:29:19 > 0:29:20Picture this,
0:29:20 > 0:29:25an anti-Utopia society that collapses under government controls.
0:29:25 > 0:29:28Does this sound familiar? It should.
0:29:28 > 0:29:31It's Ayn Rand's story of Atlas Shrugged. And now it's a movie.
0:29:31 > 0:29:33One very popular with Tea Party members.
0:29:35 > 0:29:39Atlas Shrugged is about an America where businesses are regulated.
0:29:39 > 0:29:41The rich pay taxes
0:29:41 > 0:29:44and the government tries to help the middle class and the poor.
0:29:44 > 0:29:47In other words, a doomsday scenario.
0:29:51 > 0:29:53In Rand's world,
0:29:53 > 0:29:57anyone who needs a little help in life is a moocher or a parasite.
0:29:57 > 0:30:00And anyone who wants to help others is a villain.
0:30:00 > 0:30:05Her heroes are proud to be as selfish as possible.
0:30:05 > 0:30:07You really don't care about helping
0:30:07 > 0:30:10- the underprivileged, do you? - No, Philip. I don't.
0:30:10 > 0:30:12Finally, the CEOs of America get sick and tired
0:30:12 > 0:30:15of living under a government that no longer caters to them
0:30:15 > 0:30:17and they decide to go on strike.
0:30:17 > 0:30:19- What are you selling, pal?- Nothing.
0:30:19 > 0:30:24I'm simply offering a society that cultivates individual achievement.
0:30:24 > 0:30:27They head off into the mountains and start a new society,
0:30:27 > 0:30:30one where there is no government.
0:30:30 > 0:30:32Atlas Shrugged is told as a horror story,
0:30:32 > 0:30:36a nightmarish vision of what would happen to our country
0:30:36 > 0:30:39if wealthy Americans like David Koch and Steve Schwarzman
0:30:39 > 0:30:41just left us to fend for ourselves.
0:30:41 > 0:30:45No!
0:30:45 > 0:30:48Yeah, we support it. We had screenings around the country.
0:30:48 > 0:30:50We like that story to be out there
0:30:50 > 0:30:53and we like the ideas to be out there.
0:30:53 > 0:30:55We certainly believe and share
0:30:55 > 0:30:58many of the principles and values that book was based on,
0:30:58 > 0:31:01the inherent morality of capitalism.
0:31:01 > 0:31:04You do not like the altruism by which we live?
0:31:04 > 0:31:08Well, you see, "I don't like" is too weak a word.
0:31:08 > 0:31:10I consider it evil.
0:31:10 > 0:31:13The appeal of Ayn Rand is that, um, you know,
0:31:13 > 0:31:16it's basically the Gordon Gekko message - greed is good.
0:31:16 > 0:31:20That ideology is appealing, I suppose,
0:31:20 > 0:31:23if you have a tremendous amount of money. You may feel guilty otherwise.
0:31:23 > 0:31:28How does your philosophy translate itself into the world of politics?
0:31:28 > 0:31:32We believe that America deserves a choice of two futures.
0:31:32 > 0:31:35Paul Ryan receives more money from the Koch Brothers
0:31:35 > 0:31:38than any other member of Congress.
0:31:38 > 0:31:41He is also the country's most powerful politician
0:31:41 > 0:31:45to publicly embrace the philosophy of Ayn Rand.
0:31:45 > 0:31:47By running on his anti-government views,
0:31:47 > 0:31:51this Republican from Wisconsin became a Tea Party favourite,
0:31:51 > 0:31:54a powerful member of Congress, and a candidate for high office.
0:31:54 > 0:31:57Join me in welcoming
0:31:57 > 0:32:00the next president of the United States, Paul Ryan.
0:32:00 > 0:32:04VICE President of the United States!
0:32:04 > 0:32:07We will restore the greatness of this country.
0:32:07 > 0:32:12It is our duty to save the American dream for our children.
0:32:12 > 0:32:16What kind of people do we want to be?
0:32:16 > 0:32:19- Free!- Free!
0:32:19 > 0:32:21With his rise to prominence,
0:32:21 > 0:32:24Ryan has denied his affection for Ayn Rand.
0:32:24 > 0:32:27But history tells a different story.
0:32:27 > 0:32:30I just want to speak to you a little bit about Ayn Rand,
0:32:30 > 0:32:31and what she meant to me in my life
0:32:31 > 0:32:34and the fight we're engaged here in Congress.
0:32:34 > 0:32:37The reason I got involved in public service, by and large,
0:32:37 > 0:32:41if I had to credit one thinker, one person, it would be Ayn Rand.
0:32:41 > 0:32:45You believe that there should be no right by the government to tax.
0:32:45 > 0:32:49You believe that there should be no such thing as welfare legislation,
0:32:49 > 0:32:51unemployment compensation.
