Let Them Eat Privilege

April 22, 2015 4:23 PM

The one percent isn’t some amorphous boogeyman inside all of us... It’s a very real class. And we don’t need a list of cultural “symptoms” of one-percent-style privilege to figure out who they are. Just run the numbers. If your household — or to be generous, the one you grew up in — makes an adjusted gross income of at least $343,000, you are, in fact, the one percent. Even if you smoke meth, went to boot camp, and are on your third marriage. Yes, even if most of your friends didn’t finish college and live kinda far from a Whole Foods. Now, if you or the household you grew up in make an adjusted gross income of less than $340,000, you are, technically, the 99 percent.

Let Them Eat Privilege
posted by y2karl (60 comments total)

From the article:

Most of the super rich get their money by virtue of exploiting the labor of others and holding private property — corporate shares, real estate investments, bonds and treasury bills, etc. — that they will fight tooth and nail to protect.

This is no longer true of most of the richest people in the world. Yes, you could say that Mark Zuckerberg's wealth comes from his owning Facebook, but that's hardly like owning a coal mine: in a very real sense, his wealth constitutes the returns from a (lucky? well-timed? nefarious?) idea that he had. And in the sense that a hedge-fund billionaire's money comes from capital, it comes mostly from bamboozling rich people (and pension funds!) out of that capital rather than turning their own money into more. Of course, many billionaires (and milionaires and thousand-aires) fight for their own interests, and sometimes this is destructive, but the right-ness or wrong-ness of their views bear no relationship to the AGI that they reported on their 401(k).

Not even to mention that looking at "the share of income that goes to the 1%" isn't looking at the same set of people over time: it's not like some group of people called "the 1%" became richer, it's that in many cases they themselves got replaced by other, even richer people. Just because the income distribution is becoming dangerously skewed doesn't mean, necessarily, that the root cause is a bunch of oligarchs manipulating the economy to enrich themselves. After all, many of the richest people in the world were middle-class children (or not even born!) in 1979, the year of the before-and-after comparison, so they'd need quite some foresight to have started doing their system-manipulating back then.

As this article comes perilously close to admitting, any generalization you make about people solely by looking at their income level will be wrong. So maybe instead of looking for an "oppositional politics", the right thing to look for is a set of constructive policies to mobilize around?
posted by goingonit at 4:35 PM on April 22, 2015 [9 favorites]

the right thing to look for is a set of constructive policies to mobilize around?
ok. let's reinstate glass-steagull and tax capital gains at the exact same rate as wages. that should flush em out.
posted by j_curiouser at 4:39 PM on April 22, 2015 [51 favorites]

Although tech workers make up the precarious bottom of the 1%, and although a few prominent people (Zuck, Gates) at the very top of the 1% got there by parlaying luck, technical skills, and birth into the lower fringe of the upper class into outrageous tech industry wealth, it is missing the point entirely to identify the 1% with the tech industry. The median 1%er isn't tech industry new money. The median 1%er is either in finance and/or got their money the old fashioned way, by inheriting it.
posted by You Can't Tip a Buick at 4:43 PM on April 22, 2015 [61 favorites]

As this article comes perilously close to admitting, any generalization you make about people solely by looking at their income level will be wrong.

A generalization does not have to universally true to be valid. Hell, if it is universally true it isn't a generalization.

It remains true that people who make the majority of their income through capital gains and investments do not pay a sufficient amount of taxes even if you can find a few examples of people for whom that isn't true. And it remains true that the system is rigged in their favor.
posted by Justinian at 4:44 PM on April 22, 2015 [22 favorites]

At the risk of bringing data into this discussion, here are (as of 2012) the occupations of the 1%.

Absolutely, increase capital gains tax, that would probably be good tax policy. But it's important to remember that most members of the 1% earned their money through salaries; that all of the extremely rich would still be extremely rich even with a much higher marginal tax rate; and that everyone is using "the 1%" as a short-hand for something that it really isn't.

Why is it not enough to make a (relatively minor) tax policy point without appending "that'll show 'em!" to the end of it? At least aim for something more audacious.
posted by goingonit at 4:50 PM on April 22, 2015 [5 favorites]

Isn't it slightly odd to define the 1% by income instead of by wealth?

I bet that most of the people with negative income in the millions last year are more likely to be in what most people would think of as "the 1%" than I am, despite the fact that, by simple subtraction, I earned millions more than they did.
posted by clawsoon at 4:51 PM on April 22, 2015 [56 favorites]

So maybe instead of looking for an "oppositional politics", the right thing to look for is a set of constructive policies to mobilize around?

ok. let's reinstate glass-steagull and tax capital gains at the exact same rate as wages. that should flush em out.

