Note: I wasn’t going to post this, but after all the flack Willard Romney is receiving about offering to bet his fellow millionaires $10,000, I find myself in the unusual position of being sympathetic to him. Therefore, the story of the day in early November of 1992 on which I offered to bet $10,000:
UPDATE: Paul Mulshine (h/t Blue Jersey) claims that had Perry taken the bet—that is, had the courage of his convictions—he would “have awarded him the 10 grand.”***** Instead, Perry claimed he’s “not a betting man,” all evidence contrariwise (e.g., his continuing this campaign) notwithstanding. Instead, the multimillionaire lied. Good thing he’s not running on character.
I am, truth to be told, probably a lousy poker player. Not so bad as Barack Obama, but—aside from tells—when I see a sucker, I don’t hesitate.
So, a while back, when Lance Mannion (of Lance Mannion is Still Wrong fame) started tweeting about how Obama’s recent activities meant that liberals need to double-down and work to get large Democratic majorities for Obama in 2013. Since that worked so well in 2009-2010, I went looking for an opening. And found one:
Really, Boehner almost lost his Speakership over this, he may yet, and he sounds like he won the World Series – http://goo.gl/di359
which required an appropriate, calm, measured reply*:
@LanceMannion Really, Obama lost his Presidency over this, and he sounds as if he’s cruising toward multimillion dollar CofC [Chamber of Commerce] speaking fees.
which produced the bet:
@klhoughton Dinner says he’s re-elected.
which lead to a discussion of betting on Presidential elections, which I admitted I only did once before:
K: I did bet $10K that WJC would win. But that was the day of the election. Now, my biggest risk is that Romney beats Bachmann.
L: You bet HOW MUCH?????
K: $10,000. (Trade was vetoed by my boss. Long story. Still bitter.) Other side was someone who is prominent [and from what I can tell a major source] in [William D. Cohan’s] House of Cards.
The bitter story below the fold.
It’s Election Day, 1992. I am (somewhat) young, single, paying about $600/month in rent, and making Real Money for the first time in a year or so. (Ask your grandfather about the recession of 1990-1991.) In short, I am not liquidity-constrained.
Alan “Ace” Greenberg—the last CEO of Bear Stearns who was worth paying—had endorsed William Jefferson Clinton several months previously. He was the first head of a Wall Street firm to do so, but not the last.
Meanwhile, George H. W. Bush has been going around the country for the past week, campaigning as if he doesn’t want to win. Or at least that’s the way it sounded to me, and I suspect the majority of the American people. It’s long after the Supermarket Scanner incident,** but he has spent the past two days yelling—calling Al Gore “Ozone Man” in Detroit—and generally Not Being Serious. For a candidate whose major strength is that he is Serious, it was clear that he was expecting to lose.
When the candidate expects to lose, it’s not a bad idea to bet against him. His information is likely better than yours, and his “tell” is showing.
So when one of the salespeople, who had a rather short temper, was pontificating at the end of the day about how GHWB was going to win that evening, I offered a friendly wager. At least, it started out that way. But this is Wall Street.
Ken: “Bet you $10 Clinton wins.” As I said, trying to keep it a friendly wager. We would spend more than $10 on lunch (which was a company expense anyway).
Salesman (irritated at being challenged): “Make it $100.”
Well, when the mark says, “Take my money!” it’s at least a venial sin not to do so. But if we’re going to talk about real money…
Ken: “Make it $1,000.”
Salesman (getting angrier): “If you’re that certain, make it $10,000.”
At this point I hesitate. Not for effect, but just to do the calculations. I know I have about $20,000 in liquid assets*** at the time, so another order of magnitude is out of the question.**** Can I afford to lose A Sure Thing? Absolutely.
At this point, my boss—who had met the soon-to-be-former President and still thought fondly of him—intervened. (It is left as an exercise whether he made it up to me in bonus.)
So when millionaire Willard “Mitt” Romney offers to bet $10,000 with millionaire Rick Perry or millionaire Newt Gingrich, he’s basically fitting the minimum criterion for “this should get your attention.” It’s hardly an “all-in”bet; as Hendrik Hertzberg notes, it’s more a casual wager.