0:32:51 > 0:32:54It's inspired me so much that its required reading in my office
0:32:54 > 0:32:57for all my interns and my staff, we start with Atlas Shrugged.
0:32:57 > 0:33:02How do we build roads? Sanitation facilities, hospitals, schools?
0:33:02 > 0:33:04I believe in private roads,
0:33:04 > 0:33:07private post offices, private schools.
0:33:07 > 0:33:09It's so important that we go back to our roots,
0:33:09 > 0:33:12to look at Ayn Rand's vision, her writings,
0:33:12 > 0:33:15to see what our girding undergrounding principles are,
0:33:15 > 0:33:17we have to go back to Ayn Rand.
0:33:19 > 0:33:22Our plan takes power away from Washington
0:33:22 > 0:33:24and gives it back to the individual.
0:33:24 > 0:33:28While in Congress, Ryan put Ayn Rand's philosophy into practice
0:33:28 > 0:33:32through a plan he called "The Path to Prosperity."
0:33:32 > 0:33:33It was a budget proposal
0:33:33 > 0:33:37that would dramatically cut government programmes for the poor
0:33:37 > 0:33:40while handing out an even bigger tax cut for the rich.
0:33:40 > 0:33:42I think that The Path to Prosperity
0:33:42 > 0:33:45that Chairman Ryan and his committee have put together
0:33:45 > 0:33:47is a blueprint for America's Future.
0:33:47 > 0:33:51The Path to Prosperity passed the House of Representatives
0:33:51 > 0:33:53in March of 2012. It now appears to be at the heart
0:33:53 > 0:33:57of the economic philosophy of the Republican Party.
0:33:57 > 0:34:00Mitt Romney and I will take the right steps,
0:34:00 > 0:34:03in the right time, to get us back on the right track.
0:34:03 > 0:34:06What do you think of Ryan's budget framework?
0:34:06 > 0:34:09Oh, I think it's ridiculous on the face of it.
0:34:09 > 0:34:12He's proposing a 10 trillion tax cut
0:34:12 > 0:34:15as part of his deficit reduction plan
0:34:15 > 0:34:19and obviously, if you're going to cut taxes by 10 trillion,
0:34:19 > 0:34:22you've got to cut spending by even more than 10 trillion.
0:34:22 > 0:34:25Every programme you can possibly think of,
0:34:25 > 0:34:27from roads to education to energy,
0:34:27 > 0:34:30would be more or less abolished
0:34:30 > 0:34:33if you're going to take seriously the numbers he has put forward.
0:34:33 > 0:34:40The idea that there's legitimate economics behind this is absurd.
0:34:40 > 0:34:45Conservatives throughout the ages have never spoken like Paul Ryan.
0:34:45 > 0:34:48Milton Friedman talked about a negative income tax
0:34:48 > 0:34:51and guaranteed incomes for the poor.
0:34:51 > 0:34:56Friedrich Hayek, who was one of the acmes of free market economics,
0:34:56 > 0:35:00talked about the need of societies to guarantee minimum standards
0:35:00 > 0:35:02and provide health care.
0:35:02 > 0:35:05So, there's clearly an ideology involved here.
0:35:05 > 0:35:11They actually want to use tax policy to eviscerate government programmes.
0:35:11 > 0:35:14If we try to go down the path
0:35:14 > 0:35:17where we had put the government in the place
0:35:17 > 0:35:19to equalise the results of peoples' lives,
0:35:19 > 0:35:23where we try to equalise outcomes, we'll all be more equally miserable.
0:35:23 > 0:35:25CHUCKLING
0:35:25 > 0:35:30Rather, let's focus on equality of opportunity.
0:35:30 > 0:35:33My mom used to say to me, "Son, it don't matter where you begin,
0:35:33 > 0:35:34"what matters is where you end.
0:35:34 > 0:35:38"You live in the United States of America." And that's something
0:35:38 > 0:35:41that I think is an inherently moral thing about America -
0:35:41 > 0:35:42it gives you a chance to make it.
0:35:42 > 0:35:46Much of what they say is about
0:35:46 > 0:35:50providing opportunity to make money to everybody equally,
0:35:50 > 0:35:52that's what they would argue about,
0:35:52 > 0:35:57and, um, it doesn't seem to accept the possibility
0:35:57 > 0:36:02that if you're poor enough and your schooling is bad enough
0:36:02 > 0:36:05that you don't really have an opportunity to compete.
0:36:11 > 0:36:13Almost everyone agrees
0:36:13 > 0:36:16that education is the key to upward mobility.
0:36:16 > 0:36:19For people starting at the bottom of the ladder,
0:36:19 > 0:36:23a college degree can quadruple their chances of making it to the top.
0:36:24 > 0:36:28But college is increasingly out of reach.
0:36:28 > 0:36:31The cost has gone up over 500% since 1980.