Institute a financial transactions tax. Eliminate the carried interest exception. Increase, not eliminate, the estate tax. Lift the earnings cap on Social Security taxes and expand benefits. Reduce student loan interest to the same rate as offered to financial firms through the Fed discount window, and allow all current borrowers to refinance. Eliminate the Chapter 7 Means test and non-dischargabiltiy of student loans for bankruptcy filings. Expand the Child Tax Credit. Overturn Citizens United. Repeal 504c4 super-PACS and require public disclosure of all campaign contributions by any individual or legal entity. Fully fund the IRS up to the agency's request. Fully fund the VA, SSA, FTC, CMS/HHS and CFPB. Create a public health insurance option or allow Medicare buy-in for all age groups. Explore a basic income guarantee.
posted by T.D. Strange at 4:54 PM on April 22, 2015 [146 favorites]

The occupations list is kind of misleading since it includes people with low-paying jobs who marry a 1%er. Not very useful.
posted by Justinian at 4:54 PM on April 22, 2015 [7 favorites]

As this article comes perilously close to admitting, any generalization you make about people solely by looking at their income level will be wrong. So maybe instead of looking for an "oppositional politics", the right thing to look for is a set of constructive policies to mobilize around?

I suppose "revolution, now" isn't a constructive policy?

But yes, there are a number of constructive policies that people on the left are rallying around; at one end, the restoration of regulation against some categories of theft by financiers, at the other, things like campaigns to raise the minimum wage, to institute rent control, to strengthen labor unions, and to otherwise flatten the income curve by rewarding work instead of rent-seeking.
posted by You Can't Tip a Buick at 4:54 PM on April 22, 2015 [2 favorites]

TD Strange has some good examples of policy. I would add: Eliminate the mortgage interest tax deduction.
posted by Justinian at 4:55 PM on April 22, 2015 [16 favorites]

The article is both right and wrong. It's right that the big winners are the 1%. But look at the chart he provides: since 1979 the top 10% have been doing well, the bottom 90% have not. (To make it into the top 10% of households, you have to have an income of about $145,000.)

Why is this important? Because the top 10% are the allies and enablers of the 1%. It's not an accident that the income of the 10% keeps rising when no one else's does.

As for what to do, why not go back to what actually controlled the income of the rich before 1979? That is, double the top marginal tax rate.
posted by zompist at 4:57 PM on April 22, 2015 [15 favorites]

The 99% is, in Marxist terms, not strictly a class, so neither is the 1%. What's import is the understanding that there is a sharp divide in the US, of a sort usually seen in third world countries, and that the vast majority have an interest in core ting that imbalance. OWS was just the first echo of class politics in the US. It wasn't going to spring fully formed from the head of Marx.
posted by graymouser at 4:58 PM on April 22, 2015 [2 favorites]

I've long thought that, while catchy, the framing of the issue as "the 1%" vs. "the 99%" was a really unfortunate choice as even within "the 1%" the amount of accumulated wealth and economic power at issue is very, very unevenly distributed.

Those double-income married professional couples who live in the nice part of your small town or the successful insurance agent down the road may make enough for their household income (and can we decide once and for all whether we're going to be talking about income or wealth and stick to that? I'm using income this time because that's what the write-up uses..) are vastly more numerous, and more familiar to people everywhere across the country, than people like the Walton heirs or the Koch brothers or George Soros. They're also not anywhere near as individually influential and their ideology is considerably less focused than that of the extremely high-wealth individuals except on a very small number of issues.

You could probably talk about "the 1% of the 1%" and still be over-including. The big issue is the very small number of people whose wealth is substantial enough to warp the fabric of society around them and most of "the 1%" don't come close to that level.

[I see on preview that some of my thoughts have been expressed by others while I was writing them down; I'm just going to leave them in to signify agreement..]
posted by Nerd of the North at 4:59 PM on April 22, 2015 [18 favorites]

i've noticed a bit of pushback on some parts of the left lately against privilege-centered analysis as too individualistic and atomizing, and an effort to focus more on collective economic/class goals. basically summarizable by this david harvey quote:

"Neoliberal rhetoric, with its foundational emphasis upon individual freedoms, has the power to split off libertarianism, identity politics, multi-culturalism, and eventually narcissistic consumerism from the social forces ranged in pursuit of social justice through the conquest of state power. It has long proved extremely difficult within the US left, for example, to forge the collective discipline required for political action to achieve social justice without offending the desire of political actors for individual freedom and for full recognition and expression of particular identities. Neoliberalism did not create these distinctions, but it could easily exploit, if not foment, them."

posted by p3on at 5:00 PM on April 22, 2015 [4 favorites]

I suppose "revolution, now" isn't a constructive policy?

