FAILURE TO PERCEIVE

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.

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33 Responses to “FAILURE TO PERCEIVE”

  1. John Says:

    Yeah, it's pretty funny seeing this guy complain about his finances when he spends more on his kids' private schooling than I make in a year. And I'm a software developer.

    There was a piece done a while back, I believe in the NY Times, that I've unfortunately forgotten the title of. The author was writing about the banality of wealth — essentially that people who were, by average American worker standards, fabulously wealthy, felt harried and stressed on the budget because of all the things they *had* to have, because those were the things that their elite peers expected of them to be part of the cool club. Things like chauffers, a luxury that the rest of us would balk at as a ludicrously stupid waste of money.

    And that is exactly how someone who's family brings in a third of a million dollars per annum can pretend to know what financial hardship is. The fact that their kids' private school tuition is more than the sum total of my entire compensation for a year doesn't even enter their minds. They are so used to being incredibly wealthy that they don't even have a clue what it's like to be an average American.

    Force them to live on 100 grand a year, as someone like I might (assuming I had a spouse with equal employment). See how long they keep favoring this crony capitalism.

    I don't even struggle on 50K, because I live within my means. I have tailored my life around the amount of money I make, and I live quite comfortably. I don't worry about what uncle sam is going to do to my tax rate.

    I also don't have domestic servants and a million-dollar home.

  2. Nunya Says:

    Paul Krugman's latest post mirrors this sentiment:
    http://www.nytimes.com/2010/09/20/opinion/20krugman.html?hp

    I've worked with a lot of what most of us would consider very well off people who can't understand why I don't just buy a new Lexus Hybrid because it's so much better for the environment or why I don't just hire a gardner or a maid to pick up the slack after I just put in 90 fucking hours on a salary-exempt job.

    You know what, you clueless fucks? It's because I can't afford to and it's certainly not worth going into debt to keep up appearances.

    That being said, I can remember my time as a full-time student with a full time job when I came to the conclusion that if I just made $10/hour, things would be just fine. I'd have plenty of money. Fast forward to a period where I made 5X that magic number and I still felt kind of stretched. Granted, I traded my fleabag apartment in for a modest house and my rusty, barely road worthy car was replaced with a "sensible" Italian import but the truth is, at least for a time, I lost sight of just how little money you can scrape by on.

    Americans are better than almost anyone in wasting their money on luxury items. I know people who bring in maybe $35K/year but own $500 handbags. I know guys bringing in $50K that lease Audi S6s and Porches bucause they think it will get them noticed or laid. It's not that the American worker, as a whole, doesn't deserve a fat raise, it's that we will go into debt for status symbols at an alarming rate.

    I think saving money will be instilledpermanently in a lot of people that got hosed in the Great Recession and it's about time. Having enough money in the bank to be able to quit a soul-sucking job is worth far, far more than the momentary pride you get when you step out of your new car or impress the crowd with your fashion sense.

  3. roboteating Says:

    I feel an episode of Trading Spouses coming on!

  4. AG Says:

    Excellent point, Ed. And yeah Krugman's post too talks about this (though I take umbrage at Krugman's including himself in the rest of the 99% lot … he is rich but that's beside the point, so I will stop).

    This Slate article slams the $250k whiners in a more generalized take: http://www.slate.com/id/2243529/

  5. Jeff C. Says:

    I'm anxious to see other deprived conservatives come to Henderson's rescue.

    Update with links when that happens?:P

  6. bb in GA Says:

    Social commentary on the financial habits of Momma Doc and Poppa Doc are valid since they have chosen to make them public. However, I always get a little nervous when Liberals use "need" in reference to voluntary expenditures of individuals.

    I'm sort of standing around waiting for an Obama Czar to pop up w/ a plan to limit folks in what they can spend for this or that based on what the Government says they NEED.

    I did not read the links, but in my scan of the comments no one said the G word. I am very proud. That is usually par in these discussions to accuse anyone w/ more $ than you as being greedy.

    The peso envy is palpable and reminds me of the lyrics of a Blues song

    "That S.O.B. in his S.U.V."