0:36:33 > 0:36:38Meanwhile, without a college degree, it's harder than ever to get a job.
0:36:38 > 0:36:41If you only have a high school diploma,
0:36:41 > 0:36:45there's a 7/10 chance that you don't have full-time work at all.
0:36:46 > 0:36:50It's a cruel irony that the US economy has a desperate need
0:36:50 > 0:36:54for skilled labour in manufacturing, hi-tech, and health industries
0:36:54 > 0:37:00but there aren't enough qualified workers to fill those jobs.
0:37:00 > 0:37:03Even with 12 million Americans unable to find work,
0:37:03 > 0:37:07training and education programmes are being slashed by both parties
0:37:07 > 0:37:09in favour of tax cuts for the rich.
0:37:10 > 0:37:13I find it hard to be an optimist right now,
0:37:13 > 0:37:15for people whom I care about,
0:37:15 > 0:37:18and people who the Poverty Institute cares about,
0:37:18 > 0:37:21people who want to support their families through work, and can't.
0:37:23 > 0:37:27Today, one in seven Americans receives food stamps.
0:37:27 > 0:37:30More than half of those people are children and elderly.
0:37:30 > 0:37:3441% of recipients live in working households.
0:37:34 > 0:37:38A job is no longer enough to keep Americans out of poverty.
0:37:39 > 0:37:42For the people that think, OK, they don't need anything,
0:37:42 > 0:37:45they don't need a handout, they should just go get a job -
0:37:45 > 0:37:49yes, as soon as they create jobs for people to get them,
0:37:49 > 0:37:52then great, I'm pretty sure they'll be there.
0:37:52 > 0:37:55There's nothing. So what do you do when there's nothing?
0:37:55 > 0:37:58That's where the safety net comes in.
0:38:00 > 0:38:02Yet Paul Ryan's budget proposal
0:38:02 > 0:38:04would cut the food stamp programme
0:38:04 > 0:38:07by 134 billion dollars over the next ten years,
0:38:07 > 0:38:10which could shred the safety net for 8 million people.
0:38:12 > 0:38:14- My name's James Salt.- Hey.
0:38:16 > 0:38:18- Oh, great!- I have a question.
0:38:28 > 0:38:30Guys, let me get to my car.
0:38:36 > 0:38:40I appreciate it, I've got some Bibles, thank you very much.
0:38:42 > 0:38:45In April 2012, the US Conference of Catholic Bishops
0:38:45 > 0:38:48urged Congress to protect food stamps.
0:38:48 > 0:38:51Bishops suggested that if spending cuts were necessary,
0:38:51 > 0:38:53they should be made to government subsidies
0:38:53 > 0:38:55for rich agricultural companies,
0:38:55 > 0:38:59instead of taking food from hungry children, poor families,
0:38:59 > 0:39:01and vulnerable seniors.
0:39:01 > 0:39:03Our nation is approaching a tipping point.
0:39:03 > 0:39:05We're at a moment
0:39:05 > 0:39:09where if government's growth is left unchecked and unchallenged,
0:39:09 > 0:39:11America's best century
0:39:11 > 0:39:13will be considered our past century.
0:39:13 > 0:39:15This is a future in which
0:39:15 > 0:39:18we will transform our social safety net into a hammock.
0:39:18 > 0:39:20You can hear Paul Ryan talk about his hammock.
0:39:20 > 0:39:24This hammock - the average benefit in Wisconsin
0:39:24 > 0:39:27was 246 a month last year for two people,
0:39:27 > 0:39:29about 350 for four.
0:39:33 > 0:39:34Is that enough for you to say,
0:39:34 > 0:39:38"Ah! Put my feet up in a hammock, you know, I got these food stamps"?
0:39:38 > 0:39:43Feeding people is something that this country can afford to do
0:39:43 > 0:39:46and should be able to do. That's not a hammock.
0:39:46 > 0:39:48And if you try to raise our taxes
0:39:48 > 0:39:51and trample on our liberties,
0:39:51 > 0:39:53we're either going to beat you
0:39:53 > 0:39:55or make your life miserable!
0:39:55 > 0:39:59CHEERING
0:40:02 > 0:40:05The government has been starved of funds.
0:40:05 > 0:40:07We're at about the lowest tax collection
0:40:07 > 0:40:11as a share of national income in our modern history.
0:40:13 > 0:40:18We can't even pay for the most basic public services right now.
0:40:18 > 0:40:22We can't keep our schools functioning.
0:40:22 > 0:40:25We can't keep our roads intact.
0:40:25 > 0:40:29Taxes are the price you pay for civilisation.
0:40:29 > 0:40:32And if you don't pay taxes, you don't get civilisation,
0:40:32 > 0:40:33it's as simple as that.
0:40:33 > 0:40:37By that measure, our civilisation is in trouble.
