We *Are* the Rich
Since the "We Are the Super Rich" post is gone from the "Truth on the Market" weblog, I have grabbed it from the Google Cache and put it here. Anyone who wants the comments--which are remarkable, in many ways--should email me.
And having rescued it from Google Cache, I cannot resist a Parthian shot. The post makes three points:
(1) Failing to extend the upper-bracket Bush tax cuts will harm aggregate demand because those taxed are--like him--people who are "just getting by." They will cut back on their spending, and the economy will suffer from diminished aggregate demand. I understand the "just getting by" problem, but it is "just getting by" in the sense of occasional cash-flow crises--which I understand: believe me, I am so there too--it is not "just getting by" in the sense of not having the income to buy what you want. The answer to this is that he (and I) are atypical. Nearly all people in our income range are not "just getting by" in the sense that a small negative shock to our income will produce a one-for-one fall in our spending. Indeed, that is not true for most people. Because it is not true, Doug Elmendorf and his CBO in the chart to the right rank income tax cuts as among the least effective ways to reduce unemployment as far as bang-for-buck is concerned. To boost employment we would be much better advised to raise income tax rates and devote the extra money to boosting unemployment insurance, or giving employers a break on payroll taxes, or giving a break on payroll taxes to employers who are hiring. The argument that we need to respond to the planned expiration of the Bush cut in the tax rate on the high bracket by renewing it in order to keep unemployment from rising fails.
(2) His taxes should be cut because he can spend his money better than the government can. This is an argument that I feel strongly about, but what I feel strongly about is that he has no standing to raise it. It may be true, it may be false, but the moment to raise it would have been in 1981, when Ronald Reagan pushed an unfunded increase federal spending on defense, and in 2003, when George W. Bush rammed the unfunded Medicare Part D through the congress. As Milton Friedman liked to say, to spend is to tax: if you don't object to the spending, you cannot object to the taxes to pay for them. Members of the Rubin wing of the Democratic Party like me--people who have been fighting for decades for rational fiscal policy, for PAYGO, for balancing the government's income and outgo--have standing to object when government is not right-sized, when it is either too big or too small. People who were deserters from the war for fiscal sanity throughout George W. Bush's regime simply don't have standing. When he willed the spending, he willed the taxes to pay for them. No backsies.
If they want to stand up and say that he made a horrible mistake in supporting George W. Bush and all the other Republicans he has voted for who believe that you can increase spending and never pay for it through increased taxes, then we can talk.
But until he does, he needs to remain silent.
And this is something I feel strongly about.
This brings us to his last argument:
(3) I am not rich. Other people can afford to pay higher taxes. But not me. You need to quote it at length in order to get the full flavor:
The rhetoric in Washington about taxes is about millionaires and the super rich, but the relevant dividing line between millionaires and the middle class is pegged at family income of $250,000. (I’m not a math professor, but last time I checked $250,000 is less than $1 million.) That makes me super rich and subject to a big tax hike.... I’m the president’s neighbor in Chicago.... 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.... [W]e are just getting by despite seeming to be rich. We aren’t.... [T]he president plans on raising my taxes. After all, we can afford it, and the world we are now living in has that familiar Marxian tone of those who need take and those who can afford it pay.
The problem is, we can’t afford it.... $100,000 in federal and state taxes.... our mortgage.... We chose to invest in the University community and renovate and old property, but we did so at an inopportune time. We pay about $15,000 in property taxes.... My wife has school loans of nearly $250,000 and I do too.... Since we care the education of our three children, this means we also have to pay to send them to private school... We try to invest in our retirement by putting some money in the stock market, something that these days sounds like a patriotic act.... 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....
[W]e can cut back.... The (legal) immigrant from Mexico who owns the lawn service we employ... the (legal) immigrant from Poland who cleans our house... 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.... 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. The irony here, of course, is that the government is working to save both of these industries despite the impact that increasing taxes will have.
The problem with the president’s plan is that the super rich don’t pay taxes – they hide in the Cayman Islands or use fancy investment vehicles to shelter their income. We aren’t rich enough to afford this – I use Turbo Tax. But we are rich enough to be hurt by the president’s plan. The next time the president comes home to Chicago, he has a standing invitation to come to my house (two blocks from his) and judge for himself whether the Xxxxxxxxxs are as rich as he thinks.
On what appears to be roughly nine times American median household income...