Frankly I wish people on the far Left were significantly louder and madder than they are. I mean look at this discussion so far: rage at the rich being channeled into tax reform suggestions. What would Eugene V. Debs think? I'm pretty sure I don't want a revolution but it kind of gives me the heebie-jeebies that nobody with a platform on the Left does either.

I guess what I'm saying is that if the fight you're having is over carried-interest tax deduction, maybe that's a sign that your society is serving you pretty well -- or at least that economic injustice really isn't the injustice that most needs addressing.

And if you really don't like the way society is going, please have the audacity to dream much bigger than, like, Glass-Steagall.
posted by goingonit at 5:04 PM on April 22, 2015 [5 favorites]

What would Eugene V. Debs think

Maybe that he lost all five of his races and never got more than 5% of the vote, so perhaps people in later times should try a different tack?
posted by Justinian at 5:06 PM on April 22, 2015 [9 favorites]

The weird thing about contemporary American politics is that everything that's not right wing is verboten from the outset in polite company, and so even liberals like Warren pushing for modest finance industry reforms are treated as if they were bomb throwers.

If your social group slides far enough to the left, you may find yourself in tedious discussions over reformist strategies vs. revolution or whatever; my response when I get roped into one of those useless conversations is to note that we don't have to choose between the two, because capital is increasingly making it clear that even mild attempts at reform will be treated and responded to as if they were calls for revolution.
posted by You Can't Tip a Buick at 5:10 PM on April 22, 2015 [41 favorites]

Why is this important? Because the top 10% are the allies and enablers of the 1%.

furthermore, it's the 10% that you're more likely to deal with in your personal life

i'm thinking that a better division here is between those who have an active stake in the system and are helping run and defend it, as opposed to those who merely get to follow orders and hope to get something from the system for survival in return

many of the former aren't anywhere near the 10% in wealth or income - but it's the mentality that counts
posted by pyramid termite at 5:19 PM on April 22, 2015 [3 favorites]

Isn't it slightly odd to define the 1% by income instead of by wealth?

Yes this seems to be an intentional thing in these discussions-- an attempt to sow division amongst the people working for a living and deflect attention away from those who live off of capital.

Why aren't there more direct taxes on wealth in the USA? We fought to escape the rule of an inherited wealth class but seem to be creating that class here.

We seem to have returned to a land of taxation without representation-- taxes on income(payroll and non-dividend non-capital gain income taxes)make up a huge majority of federal revenue, but you have to be incredibly wealthy to be actually heard by members of congress.
posted by GregorWill at 5:25 PM on April 22, 2015 [25 favorites]

Yes this seems to be an intentional thing in these discussions-- an attempt to sow division amongst the people working for a living and deflect attention away from those who live off of capital.

Which is the essential point here: the top of the pyramid is a market where the commodity being traded is the labor of other people. There are a multitude of factors that keep this hierarchy going, but this is one of the most important points to have in mind. So long as people continue to believe that workers and consumers are two different sets of people, that hard work will bring wealth, and that we depend on the super-rich, the top of the pyramid will continue its relatively peaceful existence while we're all sniping each other.
posted by Aya Hirano on the Astral Plane at 5:38 PM on April 22, 2015 [7 favorites]

Huge respect for Jacobin for continuing to draw attention to the centrality of Class in the battles the Left is trying to wage. Others on the Left will continue to try to splinter their efforts along Identitarian lines, which is why my IRA will keep doing well.
posted by fraxil at 5:41 PM on April 22, 2015

I don't really agree with this.

Lots of people benefit from the existence of the 1%, without ever having high incomes themselves. Most obviously, the kids of the 1% who inherited a lot of money, and the ex-spouses of the 1% who get massive divorce settlements. But in most cases a whole network of friends and family benefits from one wealthy person through access to cushy jobs, help with school and college, emergency cash when times get tough, and even just the doors that being connected to a wealthy person can open.

I think it is completely possible to be a member of the 1% as a class, without actually being in the literal 1%. In fact I think there are more people in that group than there are who are literal 1%ers.
posted by miyabo at 5:59 PM on April 22, 2015 [1 favorite]

I think it is completely possible to be a member of the 1% as a class, without actually being in the literal 1%. In fact I think there are more people in that group than there are who are literal 1%ers.

