Lazarus May Be Starving, But Dives Feels Poor

The AP today reported that, based on the 2009 census data, the gap between rich and poor in the US has continued to widen. It’s been driven by two factors: rapidly-rising incomes of the top earners, even during the depression, and a mirrored increase in the US poverty rate. The end result is that we have more people in poverty than ever before, increasing social stratification, and an income gap that puts us near the bottom of industrialized countries.

Hm, I wonder if there’s some recent news that could throw this into stark relief.

Democrats and Republicans are locked in a game of political chicken over George W. Bush-era tax cuts due to expire at the end of the year. Democrats want to extend the tax cuts only for individuals earning less than $200,000 or couples making less than $250,000. Republicans want to extend the breaks for taxpayers in all income brackets.

Goodness. Couples making over $250,000 a year represent about 1.5% of all Americans. It’s four times the US median income, or some 17 times the amount of money a couple can make and be considered poor. Surely these couples recognize their truly privileged situation?

I, like the president before me, am a law professor at the University of Chicago Law School, and my wife, like the first lady before her, works at the University of Chicago Hospitals, where she is a doctor who treats children with cancer. Our combined income exceeds the $250,000 threshold for the super rich (but not by that much), and the president plans on raising my taxes. After all, we can afford it, and the world we are now living in has that familiar Marxian tone of those who need take and those who can afford it pay. The problem is, we can’t afford it….

We pay about $15,000 in property taxes, about half of which goes to fund public education in Chicago. Since we care the education of our three children, this means we also have to pay to send them to private school. My wife has school loans of nearly $250,000 and I do too, although becoming a lawyer is significantly cheaper….

Like most working Americans, insurance, doctors’ bills, utilities, two cars, daycare, groceries, gasoline, cell phones, and cable TV (no movie channels) round out our monthly expenses. We also have someone who cuts our grass, cleans our house, and watches our new baby so we can both work outside the home. At the end of all this, we have less than a few hundred dollars per month of discretionary income.

Well, goodness. I can understand how hard it must be to make ends meet, what with private school, a lawn service, a cleaning service, and a nanny. It’s hard not to be poor when you have to pay for all of these.

Okay, this was just a Chicago law professor. I’m sure it’s an isolated–

Picture, if you will, my lawyer friend, Caitlin. She’s a mid-level finance associate at one of New York’s biggest lawyer factories. She’s been at the Big Law game long enough to be depressed on the good days and on the hunt for sturdy noose material on the bad days—which is to say most days. But, as luck would have it, after months of furtive interviews, she finally got an offer a couple of weeks ago to go in house at a media company that most people I know, including me, would kill to work for….

“It’s just…I’m just afraid…” She darted her eyes around and leaned in closer, lowering her eyes.

“I’m just afraid of what it’ll be like to feel…” she whispered, “…poor.”

The offered salary of the new in-house gig? $120,000 a year.

And now, a couple of weeks later, I’m still not sure what’s more disturbing: the fact that this friend—a worldly, educated, smart, able person—truly thinks that a single lawyer living in New York City on $120,000 could feel “poor” — or that fact that she’s absolutely right.

No. Just no. It’s no fun feeling poor, but feeling poor isn’t being poor any more than feeling like I can fly makes me an airplane. Feeling poor isn’t having to choose between a doctor’s visit or food for your family. Feeling poor isn’t wondering when they’ll get around to cutting your electricity. And that’s just in comparison to the US’s genteel version of poverty.

I’m sorry that the Chicago law professor doesn’t feel rich because he’s surrounded by people making far more than he, and he only has a few hundred dollars to spend as he sees fit after investing, paying his domestic help, and putting his three kids in private school. It’s terrible that Caitlin is having an attack of the vapors over feeling poor. But you know what? If you beg for sympathy in these situations, I’m going to point and mock. They, like me, live in a society where the rich are getting far, far richer and the poor are getting far, far poorer. They can feel all they want, but it won’t change that fact.

