In the ever-deepening quagmire that is the American political debate over the ever-deepening quagmire that is the war in Iraq, there is one thing, at least, that unites Democrats and Republicans: outrage over the Iraqi Parliament's decision to take off the month of August. Michigan Democrat Carl Levin deemed the break from work "unthinkable." Kentucky Republican Mitch McConnell proclaimed the Parliament "largely an embarrassment." Even President Bush, speaking in May to Republican lawmakers angry about the Iraqi Parliament's summer plans, said, "The vice president is over there to tell them, 'Do not go on vacation.'" To which we can only respond: How American! Because, while Iraqi lawmakers still have much to learn about democracy, they could certainly teach the United States a thing or two about leisure.
Americans, to put it bluntly, suck at vacationing. The problem, alas, is not that we are a nation of Clark Griswolds--the blue-socks-and-sandals-wearing Chevy Chase character who routinely mucks up his family's vacations. Griswold, for all the bumbling he does on his vacations, at least takes a lot of them (four movies' worth, in fact). Most Americans don't even do that. According to the World Tourism Organization, Americans average only 13 days of vacation per year, as compared with 42 days for Italians, 37 days for the French, and 34 days for Brazilians. Even our neighbors to the north, the ever-industrious Canadians, take double the number of vacation days per year that we do.
So what explains the American aversion to leisure? The Center for Economic and Policy Research's Rebecca Ray and John Schmitt blame the government. In their recent paper, "NoVacation Nation," Ray and Schmitt survey 21 economically advanced countries and find that, while most in the group have a statutory minimum annual leave of about four weeks, "the United States is the only country in the group that does not require employers to provide paid leave." As a result, Ray and Schmitt report, "the average worker in the U.S. private sector receives only about nine days of paid leave and about six paid public holidays per year"; and, according to the Bureau of Labor Statistics, about 25 percent of American workers in the private sector do not get any paid vacation time at all. Making matters worse, Ray and Schmitt find that, in the absence of statutory requirements, the paid leave Americans do receive is distributed unequally--with lower-wage, part-time, and small-business workers likely to have the least. Contrast this with a country like Australia--which actually requires one more week of paid leave for its shift workers than for everyone else--and the backwardness of the American approach to vacation becomes more glaring still.
But, even if the U.S. government suddenly wised up and required private employers to offer paid leave on par with other advanced nations, there's no guarantee American employees would respond by making a beeline to their umbrella drinks. A recent survey by the employment firm Hudson found that more than percent of American workers fail to take all the vacation days they do have, and 30 percent use less than half of them. Ironically, this dereliction of leisure is acute even among those most likely to own Hamptons beach houses and Aspen villas. In a recent article in The Harvard Business Review, Sylvia Ann Hewlett and Carolyn Buck Luce wrote about the "extreme jobs" phenomenon--in which high-income employees hold jobs that require them to work at least 60 hours per week and feature extensive travel, tight deadlines, and other similar characteristics. Among extreme-job holders, Hewlett and Buck found, 42 percent "take ten or fewer vacation days per year--far less time off than they are officially entitled to--and 55 percent claim they have had to cancel vacation plans 'regularly.' Moreover, they say no one is forcing them to do this." Indeed, what's most remarkable about these high-earning, vacation-skipping extreme-job holders is that, according to Hewlett and Buck, 66 percent of them wouldn't have it any other way. And if you can't count on the rich--the so- called leisure class--to take vacations, then who can you count on?
Of course, our decrying of America's aversion to vacation will only do so much to solve this growing crisis. Which is why we're happy to say that, with the publication of this issue, The New Republic will try to do its part by joining those Iraqi M.P.s and taking some time off in August. It won't be the month our Baghdad brothers will enjoy, only seven days, but that means the next issue of tnr won't be published for another three weeks instead of the customary two. What you, dear reader, will do without tnr for that one week is hard to fathom, but we'd be remiss if we didn't offer one suggestion: Maybe you should take a vacation, too.
Stephen Schwarzman, noted solipsist and private equity kingpin, was delivering a speech at the New York Stock Exchange last month when his cell phone rang. "There's a crisis going on," he said, then answered it. For the next few minutes, the audience was treated to a real-life case study in crisis management. Finally, Schwarzman returned to the podium and revealed the cause for his alarm. A terrorist attack? A market meltdown? A last-minute glitch in the iPhone? Not quite. Two senators had just introduced a bill requiring his firm--starting in 2012--to pay its fair share of taxes.
At the time, the Blackstone Group, which Schwarzman runs, was planning to raise some
$4 billion in a public stock offering. (The actual amount came pretty close to that when the IPO happened in late June.) But, unlike most public companies-- even those, such as investment banks, in essentially the same business-- Blackstone would not have been subject to the corporate income tax on its profits. The loophole arises from a law that allows publicly traded partnerships to mostly avoid the 35 percent corporate tax so long as they generate the vast majority of their income from passive investments. (Partners pay only a 15 percent capital gains tax on profits remitted to them directly.)
Problem is, there is no English-language definition of the word "passive" that describes Blackstone's business model. The whole point of a private equity firm, after all, is to buy up undervalued companies and overhaul their operations. "Go and talk to the companies they buy," says Victor Fleischer, a tax expert at the University of Illinois. "They very much feel like [the ownership] is active." In weaker moments--like, say, its SEC filings--even Blackstone concedes as much.
The two senators, Democrat Max Baucus and Republican Chuck Grassley, want to fix this inequity by closing the loophole. Blackstone's defenders, meanwhile, trot out a fairness argument of their own. The logic, as summarized in a recent Wall Street Journal editorial, is that Blackstone makes its money from subsidiary companies. And, since those companies already pay corporate taxes on their own profits, it would be punitive to levy the tax a second time. Which might be true, if the subsidiary companies actually paid taxes. As it happens, Blackstone takes on so much debt when it buys them that their effective tax rate is negative (meaning they receive money from the government). Moreover, by the Journal's logic, GM shouldn't pay the corporate tax, either, since it has already paid taxes on the glass and steel that it fashions into cars. Blackstone's management presumably thinks it's engaging in a productive economic activity--capital allocation--when it buys up companies. It's hard to see why profits from this activity should go largely untaxed. Finally, much of Blackstone's revenue comes from the sale of subsidiary companies, not their operations. Other public companies have to pay corporate taxes on profits from such sales. Blackstone gets to pay a far lower rate.
"A hallmark of corporate status is access to the capital markets," Grassley noted when introducing the legislation, which is currently awaiting a committee vote. "It's unfair to allow a publicly traded company to act like a corporation but not pay corporate tax." He's exactly right. No one is forcing Blackstone and its ilk to raise money from the public. If they do, they should bear the responsibilities that go with it.
By The Editors