0:40:37 > 0:40:41General Electric made 5 billion in US profits last year,
0:40:41 > 0:40:44but claimed a 3.3 billion tax credit.
0:40:44 > 0:40:48These days, some of the nation's most profitable companies
0:40:48 > 0:40:51are paying little or no taxes at all.
0:40:51 > 0:40:53Thanks to tax breaks, loopholes,
0:40:53 > 0:40:54and clever accounting,
0:40:54 > 0:40:58the tax rate corporations actually pay
0:40:58 > 0:41:00is at an all-time low.
0:41:00 > 0:41:01The same thing is true
0:41:01 > 0:41:03for personal income taxes,
0:41:03 > 0:41:06especially for the ultra-rich.
0:41:06 > 0:41:08Tax rates for millionaires
0:41:08 > 0:41:12have dropped more than 25% in the last two decades.
0:41:12 > 0:41:16And for a handful of extremely wealthy individuals at the top,
0:41:16 > 0:41:19taxes have fallen by almost 50%.
0:41:20 > 0:41:22A big part of that dip
0:41:22 > 0:41:27is because of the tax cuts signed into law by President George W Bush.
0:41:27 > 0:41:31Bush slashed the capital gains rate on investments to 15% -
0:41:31 > 0:41:35nearly half what the rate was under Ronald Reagan.
0:41:35 > 0:41:39The Republicans made all these arguments back in 2003,
0:41:39 > 0:41:42that if we cut taxes on dividends and capital gains
0:41:42 > 0:41:45and reduce the top tax rate on the wealthy,
0:41:45 > 0:41:47we'll get this explosion
0:41:47 > 0:41:49of investment and growth and jobs.
0:41:49 > 0:41:52You can look up the data for yourself
0:41:52 > 0:41:56but I certainly don't remember any big increase in growth after 2003.
0:41:56 > 0:41:59There was essentially no economic impact at all,
0:41:59 > 0:42:01except that it increased the deficit.
0:42:01 > 0:42:07The Bush tax cuts have added over 2.9 trillion to the national debt.
0:42:07 > 0:42:09Paul Ryan's proposed tax cuts
0:42:09 > 0:42:12would add another 4.6 trillion
0:42:12 > 0:42:14in debt over the next ten years.
0:42:15 > 0:42:17What's hard to understand
0:42:17 > 0:42:20about this relentless push to cut taxes for the rich
0:42:20 > 0:42:24is that they already have so much more than the rest of us.
0:42:24 > 0:42:27In 1965, CEOs made about 20 times
0:42:27 > 0:42:29as much as the average worker.
0:42:29 > 0:42:33Today, by the most conservative estimate,
0:42:33 > 0:42:35that number is 231.
0:42:36 > 0:42:38So what's going on here?
0:42:38 > 0:42:42Are CEOs getting paid more because they deserve it?
0:42:42 > 0:42:45Meet another resident of 740 Park,
0:42:45 > 0:42:49John Thain, the highest paid CEO in 2007.
0:42:49 > 0:42:53Thain's apartment is actually my personal favourite,
0:42:53 > 0:42:56for if I could live at 740 Park.
0:42:56 > 0:42:58It's a little tiny jewel-box duplex.
0:43:00 > 0:43:03Thain had been a senior executive at Goldman Sachs
0:43:03 > 0:43:06and served as CEO of the New York Stock Exchange
0:43:06 > 0:43:10before becoming the head of the investment bank Merrill Lynch.
0:43:10 > 0:43:14In 2008, as losses were soaring and his company's stock was plummeting,
0:43:14 > 0:43:19Thain was busy with a 1.2 million office renovation.
0:43:19 > 0:43:23You spent more than 1 million renovating your office. Is this true?
0:43:23 > 0:43:26It wasn't my office, it was two conference rooms
0:43:26 > 0:43:27and it was a reception area.
0:43:27 > 0:43:31But it is clear to me, in today's world,
0:43:31 > 0:43:33that it was a mistake.
0:43:33 > 0:43:37I apologise for spending that money on those things.
0:43:37 > 0:43:41While Thain was busy picking chairs, rugs and wastebaskets,
0:43:41 > 0:43:43Merrill and the other investment banks
0:43:43 > 0:43:45helped bring down the global economy.
0:43:45 > 0:43:47Wall Street has been turned upside-down.
0:43:47 > 0:43:51The collapse of one investment bank, the takeover of another...
0:43:51 > 0:43:5329 billion to help JP Morgan...
0:43:53 > 0:43:5785 billion dollars to bail out the insurance giant AIG...
0:43:57 > 0:44:01Wall Street was rescued by US taxpayers, not only through bailouts
0:44:01 > 0:44:04but also through government loans that carried virtually no interest.