BUT if you stake vampire lords through the heart, the vampires they've converted shrivel up too, because they become weak in the absence of their masters' power. That's why it's so important to go after the vampire lords, and not just the run-of-the-mill vampires that serve them.
posted by You Can't Tip a Buick at 6:07 PM on April 22, 2015 [15 favorites]

Not sure what I think of this yet, but saying Giridharadas sounds like "a wealthy New Yorker whose only concept of flyover America is an episode of Justified" is exactly the kind of culture-based shaming the Jacobin essay supposedly inveighs against. That's some Limbaugh-level bullshit ad hominem there.
posted by neroli at 6:11 PM on April 22, 2015 [3 favorites]

Elizabeth Warren has a game-changing idea that doesn't require Congress - "An agenda for cracking down on Wall Street that Hillary Clinton could embrace — but probably won't."

Warren has a much more far-reaching critique of banks' role in American politics and economics. From Obama's point of view, deferred prosecution agreements are a prudent way to manage a risky situation. From Warren's point of view, the idea of banks that are simultaneously so vulnerable to collapse and so integral to the ongoing operation of the economy that the government dare not prosecute them is the essence of the problem. And the broad nature of the discretion afforded to federal prosecutors and their bosses means that criminal prosecutions are a potentially powerful tool for any president who cares to use them.

also btw...
-No More Cheating: Restoring the Rule of Law in Financial Markets
-How Wall Street captured Washington’s effort to rein in banks
-America's lobbying addiction
-Where Your 2014 Taxes Went
-The rich get government handouts just like the poor. Here are 10 of them.
-Middle Class, but Feeling Economically Insecure
posted by kliuless at 6:14 PM on April 22, 2015 [12 favorites]

Lots of people benefit from the existence of the 1%, without ever having high incomes themselves. Most obviously, the kids of the 1% who inherited a lot of money, and the ex-spouses of the 1% who get massive divorce settlements. But in most cases a whole network of friends and family benefits from one wealthy person through access to cushy jobs, help with school and college, emergency cash when times get tough, and even just the doors that being connected to a wealthy person can open.

Sure, the problem with trickle down economics you've just described here isn't that the friends and heirs of the 1% aren't getting rich too, it's that those friends and heirs constitute the 2-10%. The trickle doesn't extend much further down than 1 degree of separation, and it certainly doesn't reach into working class communities where no one in 3 generations has ever even met a billionaire.
posted by T.D. Strange at 6:26 PM on April 22, 2015 [11 favorites]

Yes this seems to be an intentional thing in these discussions-

The discussion is about a piece urging people to look solely at income.
posted by jpe at 6:38 PM on April 22, 2015

why not go back to what actually controlled the income of the rich before 1979? That is, double the top marginal tax rate.

Presumably we'd get all the tax shelters back, too. That's why the effective rate on the 1% was 35% in 1979 and 33% in 1999.
posted by jpe at 6:44 PM on April 22, 2015 [2 favorites]

Lifetime bond, issued at birth or naturalization, with coupon pegged to a 30% distribution of NGDP/capita at a 4% annual increase rate. If you want to discourage mostly apocryphal having babies for money, linearly increasing fraction of full payout from birth to 16. Fed doesn't have hardly any more politically uncomfortable aggregate demand stimulation either.

Easy peesey.
posted by PMdixon at 6:54 PM on April 22, 2015

The weird thing about contemporary American politics is that everything that's not right wing is verboten from the outset in polite company, and so even liberals like Warren pushing for modest finance industry reforms are treated as if they were bomb throwers.

A soundtrack suggestion. [slyt]
posted by mr. digits at 7:05 PM on April 22, 2015

The Giridharadas was horrible, and I thought this was a fair rebuttal. The if no one you know uses meth &c pull-quote represents an idealized middle class, not some rarefied elite.

I didn't get any sense of "Limbaugh-level bullshit ad hominem" in the article. One catty remark does not a Limbaugh make.

I am surprised that a $343,000 income puts a household in the 1%. I just assumed it was higher. Not that I'm anywhere close to that ... or ever will be, unless I marry into it.
posted by kanewai at 7:32 PM on April 22, 2015 [3 favorites]

I am surprised that a $343,000 income puts a household in the 1%. I just assumed it was higher. Not that I'm anywhere close to that ... or ever will be, unless I marry into it.

As someone who is also not very close to the one percent level, I take that figure as a reminder of how the real issue is with the concentration of wealth (and income, but more importantly wealth) in the top fraction of the one percent.
posted by Dip Flash at 7:36 PM on April 22, 2015 [3 favorites]

What it takes to be in the 1% by state
posted by T.D. Strange at 7:47 PM on April 22, 2015 [3 favorites]

Even when the income of the one percent (mostly the bottom half of that select group) is derived primarily from high salaries (as opposed to returns on investment) it’s far more likely to be reinvested in shares, bonds, and real estate — and of course elite educations and other opportunities for their children — than the income of the middle 40 percent, who have hardly anything left once the bills are paid.