    //bb

  7. Elder Futhark Says:

    UChicago may be infamous for many things, but it is not reknowned for hiring drooling slackjawed dipshit meatslappers into faculty positions.

    I question the existence of Perfesser X. More likely, this is some PR cubicle hack groaning up a storm and churning out a particularly frothy bowl of bowel sauce ala "Why I am not hiring…".

    Funny thing is, nowadays some stankhole making enough to ape the superrich would not be allowed to hold the pissbucket at the orgy, or receive any coins in same (bucket, that is). They are, whether they know it or not, on the serf side of the equation, like the other 99% of Americans. And they cheer lustily for their masters. Fucking chumps.

    Reminds me of the old Paul Rodriquez joke about The Mexican Who Thought He Was Not A Nigger Until The Police Suggested Otherwise.

  8. ladiesbane Says:

    I say, "hear, hear!" except for a single point. The Henderson quote says: "We also have someone who cuts our grass, cleans our house, and watches our new baby…," which does not imply three domestic servants. "Someone" is singular. People tend to use the plural pronoun "they" with it, in a bad attempt at gender inclusiveness, but I don't see that it was done here.

    Did the American Dream used to include spending every dime you made, borrowing deep, and imitating the lifestyles of the higher tax brackets? And has anyone dared say HEY, let's cut military spending? There are many ways we could rework the budget, no? Unlike that fool in Hyde Park, who went to a good school, apparently, but can't do kitchen math.

  9. Elder Futhark Says:

    P.S. More regular installments of the Hissy and Pissy Show, if you please. The intergenerational paddlewheel softie-slap fests like yesterday are no end of fun — kind of like watching the rumble scene in West Side Story, but cast with palsied effeminate retards.

  10. Verbal Says:

    Sometimes I feel that those "how to make a budget and live within your means" (see http://www.practicalmoneyskills.com/personalfinance/savingspending/budgeting/means.php ) are kind of condescending.

    But then you hear about people like this, and you think: HUGE portions of America just don't understand how to set priorities, manage a budget, save, or anything. Even the rich are financially illiterate.

    No wonder we're in so much trouble.

  11. bb in GA Says:

    The big item that was missing from the Two Docs budget was charity. If you give away a noticeable portion of your income, it helps order your other spending priorities.

    //bb

  12. Elder Futhark Says:

    Hm. So apparently he really does exist. Well then, obviously all his problems stem from the fact that he chooses to call himself "Todd".

  13. mojidoji Says:

    I'm with Elder Futhark – I'm not quite in the "Super Rich" category, but not too far off and the $100k in taxes on $330k of income reeks of someone making shit up. We pay an embarrisingly low amount of taxes without claiming a bunch of non-existant donations, buying losses, or hiding the money overseas – last year, I paid 8% in Federal income taxes and I don't have a mortgage. I hear these sorts of number all the time from people who are unlikely to know better (those without the doc's income), to the extent that I almost automatically assume them to be fake.

    To bb's point, I wouldn't go so far as to claim that the docs are greedy, but I will claim they are living far above their means and so are irresponsible (assuming they actually exist). With a few exceptions, when one's household income goes north of $150k/year, affording a decent lifestyle is bloody trivial.

  14. Zach Says:

    To make things worse, the Professor got a major smack down from his wife:

    "The posts that generated an unintended blogocane have been deleted. I stand by the posts, the facts in them, and the points they were making. The reason I took the very unusual step of deleting them is because my wife, who did not approve of my original post and disagrees vehemently with my opinion, did not consent to the publication of personal details about our family."

    Good to see she has enough sense to fully appreciate the lavishness of their $330,000 a year.

  15. Radical Scientist Says:

    I often wonder if the well to do people who complain about making ends meet are the same well to do people who complain when they see poor people enjoying even the most modest luxuries–who say disparaging things if they see someone buy brand name cereal with food stamps, when a homeless guy checks his cell phone, or when the cashier at McDonald's has nice shoes on. I haven't really had enough contact with that tax bracket to say if it's the same people being hypocritical, or whether only the thrifty rich judge the poor for failing to live in the most abject poverty possible. But I suspect that some of the same people who complain that they can hardly get by on $330,000 are also incensed that their maid can afford an ipod.