0:44:04 > 0:44:08I'm confident that this rescue plan, along with other measures
0:44:08 > 0:44:11taken by the Treasury Department and the Federal Reserve,
0:44:11 > 0:44:14will begin to restore strength and stability
0:44:14 > 0:44:17to America's financial system and overall economy.
0:44:17 > 0:44:20Meanwhile, under Presidents Bush and Obama,
0:44:20 > 0:44:24millions of middle-class American homeowners facing foreclosure
0:44:24 > 0:44:28received only a tiny fraction of the bailouts given to wealthy bankers.
0:44:28 > 0:44:32In the end, Merrill Lynch suffered over 27 billion in losses
0:44:32 > 0:44:34under Thain's leadership
0:44:34 > 0:44:36and was sold to Bank of America,
0:44:36 > 0:44:39but that didn't stop Thain from handing out 3.6 billion
0:44:39 > 0:44:43in performance bonuses to Merrill executives.
0:44:43 > 0:44:44The bonuses were paid
0:44:44 > 0:44:48even as Merrill suffered 15 billion in losses.
0:44:49 > 0:44:53If you live in a world where everyone you know
0:44:53 > 0:44:58is chasing huge sums of money every day,
0:44:58 > 0:45:01and their morality is determined
0:45:01 > 0:45:05by what it's necessary to do to get richer and richer and richer,
0:45:05 > 0:45:09you're not going to have the same moral constructs
0:45:09 > 0:45:11affecting your behaviour.
0:45:13 > 0:45:16When I started at 740, I was like, "This is great," you know.
0:45:16 > 0:45:18"Come around to Christmas time,
0:45:18 > 0:45:20"I'm going to get a thousand from each resident,
0:45:20 > 0:45:23"you know, because they are multi-billionaires."
0:45:24 > 0:45:27But it's not that way.
0:45:27 > 0:45:29These guys are businessmen.
0:45:29 > 0:45:31They know what the going rate is.
0:45:31 > 0:45:34They're not going to give you anything more than that.
0:45:34 > 0:45:39The cheapest person overall was David Koch.
0:45:39 > 0:45:41We would load up his trucks,
0:45:41 > 0:45:45two vans usually, every weekend for the Hamptons.
0:45:45 > 0:45:47You know, I mean multiple trips,
0:45:47 > 0:45:50multiple guys, in and out, in and out, heavy bags.
0:45:50 > 0:45:52We would never get a tip from Mr Koch.
0:45:52 > 0:45:56We would never get a smile from Mr Koch. 50 cheque for Christmas.
0:45:56 > 0:45:57- A cheque?- A cheque, too, yeah.
0:45:57 > 0:46:00I mean, at least you could give us cash.
0:46:00 > 0:46:02Just because you're rich doesn't make you smart.
0:46:02 > 0:46:04Just because you're rich doesn't make you cultured,
0:46:04 > 0:46:07just because you're rich doesn't make you refined.
0:46:07 > 0:46:10Being rich means you're rich.
0:46:10 > 0:46:13Some rich people are just dicks.
0:46:13 > 0:46:16Steven Schwarzman unleashed a disgusting comparison
0:46:16 > 0:46:19over the administration's effort to increase taxes. He said, quote,
0:46:25 > 0:46:29In thousands of different people that we've studied across the country,
0:46:29 > 0:46:31the more you have, the more entitled
0:46:31 > 0:46:33and deserving of those things you feel.
0:46:33 > 0:46:36And that might account, in part, for the vitriol
0:46:36 > 0:46:38that you see when people feel
0:46:38 > 0:46:41like their privileged position is being undermined by others.
0:46:41 > 0:46:45Since when, in this country, was it OK to demonise success?
0:46:45 > 0:46:47The free enterprise system is under attack.
0:46:47 > 0:46:50Back to the old populist "demonise the rich."
0:46:50 > 0:46:53The Republicans are always complaining
0:46:53 > 0:46:55about the Democrats playing class warfare.
0:46:55 > 0:46:58The Democratic party's going to have to stop bashing the rich.
0:46:58 > 0:47:00But they do it themselves
0:47:00 > 0:47:03by, for example, they're always quick to point out
0:47:03 > 0:47:06that something like half of all people
0:47:06 > 0:47:09who file individual income tax returns
0:47:09 > 0:47:12have either a zero or a negative tax liability.
0:47:12 > 0:47:15We have a system today in the United States
0:47:15 > 0:47:19where 45% of Americans don't pay any income tax.
0:47:19 > 0:47:22You have to have skin in the game.
0:47:22 > 0:47:24Over 45% of the people in this country
0:47:24 > 0:47:26don't pay income taxes at all,
0:47:26 > 0:47:30and we have to question whether that's fair.
0:47:30 > 0:47:34Those are people who don't pay INCOME taxes. OK?