As Francis Scott Key’s descendant once noted, “The rich are different.” And Papa’s rejoinder, “Yes, they have more money” is especially relevant when judging how sincerely the person believes their position to be correct.
Mitt’s offer to his fellow multimillionaires isn’t notable for its size; what is notable is that—as with me nineteen years ago—neither Gingrich nor Perry was willing to call and raise him.
*Those who have read my last two posts will realize that I say this without the slightest hint of irony, and that your mileage may vary.
**I’m sympathetic to GHWB on that one, by the way. I lived and shopped in Washington Heights at the time, so we didn’t have scanners in any of our supermarkets either. No one managing those stores would even think about making that type of capital investment. And I shopped in stores a lot more often than the President—or even the Vice President—of the United States ever would. Those being the two jobs GHWB had had since 1981, the odds of him having encountered a supermarket scanner are about the same as [pick famous actress not related to my neighbor’s husband or filming one of her novels] showing up on my front door.
***I may have been counting Lines of Credit as part of liquid assets.
****I’m certain, in retrospect, that he would have said “done” on $100K. And given that I would have estimated the probability of losing at less than 10%, economic theory says that I should have offered the higher amount, even knowing I couldn’t cover it. I believe this is the theory recently used by MF Global, who were dealing on direct-from-Mario-Draghi information.
*****The AP disagrees, but I find myself agreeing with Mulshine—a strange feeling in itself.
When I left this series in September, I had introduced the idea of looking at past tax tables as a means of understanding how We the People define rich. One specific note from history was a surcharge on top of themarginal tax rates to pay for the Great One (WWII). Obviously, that aspect of our moral character has gone right out the window.
But before you get to excited aboutthis suggesting or, that I am saying that the poor need to pay moretaxes and the rich are over taxed consider the tax table from 1936,its lowest income tax bracket is 4%. This is on an income up to$4000. Let’s bring that forward to 2010 using my favorite money converter. CPI states that $4000 is now $60,400. Today’s rate for $16,750 to $68,000 is 15% instead of 4%. Of course,I like the unskilled labor and nominal GDP/capita numbers of $145,000and $275,000 respectfully.
Alright, I’ll be fair. The lowest rate in1967 is 14% for up to $1000. That figures to 2010 of $6540 CPI,$6670 unskilled and $11200 nominal GDP/capita. Though, the $4000 in1936 is $9640 in 1967 which puts one in the 22% bracket ofthat year. Using the $12000 for the top of that 1967 bracket brings us to$78,300 CPI adjusted gross income for 2010. $78,300 puts one in the25% bracket for 2010. Obviously another issue we have here when itcomes to setting up marginal rates based on historical records is howmuch the base (adjusted gross income) is effected by how the CPI iscalculated. Any way you figure it, we have been pushing the marginalrate higher and deeper into the lower end of the income pool.
By Daniel Becker
I have constructed 4 sets of data using the tax rates of 1936/37, 1945/46, 1965/67 and 2010. I chose 1936 because it is a tax rate increase after the economy had turned north based on Mikes posting. I chose 1945/46 because it is another adjustment that happens right after after WWII. I chose 1965/67 because it is the decrease often spoken of fondly. Of course 2010 is because that is where we are at.
Generally speaking, Mellon argued that tax burdens were too high. Steep rates, he insisted, served only to stifle incentive and foster tax evasion. “Any man of energy and initiative in this country can get what he wants out of life,” he wrote. “But when initiative is crippled by legislation or by a tax system which denies him the right to receive a reasonable share of his earnings, then he will no longer exert himself and the country will be deprived of the energy on which its continued greatness depends.”Worse yet, Mellon argued, high rates didn’t even raise money. By encouraging both legal tax avoidance and illegal tax evasion, they eroded the tax base and reduced overall revenue. Lower rates, he said, would actually raise money by spurring economic growth and reducing the incentive for tax avoidance. “It seems difficult for some to understand,” he complained, “that high rates of taxation do not necessarily mean large revenue to the government, and that more revenue may actually be obtained by lower rates.” In particular, Mellon insisted that high rates distorted investment decisions, boosting the popularity of tax-free state and local government bonds. Indeed, Mellon made these tax-free bonds a regular target of his reform attempts, but Congress resisted his plans to eliminate them.