If you would like to change that fact, find a local food bank, or consider donating to Feeding America. Do you have a woman and children’s shelter in your town? Poverty and recessions hit women and children hardest. You don’t have to donate money; donations of time are always welcome.

And who knows? Maybe focusing on others in need will change how all of us feel.

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22 Comments

  1. Seth Vidal
    on September 28, 2010 at 9:20 pm | Permalink

    well said, stephen.

    Not to besmirch the chicago law professor more but if you chose to conceive 3 children then you don’t get to complain about the cost of raising them. It’s not like there are any shortage of estimates of how much children cost to raise. And I’m sorry, I can see how one child could be a ‘surprise’. I MIGHT be able to believe 2 children – but unless you had triplets I don’t see how you didn’t choose to have 3 kids.

  2. on September 28, 2010 at 11:59 pm | Permalink

    Thank you for putting this together. It’s brilliant, true, and ridiculously sad. It is important to me to remember to replace thoughts of “I can’t afford that” with the more accurate “I’m choosing to spend my money elsewhere.” Because I do have choices… unlike so many others.

  3. on September 29, 2010 at 9:08 am | Permalink

    Jaime: I completely agree. It’s a matter of focus and choice.

  4. Jesse
    on September 29, 2010 at 10:06 am | Permalink

    Brad DeLong had another great response to this: http://delong.typepad.com/sdj/2010/09/in-which-mr-deling-responds-to-someone-who-might-be-professor-todd-henderson.html

  5. on September 29, 2010 at 10:24 am | Permalink

    Democrats want to extend the tax cuts only for individuals earning less than $200,000 or couples making less than $250,000.

    Well, not all of them. http://www.newsmax.com/Newsfront/47DemocratsPelosiTax-Cuts/2010/09/29/id/371919

    I’m struggling to remember the last time 47 or more Republicans broke ranks to support some progressive piece of legislation.

  6. on September 29, 2010 at 10:49 am | Permalink

    Jesse: That’s one of my favorite things I’ve seen Brad write.

    Paul: The Republican caucus’s discipline is excellent; compared to them, the Democrats look like a local book club where no one can agree whose turn it is to bring the cookies. It’s not too hard to suss out the driving force: the Democrats who are against letting the tax cuts elapse for income above $2(5)0,000 are overwhelmingly from rich districts and states.

  7. Missy K.
    on September 29, 2010 at 11:07 am | Permalink

    Preach on, brother! It’s sad how sheltered people choose to be. If you only surround yourself with your doc and lawyer buddies, yeah you might just “feel poor.” But surely, if you look around you at websites like amazimaministries.com, read the of the more than 100 million orphans in the world, visit a shelter, or just turn on the news, you should be ashamed to complain about your lack of “discretionary income.”

    Not to be Marxist, but I work in a building with a man who is a multibillionaire. Down the street, the shelters are continually asking for people who care to donate toilet paper and meals. I’m thankful for the compassion Bill Gates has shown in asking the megarich to give away most of their wealth. I hope the trend catches on.

  8. Chris C
    on September 29, 2010 at 12:15 pm | Permalink

    They wealth gap is increasing not in small part beacause there are more unemployed. Raising taxes on the “Rich” making more that $250k will raise taxes on small businesses that would otherwise be able to provide jobs. That tax money, taken from the business, will then be given by the governement to the unemployed and suffering; many of whom, I’d venture, would much rather have the job that could have been created by the business from whom the money was taken in the first place. The myth of increased deficits through tax cuts is addressed by this increased tax base. The notion of raising taxes in an economic situation like this flies in the face of the historical record and will kill more jobs.
    Though feeling poor does not make you poor, soaking the rich will not lift anyone out of poverty. In fact it will create more poor by keeping the job creators from making more jobs. The additional side effect of this class warfare mentality is a reduction in the willingness of “rich” individuals to give to charity. People give what they “feel” they can give. If you “feel” poor, you won’t give to the poor. If money is being taken from the rich to take care of their neighbor’s problems, they will also have much less of a sense of responsibilty for that neighbor. “I don’t need to worry about that, the government will take care of them.” The cycle of this thought process results in a further disconnect between the rich and poor neighbor.
    All that said, this guy seems pretty tone deaf. But if you’re not a supply sider at this point, you haven’t been paying attention.

