The Associated Press describes a new problem in Obama’s America. Wealth is once again threatening to rear its ugly head. You may not realize it, but there’s a danger that as many as one in five Americans may get rich sometime in their lifetimes.
WASHINGTON (AP) – Fully 20 percent of U.S. adults become rich for parts of their lives, wielding extensive influence over America’s economy and politics, according to new survey data.
These “new rich,” made up largely of older professionals, working married couples and more educated singles, are becoming politically influential, and economists say their capacity to spend is key to the U.S. economic recovery. But their rise is also a sign of the nation’s continuing economic polarization.
They extend well beyond the wealthiest 1 percent, a traditional group of super-rich millionaires and billionaires with long-held family assets. The new rich have household income of $250,000 or more at some point during their working lives, putting them – if sometimes temporarily – in the top 2 percent of earners.
The new survey data on the affluent are being published in an upcoming book, and an analysis by The AP-NORC Center for Public Affairs Research provided additional information on the views of the group.
In a country where poverty is at a record high, today’s new rich are notable for their sense of economic fragility. They rely on income from their work to maintain their social position and pay for things such as private tutoring for their children. That makes them much more fiscally conservative than other Americans, polling suggests, and less likely to support public programs, such as food stamps or early public education, to help the disadvantaged.
Last week, President Barack Obama asserted that growing inequality is “the defining challenge of our time,” signaling that it will be a major theme for Democrats in next year’s elections.
The story relates how “after growing up on food stamps, [a man named] Lott now splurges occasionally on nicer restaurants, Hugo Boss shoes and extended vacations to New Orleans, Atlanta and parts of Latin America.” Clearly this does not bode well for income equality if your goal is income equality.
Quite apart from being distasteful, it is also destabilizing. Nobody — at least nobody of quality — likes a parvenu. By definition income equality refers to the distribution of income. The only ways to achieve it are to reduce income variance or apply some redistributional mechanism to level things off.
What is more some of those newly wealthy will also lose their fortunes some time in their lives. The process of the poor striking it rich and the rich going bust creates a turmoil in the income structure that is inimical to social stability. How can you plan for the future when you don’t know what it is?
During the 2008 presidential campaign Barack Obama had a conversational encounter with Samuel Joseph Wurzelbacher, who became known as “Joe the Plumber” that captured the dilemma. When Joe the Plumber declared his desire to earn $250,000 a year Obama replied:
It’s not that I want to punish your success. I just want to make sure that everybody who is behind you, that they’ve got a chance at success, too… My attitude is that if the economy’s good for folks from the bottom up, it’s gonna be good for everybody. If you’ve got a plumbing business, you’re gonna be better off [...] if you’ve got a whole bunch of customers who can afford to hire you, and right now everybody’s so pinched that business is bad for everybody and I think when you spread the wealth around, it’s good for everybody.
But the difficulty, Wurzelbacher later told Katie Couric, was that in order to “spread the wealth around” you had to tax the rich. And who exactly were these rich who should be taxed?
Asked whether Obama’s proposed $250,000 tax threshold would affect him, Wurzelbacher replied: “Not right now at presently, but (…) he’s going to do that now for people who make $250,000 a year. When’s he going to decide that $100,000 is too much? (…) You’re on a slippery slope here. You vote on somebody who decides that $250,000 and you’re rich? And $100,000 and you’re rich? (…) Where does it end?”
It ends when there’s “income equality”.
A quarter million a year now marks the danger threshold, the point at which differences become undesirable. Ironically one person who might actually not consider this a problem was the arch Communist Deng Xiaoping. He is famous for having said: “To get rich is glorious!”. This is now disputed.
Deng is commonly quoted with this phrase in western media but there is no proof that he actually said it. However, this phrase in Chinese is more accurately translated as “wealth is glorious,” where wealth can have a very general meaning, including knowledge, personal relationships, family: anything of value. Understood this way, the quote is not as directly controversial as a ideological/political statement, and so it is not hard to believe that he really did say this.
The probable truth is that wealth is both glorious and shameful. It’s glorious for the IRS so they can have something to tax. It’s shameful for the individual since he must be encouraged to “spread it around.”
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