Which says nothing about the rest of the top 10%.

That means that even with nothing more than a killer W-2, the salaried lower half of the one percent still have the means to consolidate themselves as an elite class while the rest of us are immiserated.

No, it means the middle 40% are immiserated.

When a cut in capital gains taxes is paid for by hiking state tuition and slashing social services, the one percent benefits while the vast majority of the 99 percent loses.

Correct -- 90% is the vast majority of the 99%.

When a new law is passed making it harder to organize a union or wages are squeezed to ring out higher and higher corporate profits, it’s the one percent — and their investment portfolios — that benefits and the majority of the 99 percent who loses.

Right -- the 90%.

It's weird how this article insists that it's "the 1%" who are "the real villains" while having enough respect for fact to make clear, at every point, that the people making $200,000 a year, the 10%-ers, are also making out just fine under the system as it is.
posted by escabeche at 8:03 PM on April 22, 2015 [2 favorites]

Yes, you could say that Mark Zuckerberg's wealth comes from his owning Facebook, but that's hardly like owning a coal mine: in a very real sense, his wealth constitutes the returns from a (lucky? well-timed? nefarious?) idea that he had.

I don't think whether the company is directly exploitative is the issue. Zuckerberg's family was wealthy enough to get him into Harvard. Bill Gates Sr. was firmly in the 1% before Microsoft ever existed.

Capital gives you incredible leverage that the average person doesn't have and while Facebook doesn't have the reputation for nasty business dealings that Microsoft does, I'm sure they've crushed a few competitors (metaphorically) along the way purely based on the amount of money they could throw at a problem.
posted by CheeseDigestsAll at 8:04 PM on April 22, 2015 [6 favorites]

please have the audacity...
Everything TD Strange and Justinian said, plus Glass-Steagull, plus non-property-tax funding of public schools, plus, uh...lets say cut defense spending by 75% over 10 years. And free ponies.
posted by j_curiouser at 8:27 PM on April 22, 2015

Calling our class enemies the 1% is extremely misleading. The real problem is the top 0.01%, the men who can buy private jets, senators and elections.

There's little qualitative difference in lifestyle or political influence between making $200k a year and making $400k. But once income reaches millions everything changes.
posted by monotreme at 8:57 PM on April 22, 2015 [4 favorites]

Yup. If you make a couple hundred K, you have financial security for yourself, no matter what happens. If you make a couple million, you have financial security for yourself, and your kids, and their kids, and their kids, pretty much forever unless someone screws up or there's a populist revolt in the interim. It's a completely different frame of mind.
posted by miyabo at 9:34 PM on April 22, 2015 [2 favorites]

Capital gives you incredible leverage that the average person doesn't have...

-American companies are running out of places to stash their insane pile of cash
-The Greatest Tax Story Ever Told: How U.S. companies learned to relocate their official addresses overseas and avoid taxes—in one operetta

meanwhile in kansas...
-We Know What’s the Matter With Kansas
-The Kansas Experiment is Over. Kansas Lost.
posted by kliuless at 10:01 PM on April 22, 2015 [7 favorites]

We fought to escape the rule of an inherited wealth class [...]

That's a funny way of framing a tax rebellion.
posted by Kadin2048 at 10:15 PM on April 22, 2015 [4 favorites]

that's hardly like owning a coal mine

I was fumbling around Wikipedia's entries on real estate law the other day trying to figure out to what degree a mine, as a hole in a parcel of land, can be a separate asset from the land itself or even the mineral rights to that land.

Which it can be I think, and that makes sense in many ways, but it's crazy how you can go searching for the roots of our economic system and down many paths everything appears to dissolve into a sort of philosophical-notional foam.
posted by XMLicious at 4:56 AM on April 23, 2015 [1 favorite]

From the Bloomberg piece about Kansas linked above:

Under the leadership of Republican Governor Sam Brownback, the state radically cut income taxes on corporations and individuals. Going on the assumption that this would generate a burst of economic growth and higher tax revenue, no alternative sources of revenue were put into place. Similarly, the state failed to lower spending.

Alas, reality trumps theory. As we have seen almost every time this thesis has been put into practice, it fails. The tax cuts don't magically kick the economy into higher gear and the government ends up short of money. Remember former President George W. Bush and his tax cuts? Same deal.

And yet when the economic effects fail to materialize -- and let's not forget that what economic growth we saw during the George W. Bush administration was arguably attributable to a housing bubble created in part due to the Fed keeping interest rates low (in other words, pedal-to-the-metal monetary policy, not the magic of supply side economics) -- raising taxes remains verboten to Republicans. (And as we've discussed here before, the cost of government is being pushed onto lower income people via fees and fines.)

Why, it's almost as if cutting taxes on higher incomes is itself the policy, and the supposed economic benefits just a sales pitch.
posted by Gelatin at 6:57 AM on April 23, 2015 [6 favorites]

tax wealth
tax wealth
tax wealth
posted by overeducated_alligator at 7:12 AM on April 23, 2015 [7 favorites]

If you make a couple hundred K, you have financial security for yourself, no matter what happens.

Unless you lose your job.

Is that a distinction worth making, maybe? People who have to worry about "How will I make the mortgage payment/rent if I lose my job?" vs. people who don't have to worry about that because they own their property (or properties) outright and don't exactly have "jobs" either?
posted by OnceUponATime at 8:05 AM on April 23, 2015 [3 favorites]

I guess that second category would mostly include retired people...
posted by OnceUponATime at 8:30 AM on April 23, 2015

What if we have 4 categories:
1) People who have no financial security at all
2) People who have financial security day-to-day, but everything would fall apart if they lost their jobs (probably households making 100K+)
3) People who make enough that they'd realistically be fine even if they could never work again, but they worry about their kids (probably households making 300K+)
4) People who have so much money that they and their kids will have perfect financial security for at least a couple of generations (households with millions or billions in the bank)
posted by miyabo at 8:44 AM on April 23, 2015 [1 favorite]

The alleged AMA comment, supposedly a response to the Hollister riot in 1947,[23][24] is denied by the AMA, who claim to have no record of such a statement to the press, and that the story is a misquote.

That's why the unique mission of Hell's Wikieditors is to track down every last one of those bikers wearing a 1% patch and hold them down while a "Needs citation" patch is superglued beneath it.
posted by yoink at 9:47 AM on April 23, 2015 [2 favorites]

Two separate statement I feel aren't correct.

> it's that in many cases they themselves got replaced by other, even richer people.

In "many cases" that's true, but statistically that is not true. Economic mobility in the United States is at a low - if your family is in the 1% this year, it's very likely that it was in the 1% 20 years ago.

--

> 3) People who make enough that they'd realistically be fine even if they could never work again, but they worry about their kids (probably households making 300K+)

$300K a year is a lot of money. It's nowhere near enough to "never work again" - perhaps enough to "retire at 55" if you earn that much for many years.

If you're earning this much, your expenses are significant. If you have two children who are going to top schools and you live in a major metropolitan area, you might be struggling to keep up on $300K - for an experience objectively not so different for what $100K might get you if you lived in Indianapolis with a nice apartment and send your kids to good state universities.

If you think capitalism lets up on you when you are moderately rich, you haven't met many of these people. The system wouldn't work if you could quit when you got ahead.

> 4) People who have so much money that they and their kids will have perfect financial security for at least a couple of generations (households with millions or billions in the bank)

Millions in the bank is definitely not enough for perfect financial security for a couple of generations!

Ignoring interest, simply to give one person "perfect financial security" for 80 years would cost you 80 * 1 year of perfect financial security - at $100,000 a year, that's $80 million.

And this is for you and your partner, your kids and their partners, and their kids and their partners - 15 people.

So, discounting interest and returns on your investments, you need $1.2 billion in raw cash outflows in the future to do this. Discounting to the present over 100 years of unknown economies in the future is hard, but I'd certainly say you'd need to start with $100 million to really do this effectively.
posted by lupus_yonderboy at 10:27 AM on April 23, 2015 [1 favorite]

> Ignoring interest, simply to give one person "perfect financial security" for 80 years would cost you 80 * 1 year of perfect financial security - at $100,000 a year, that's $80 million.

This hardly seems like a fair thing to ignore. Any retirement fund adviser will tell you that you can count on a ~4% rate of return on capital averaged over the long term. If you wanted to be utterly conservative, a 2% draw on your capital will last indefinitely and let you pass on a larger amount than you started with to your estate.

Start with $10 million invested entirely in index funds of stocks and bonds, and you can safely draw $200,000 per year and short of a national collapse or civilizational catastrophe, you'll end up with more than you started.
posted by RedOrGreen at 10:45 AM on April 23, 2015 [5 favorites]

> This hardly seems like a fair thing to ignore

I do not ignore that. That's what "discount to the present" in the next paragraph means - "taking into account rate of returns in the future".

Before discounting: $1.2 billion - afterwards, at least $100 million.

This was a back-of-the-envelope calculation, taking into account that today's interest rates are historically low, that the payments would have to be forward-weighted, and that you'd expect a death.

I'd welcome your more detailed calculations, but to keep you and two generations at an upper-middle-class lifestyle for the rest of their lives will cost a vast amount of money no matter how you slice it.

Honestly, to have "perfect financial security" you'd really need twice that, considering that over a horizon of a century you'd need to guard against "black swan" events and hyperinflation, and keep a significant portion in contrarian investments. Even that wouldn't be "perfect" but just "very very good financial security".
posted by lupus_yonderboy at 12:02 PM on April 23, 2015 [2 favorites]

Missed this:

> Start with $10 million invested entirely in index funds of stocks and bonds, and you can safely draw $200,000 per year.

That $200K isn't going to pay for your family, your kids family's and the grandkids families - "us and two more generations".

You're talking 15 people, not 2. If you take that into account, you get my $100 million number...
posted by lupus_yonderboy at 12:07 PM on April 23, 2015 [1 favorite]

One last piece of data here. It is also imperfect, but it's something.

The mobility of the top 1 percent of the income distribution is also important. More than half (57.4 percent = 100 – 42.6) of the top 1 percent of households in 1996 had dropped to a lower income group by 2005. This statistic illustrates that the top income groups as measured by a single year of income (i.e., cross-sectional analysis) often include a large share of individuals or households whose income is only temporarily high. Put differently, more than half of the households in the top 1 percent in 2005 were not there nine years earlier. Thus, while the share of income of the top 1 percent is higher than in prior years, it is not a fixed group of households receiving this larger share of income. As suggested by the Schumpeter hotel analogy, many of the more luxurious rooms are occupied by different people at different times.

So yes this is on one hand an argument that wealth is better than income for judging who "the 1%" really are. But this is still a significant figure! There's some other great stuff in that document, too.

I really think that the advantages that "the rich" have in America aren't about money per se so much as they are about being beneficiaries of the system in a larger way. The FPP about first-generation college kids is a great example here: it's not just that rich kids' parents have the resources to get them into Harvard, it's that they were born into a culture, race, and position that would enable them to more easily find success there. And this is what solely wealth-based critiques miss.

Ultimately this is why privilege is more important than (economic) class in America today, contra the Jacobin article. I know that if you come from a Marxist viewpoint, being rich in a Capitalist society has to be inherently bad for your belief system to make sense, but if you don't, why is it so important that concentrated wealth per se be the root of all evil? I think we have lots of reasons to believe that the screwed-up-ness of America today comes from a much deeper place than low marginal tax rates.
posted by goingonit at 12:53 PM on April 23, 2015 [1 favorite]

That $200K isn't going to pay for your family, your kids family's and the grandkids families - "us and two more generations".

Most families grow more slowly than the stock market -- the stock market doubles every 12 years or so, and most families double every 25 years (assuming everyone has 2 kids at age 25). That means as long as you spend less than 50% of your annual returns, your family money will effectively keep up with the size of your family forever. Somewhere around $8-10m, you're talking about you and every descendant having an income greater than the average US household income -- forever, without working.
posted by miyabo at 1:33 PM on April 23, 2015 [3 favorites]

“After Piketty”, 12 policy proposes to reduce inequality of outcomes (via)

1. The direction of technological change should be an explicit concern of policy-makers, encouraging innovation that increases the employability of workers, notably by emphasizing the human dimension of service provision.
2. Public policy should aim to reduce market power in consumer markets, and to re-balance bargaining power between employers and workers, contribute to reducing the share of capital.
3. Return to a more progressive rate structure for the personal income tax, with a top rate of 65 per cent on the top 1 per cent of incomes.
4. The government should offer guaranteed employment at the living wage to everyone who seeks it.
5. Employers should adopt ethical pay policies that share common principles, and the adoption of such a policy should be a pre-condition for eligibility to supply goods or services to public bodies.
6. Increased taxation of investment income via the re-introduction of earned income relief in the personal income tax, so that earnings are taxed at a lower rate over an initial range.
7. A fresh examination of the case for an annual wealth tax, and the prerequisites for its successful introduction.
8. All receipts of inheritance and gifts inter vivos to be taxed either under a lifetime capital receipts tax or under the personal income tax, with appropriate averaging provisions and thresholds.
9. The government via National Savings should return to offering a guaranteed positive (and possibly subsidised) real rate of interest on savings, up to a maximum per person.
10. The encouragement of institutions to represent the interests of savers and to provide alternative outlets for saving not driven by shareholder interests, aided by the establishment of a publicly-funded money advice service providing independent guidance free to all savers.
11. A capital endowment for all, either at adulthood or at a later date.
12. An EU initiative for a participation income as a basis for social protection, starting with a universal basic income for children.

also btw...
"Miles Kimball also thinks that Matt Rognlie's critique of Piketty[*] implies a need for land taxes."
posted by kliuless at 3:47 PM on April 23, 2015 [8 favorites]

Omnivore: All you need to know about income inequality
posted by the man of twists and turns at 9:24 PM on April 23, 2015

"Millions in the bank is definitely not enough for perfect financial security for a couple of generations!"

