Pissing Down Your Leg

Thoughts on Economics and Economic Policy

Class Warfare

with 2 comments

Whenever the working class bring up the exorbitant salaries of the rich, they are accused of engaging in class warfare. The rich seem to have decided that the best defense is a good offense, and rather than try to justify their unjustifiable incomes, they accuse the plebs in the bottom 90% of fighting a class war.

Steven Geenhouse, over at the NYT Economix blog, links to a site from the AFL-CIO that points out that the average salary of 299 CEOs at S&P 500 companies averaged over $11 million in 2010. I’m sure that pointing this out will lead to claims that the AFL-CIO is engaging in class warfare.

As I’ve pointed out before, the income for the top 1% and the top 0.01% has been growing out of control for the last 30 years. The most obvious thing to do would be to tax all of that income at a fairly high rate. That will either bring pay down (to levels from the 1950s-1970s when the American economy was strong and growth was shared) or it will raise a lot of tax revenue that can be spent on education and infrastructure that should support growth in the future.

The major problem is the top 1% (and top 0.01%) which has increased its share of (non-capital gains) income from 8% in 1981 to almost 18% in 2008. Those numbers are 0.7% in 1981 and 3.3% for the top 0.01% (all of about 15,000 households). But the whining of those in the top 5% (say percentile 95-99) also pisses me off. These are the people who have an average income of around $200,000 (almost twice the income of my family, and I realize I’m rich almost every day) and complain that they’re not really rich.

Catherine Rampell (also at the NYT Economix blog) notes that 2/3 of people earning over $250,000 think their taxes are too high. Well this group has increased its income share from 12.9% in 1981 to 15.7% in 2008. The real average income for this 4 percent of the population increased from $130,000 to over $200,000 during that time period. Meanwhile the average income of the bottom 90% went from $30,199 to $30,981, a whopping $782 per year (“Yeah! We can take that vacation to the movie theater this year!”).

The comments on Rampell’s post just make me want to puke. Here’s my favorite of the one’s I read from JH:

What is “rich?” I wouldn’t say someone is “rich” unless they have significant discretionary income. When you say “rich” people think of Donald Trump, and they would certainly be right. But, unfortunately, under this columnist’s definition of rich, a lot of very hard working people who have very little discretionary income are being caught in that net. And that’s unfair. As another poster noted, 250K is one thing in a place like Cincinnati, another in Washington, DC or San Francisco. My wife and I both work, have three children to support, have a nice but modest home in a nice neighborhood in DC, have two cars, and we try to go on vacation once a year. We make about 250K. We get nailed by the alternative minimum tax every year. After we take care of expenses – mortgage, utilities, car payments, education and day care, insurance, and of course, taxes, guess what? We have nothing left. There are probably millions like us. We are paying taxes through the nose and they are going up everywhere we turn. You want to bash us for being rich? Fine. We’ll vote Republican then. But we ain’t rich. The Democrats are making a BIG mistake if they think families who make 250K are rich!!!

Ok, maybe JH and his wife couldn’t earn the $250k they do if they lived in Cincinnati (I can’t help but wonder if either of their jobs is related in any way to the Federal government and the taxes he hates to pay). But I know a little bit about this area, and they could live very well on $250k a year if they so chose. If they want to send their kids to public schools, I would recommend Silver Spring or another town in Montgomery County. They could have a reasonable house for the five of them for under $500k. If they wanted to live like kings, just move over to Prince George’s County (Greenbelt is very nice and quite affordable). True, the public schools are fairly stinky there, but I know a great private school for only $8k a year.

My only point is that the top 5% doesn’t seem to know how the bottom 90% lives. Or maybe these people do know how the others live and want nothing to do with it. But when you earn $250k a year you are rich, no matter where you live. You are very close to the richest 1% of all Americans (threshold income in 2008 was $340k). Could you have more money? Yes. Would you enjoy more money? Yes. Do you need more money? Most definitely not.

Our family income puts us right at the 90th percentile. Like everybody else, we would like more. And because of the spending decisions we’ve made we don’t have much extra from month to month. But that was a choice. We live in a nice town in a nice house. We drive decent cars and send our kids to nice schools. But just because we can’t afford that vacation to France or even California doesn’t mean we aren’t rich. We are and we know it.

Maybe it’s time to remind those in the top 10% or top 5% or top 1% how rich they are. Maybe if the bottom 90% is going to be accused of class warfare it should actually engage in some class warfare. Maybe it’s time for some political candidates to run on a truly progressive platform of taxing the rich, spending it on public goods, and making America as strong as it was 50 years ago.

I’m not going to hold my breath.

Advertisements

Written by Liam C Malloy

April 19, 2011 at 10:03 pm

2 Responses

Subscribe to comments with RSS.

  1. […] Whenever the working class bring up the exorbitant salaries of the rich, they are accused of engaging in class warfare. The rich seem to have decided that the best defense is a good offense, and rather than try to justify their unjustifiable incomes, they accuse the plebs in the bottom 90% of fighting a class war. Steven Geenhouse, over at the NYT Economix blog, links to a site from the AFL-CIO that points out that the average salary of 299 CEOs … Read More […]

  2. “The gonervment can reduce the deficit by decreasing spending and increasing taxes in order to get things under control.” Sure they can, but will they? And before or after we hit the proverbial brick wall?

    shuLfy

    February 1, 2012 at 11:20 am


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: