cmaukonen's picture

    Greed...It's Not Just For Wall Street Any More

    By cmaukonen on Thu, 11/11/2010 - 5:00pm |

    This is an old piece but I think needs resurrection to illustrate some points. 

    Law Professor Todd Henderson's blog post yesterday on Truth on The Market, created such a firestorm that today he deleted the post.Citing an "electronic lynch mob" Professor Henderson wrote that he has received hate mail and mean comments from posters, and the post has  caused his relationship with his wife to become strained. (She disagrees with his sentiments vehemently, and was not made aware of the intention to go public prior to the publication.)

    UC Berkeley Professor Bradford DeLong has re posted the commentary for the sake of posterity and to further the conversation on why the rich don't feel rich. The link will take you to Professor Henderson's original arguments on why he and those in his income bracket should not be subject to additional income taxes if the Bush tax cuts are repealed. Professor Henderson and his wife make approximately $450,000.00 annually and argue that they don't feel rich, and know people that make ten times their income. Here's a comment from Professor DeLong on this:

    Instead, Mr. Xxxx Xxxxxxxxx looks up. 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.

    Even if one accepts the premise that making $450,000 a year doesn't make one rich, asking for American's that have prospered and done well to give a bit more back in taxation to help the truly hard working, out of work and working poor doesn't seem like asking too much. Does it?

    Remember, we are hearing from conservatives and Republicans primarily that spending is out of control, and sacrifices will have to be made by all Americans. Extending the tax cuts to the 2% of the population that Professor Henderson belongs to, will cost the US Government approximately 690 Billion Dollars over the next ten years.  Let's also not forget that when these tax cuts were enacted no offsets in spending were made to pay for the cuts. That is not the making of fiscal conservative economic policy. Current debate and arguments by proponents of extending the tax cuts for all income groups are the same groups that are telling working class Americans and retirees on fixed incomes,  to expect cuts to Medicare and Social Security "entitlements."

    And this from Huffington.  How did people get so damn snotty in this country ?

    When I grew up - in the 1950s and 1960s - I and my family knew people like Professor Henderson. Some make more some less. Lawyers, and doctors and surgeons and small businessman. My best friend's father owned the local hardware store but also inherited quite a bit from the sale of the family farm.  I do not remember them complaining about their lot in life not do I remember them getting a new car every other year or living in some fancy gate community. They did not buy their children their first car or send them to private schools. Their kids did not wear the latest designer clothes or even have their own stereo. Maybe an inexpensive transistor radio.  They did not travel to Europe or Asia for vacation. Maybe out to the Rockies or something and quite often camped. Their furniture and a lot of other things came from Sears or Montgomery Wards or Penney's. 

    They did not have commercial restaurant style appliances in their kitchens. Or fancy imported wine or beer.  Though some could well afford a number of these things. They lived a modest life. So to hear of people complaining like the above, seems at best a little self centered.  These self same folks are the first to complain about entitlements and ironically are the ones who seem to feel the most entitled  and privileged.

    The depression of the 1930's gave us some very positive things. Good legislation and financial regulation as well as social safety nets.  it also gave us people with some common sense and humility and empathy for others.  Unfortunately these positive social traits have gone by the board.  The first ladies public shopping spree in the middle a major economic down turn is the epitome oh the attitudes that seem to be present amongst those in the upper crust of late. A lack of sensitivity and humility.

    Changing the financial landscape and economic regulation will accomplish little if these attitudes do not change. And I fear it will take another major economic upheaval to change them.

