## Paul Krugman on the Displaced (and Misplaced) Ressentiment of the Merely Rich

UPDATE: Professor Xxxx Xxxxxxxxx attacks Paul Krugman:

Now I know I must be right: Putting aside the false claims [Krugman] makes (e.g., that I make $450,000 per year) that I’ve already pointed out, the dear professor says I’m engaging in self-pity and am “a sorry-for-myself person” because I might pay about 2 percent more of my income next year in taxes. This was not the point of my post. Some observations: First, two percent of$450,000 (again, not even close to our income on the high side) is nearly $10,000. That is real money. Not so much relative to gross income, but it is relative to income after taxes, housing, food, debt, and other fixed costs... We have a problem here--basically, Professor Xxxx Xxxxxxxxx is what we call an unreliable narrator. On the one hand, Professor Xxxx Xxxxxxxxx says that his household income exceeds the$250K/year threshold "but not by much." On the other hand, he says that Obama's failure to reenact the4.6% unfunded Bush-era reduction in the top income tax rate from 39.6% to 35% will raise his taxes "significantly."

He cannot have it both ways.

The arithmetic says so.

Professor Xxxx Xxxxxxxxx says that this failure to reenact a 4.6% marginal rate reduction will cost him $10,000/year. This rate applies only to marginal taxable incomes in excess of$250,000/year.

We can thus use an equation to figure out what Professor Xxxx Xxxxxxxxx's taxable income Y is:

(Y - $250K/year) * .046 =$10K/year

Y = $467K/year That is taxable income. Add on exemptions, deductions, compensation shielded by tax-preferred savings vehicles, employer matches to retirement savings, the break on Lab School tuition given to University of Chicago faculty, health care, etc.--and we are well over$500K a year in household income, possibly in excess of $600K/year. I think that there are two scenarios: (i) Professor Xxxx Xxxxxxxxx is lying when he says that his total household income is only a little more than$250K/year, because it is more like twice that; (ii) Professor Xxxx Xxxxxxxxx is actually not going to be dinged by the top rate increase--but is sufficiently innumerate and ideologically blinded that Republican campaign operatives have convinced him he is.

Neither scenario would seem to be a credit to the University of Chicago, to legal academia, or indeed to the academy in general...

Paul Krugman:

Have You Left No Sense Of Decency?: Let me recommend, once again, Brad DeLong’s superb discussion of how it is that people at the 99th percentile, despite making twice what their counterparts made in 1980, feel poorer now than they did then. On reflection, however (and discussion with Robin), it seems to me that there’s something Brad didn’t say that’s worth mentioning — the change in social norms.

Even in 1980, there were surely many people at or near the 99th percentile who felt sorry for themselves, at least some of the time. It happens to everyone, after all: I lead a very privileged life (yes, I’m well into the range that will pay higher taxes under the Obama plan), yet even now I find myself experiencing occasional flashes of green-eyed envy. (What? You’re driving me back to the airport in Sao Paulo, in all that traffic? Don’t I rate a helicopter?)

But 30 years ago people with high but not super-high incomes generally felt ashamed of themselves for griping — or at least, felt that they would be ridiculed if they gave voice to their gripes. Today, all restraints are off. The fuss over Messrs. Xxxxxxxxx and Stein is the exception that proves the rule: they wouldn’t be providing this spectacle if they didn’t normally swim in social circles where complaining that you only have 9 or 10 times median family income is considered totally acceptable.

Pretty soon, we’ll be having serious, completely un-self-conscious discussions in major magazines about the servant problem.

He also complimented me here:

Rat Race America: Brad DeLong’s post on Xxxx Xxxxxxxxx, the already-infamous whining Chicago professor who appears to be near the 99th percentile but feels poor, is worth reading for more than the takedown. Brad isn’t the first to make this point, but his discussion of how rising inequality at the top — a fatter right tail in the income distribution — makes the objectively rich feel poor is exceptionally fine.... What Brad doesn’t say, but is also true, is that the status anxiety created by high inequality means that the rich-but-not-rich-enough often lead worse lives than their somewhat poorer counterparts did a few decades ago: they work longer hours, take fewer vacations, and spend more on things that don’t give them pleasure but that they hope will impress others.

Or let’s just quote Gordon Gekko:

Wake up, will ya pal? If you’re not inside, you’re outside, OK? And I’m not talking a $400,000 a year working Wall Street stiff flying first class and being comfortable … To which I replied: I should probably 'fess up: I have no special insight into what Professor Xxxxxxxxx feels, and when I say "Professor Xxxxxxxxx" in the passage that Paul quotes, I mean "me." I try to fight against feeling relatively deprived because we just have a 3400 sq ft house east of Berkeley--and don't also have a pied-a-terre in San Francisco, a cottage in Carmel, and a condo in Cabo--but I am not always successful. And the days are rare when I am able to pull myself back to sanity and recall that I am not underpaid... And took on the subject in this morning's column: Op-Ed Columnist - The Angry Rich and Taxes/a>: [I]f you want to find real political rage... [y]ou’ll find it instead among the very privileged, people who don’t have to worry about losing their jobs, their homes, or their health insurance, but who are outraged, outraged, at the thought of paying modestly higher taxes. The rage of the rich has been building ever since Mr. Obama took office. At first, however, it was largely confined to Wall Street. Thus when New York magazine published an article titled “The Wail Of the 1%,” it was talking about financial wheeler-dealers whose firms had been bailed out with taxpayer funds, but were furious at suggestions that the price of these bailouts should include temporary limits on bonuses. When the billionaire Stephen Schwarzman compared an Obama proposal to the Nazi invasion of Poland, the proposal in question would have closed a tax loophole that specifically benefits fund managers like him. Now, however, as decision time looms for the fate of the Bush tax cuts — will top tax rates go back to Clinton-era levels? — the rage of the rich has broadened, and also in some ways changed its character. For one thing, craziness has gone mainstream. It’s one thing when a billionaire rants at a dinner event. It’s another when Forbes magazine runs a cover story alleging that the president of the United States is deliberately trying to bring America down as part of his Kenyan, “anticolonialist” agenda, that “the U.S. is being ruled according to the dreams of a Luo tribesman of the 1950s.” When it comes to defending the interests of the rich, it seems, the normal rules of civilized (and rational) discourse no longer apply. At the same time, self-pity among the privileged has become acceptable, even fashionable. Tax-cut advocates used to pretend that they were mainly concerned about helping typical American families. Even tax breaks for the rich were justified in terms of trickle-down economics, the claim that lower taxes at the top would make the economy stronger for everyone. These days, however, tax-cutters are hardly even trying to make the trickle-down case.... Instead, it has become common to hear vehement denials that people making$400,000 or $500,000 a year are rich. I mean, look at the expenses of people in that income class — the property taxes they have to pay on their expensive houses, the cost of sending their kids to elite private schools, and so on. Why, they can barely make ends meet. And among the undeniably rich, a belligerent sense of entitlement has taken hold: it’s their money, and they have the right to keep it. “Taxes are what we pay for civilized society,” said Oliver Wendell Holmes — but that was a long time ago. The spectacle of high-income Americans, the world’s luckiest people, wallowing in self-pity and self-righteousness would be funny, except for one thing: they may well get their way.... You see, the rich are different from you and me: they have more influence. It’s partly a matter of campaign contributions, but it’s also a matter of social pressure, since politicians spend a lot of time hanging out with the wealthy. So when the rich face the prospect of paying an extra 3 or 4 percent of their income in taxes, politicians feel their pain — feel it much more acutely, it’s clear, than they feel the pain of families who are losing their jobs, their houses, and their hopes. And when the tax fight is over, one way or another, you can be sure that the people currently defending the incomes of the elite will go back to demanding cuts in Social Security and aid to the unemployed. America must make hard choices, they’ll say; we all have to be willing to make sacrifices. But when they say “we,” they mean “you.” Sacrifice is for the little people. Paul is, of course, talking about Xxxx Xxxxxxxxx and his ilk: Xxxx Xxxxxxxxx (recall that counting the Lab School tuition discount, U. of C. college tuition benefits, and really generous employer pension matching that it looks like the income of Professor Xxxxxxxxx's household is about$500,000 a year:

We are the Super Rich: The rhetoric in Washington about taxes is about millionaires and the super rich.... That makes me super rich and subject to a big tax hike if the president has his way. I’m the president’s neighbor in Chicago, but we’ve never met. I wish we could, because I would introduce him to my family and our lifestyle, one he believes is capable of financing the vast expansion of government he is planning. A quick look at our family budget, which I will happily share with the White House, will show him that like many Americans, we are just getting by despite seeming to be rich. We aren’t.

I... am a law professor at the University of Chicago Law School... my wife... is a doctor.... Our combined income exceeds the $250,000 threshold for the super rich (but not by that much)[1]... the president plans on raising my taxes.... [W]e can’t afford it. Here is why. The biggest expense for us is financing government. Last year, my wife and I paid nearly$100,000 in federal and state taxes.... Our next biggest expense, like most people, is our mortgage. Homes near our work in Chicago aren’t cheap.... We pay about $15,000 in property taxes, about half of which goes to fund public education in Chicago. Since we care the education of our three children, this means we also have to pay to send them to private school. My wife has school loans of nearly$250,000 and I do too.... We try to invest in our retirement by putting some money in the stock market.... 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 so we can both work outside the home. At the end of all this, we have less than a few hundred dollars per month of discretionary income. We occasionally eat out but with a baby sitter, these nights take a toll on our budget. Life in America is wonderful, but expensive.

If our taxes rise significantly, as they seem likely to, we can cut back.... The (legal) immigrant from Mexico who owns the lawn service we employ will suffer, as will the (legal) immigrant from Poland who cleans our house a few times a month. We can cancel our cell phones and some cable channels, as well as take our daughter from her art class at the community art center, but these are only a few hundred dollars per month in total. But more importantly, what is the theory under which collecting this money in taxes and deciding in Washington how to spend it is superior to our decisions? Ask the entrepreneurs we employ and the new arrivals they employ in turn whether they prefer to work for us or get a government handout.

If these cuts don’t work, we will sell our house – into an already spiraling market of declining asset values – and our cars, assuming someone will buy them....

[T]he super rich don’t pay taxes – they hide in the Cayman Islands or use fancy investment vehicles to shelter their income...

[1] As I noted elsewhere, it looks as though the family economic income of Professor Xxxxxxxxx's household is twice the \$250K/year threshhold.