0:47:34 > 0:47:37It includes all elderly women living alone
0:47:37 > 0:47:40who just have enough social security, they don't even declare it.
0:47:40 > 0:47:43It includes disabled people who don't have earnings,
0:47:43 > 0:47:48but all those people pay payroll taxes, sales taxes, property taxes.
0:47:48 > 0:47:49State and local taxes,
0:47:49 > 0:47:52gasoline taxes, liquor taxes,
0:47:52 > 0:47:55This is ridiculous to say low-income people don't pay taxes.
0:47:55 > 0:47:57They do pay taxes and they pay a lot of them.
0:47:57 > 0:48:00They've managed to take the resentment of the middle class,
0:48:00 > 0:48:03which has actually been quite economically squeezed
0:48:03 > 0:48:05over the last couple decades,
0:48:05 > 0:48:08and turn their resentment against the people beneath them.
0:48:08 > 0:48:09I think we're reaching a tipping point.
0:48:09 > 0:48:12We're coming close to a tipping point in America,
0:48:12 > 0:48:15where we might have a net majority of takers versus makers in society.
0:48:15 > 0:48:18It's really, you know,
0:48:18 > 0:48:19like a magician, you know,
0:48:19 > 0:48:22trying to point people in a different direction
0:48:22 > 0:48:25so they won't notice what's really going on.
0:48:25 > 0:48:27If you can take the resentment of the middle class
0:48:27 > 0:48:31and point it downward, rather than having it point upward
0:48:31 > 0:48:34to the people on the top of the 1%
0:48:34 > 0:48:37who are really walking away richer than ever,
0:48:37 > 0:48:39then you can succeed politically,
0:48:39 > 0:48:41and I think they've been very good at that.
0:48:41 > 0:48:45You know, the poor are not very well represented
0:48:45 > 0:48:48in our system of government, I'm afraid.
0:48:48 > 0:48:50Why is that, do you think?
0:48:50 > 0:48:54Well, I think one reason...
0:48:54 > 0:48:57I think has a lot to do with the decline of the unions.
0:48:57 > 0:49:00Throughout the '30s and '40s and '50s,
0:49:00 > 0:49:04the unions were the vanguard in pushing for social legislation
0:49:04 > 0:49:07that would help the lower classes in general.
0:49:07 > 0:49:10Unions are perhaps the only organisations
0:49:10 > 0:49:12with significant financial and political clout
0:49:12 > 0:49:15that actually represent the working class.
0:49:15 > 0:49:17Since the late '70s,
0:49:17 > 0:49:19corporate interests have been extremely successful
0:49:19 > 0:49:22at limiting the power of unions.
0:49:22 > 0:49:25Only public sector unions have shown signs of growth.
0:49:25 > 0:49:28And the Koch brothers have put their financial muscle
0:49:28 > 0:49:30behind an effort to destroy them.
0:49:31 > 0:49:33Wisconsin is ground zero.
0:49:33 > 0:49:36I think it's going to determine, largely, whether or not
0:49:36 > 0:49:41the pampered nature of these public employee unions is finally reined in.
0:49:41 > 0:49:43If you, like David Koch and Charles Koch,
0:49:43 > 0:49:47want to take over American politics, you're going to want to knock out
0:49:47 > 0:49:50whatever the organized forces are on the other side.
0:49:50 > 0:49:51Discharge the duties...
0:49:51 > 0:49:54On January 3rd 2011,
0:49:54 > 0:49:57Scott Walker became Governor of Wisconsin.
0:49:57 > 0:49:59He had received significant financial support
0:49:59 > 0:50:01from the Koch brothers.
0:50:01 > 0:50:02Congratulations, Governor.
0:50:02 > 0:50:04APPLAUSE
0:50:04 > 0:50:08The national conservative movement wanted a Petri dish, and we were that
0:50:08 > 0:50:10and he was more than willing to do what they wanted,
0:50:10 > 0:50:12and not the people of Wisconsin.
0:50:12 > 0:50:14- Good morning.- Good morning.
0:50:14 > 0:50:18Walker quickly introduced a bill to balance the state's budget
0:50:18 > 0:50:21but it disguised a much broader agenda.
0:50:21 > 0:50:24The Governor said, "Look, you guys got a great deal on your pension,
0:50:24 > 0:50:27"you don't pay anything for your pension and it's a good pension
0:50:27 > 0:50:28"so you should pay 5%."
0:50:28 > 0:50:31Half of what the overall contribution is,
0:50:31 > 0:50:32which is about 5.8%.
0:50:32 > 0:50:36"OK. Compared to other places that I see? OK."
0:50:36 > 0:50:38He said, "You should pay more for your healthcare."
0:50:38 > 0:50:41We're asking for a healthcare premium contribution
0:50:41 > 0:50:44of just about 12-and-a-half per cent.
0:50:44 > 0:50:46"Eh, we got a good deal on healthcare. OK."
