Posted in Rants on September 21st, 2010 by Ed

Just as I was getting ready to address the topic of the "so-called" rich making over $250,000, Glenn Reynolds' retarded ass dropped this gift directly into our laps. Hence Brad DeLong and Michael O'Hare have already done the requisite rhetorical bitchslapping of Reynolds' ridiculous argument.

To recap in brief, Instarube writes of a fellow law professor, one Prof. Henderson, with a working spouse. Together Henderson claims that their incomes exceed the "$250,000 threshold for the super-rich (although not by much)." O'Hare proceeds to do some math based on the information provided by Henderson/Reynolds and determines that the prof and his wife make about $330,000 – comfortably over the "threshold" after all. Their approximate budget looks something like this, O'Hare estimates (and shows his work):

Taxes $100,000

Housing* $65,000 mortgage + 15,000 insurance & maintenance = $80,000

Two really nice cars $.70/mile x 15,000** miles = $10,500

Student loan payments (20 year amortization at 10%) = $60,000

*Why a couple with a half-million dollars of debts decides it needs a million-dollar house in Chicago, where the Hyde Park average price ” near their work” is a third of that, is not entirely clear. Also note that $25,000 of this is going into their own pockets, building equity in their house.

**They live near their work, so this is probably generous.

This leaves about $90,000, a lousy $245 a day, for food, clothes, vacations, cable TV, and like that. You can walk into Nordstrom’s on Upper Michigan and spend that in a minute, and for stuff you really need. Really, I don’t know how these people get by; their adaptive skills, economical habits, and modest living style is an inspiration to all of us. Perhaps they are careful to tip no more than 15% at the Sizzler when they splurge.

Henderson follows up with DeLong, pointing out, among other issues, that this approximate budget omits "education and daycare", which will "come close to $60,000" this year. Then the wheels, tenuously attached as they were, really fall the fuck off:

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.

So they have three domestic servants, a million-dollar home (in a Hyde Park neighborhood in which the median home price is about $300,000), and they devote to their three children a combined $60,000 in K12 education and daycare. And he's angry, for some reason, about the $500,000 in student loans for Wifey's med school that must be repaid.

See, this is the problem with this entire debate and with accusations of "class warfare" in general: these people do not feel rich because they are essentially living paycheck-to-paycheck. Their personal financial skills are so piss-poor and their sense of things to which they are entitled is so great that they look at the balance sheet and decide that they aren't rich after all. How can they be "rich" if they struggle to make ends meet?

The median family income in this country is just over $50,000. The Henderson clan makes seven or eight times that, yet they still don't have any money. Prof. Henderson is panicked about a small Federal tax increase because they have no leeway. Everything they make, they spend. Often they spend the money before they even make it. So despite the $300,000+ in annual income, they can't afford many of the outward signs of wealth – fancy vacations, lavish wardrobes, shopping/redecorating sprees, $20,000 watches, and so on. Those are things that rich people have. Ergo people who do not have them are not rich, right?

Never mind the fact that every aspect of the Professor's personal finances represents a choice, not to mention an indulgence. The million-dollar house, the nanny, the $60,000 in private school tuition, the maid, the landscaper…none of these things are necessities. If they want to live MTV Cribs-style on a third of a million dollars, they could put the kids in public school or live outside of Chicago city limits. They could clean their own kitchen and mow their own lawn. That would leave plenty for bling, vacations, a couple of BMWs, and all of the other "show-me" aspects of wealth.

DeLong suggest that the problem is the growing gap between the merely rich like Henderson and the Super-Rich who live the lifestyle that Henderson et al associate with being rich. They go to Dubai, own multiple homes, eat at the $1000 restaurants, and so on. I'd argue that this is a simple failure to realize that the rest of us – and I mean like 99% of Americans – can and do get by on less than one Henderson kid's kindergarten tuition. We make it work. In most cases, we do just fine. We'd like more money and we don't live in luxury, but we're getting by. That we can't afford a million-dollar home and a nanny is not evidence that we are poor. We aren't. More importantly, Professor, you are neither poor nor an Average Working Joe just because you manage to piss through the huge amount of money you make with such stunning alacrity.