The blogosphere has pretty much worn out the income inequality angle today. Most of the talk has focused on Gabriel Sherman’s New York Magazine piece about Wall Street high flyers lamenting their current circumstances.

The sentiments that the newly disenfranchised master of the universe expressed in Sherman’s article were clearly over the top. They made for great blog excerpts and an easy means of getting on the side of the American working man. But the whole exercise recalled a thought that I picked up from the Curious Capitalist a few months ago.

Justin Fox had put forth an intriguing idea about the real threat to America’s super-wealthy. I picked it up and did a post around it. Here is a piece of that post that includes the central part of Fox’s thoughts:

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. 

So far, it looks as if Justin was pretty prescient. I don’t know if he foresaw the TARP compensation limitations but that is probably beside the point. The seeming reluctance of the government to let any bank out of the deal right away makes some sense if you look at it through this prism. The thesis might also go a ways towards explaining why there has been relatively little push back from the right with regard to limiting executive salaries. 

If there is something to this whole idea, then the Obama administration has been extremely lucky in terms of the economic environment it inherited. They pretty much have a free hand to do what they want to the rich with little prospect of any dissent from other classes. In fact, the more they punish, the more popular are their measures likely to be.

We will have to wait to see just how far the administration and congress go. In the meantime, those on the other side should definitely refrain from furnishing Gabriel Sherman any more gasoline to throw on the fire.