0:50:46 > 0:50:49We remove healthcare
0:50:49 > 0:50:52and pension contributions from collective bargaining.
0:50:52 > 0:50:55Then he said, "Now we don't want any more collective bargaining."
0:50:55 > 0:50:58We went, "Whoa, wait a minute! Stop! You can't do that!"
0:50:58 > 0:51:01Walker's legislation was a surprise attack
0:51:01 > 0:51:04on the political power of public sector unions
0:51:04 > 0:51:07and their ability to negotiate on behalf of workers.
0:51:07 > 0:51:11Take away collective bargaining and what does a person that's making,
0:51:11 > 0:51:13let's say, 7-9 an hour
0:51:13 > 0:51:15at University of Wisconsin Hospital serving lunch,
0:51:15 > 0:51:18what voice will they have in the workplace?
0:51:18 > 0:51:21Within days, the largest unions announced that they were willing
0:51:21 > 0:51:24to make sacrifices that would help save the state money,
0:51:24 > 0:51:28but they wouldn't give up their collective bargaining rights.
0:51:28 > 0:51:31The unions and the Democrats have said they're willing
0:51:31 > 0:51:33to take the concessions on wage and health benefits.
0:51:33 > 0:51:36They're willing to take about an 8% pay cut
0:51:36 > 0:51:38but they simply don't want you to take away
0:51:38 > 0:51:40their collective bargaining rights.
0:51:40 > 0:51:42What we're asking for, realistically,
0:51:42 > 0:51:45is something that nearly every other person in this state
0:51:45 > 0:51:48and every other person across this country's paying a lot more for
0:51:48 > 0:51:49when it comes to retirement.
0:51:49 > 0:51:52But they already said they're ready to give that up, Governor,
0:51:52 > 0:51:56they already said they're willing to give up on pensions and healthcare.
0:51:56 > 0:51:59- They've already made those concessions.- That's a red herring.
0:51:59 > 0:52:02But you can say anything in the midst of the debate.
0:52:02 > 0:52:04Then we really knew
0:52:04 > 0:52:06it was not about fixing a budget at all.
0:52:06 > 0:52:10It was about breaking unions
0:52:10 > 0:52:14and breaking the political power that unions have.
0:52:14 > 0:52:17Governor Walker's agenda is a national agenda.
0:52:17 > 0:52:22I mean, it's seeded and it's well funded by the Koch brothers.
0:52:24 > 0:52:27DRUMMING, CHANTING
0:52:27 > 0:52:32For more than a year, Wisconsin became a battleground.
0:52:32 > 0:52:36Pro-union protesters occupied the state house for more than two weeks.
0:52:37 > 0:52:40They gathered over a million signatures
0:52:40 > 0:52:43to force a recall election to get Walker removed.
0:52:43 > 0:52:46The unions spent millions fighting for their survival,
0:52:46 > 0:52:50but wealthy interests outside the state spent far more.
0:52:50 > 0:52:55The biggest single source of money was Americans For Prosperity,
0:52:55 > 0:52:59which has spent over 10 million to support Scott Walker.
0:52:59 > 0:53:02Today we have more activists in our Wisconsin AFP chapter
0:53:02 > 0:53:05than there are members of the Wisconsin Teacher's Union.
0:53:05 > 0:53:08We have a very strong, vibrant operation there.
0:53:08 > 0:53:11Walker has painted teachers
0:53:11 > 0:53:16and other public union employees as the haves
0:53:16 > 0:53:19and the private sector as the have-nots.
0:53:19 > 0:53:24What they're trying to do is really squash you
0:53:24 > 0:53:27so that they can have that much more power
0:53:27 > 0:53:30and you can have that much less voice.
0:53:30 > 0:53:34It's teachers whose pay has been reduced, against the Koch brothers.
0:53:34 > 0:53:35It's not a really fair fight.
0:53:35 > 0:53:38PHONE RINGS
0:53:38 > 0:53:40Hi, this is Scott Walker.
0:53:40 > 0:53:43Scott. David Koch, how are you?
0:53:43 > 0:53:45David, I'm good, and yourself?
0:53:45 > 0:53:46I'm very well.
0:53:50 > 0:53:54Little disheartened by the situation there, but what's the latest?
0:53:54 > 0:53:56Well, announced Thursday,
0:53:56 > 0:53:59and we'll probably get 5,000-6,000 state workers
0:53:59 > 0:54:02who'll get at-risk notices for layoffs.
0:54:02 > 0:54:05Beautiful, beautiful. We've got to crush that union.
0:54:08 > 0:54:11Just got to pass the message on to these guys -
0:54:11 > 0:54:15if they think I'm caving, they've been asleep for the last eight years
0:54:15 > 0:54:17- cos we don't budge.- Goddamn right.