1906…We should discriminate in the sharpest way between fortunes well-won and fortunes ill-won; between those gained as an incident to performing great services to the community as a whole, and those gained in evil fashion by keeping just within the limits of mere law-honesty.1907 regarding an income tax:…while in addition it is a difficult tax to administer in its practical working, and great care would have to be exercised to see that it was not evaded by the very men whom it was most desirable to have taxed, for if so evaded it would, of course, be worse than no tax at all; as the least desirable of all taxes is the tax which bears heavily upon the honest as compared with the dishonest man.No advantage comes either to the country as a whole or to the individuals inheriting the money by permitting the transmission in their entirety of the enormous fortunes which would be affected by such a tax; and as an incident to its function of revenue raising, such a tax would help to preserve a measurable equality of opportunity for the people of the generations growing to manhood. We have not the slightest sympathy with that socialistic idea which would try to put laziness, thriftlessness and inefficiency on a par with industry, thrift and efficiency; which would strive to break up not merely private property, but what is far more important, the home, the chief prop upon which our whole civilization stands. Such a theory, if ever adopted, would mean the ruin of the entire country–a ruin which would bear heaviest upon the weakest, upon those least able to shift for themselves.
by Divorced one like Bush
There were some good responses to the first posting that I agreed with. They were, could we say, jumping the gun as to how I want to proceed, however. So, with this post I want to continue with looking at phrases/concepts/thoughts that are a part of, or were a part of any discussion regarding “rich”.
Have you missed the phrase: Rat Race?
Wonder why we ask: Is the American Dream dead?
Could it be that in an economy where “rich” is not or will not be defined, the race is won and the dream obtained? After all, we’re all rich now! Sodahead specifically asked the question.
We have polls regarding the Dream. From the group: Change to Win, the 2006 American Dream Survey:
A majority of American workers feel both the country (63%) and the national economy (63%) have gotten off on the wrong track. Just 26% of workers say the country is headed in the right direction, while 28% say the national economy is headed in the right direction.
The most widespread serious worries of American workers today include the prospect of not being able to afford health care when they need it (a serious concern for 77%), not having enough money for retirement (77%), losing their health care benefits (72%), not being able to keep up with bills (69%), and having their standard of living slip further and further (68%).
When asked the open ended question of what the American Dream means to the them, respondents say it means having a good job and being able to make a comfortable living (37%) while notably, almost no one mentions being wealthy or affluent (1%).
From New American Dream.org 2004 survey report:
More than 4 in 5 Americans (85%) say that our society’s priorities are out of whack.
Nearly all Americans (93%) agree — more than half agree strongly (52%) — that Americans are too focused on working and making money and not enough on family and community.
More than 4 in 5 Americans (83%) agree that they wish they had more of what really matters in life.
Less than 3 in 10 say that having a bigger house or apartment (29%) or nicer things (16%) would make them much more satisfied.
In this survey is a chart of phrases asked to be rated in how well it describes the American Dream and importance for society on a 10 point scale. They report the percentage that rated each phrase at 8 or higher. The following are significant for this discussion:
“To consume or buy what we want”. Only 55% said it described the Dream and 49% said it was important.
“Achieving an affluent or wealthy life style”. Only 49% said it described the Dream and 44 % said it was important.
These are low numbers compared to the other phrases.
Thus, between these two surveys, the idea of getting rich so that you can consume as you please is not a big part of the Dream. In fact this survey found:
Over the past 5 years, nearly half of Americans (49%) say that they have voluntarily made changes in their life which resulted in making less money.
What kinds of changes have Americans who are downshifting made? One in three Americans (33%) say they have ”quit working outside the home” and more than 1 in 4 say they have either changed to a lower paying job (28%) or reduced their work hours (26%).
That brings us to the phrase: Rat Race.
A rat race is a term used for an endless, self-defeating or pointless pursuit…The rat race is a term often used to describe work, particularly excessive work; in general terms, if one works too much, one is in the rat race.
Now, consider that there were 38.8 million hits for “is the American Dream Dead” but only 3.98 million hits for “rat race”. “Houston, we have a problem.” People know what the American Dream is and they know we ain’t livin’ it, BUT, they have no idea what they have been living.