    Comments

    With an annual income of $450,000 does he think I'll believe he and his wife are spending it all on comsumption? Seriously! With that level of income, they should have some hefty investments in the works developing a sweet nest egg for their retirement. Does he seriously think people will think in only income earned in a year? That it wouldn't even dawn on us the money not used last year went into high yield investments which means his overall wealth is far greater than his annual salary?


    by Beetlejuice on Thu, 11/11/2010 - 8:06pm

    You just never know Beetle.


    by cmaukonen on Thu, 11/11/2010 - 8:15pm

    It's amazing what can be spent. Back in the 80s we had one client who wanted a 5,500 square foot house. They were empty-nesters, but they wanted rooms for all their children in case they visited, and a large atrium for their art collection. Another fellow wanted an 8,800 sf house. He and his wife had adopted 5 orphans, so each one got a bedroom, and the wife got a pottery studio with a kiln, and the husband wanted an enormous living room.


    by Donal on Thu, 11/11/2010 - 9:22pm

    Well if you are going to spend like a sailor don't be surprised if you wind up under water at some point.


    by cmaukonen on Thu, 11/11/2010 - 9:52pm

    But the cost for a McMansion is one time expense overtime. And with that kind of annual income, their banker is spending a lot of time working out deals where the earned income isn't upside down with payment for an extravagant lifestyle. Besides banks make money with high rollers and it's to their advantage to keep the nest egg from being diluted with extravagant spending.  No banker with half a mind would let a high roller blow his wad on trivial pursuits.


    by Beetlejuice on Fri, 11/12/2010 - 10:51am

    I know this'll tick some people off but I don't see any great virtue in living modestly if you don't have to.  That's not to say I sympathize with this guy's complaint.  He's rich, no doubt about it, and should at least not whine about that in public.  But so far as luxurious living goes -- shouldn't we be enjoying the luxuries we can afford while trying to expand access to luxuries for everyone else?


    by Michael Maiello on Fri, 11/12/2010 - 2:14pm

    Doesn't seem anyone wants to touch this question, Destor.  But just remember, there are the poor and there are those who are politically motivated to claim poverty in solidarity and they sometimes sniff at any kind of consumption. 

    Yet a friend of mine, who is the most vehement in this kind of solidarity among the people I know, has Gaggenau appliances. 

    Go figure. 


    by anna am on Fri, 11/12/2010 - 5:01pm

    Ultimately I believe in better living through chemistry, technology, travel and the arts.  Those things cost money.  They also aren't available to a lot of people.  Somewhere along the line we do have to make some choices.  Luxury cars for a few while the majority do without?  Or retirement, health care and educational security so everyone has a shot?  But these are tougher questions than they seem when we get specific.  The guy says "if you raise my taxes, I'll fire my gardener."  Part of me says "hmmph, do your own damned gardening like everyone else."  Of course, I'm not his gardener. 


    by Michael Maiello on Fri, 11/12/2010 - 5:42pm

    See David Seaton's blog above.


    by cmaukonen on Fri, 11/12/2010 - 5:59pm

    I read the whole sad story on Brad De Long's blog, including all of the supposed perp professor's followup comments (I recommend doing the latter before passing judgment.)

    Here's the narrative I saw:

    A stupid populist internet mob turning a swing voter, once and for all, into a lifelong Republican.

    Wherein the once swing voter professor never got a reasonable debate on his question of whether it would better for him to fire his immigrant lawn care service, housecleaner, nanny etc. and give the money to the Feds to distribute.

    Instead, he got a response that confimed his suspicions that if he didn't vote GOP from now on, he might end up like Dr. Zhivago after the revolution.

    Way to go to win hearts and minds to support your goals, ye internet populists, way to go!

    P.S. Yes, it matters that he stupidly doesn't understand the consequences of the proposed tax changes on his own financial situation. But none of the mob apparently tried to explain that to him until Brad De Long took notice. Instead, they just went for his jugular.


    by artappraiser on Fri, 11/12/2010 - 2:18pm

    The whole thing is interesting to me because he was really asking a pretty loaded question: what, of my possessions, don't you want me to have?  It's a reasonable enough thing for him to ask.  There are also reasonable answers.  But it's not the discussion we had.