  16. cynic Says:

    I have news for the professor: I too make north of 350k. But I drive a 1995 Honda, I cut my own damn grass, I do the fixing up around the house, my daughter goes to a private school to which I donate a years tuition to a needy child at that school besides my daughter's own tuition.

    I too have a cleaning lady who comes once in too weeks and we just took a nice vacation in Italy (paid for with frequent flier miles). I pay federal, state, FICA taxes.

    A big part of my compensation is deferred so I only take home about half of the total pay. But there is not a day that goes by when I don't thank my fortune that I can live so comfortably and without a care in the world. Why? Because I am living the same lifestyle I used to when I was making 100k a year not so long ago.

    I will gladly pay the additional 3% taxes if it will help the nice lady who cleans my house get better healthcare.

  17. Bugboy Says:

    I think I have a line that is sure to get me a raise next time I ask for one:

    "But I want to hire a maid!"

    Since all these folks seem to think hiring domestic servants is some great service to society.

  18. Satan Mayo Says:

    I'm sort of standing around waiting for an Obama Czar to pop up w/ a plan to limit folks in what they can spend for this or that based on what the Government says they NEED.

    I don't really associate either Obama or czars with communist state-run economies, but keep waiting.

  19. jazzbumpa Says:

    Well done righteous rant, Ed – targeted, specific, and making valid points.

    My only quibble is with, "We make it work. In most cases, we do just fine."

    I dunno. With U6 near 17% and about 50% of workers not making enough to pay any income tax, your "most" might be 50.001%. The American dream has been declining since Reagan, and at this point is pretty much dead.

    bb @ 8:51 – your comment is stunningly off topic, and your straw twins, "Czar" and "greed" are startlingly irrelevant subjective mental leaps with no basis in reality, and no referent in this discussion.

    This is ass-hattery of a very high order. I'm impressed.

    Cheers!
    JzB

  20. bb in GA Says:

    Dear Satan:

    I am just using the lingua franca of the news media. I tend to stand w/ the late Robert Heinlein (uber sci fi writer)

    "Political tags — such as royalist, communist, democrat, populist, fascist, liberal, conservative, and so forth — are never basic criteria.

    The human race divides politically into those who want people to be controlled and those who have no such desire. The former are idealists
    acting from highest motives for the greatest good of the greatest number. The latter are surly curmudgeons, suspicious and lacking in altruism.
    But they are more comfortable neighbors than the other sort."

    //bb

  21. MidgetPole Says:

    @ Elder:

    they have pissbuckets at orgies?

  22. Entomologista Says:

    The human race divides politically into those who want people to be controlled and those who have no such desire.

    This is hilarious coming from a conservative. Conservatives are the ones who are so interested in regulating our sexual and reproductive lives. You're confusing controlling people with controlling markets. The economy isn't a person and its feelings aren't going to be hurt and its rights are not going to be violated if you regulate its behavior.

    I'd say that the human race divides politically into two types of people: those who think money exists to serve people, and those who think people exist to serve money.

  23. J. Dryden Says:

    I've said it before and I'll say it again: Short of breaking out the tumbrels and the guillotines, there really is no way to screw over the rich. Why? Because they're *rich*. At the end of the day, they will still have more money than the rest of us put together. And they will figure out a way to keep the rest of us poor enough so that we will be happy to mow their lawns and watch their kids. But people are always going to have expectations in excess of their means–I'm reminded of the 17th-century French nobleman who, on being informed that because he was broke, he would have to give up *one* of his multiple pastry chefs: he threw a fit, demanding why a man couldn't have a fresh croissant with his breakfast. It still shocks me that the Revolution came as a surprise to such people.

