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Gayle in MD
08-27-2008, 11:26 AM
http://www.huffingtonpost.com/jared-bernstein/why-mccains-wealth-matter_b_120933.html
Why McCain's Wealth Matters
by: Jared Bernstein



So McCain is rich. Or, his wife is rich, and that makes him rich too. Wasn't there some movie where Dudley Moore was engaged to a women with megabucks, and he kept getting drunk and introducing her to people as my 'financier' (instead of fiancée)?

For all the ink spilled over this last week, two related issues were under-explored, the latter of which is especially important: what's 'rich,' and why does it matter? What does McCain's wealth, and the way he talks about it, reveal about his ability to be a successful president?

On the first point--what means 'rich'?--there's no simple answer, no line in the economic sand that divides the rich from the rest. I'll get to the income data in a second, but they're only of marginal help here.

For one, there's tremendous geographical variation. If your family income is $100,000 in a rural area of a low-income state, you're well off. That income in Manhattan arguably puts you in the middle-class.

This example also suggests that there's a relative component to "rich." To be rich means you breath the rarified air in the upper reaches of the income scale. In a series of recent revealing remarks, McCain said he thought an income of $5 million made you rich. There's no doubt that's true, but if that's your income cutoff, almost nobody's rich.

The often-cited work of income analysts Piketty and Saez (see Table 0) reveals that admission to the top 1% of the income scale will run you a cool $375,000. Too many common folk there for your taste? Then you'll need about $600K to move up to the top half of the top 1% (i.e., the top 0.5%).

What's that? You want to roll with some serious money? It'll cost you $2 million to break into the top 0.1% (the top tenth of the top percent), and $10.5 million for the top 0.01% -- the top one-hundredth of the top one percent, average income: $30 million.

So yes, Cindy's $100 million in wealth, inherited from her family business, puts the McCain family solidly up there in the narrowest sliver of the richest of the rich. But numbers like these only give you an upper bound. Certainly, there are more rich people in America than those who reside in the 15,000 households of the top 0.01%.

My research on income class has led me to take a less quantitative approach to the question of who's middle class, rich, poor, etc. I think it has much to do with your choices and your access to opportunities.

Rich people's choices are generally not constrained by lack of income (boy, that sounds really obvious, but read on). Years ago when I worked with poor clients in New York City, I remember someone telling me they thought about cost before making a long-distance phone call.

Move up the "choices chain" and you get the picture. Middle class people tend not to think twice about a phone call, but a baby sitter, dinner, and a movie, is not a slam dunk right now, what with prices up and incomes down. And speaking of the price of transportation, vacations don't become "stay-cations" for rich people. Their choice set isn't constrained that way.

These choices may sound kind of trivial, but of course, there are real life-changing opportunities at stake here. One of my favorite -- well, least favorite, really -- factoids to make this point has to do with access to higher education. Once you control for cognitive ability, high-testing, low-income kids have the same (low) college completion rates as low-testing high-income kids. We do not, my fellow HuffPosters, reside in a meritocracy.

(If I may shamelessly tout my own work with colleagues at EPI, please read our forthcoming chapter on income mobility from the new State of Working America, out Labor Day -- though I'll see if I can get the mobility chapter posted here ASAP. It's a tour through this critical question of how challenging it is for people to get ahead given the mobility barriers they face these days. To us, this strikes at the heart of a basic American economic value. We may not believe in equal outcomes in this country, but we sure believe in equal opportunities. And the data on inequality and mobility suggest this basic value is under siege.)

Oh, and yes, if you don't know how many homes you own, you're definitely rich. (When I told my sister about this McCain gaffe last week, she responded: "Well, I don't know how many pairs of shoes I own." See...it's all relative.)

Which brings us to he who would be president. I understand and appreciate the urgency in campaigns to frame your opponent. In this case, the Obama team jumped quickly and effectively on these gaffes to paint McCain as elite and out-of-touch. But beyond the campaign politics, what do these statements, and more pointedly, his wealth, say about McCain as president?

After all, FDR was rich, and his empathy and energy devoted to helping the have-nots was boundless. Lots of politicians who came from humbler backgrounds but ended up rich, like Bill Clinton, John Edwards, or for that matter, Barack Obama, also built a policy agenda to offset the status quo regarding inequality and opportunity. Is it simply that rich Democrats get this in a way rich Republicans don't?

Perhaps so, though I'm sure there's lots of exceptions. Problem is, I don't think McCain is one of them. It is important to view his comments in the context of his agenda, which is as unempathic as his gaffes. As I pointed out last week (see Figure 1 here), his tax plan delivers by far the biggest boost to the average incomes of the richest households; Obama's plan does the opposite. McCain really does double-down on Bushonomics, which takes the inequities inherent in today's market outcomes, and injects them with a dose of steroids.