    I do think his approach is more than a little to blame.  It is hard for people with more poignant and obvious struggles to listen to that and not get angry.  But at the same time... well,,, there was reference to Michelle Obama's shopping trip in the post above and what did you think of that?  On one hand, sure... how can she buy designer clothes for herself and her kids while so many people are scraping by and forgoing a new shirt from K-Mart?  On the other hand, do you want to tell her daughters, who will grow up and come of age in the public eye (or heck, even if there had normal childhoods) that they can't have a new dress?


    by Michael Maiello on Fri, 11/12/2010 - 2:39pm

    The difference is des, I don't see the First Lady complaining that she doesn't want her taxes to increase.

    When is enough, enough? How much does one need to have before one has enough so that he feels good about sharing his bounty in the form of higher taxes?

    The increases in the proposed taxes is minimal to the individual. It amazes me how few people understand progressive taxation. There are those out there who think that when the top income tax rate is 50% that people in that bracket have to fork over 50% of their earnings, and they find that unfair. But that's not what happens. Additionally, many of the truly wealthy have so many tax shelters, the actual amount they pay is ridiculously low.

    We've never come anywhere near $250K per year, and, we live in California (not the cheapest state in the union) and yet we live well. We don't have a mcMansion, or a yacht, or an airplane, or a villa in the south of France, but somehow we've managed to be happy. We have enough. I find it hard to believe that someone making $450K would experience an actual "hardship" to pay a few extra thousand a year in taxes. If it is, they need to get a part  time job...that seems to be the suggested fix for people who really ARE hurting.


    by stillidealistic on Fri, 11/12/2010 - 4:15pm

    Oh, I agree with you.  The guy's whining was unseemly.  And... it is sad that people don't understand something as simple as tax brackets.  As you say, when somebody proposes a 50% tax bracket for people who make more than $250,000 they freak and think that there take home pay is going to drop to $125,000.  It doesn't work like that at all.


    by Michael Maiello on Fri, 11/12/2010 - 4:40pm

    I think that most people don't realize your taxes would increase just on your earnings above 250,000, either, not on your entire earnings. 


    by we are stardust on Fri, 11/12/2010 - 5:36pm

    Hmm.  I suppose it's inconceivable that the professor might have been led to reflect, in a most unrequested and rough but perhaps salutary way, on the many blessings of his life?  And that perhaps he was being a bit whiny, selfish, and self-pitying?  That it might not be the worst thing that could happen to him if he ended up paying a bit more in taxes?  That perhaps what he most needs to do is get over himself and come away from the experience a more broad-minded and empathetic person instead of a more fearful one? 

    It's as conceivable to me he might have had any of those reactions as that he would have been quietly persuaded by sweet reason to see things the way the people attacking him apparently do on this matter.     

    My father grew up during the Great Depression. His parents were small business owners, never close to wealthy, in a small town in upstate New York and they struggled as most did then.  He conveyed to me his sense at the time that if something wasn't done to help people there could really be a revolution in this country.  He did not see that as a good thing.  He was deeply frightened at the possibility, as, I think, anyone who feels they have anything to lose--and in this society that's most of us--would be.  His conclusion--quite wise as well as humane, and prescient for someone his age at the time--was that there had to be more sharing at a societal level, with jobs programs and the like. 

    We are not at that point in this country.  Not yet.  But the long-term data on income not going up with productivity--which is supposed to be the fair deal the worker gets in this country for performance--the signs all around including the political instability and the unrest manifested in last week's elections, are there for all to see.  I don't know what it will take, if anything, to get some attention paid, as Willy Loman's wife might have put it.   

    How does someone like this professor, and others like him in this country, get shaken from his narrow-minded and obtuse self-absorption (I take it you would not call it that; I would.)?  I don't know.  I'm sure the answer depends on the individual and that for some people, there probably isn't anything that will have that effect.  And it's possible you're right, that having a bunch of strangers confront him in the way they did might turn him into a lifelong Republican. 

