unknown
2008-08-27 18:12:26 UTC
Does McCain Really Need Another Mansion? Giving Him White House Is One Too
Many
By Jared Bernstein, Huffington Post. Posted August 27, 2008.
McCain's got eight houses and a level of wealth that insulates him from the
real lives of 99% of Americans. That's dangerous for a president.
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 fiance)?
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." SeeĀ 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.
Jared Bernstein is a senior economist and director of the Living Standards
Program at the Economic Policy Institute in Washington D.C.
Many
By Jared Bernstein, Huffington Post. Posted August 27, 2008.
McCain's got eight houses and a level of wealth that insulates him from the
real lives of 99% of Americans. That's dangerous for a president.
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 fiance)?
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." SeeĀ 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.
Jared Bernstein is a senior economist and director of the Living Standards
Program at the Economic Policy Institute in Washington D.C.