Monday Business Edition
Monday Business Edition is an Open Thread
The Angry Rich
By PAUL KRUGMAN, The New York Times
Published: September 19, 2010
(I)f you want to find real political rage – the kind of rage that makes people compare President Obama to Hitler, or accuse him of treason – … (y)ou’ll find it … among the very privileged, people who don’t have to worry about losing their jobs, their homes, or their health insurance, but who are outraged, outraged, at the thought of paying modestly higher taxes.
(W)hen Forbes magazine runs a cover story alleging that the president of the United States is deliberately trying to bring America down as part of his Kenyan, “anticolonialist” agenda, that “the U.S. is being ruled according to the dreams of a Luo tribesman of the 1950s.” When it comes to defending the interests of the rich, it seems, the normal rules of civilized (and rational) discourse no longer apply.
Tax-cut advocates used to pretend that they were mainly concerned about helping typical American families. Even tax breaks for the rich were justified in terms of trickle-down economics, the claim that lower taxes at the top would make the economy stronger for everyone.
These days, however, tax-cutters are hardly even trying to make the trickle-down case. Yes, Republicans are pushing the line that raising taxes at the top would hurt small businesses, but their hearts don’t really seem in it. Instead, it has become common to hear vehement denials that people making $400,000 or $500,000 a year are rich. I mean, look at the expenses of people in that income class – the property taxes they have to pay on their expensive houses, the cost of sending their kids to elite private schools, and so on. Why, they can barely make ends meet.
And among the undeniably rich, a belligerent sense of entitlement has taken hold: it’s their money, and they have the right to keep it.
In Which Mr. Deling Responds to Someone Who Might Be Professor Todd Henderson
J. Bradford DeLong, Department of Economics, U.C. Berkeley
September 18, 2010
As best as Michael O’Hare could determine (and Professor Henderson or whoever it is does not challenge him), the Henderson annual family budget is this:
$455,000 a year of income, of which:
- $60,000 in student loan payments
- $40,000 is employer contributions to 401(k) and similar retirement savings vehicles
- $15,000 is employer contributions to health insurance
- $60,000 is untaxed employee contributions to tax-favored retirement savings vehicles
- $25,000 building equity in their house
- $80,000 in state and federal income taxes
- $15,000 in property taxes
- $10,000 for automobiles
- $55,000 in housing costs for a $1M house (three times the average price in the Hyde Park neighborhood
- $60,000 in private school costs for three children
- $35,000 in other living expenses
And of this budget, Professor Henderson (or whoever) writes:
|Like most working Americans, insurance, doctors’ bills, utilities, two cars, daycare, groceries, gasoline, cell phones, and cable TV (no movie channels) round out our monthly expenses. We also have someone who cuts our grass, cleans our house, and watches our new baby…. [W]e have less than a few hundred dollars per month of discretionary income. We occasionally eat out but with a baby sitter, these nights take a toll on our budget. Life in America is wonderful, but expensive. If our taxes rise significantly… the (legal) immigrant from Mexico who owns the lawn service we employ will suffer, as will the (legal) immigrant from Poland who cleans our house a few times a month. We can cancel our cell phones and some cable channels, as well as take our daughter from her art class at the community art center…
Now it is time for a reality check on this “most working Americans.” The median household income in the United States today is $50,000. Half of all households make more than this. Half of all households make less. The big expenses in the Henderson family budget–their $60,000 a year in contributions to tax-favored retirement savings vehicles, their $25,000 a year savings building home equity, their $55,000 for housing, their $60,000 in private school costs, even their $10,000 a year for new cars–are simply out of reach for the overwhelming majority of Americans. Half of all households make less than $50,000 a year–the Hendersons make nine times that. 90% of households make less than $100,000 a year–the Henderson’s make 4.5 times that. The Henderson’s are solidly in the top 1% of American households, in the select 1% group that receives more than $350,000 a year.
By any standard, they are really rich.
But they don’t feel rich. They have a cash flow problem. When the bills are paid at the end of the month, the money is gone–and they feel that they have to scrimp.
Professor Henderson’s problem is that he thinks that he ought to be able to pay off student loans, contribute to retirement savings vehicles, build equity, drive new cars, live in a big expensive house, send his children to private school, and still have plenty of cash at the end of the month for the $200 restaurant meals, the $1000 a night resort hotel rooms, and the $75,000 automobiles. And even half a million dollars a year cannot (get) you all of that.
(W)hy does he think that that is the way things should be? … (H)ere is the dirty secret: Professor Henderson thinks that that is the way things should be because he knows people for whom that is the way it is.
Professor Henderson in 1980 would have known who the really rich were, and they would on average have had about four times his income–more, considerably more, but not a huge gulf. He would have known people who were truly rich, and he would have seen himself as one of them–or as almost one of them.
Now fast forward to today.
Of the 100 people richer than he is, fully ten have more than four times his income. And he knows of one person with 20 times his income. He knows who the really rich are, and they have ten times his income: They have not $450,000 a year. They have $4.5 million a year. And, to him, they are in a different world.
And so he is sad. He and his wife deserve to be successful. And he knows people who are successful. But he is not one of them–widening income inequality over the past generation has excluded him from the rich who truly have money.
And this makes him sad. And angry. But, curiously enough, not angry at the senior law firm partners who extract surplus value from their associates and their clients, or angry at the financiers, but angry at… Barack Obama, who dares to suggest that the U.S. government’s funding gap should be closed partly by taxing him, and angry at the great hordes of the unwashed who will receive the Medicare, Medicaid, and Social Security payments that the government will make over the next several generations.
And in the real world-
Poverty stats show the damage
By Carol Morello, Washington Post Staff Writer
Friday, September 17, 2010
In the second year of a brutal recession, the ranks of the American poor soared to their highest level in half a century and millions more are barely avoiding falling below the poverty line, the Census Bureau reported Thursday.
About 44 million Americans – one in seven – lived last year in homes in which the income was below the poverty level, which is about $22,000 for a family of four. That is the largest number of people since the census began tracking poverty 51 years ago.
Business News below the fold.