    I don't know where all this goes.  I have a pretty clear sense of where things have been going in this country for quite awhile now.  Sweet reason, appeals to peoples' better natures, hoping and praying, and things like elections do not seem to have had much effect in getting the point across so far to the powers that be.  Perhaps a more assertive approach is called for.  Not uncivil, not rude, I don't condone that. No.  Just more assertive.  I am not at all a confrontational person by habit.  But all the things we get taught growing up to believe will work--what I am observing is that they are not working.  So I am rethinking my own commitments these days.  For reasons that I think of as conservative as well as liberal--but prefer to think of as just sensible and humane.  The way my dad saw things a long time ago.


    by AmericanDreamer on Fri, 11/12/2010 - 6:04pm

    I vote to let all the tax cuts expire. Why not?  How bad would it hurt those directly affected? Obviously middle class tax payers still have jobs. How important are the billions that the middle class tax cuts would cost? Are they as important as those fungible billions we want from the upper percentile earners?  We keep talking about how good the nation did under Clinton's tax rates. We say that a tax cut does very little to stimulate growth so there must be a corollary to that.  Inflation has been low. Those who have lost work aren't paying income tax anyway, they won't be hurt further by a rate change. We all agree that the deficit is a problem. 

     For the political side, I would have Obama promise to veto any tax cut to the rich, who do not need it, and to say that if congress thinks the middle class needs a tax break to send him a bill for the middle class. If they are determined to make the rich even richer by including them, then send a veto proof bill.
     
    There are good arguments for a progressive tax rates. They should be made and be part of the conversation. Simply demonizing the rich, whether they deserve it or not, just to justify taking more from them, is too simplistic. It strikes a lot of people wrong.


    by A Guy Called LULU on Fri, 11/12/2010 - 6:20pm

    I remember reading this on DeLong's blog.  I can't remember whether or not he says this explicitly, but research supports the idea that is at the core of the story he tells, which is that people "feel" rich or poor not because they looked at broad data about income, but because they looked around them.  I'm not supporting this guy's position and feel that his argument is symptomatic of a view that, while prevalent, does not amount to a plan for governance, but this is not something that only Mr. Henderson, or even only the rich in general, is prone to.


    by DF on Fri, 11/12/2010 - 6:29pm

    people "feel" rich or poor not because they looked at broad data about income, but because they looked around them. 

    Yes, that appears to be how this works.  What I wonder is how does this change?  Does a President getting heat for letting these tax cuts expire try to remind the public--without demonizing people for being financially successful (my beef expressed above is with the insular, whiny attitude of the prof above, not the fact that he is financially successful)--that people above such-and-such income level represent x percentage of the population and are being taxed at higher rates because they are most able to pay?  Maybe in a country where saying "I was never any good at math" isn't taken as almost a badge of honor.  I don't know.     


    by AmericanDreamer on Fri, 11/12/2010 - 6:55pm

    Well, it certainly becomes a much more difficult issue to tackle if you accept that it's not something that is restricted to people in certain income brackets, ie that it's just in our nature.  Personally, I think the right thing for us to do is to understand that people do this and why.  As far as political leadership goes, there needs to be a willingness to put things into perspective.  "I feel poor" isn't a basis for policy.  The numbers are what matter there, but the task of leaders is to use those numbers to buttress a narrative that speaks to other things that people "feel" - like that things should be "fair."  There's a very compelling case to be made that it's perfectly fair for this guy and his cohorts to pay more.  Of course, you will still end up with Sean Hannity accusing of being you a Marxist, but that's no reason not to both forcefully make the argument and pursue the policy.

    At one point not too long ago, people used to argue that monarchy "felt" ordained by a higher power.  Hardly anyone accepts that now.


    by DF on Fri, 11/12/2010 - 7:10pm

    Well, to a certain extent, wealth is meaningless if we don't view it in a relative way.  I mean, why does it matter that Paris Hilton is way richer than I am?  Only because her wealth means she can go places I can't, do things I can't, own things I can't and basically enjoy freedoms that I don't get to enjoy.

    Relative wealth pretty much only matters because we know we all only get one shot at life as humans on Earth and that some of us suffer, some of us struggle and others of us get to party the whole way through.  If that unfairness isn't important then we have no argument at all for progressive taxation.


    by Michael Maiello on Fri, 11/12/2010 - 8:07pm

    Latest Comments