Paid in Full
I think I’ve said this before, but I’m a big fan of Megan McArdle; her blog is consistently interesting and she has been generous enough to throw a link my way (which is nice when you’re a struggling C-list blogger). That said, I don’t understand why she has this huge blind spot with regards to the relative privilege of her Manhattanite friends:
A Democrat of my acquaintance, who makes something, but not a huge something, over $200,000 a year while living in Manhattan, was recently grousing to me about the surtax. “My taxes on a marginal dollar are going to go up almost 1000 basis points!” said he.
This is true, I agreed. And just what, I wondered, had he thought was going to happen if he elected Obama? Not clear. Our subject had listened to Obama talk about taxing people who made more than $250,000, which seemed entirely reasonable; he hadn’t realized that being single, his tax hikes would start much lower than that–that he, too, was “the rich”. Mentally speaking, the rich don’t live in eight hundred moderately roach-infested square feet in an unfashionable neighborhood of New York.
Let’s assume that Megan’s friend is a 25+ year old man with a professional degree of some kind. In 2005, the median individual income for his demographic is $82, 473 – nearly twice the overall median household income, and slightly under the median household income for holders of a professional degree. A single person, making $200,000 a year is rich by any reasonable standard, even if that person is living in Manhattan. Indeed, the fact that he can even conceive of living semi-comfortably in Manhattan is indicative of his relatively privileged material situation; Manhattan remains one of the most expensive real estate markets in the country (and the world, for that matter) for a reason, after all. Living in Manhattan is a luxury in every sense of the word, and I can’t actually feel sorry for anyone “stuck” in that situation, even if they are “only” middle class by their neighbors standards.
There are a couple of things going on. First, younger professionals in a city like New York who earn $200K per year are working and socializing in circles where a lot of people make vastly more. That skews their perspective on what it means to be rich. Similarly, working in such circles can skew your perspective on what it means to be poor, or why people are poor. The $200K+ salaries are a product of pure meritocracy, you know, and if you don’t believe me just ask the people earning them. ;-)
Second, there’s a real difference between being truly rich and having aspirations to be truly rich. The young guy making $200K per year has expenses (some of which could easily be criticized as excessive – “you spent what on that suit” – but are in no small part a product of social and work expectations) and is likely also paying off student debt. He likely spends most of what he makes, and couldn’t survive long without a job. He’s shoulder-to-shoulder with people who are truly rich – they have six, seven, eight figure passive income, and losing a job may mean laying off some household staff or giving up a vacation home… but maybe not even that. That’s where the young guy wants to be. (Given his relationship with McArdle and his reduction of financial issues to “marginal dollars” and “basis points”, perhaps he may – I suspect from that, that he’s in the financial industry.)
If you have been reading the New York Times on the plight of the city’s residents in the downturn, or its various columnists, you’ll find that McArdle has a lot of company. Reporters and columnists with wealthy friends seem in large part to start viewing the world through that same lens, and the plight of a guy making $250K a year who may have to pay a higher tax bill becomes far more compelling than, say, a plant full of factory workers who have been laid off by their bankrupt employer, with no realistic prospect of employment either in the area or at a comparable wage.