    But perhaps we shouldn't blame the Hendersons too much–the credit card crisis that continues to pillage the middle class reveals that theirs is a universal condition, born of a weakness of human nature (well, at least American nature): we're spoiled brats. We want what we want and if the world doesn't cooperate, we blame the world. The thought that the more we have, the more we have to lose if society goes kaplooey never occurs to us until it's too late. Keep the masses minimally fed, clothed, sheltered, and healthy, and you get to keep your still-quite-abundant riches. Don't, and, well, you create a mob with nothing to lose, and who can't help but notice that you've been doing a lot of conspicuous spending…

    (@ ladiesbane–you may be right, but having lived in the world of the Hendersons most of my life, I can confidently state that I have never seen a domestic servant who cleans the house *and* mows the lawn. Maybe the rules are different in Southern California, where I'm from, but there it's always, but *always* a woman who does the former and a man who does the latter. Supply your own conclusions about gender roles and the values that various ethnicities place on them, but regardless of that, since being *seen* to have money is part of the 'necessity' of having servants, no one like the Hendersons could bear to have the neighbors see a *woman* doing what they think of as a man's work. Ah, the subtle dance of WASP decorum.)

  24. Elder Futhark Says:

    Midg,

  25. bb in GA Says:

    Entomologista:

    more Libertarian than Conservative…

    I agree w/ your last point.

    The cliche-ed aphorism is true- "Money is a great servant, but a poor master."

    //bb

  26. MidgetPole Says:

    @Elder – lol. thanks, man.

  27. Mark P Says:

    Dcotors? If they aren't rich, it's because they aren't trying. Any physician who can tie his shoelaces (assuming he doesn't wear loafers with tassels) can get rich easy in this country. If they need a little extra, they can just contact an insurance company that does workers' comp and set up some exams on claimants. Insurance companies pay big money for doctors that find claims are not justified.

  28. ladiesbane Says:

    @J. Dryden: you are doubtless correct — my coworkers in Oregon had assistants who were basically nannies, but who did housekeeping and make arrangements for landscapers. I've never known anyone who kept groundskeepers on staff, but now that I live in Silicon Valley, I can see anything is possible. My comment was just a bit of grammar wonk.

    And bb, I adore Heinlein, but we need to find a way to distinguish between old-school libertarianism and current Libertarian Party (TM) values (no right to choice, no equality for gays, no freedom of/from religion, no legalization of drugs, and so on.) Many so-called Libertarians seem hell-bent on revoking and limiting liberties they don't like, rather than refraining from what they don't like and letting everybody else go about their business. (I don't know where you fall on the spectrum and shan't speculate, of course.)

  29. jjack Says:

    I sort-of agree with this point. I'm an engineering student, and if everything goes as planned (haha, right) I'll go PE and be making six figures some day and be soakin' it up in the hot tub with my soul mate. With that goal in mind as I sit here in my relatively pathetic current existence, I've already promised myself that I will never bitch about taxes because without food stamps, pell grants, WIC, childcare assistance, Western Undergraduate Exchange, tax-subsidized public universities, Perkins Loans, etc. I would not be able to support my family while trying to get an education and rise above menial McJobs.

    But to me it's pretty much dicking the dog to argue about whether someone who makes $300,000 a year is "rich", "super-rich", etc. when there are people who make that much in a day and do approximately zero hours of productive labor in that time frame or quite possibly their entire lives. We're squabbling over the crumbs the elites spit out. Class is a function of relation to capital, not how much lube is applied or whether or not, and how often, the people who control capital give you a reach-around when they fuck you in the ass. You kind of have to have a perspective outside of the framework they offer to you.

  30. Aslan Maskhadov Says:

    Ironic how these are the morons always lecturing people about thrift, savings, and making the right choices.

  31. Brighton Says:

    I recommend Dean Baker's book "The Corporate Nanny State" for a decent summary of the many many subsidies the rich enjoy for no particular reason.
    PLus please read my rant of the day against the rich here:
    http://brighton-towne.blogspot.com/2010/09/its-time-to-hate-on-rich.html

  32. A.B.A.B.D Says:

    Now the WSj is getting in on the fun of bashing Todd, albeit rather pathetically by FJM standards:

    http://finance.yahoo.com/banking-budgeting/article/110801/advice-for-the-poor-rich?mod=bb-budgeting

    I think the Hendersons are going to get a reality TV show before this is over…