In that 3.98 million hits, only 1 MSM article came up early regarding “rat race” and how to get out of it. Early was page 2, second listing. Contrast that with the dead American Dream search having the first 3 hits being MSM articles.
This is how the article from MSN Money Staff, 7/20/07 begins:
Looking to get off the paycheck-to-paycheck treadmill or to drop out of the rat race altogether? Here’s what you’ll need: a solid plan for how you’ll spend your time and a way to either earn dramatically more or spend much, much less.
This is not an impossible dream. In 2004, 7.5 million U.S. households had $1 million in assets, not including their homes. The number of people worth $5 million has quadrupled in the past 10 years and numbers nearly 1 million.
So, the way to get out of the race is to win the race? Obviously they have not read what Americans believe the American Dream is. Or, could this article be getting at just how expensive it is to have the American Dream? Or, are they supporting the impression from the surveys that the chances of getting the Dream are slim and less so for the next generation? After all, what is 7.5 million households compared to a projected 110 million by 2010?
If we can not conceptualize (though we used to) what it is we are doing while having a feeling that we don’t like what ever it is we are doing because it is not part of the American Dream, then how can we define rich? However, if you are rich, and you make money from money, could there be any better environment than to have the masses unable to recognize their dilemma? Talk about putting your capital to work! Just as there is a campaign to not define rich, there has been a campaign to make the American Dream synonymous with the goal of making money. For instance, the purpose of business was not always defined as making money, however that is the pat answer returned today. (I’m going to write about this too some day.)
Just read that MSN article again. Nothing in there gives the reader permission to simply down size, to get off the rat race. No, you have to make sure you have enough money. They even suggest doubt about your being able to be happy with less. And, in the end you may already be rich. There closing sentence:
On the other hand, you may not be as poor as you think. Check out GlobalRichList to get a different take on how you compare with others.
The goal is to make money we are told. You know, the rhetoric about the lazy people, those wanting more of the American Dream than they are willing to work hard enough for? You don’t want to be like them! Yet, the pursuit of this goal is the incarnation of the concept “Rat Race”.
We have had our ideas about our purpose in and of life reduced to the concept of “rat race”, while having the concept removed from our daily lexicon so that we can’t even voice what we are experiencing. Our American dream has been reduced to “an endless, self-defeating or pointless pursuit” while we have been losing the words to voice the experience. Did you know, that the reason we can not remember our very early years is because as infants, we do not have use of language and thus can not form memories. You need words and their understanding in order to structure and reason your life out.
Defining “rich” is part of understanding the American Dream. The Dream is a life style within the framing of equality of power. The American Dream is the goal. The goal has always had a dollar amount tied to it. Because the Dream cost money, it is vulnerable to manipulation by those of unequal power: the rich.
To be continued.
(I’m broadening the discussion now.)
by Divorced one like Bush
Define rich. Define rich! Define rich?
That’s the come back every time the issue of raising the income tax on the rich come up. What is unsaid is: Go ahead. Define rich. I dare ya! (Triple dog dare at that.)
Fine. I’ll accept the challenge. But, first understand that I accept the challenge because having a definition of “rich” is needed if we are going to fix the money from money economy. We have to ask: When is enough, enough? We have to take the responsibility of having determined what enough is, if we are going to return to the ideal of our democracy. The ideal of equality of power. This ideal was discussed in my postings (3 of them) on taxation.
I think this nation used to know when enough was enough. We used to know what rich was. It was a life; as in “pick a life, not a job”. It was an ability made capable by the amount of money managed (not flowing) through one’s hands. That it was a life meant we did not fall for the rhetorical trick of: Define rich! I dare ya. The trick is that the question is asked in reference to defining levels of income at which a specified percentage of taxation will take place. It is the infamous black and white trap when we all know we live in a life that is the spectrum of color. Cross this line you pay, don’t cross it, then you don’t pay. As with all dares, there is a threat. The threat for the rhetorical “define rich” dare is that the moment a number is chosen, the one doing the daring will retort with a life example of the chosen number that under the life circumstances retort might not be considered rich.