0:54:17 > 0:54:21But uh, what we're thinking about the crowds
0:54:21 > 0:54:23was planting some troublemakers.
0:54:23 > 0:54:25You know...
0:54:25 > 0:54:29we thought about that.
0:54:29 > 0:54:32My only gut reaction to that would be,
0:54:32 > 0:54:33let them protest all they want.
0:54:33 > 0:54:37Sooner or later, the media stops finding them interesting.
0:54:37 > 0:54:39The next question, I talk to Kasich every day,
0:54:39 > 0:54:42John's got to stand firm in Ohio.
0:54:42 > 0:54:45I think we can do the same thing with Rick Scott in Florida,
0:54:45 > 0:54:47I think Snyder, if he got a little more support,
0:54:47 > 0:54:49probably could do that in Michigan.
0:54:49 > 0:54:51We start going down the list,
0:54:51 > 0:54:54a lot of us new governors who got elected could do something big.
0:54:54 > 0:54:55You're the first domino.
0:54:55 > 0:54:58Yup. This is our moment.
0:54:58 > 0:55:02This is our time to change the course of history.
0:55:02 > 0:55:04PHONE HANGS UP
0:55:17 > 0:55:18In places like Wisconsin,
0:55:18 > 0:55:22the doors of opportunity for those on the lower rungs of society
0:55:22 > 0:55:23are closing quickly.
0:55:24 > 0:55:28We are in very real danger
0:55:28 > 0:55:31that the American dream is slipping from the grasp
0:55:31 > 0:55:33of the next generation.
0:55:33 > 0:55:37This charity event is a moment for wealthy New Yorkers
0:55:37 > 0:55:40to give some of their fortunes to the poor.
0:55:40 > 0:55:44Over the last decade, Stephen Schwarzman has given over 7 million
0:55:44 > 0:55:47to New York's Inner-City Scholarship Fund.
0:55:47 > 0:55:51I worry that the social fabric of America
0:55:51 > 0:55:54is being ripped purposefully
0:55:54 > 0:55:59by people who are taking advantage of individuals who are suffering.
0:56:00 > 0:56:02Mr Schwarzman appears to be sympathetic
0:56:02 > 0:56:04to those who are living in poverty
0:56:04 > 0:56:08but oddly, for one of America's greatest capitalists,
0:56:08 > 0:56:12he doesn't seem to understand that unlike Monopoly,
0:56:12 > 0:56:15real capitalism is a game that's played for keeps.
0:56:15 > 0:56:18For every big winner,
0:56:18 > 0:56:20there are lots of losers.
0:56:20 > 0:56:22Wealth is created,
0:56:22 > 0:56:24but so is poverty.
0:56:24 > 0:56:26Without popular democracy,
0:56:26 > 0:56:30all the gains of our economy will go to the top.
0:56:30 > 0:56:31Show me what democracy looks like!
0:56:31 > 0:56:34This is what democracy looks like!
0:56:38 > 0:56:41I'm from Michigan. This is where our money is.
0:56:41 > 0:56:45People lost their homes in the banking and mortgage crisis,
0:56:45 > 0:56:48and it went here.
0:56:48 > 0:56:50There's nothing wrong with being rich.
0:56:50 > 0:56:53God wants all his children to be rich.
0:56:53 > 0:56:55But don't be rich
0:56:55 > 0:56:58and at a place where you ain't thinking about anybody else.
0:56:58 > 0:57:01They feel they need, not 10 billion,
0:57:01 > 0:57:03but 20 billion of wealth.
0:57:03 > 0:57:06They get that extra wealth by twisting politics,
0:57:06 > 0:57:08buying politicians.
0:57:08 > 0:57:12America became a place where money buys everything.
0:57:25 > 0:57:27The rich are often held up
0:57:27 > 0:57:30as shining examples of what's possible in America,
0:57:30 > 0:57:32proof that anyone can make it.
0:57:35 > 0:57:39But is there still a bridge to economic opportunity in our country?
0:57:41 > 0:57:45When we look at the river that separates the two Park Avenues,
0:57:45 > 0:57:47do we see a channel to prosperity for everyone?
0:57:48 > 0:57:52Or a barrier that prevents the poor from crossing?
0:57:53 > 0:57:55As long as our political leaders
0:57:55 > 0:57:58depend on the rich to win elections and stay in office,
0:57:58 > 0:58:02they will write laws to protect the castles of wealth and power
0:58:02 > 0:58:05on the other side of this river,
0:58:05 > 0:58:09a river that has become a deep and forbidding moat.
0:58:28 > 0:58:33Find out more about the trend of rising inequality closer to home.
0:58:33 > 0:58:38Go to bbc.co.uk/whypoverty
0:58:38 > 0:58:40and follow links to the Open University.
0:58:52 > 0:58:54Subtitles by Red Bee Media Ltd