From this perspective, the problem isn't that he's rich. It's that his wealth is part of a package that strongly suggests he can't relate to the economic struggles faced by so many people from households that don't reside in the top "fractiles" of the income distribution. And if you can't relate, you're much less likely to craft and move a policy agenda that will help, a shortcoming we've seen much too much of in recent years.

This whole dust up reminded me of a CNBC spot I was on with Phil Gramm when he was still McCain's top economic advisor. He was going on about the supply-side, trickle-down nonsense that fits ever so neatly into these guys view of wealth. Arguing his case, Gramm said something like, "I've never been offered a job by a poor person. Have you?"

If government helps rich people, so goes this mythology, they'll unleash a torrent of economic activity that they're sitting on now because tax rates are too high. Cut the regulations that bind them, the taxes that squelch their incentives, and they'll not just lift their own economic fates, but those of the least advantaged as well.

The evidence, of course, points precisely in the opposite direction, but, and here's the kicker, these folks are impenetrable to evidence, and I fear their privileged positions make them so. Their wealth insulates them from reality in a way that you don't see from the other rich folk noted above.

It's not just that McCain can't relate to have nots, it's that he doesn't really want to. He wants to pull the levers that Phil Gramm and others tell him work best, and since he doesn't relate to folks who know very well how many homes they own -- though they may be uncertain whether they'll own them next month -- he lacks the motivation to question whether these levers actually work.

I don't care how much money our president has (though the seven homes thing really does seem beyond the pale given today's housing climate). But I deeply want him or her to understand the economic plight of those with less, and the evidence regarding the policies allegedly designed to help. When their wealth operates like empathy-killing blinders, then that wealth is a problem...a big one.

To listen to McCain last week, and to do so while poring over his policy agenda, really does suggest the dangerous degree to which he's out-of-touch. The Obama folks are right. We'd better work to keep him out of yet another house: the white one on Pennsylvania Ave.

wolfdancer
08-27-2008, 12:04 PM
When their wealth operates like empathy-killing blinders, then that wealth is a problem...a big one.
You can see that here, reading some of the "conservatives" posts, and while they may have above avg, comfortable incomes, but not exactly "rich" they have no pity for America's poor, and would like to end all entitlement programs, plus SS, and esp.Medicare.
So imagine how even more removed are the real wealthy.
A friend of mine was born into wealth, and her father rewarded one of his servants of many years, by giving him a house upon his retirement...nice gesture, and a nice story if she had ended it there....but she went on to say how much better off "those" people were, when "we" ....looked out for them...not quite her exact words, but the meaning was when we ran their lives...
two hundred years later, and still a "plantation" mentality...and not that far removed from today's CCR's

sack316
08-27-2008, 08:26 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: wolfdancer</div><div class="ubbcode-body">
You can see that here, reading some of the "conservatives" posts, and while they may have above avg, comfortable incomes, but not exactly "rich" they have no pity for America's poor, and would like to end all entitlement programs, plus SS, and esp.Medicare.
</div></div>

I would fall into that category your create there, and I AM one of America's poor. I don't think anyone wants to end all entitlement programs as you say, I think we'd all just prefer them to be in check. No doubt from the conversations we've had here before that we all want those truly in need to be helped. What we don't want is those who are an unnecessary drain on such a system continually taking.

I've had a rough go from time to time. I've worked hard to keep my head above water, and have never even taken such as a food stamp. If I ever really feel I must use a program to get by, I will. But not a moment before that. Not because of some silly pride thing, but because I know that even when I'm hard off, there is someone else who is worse off than me that needs it more. And not all people that need it can get enough to really help... and such systems are in turmoil mainly because of those who are a drain taking when they don't really need.

I put SS in a different category. Afterall, that is not a "gimmie", that is something you pay into your whole working life and an earned benefit. But when I see someone pull a food stamp EBT card out of a roll of bills totalling more than I have in my bank account, I know something is wrong. And that's what I'd want to see fixed. I don't want to ever cut off all help, I don't want to ever leave somebody standing alone without so much as even a chance. But I want those things to go who need it, and not to those who simply want it and find a way to screw the system just because they can. If that paints me as one of those people you eluded to in your post, then so be it.

Sack

eg8r
08-28-2008, 08:37 AM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">I would fall into that category your create there, and I AM one of America's poor. I don't think anyone wants to end all entitlement programs as you say, I think we'd all just prefer them to be in check. </div></div>You are spinning your wheels with the lap dog. We have spent many years trying to say this and they never comprehend.

eg8r

Gayle in MD
08-28-2008, 09:23 AM
Sack,
Your fine description of what is wrong with some entitlement programs is excellent, and true. They do need to be accurately and consistantly monitored, and it is just as annoying to liberals when people work the system, dishonestly.

Unfortunately, those of us who agree that no program is perfect, but most are nevertheless necessary, and valuable, and shouldn't be completely thrown out, but rather more consistantly scrutinized, and overseen, are often framed as socialists, and worse.

Our public education system, for example, is surely worth improving, and keeping. My problem is with those who believe that privatizing everything,or demonizing others, (teachers for example) is the solution to everything that needs improvment.