Here's some assumptions:

Rate of return: 5%
Annual draw: 2.5%
Starting capital $10MM
Starting household size: 4
Time for household size to double: 30 years

Year 1: $62,500/person for 4 people
Year 100: $90,044/person for 32 people, created by assets of $115MM.

Sure, that's not a super high-flying lifestyle, but it illustrates the point that a single individual with $10MM can ensure that none of his offspring (or their offspring and on and on) ever have to work, unless they want to work.
posted by whisk(e)y neat at 9:53 PM on April 24, 2015 [1 favorite]

Year 1: $62,500/person for 4 people
Year 100: $90,044/person for 32 people, created by assets of $115MM.

For $90,000 at year 100 to be equivalent to $62,500 at year 1, the average annual inflation rate would have to be around four-tenths of one percent. In contrast, the US Bureau of Labor Statistics inflation calculator says that $62,500.00 in 1915 dollars had the same buying power as $1,452,487.62 today.
posted by laurasbadideas at 6:24 PM on April 25, 2015

The long run stock market return is above 5% after inflation -- depending on exactly how you do the numbers, around 6.5% actually.
posted by miyabo at 9:38 AM on April 27, 2015 [1 favorite]

I don't have a particular horse in this race, but just as some food for thought: I've done work for some big banks, and the point at which you will get nudged from regular-old (hah) "private banking" and into very serious multi-generational wealth management—the sort of thing where you're creating legal infrastructure that's supposed to last well into the future—is fifty million bucks. I'm sure the exact number varies from bank to bank, and it's not like if you have $30M that you're exactly going to be standing in the teller line with the plebs, but somewhere around that number you start to get people asking you whether you'd like to put in language to make sure your grandkids actually have to work or if you're OK with them just sitting on the couch eating Bon-Bons and shooting heroin all day.

Interestingly though, I was having a conversation once with someone who works with people like this, about how often people fall out of the tier and have to go back down to "regular" banking or wealth-management, because they're spending more than they're making in interest and cutting into the nest egg. She shrugged—happens all the time. Over the timescales they work on, which span generations, pretty much everyone burns up the fortune eventually. You get one bright spark who makes the serious money, then maybe their kids manage it, but by the time you get to the 3rd or 4th generation it's so diluted and there are so many people trying to nose in at the trough that eventually it becomes more hassle and argument than it's worth to maintain it as a cohesive family fortune and the trust gets broken into and it all gets distributed out.

I'm sure there are exceptions, but it would seem to take both a lot of very rigorous trust construction and also a certain emphasis on reproductive self-control (in the absence of a renewed enthusiasm for primogeniture, anyway) to keep a monolithic family fortune together for more than a few generations. Even the Koch Brothers are only the second generation in their family to be really wealthy.

Though my suspicion—no real direct evidence, admittedly, but a strong suspicion—is that most of the people who fall out of the economic stratosphere don't fall very far. The ne'er-do-well third generation loafs who finally bust up the big family trust probably still end up in the 5% upper-upper-middle class club, if not the actual 1%; I think it's simultaneously true that there is both a lot of churn among who is really spectacularly rich, while there also being a pretty hard class divide that doesn't have a ton of mobility across it.

tl;dr: Dynasty-building is a hard problem, but doesn't stop people from trying.
posted by Kadin2048 at 10:36 AM on April 27, 2015 [5 favorites]

Follow-up: Why the Right Loves Privilege Politics

Last month, I wrote a short post about how some people — particularly wealthy liberals — are trying to rob “the 99 vs. 1 percent” framing of its inherent class politics in order to turn it into a new form of privilege-checking.

My argument was that the so-called “one percent” was better understood as a class than either an accumulation of arbitrary privileges or even a specific payscale — though that’s certainly a much better start than whether you’ve smoked meth. Furthermore, I argued that by diverting attention away from this ruling class at the top, we were instead turning inwards and letting the real power players in our society get off scot-free.

Sections of the working class are without a doubt more oppressed than others, but I wrote the piece because right now Americans are inundated with a variety of liberal politics that try to turn what should be political reckonings against the truly powerful into an epidemic of guilt and complicity in which a huge portion — or, sometimes, nearly all of us — are to blame.

That’s not only not true — it’s also politically ineffective if our aim is social emancipation.

But there’s another problem with the politics of privilege: the ease with which it’s used by conservatives.

posted by Rustic Etruscan at 3:31 PM on May 5, 2015 [1 favorite]