Back when we knew what rich was, we had an income tax based on a spectrum of rich. In fact, something I quoted in my tax series confirms that we knew what “rich” was:
There was another agenda at play as well in the early years of the federal income tax: the desire to use progressive taxation as a way to “ stave off more radical calls for industrial democracy.” This explains why even some high-income Republican groups supported the Sixteenth Amendment. Andrew Mellon, Secretary of the Treasury in the 1920s and one of the wealthiest Americans, “ believed that keeping tax schedules graduated (albeit flatter) would mitigate radical demands for restructuring the capitalist system.”
Even the rich knew what rich was.
Let me say, for me wealth is not the rich I’m talking about. Wealth is another issue that should not be brought into the discussion of “rich” related to an income tax. It get’s thrown in as another rhetorical trick, the trick being that one will think about a dollar amount of wealth and then think how much money it took to get that wealth ala income. But, wealth is accounted under the asset category, not income.
Professor Mankiw posted in 2006 about a study that defined a level of rich world wide based on wealth which I think has a presentation ripe for rhetorical trap making. He quotes:
The research finds that assets of $2,200 per adult placed a household in the top half of the world wealth distribution in the year 2000. To be among the richest 10% of adults in the world required $61,000 in assets, and more than $500,000 was needed to belong to the richest 1%, a group which — with 37 million members worldwide — is far from an exclusive club.
So, from a global perspective, if you have net worth of more than $61,000, you are rich.
Really? Thirty 37 million members world wide on a planet of 6 billion is not exclusive? $61,000 of assets should make us all feel rich? The message (and I am not interpreting that Profressor Mankiw’s posting suggests any qualification) is that we should all feel equally wealthy and thus rich. Can you see how such a presentation could be used as a rhetorical trap in determining “rich”. So, let’s not go there. “There” is for the discussion of the estate tax. Besides, once the income has been turned into an asset, it’s kind of too late to worry about taxing the income. No?
Also, we are talking the United States of America. Not Zimbabwe. (See the above issue.) I know there are children starving in Africa. We have the same here, it’s just that the income needed here to not have a child starving is higher. Purchasing power parity and all that. Though, if we would be adult about the issue of “rich” and define when enough is enough, we would be able to do more for such people as there would be more left for them.
We have lost our definition of rich and I believe it was done intentionally. If you are rich, then what better camouflage is there than to undefine “rich”? And, what better way to undefine “rich” than to have an argument accepted that “rich” can not really be defined? AND, once you can’t define rich, well then hey, how can you single out anyone number as a line for having to pay a higher percentage of tax on their income? Thus, we should all pay the same percentage and thus obtain our constitutional nirvana of all man is created equal. Throw in a little pity play as in the “rich are paying most of the taxes”, (funny how those complaining about how much the rich pay in taxes seem to know what “rich” is) present your candidates as the every-man or every-woman, salt of the earth, blab, blab, blab to reinforce the perception that this is all about constitutional equality and BINGO, you get to convert life from an economy that worked for society to a society that works for an economy. And as presented, once you get beyond “enough”, all you have is to have more:
Wealth confers power beyond its consumption value. This power is economic, social, and political. The economic power of the rich derives primarily from their ability to use their wealth to invest in enterprises that employ thousands of people and can dominate large sectors of the economy.
Yes, they are talking wealth. However, as I noted, this is after the rich bought their stuff to make them happy. Now they are just accumulating power.
We need to define “rich”. We need to be adult about this and take the responsibility for understanding the interplay of society and an economy within our form of democratic governance. Personally, I think we will find that defining rich for our purposes is rather easy once we stop answering the rhetorical dare of: Define rich?
For this discussion “rich” is a life classification. The classification is consumption determined, the amount of which is a function of energy expended (ie: physical labor/intellectual labor), work performed (ie: blue collar/white collar) along with energy conserved (freedom), work diverted (power). This aspect of life is not about what the individual finds satisfying. That is another rhetorical trap. We all know of those who are fine with just hitch hiking through the galaxy and would consider them self rich for the memories. The life aspect needed for determining “rich” for the purpose of taxing is the aspect determined by the structure of the society one lives in. For us, that structure is idealized in the phrase: The American Dream. That phrase is the socially understood goal and that phrase is underscored by how much money your hands manage.
Classification as in “class warfare”. Consumption as in “autonomous consumption”. American Dream as in more than autonomous consumption. All three a function of the amount of money managed by one’s hands.
To be continued.