Why The Wealthy Need To Tone Down The Whining

Don’t think for a second that I like the Obama administration’s assault on private companies that is embodied in the recently announced senior executive pay caps. I consider them as a first wave of further intrusions into the boardroom and part of a philosophical attitude towards the private sector that is far from benign (more about this in a second). But the incessant whine of from the tone deaf in Manhattan and similar environs needs to stop.

Witness this article in the New York Times today. The title is “You Try Living On 500K In This Town.” Here is the problem:

PRIVATE school: $32,000 a year per student.

Mortgage: $96,000 a year.

Co-op maintenance fee: $96,000 a year.

Nanny: $45,000 a year.

We are already at $269,000, and we haven’t even gotten to taxes yet.

Five hundred thousand dollars — the amount President Obama wants to set as the top pay for banking executives whose firms accept government bailout money — seems like a lot, and it is a lot. To many people in many places, it is a princely sum to live on. But in the neighborhoods of New York City and its suburban enclaves where successful bankers live, half a million a year can go very fast.

That’s sort of talk is like raw meat to a pack of wolves. Moaning about your nanny expenses to the average American that spends most of their free time trying to raise their kids without help is not going to engender sympathy. Quite the opposite, it’s going to reinforce the sense that people who spend their money in this manner are truly out of touch with reality. If you want allies for the coming battle, this is the wrong way to recruit them.

I really do think that the average citizen doesn’t begrudge others their wealth and success. There is a certain admiration for those who do succeed and a secret hope that it might happen to them or their children. The idea that sort of opportunity is open to all still exists though it burns less brightly. That same citizen will, however, turn on a dime if the wealthy start to assert a sense of entitlement towards their comforts. Right now, with tough times all around, a low profile is the recommended profile.

There was an excellent post at the Curious Capitalist a couple of days ago. Justin Fox cited an article that appeared in Fortune a few years ago. The gist of the author’s argument is that the lower portion of the upper 1% of income earners are envious of the success of the top of that tier. In many cases they were educated together and through luck or skill some have gone on to accumulate significant riches while others have not. Here is a glimpse of the author’s proposal:

Here’s my outlandish theory: that economic resentment at the bottom of the top 1 percent of America’s income distribution is the new wild card in public life. Ordinary workers won’t rise up against ultras because they take it as given that “the rich get richer.”

But the hopes and dreams of today’s educated class are based on the idea that market capitalism is a meritocracy. The unreachable success of the superrich shreds those dreams.

“I’ve seen it in my research,” says pollster Doug Schoen, who counsels Michael Bloomberg and Hillary Clinton, among others. “If you look at the lower part of the upper class or the upper part of the upper middle class, there’s a great deal of frustration. These are people who assumed that their hard work and conventional ‘success’ would leave them with no worries. It’s the type of rumbling that could lead to political volatility.”

Justin Fox goes on to point out that the people in the lower 1% are by and large the policy makers now in charge in the Obama administration. Fox expects that we may see more assaults on the incomes of the rich over the next few years. He suggests that the income tax code is the likely tool.

If the wealthy have any hope of holding off this raid they are going to have to run a much smarter campaign than they have so far. History is pretty clear as to what happens when too large a gulf develops between a small portion of society and the majority. It is even more explicit about the results of such a divide when the upper class adopts explicitly public displays of their good fortune and demonstrates a sense of entitlement towards their lifestyle. Just ask the Europeans about wealth taxes.

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