It isn't. We've surely observed that in Iraq.

There are people who will find ways to abuse nearly every program and philosophy. If we let that stop us, we'd never have managed to form this great country of ours.

While I don't include you in that, I know how many from the far right would gladly do away with every single government effort to help anyone in this country, including those who are too optimistic about an approaching hurricane, or too poor of means to get out of the way and avoid it.

That's not what I call compassion. That's not what I call the American way, either!

Gayle in Md.

Kerbouchard
08-28-2008, 09:53 AM
Lets explore this realistically...If Barack raises taxes for, say, people who make over 250,000 a year, who will benefit? The 'people'? How?

We'll assume for the sake of argument that it actually increases Gov't revenue(which it never has in history).

What is the gov't going to do with the money? Are they going to commission more projects to study the DNA of bears in Montana? Or build more bridges to nowhere? Or more projects like the million dollars for a Woodstock Museum?

I can't for the life of me understand why taking money from people who are successful at investing it, and giving it to the gov't who is horrible about spending it, could possibly benefit anybody.

Heres what it will actually do: lower gov't revenue, reduce investments, encourage outsourcing to foreign countries, lead to a work force reduction, and generally destroy the economy.

Deeman3
08-28-2008, 10:10 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Gayle in MD</div><div class="ubbcode-body">Sack,
Your fine description of what is wrong with some entitlement programs is excellent, and true. They do need to be accurately and consistantly monitored, and it is just as annoying to liberals when people work the system, dishonestly.

<span style="color: #FF0000">Then liberals should help us fix the systems. You say this but any accountability is quickly traded for votes by the left. </span>

Unfortunately, those of us who agree that no program is perfect, but most are nevertheless necessary, and valuable, and shouldn't be completely thrown out, but rather more consistantly scrutinized, and overseen, are often framed as socialists, and worse.

<span style="color: #FF0000"> Again, it is a misrepresentation to say we are wanting to "completely throw out" programs, we just want them reasonable, accountable and in some manner of control. </span>

Our public education system, for example, is surely worth improving, and keeping. My problem is with those who believe that privatizing everything,or demonizing others, (teachers for example) is the solution to everything that needs improvment.

<span style="color: #FF0000">Unfortunately, teachers, by the nature of their jobs, are at the core of a successful teaching system. They have become almost untouchable because of union power and, short of wearing a cross or sleeping with students, have almost no accountability in the public system. They reject standards, performance critique and any efforts to hold them to any measuable standard. Caveing in to increases in salary demands without standards, does not improve our schools as we spend more than ever. It's hard to get beyond that.</span>


There are people who will find ways to abuse nearly every program and philosophy. If we let that stop us, we'd never have managed to form this great country of ours.

<span style="color: #FF0000">If we, for instance, protect our borders, you will say we are mistreating a potential voting block for the Dems. Why not let us, together, fix the leaks in systems? Would that not provide more for the truely needy? </span>

While I don't include you in that, I know how many from the far right would gladly do away with every single government effort to help anyone in this country, including those who are too optimistic about an approaching hurricane, or too poor of means to get out of the way and avoid it.

<span style="color: #FF0000">Did you see Nagel last night saying, "This time, I'll provide the busses and the drivers!" This was a fiasco going way beyond the ferderal government and, you know as well, thousands of people that refused to go, even when provided a way. You can't legislate against ignorance or people who will roll the dice. Did we ever hear you criticize the LA governor for her not allowing the gov in until it was too late? Have you ever recognised that many administrations ignored the levees? It was just GWB, right? </span>

That's not what I call compassion. That's not what I call the American way, either!

<span style="color: #FF0000"> I think we are the most compassionate nation on earth. We prove it every day. To ask that everyone have everything they "deserve" without oversight and consideration is not American, it's stupid pandering to a voter base or worse.</span>

Gayle in Md. </div></div>

Gayle in MD
08-28-2008, 10:19 AM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> Heres what it will actually do: lower gov't revenue, reduce investments, encourage outsourcing to foreign countries, lead to a work force reduction, and generally destroy the economy. </div></div>

The evidence proves otherwise. Statistics prove otherwise. History proves otherwise.

Tax cuts for corporations which outsource, encourage oursourcing.

Cutting taxes for the Middle Class stimulates the economy.

Shifting our priorities to spending for investments that create jobs, education, energy independence, re-bulding our infrastructure, and away from war, is the most direct way to increase jobs, jobs which cannot be outsourced to foreign countries.

Massive debts accumulating from the war, have a huge impact on the value of the dollar, and the economy, and when the debt service grows, the interest on the debt, foreign countries and reduce investments in the bond markets.

Tax cuts and loopholes for the wealthiest top 5%, do not historically find their way to job increases.

There is another thread which was posted recently, about the Trickle down theory, which Q posted, that includes more documentation on taxes, and where the money ends up. You might want to look for that one.