  9. Lucian Smith
    on September 29, 2010 at 12:29 pm | Permalink

    Ah, yes, the lament of the rich. Wait, I’ve heard this song before! Literally!

    http://stunewsandphotos.blogspot.com/2006/06/pdq-bachs-classical-rap.html

  10. on September 29, 2010 at 12:47 pm | Permalink

    Missy K: I’d like to see more rich people take the route the Gates took. They set up trusts for their kids and are giving the rest away. They’ve contributed to amazing work around the world. I’d like to see the trend catch on as well.

  11. Jesse
    on September 29, 2010 at 1:06 pm | Permalink

    @Chris C: That’s some fine speculation, but it doesn’t seem to have much support. Start with http://articles.latimes.com/2010/sep/20/opinion/la-oe-gruener-tax-the-rich-20100920 – raising personal income taxes is unlikely to have much effect on investment.

    If you want more jobs, you have to get the economy moving again. The present lack of jobs is not caused by businesses not having enough cash — many of them have plenty and are choosing to save it rather than expand. The problem is that there’s insufficient demand. And putting money in the hands of unemployed people is well-known to do more to increase demand than putting the same amount in the hands of people who are already well-off. Supply side economics has been tried; it failed.

  12. on September 29, 2010 at 1:14 pm | Permalink

    Chris: Really? All of the data I’ve seen on supply side economics indicates that it’s on shaky ground at best. The CBO’s analysis showed that the tax cuts cost more than the corresponding increase in GDP, for instance. And by “soaking the rich” you mean moving the tax on income over $2(5)0,000 to Clinton-era levels? Goodness, it’s amazing the country managed from 1935 to about 1964, when the top marginal income tax rate was between 80% and 90%.

    It’s true that unemployment has gone up, and the ranks of the poor have fallen. But in the same period, the earnings of the top 5% (hell, the top 1%), has risen dramatically as well. Forget trickle down theories; what we have is the homeopathic distribution of wealth where the wealth of the top 1% is diluted millions of times, in effect vanishing before it reaches the bottom.

    If we want to reduce unemployment, continuing income tax breaks is one of the lowest bang-for-your-buck solutions, lagging far behind reducing employers’ payroll taxes or (even better) reducing those taxes for companies who overall increase their payroll.

  13. on September 29, 2010 at 2:42 pm | Permalink

    I’m reminded of Patrick Ewing’s infamous remark during the last NBA work stoppage, trying to drum up sympathy for multimillionaire basketball players: “Sure, we make a lot of money… but we spend a lot, too.”

    @Chris C #8
    “The additional side effect of this class warfare mentality is a reduction in the willingness of ‘rich’ individuals to give to charity.”

    That’s like saying that restaurants shouldn’t charge for the meals they serve because it’ll reduce the size of tips.

  14. dmk
    on September 29, 2010 at 3:08 pm | Permalink

    I’ll have to use “homeopathic distribution of wealth” in conversation.

  15. on September 29, 2010 at 3:52 pm | Permalink

    dmk: yay!

  16. on September 30, 2010 at 11:38 pm | Permalink

    *sigh* I’m sad and I’m angry reading this. Confusing wants and needs. The delusion of entitlement. Fallen into both those traps myself, if truth be told. Still, it is hard not to mock when confronted with such a blinding lack of self and social awareness.

    I did nothing to “earn” the intelligence that, largely, has made a comfortable life possible. Or to have had parents who encouraged learning. Or generally decent health. Or the luxury of not having had to overcome prejudice. The list of ways in which I’ve been blessed is very, very long. If most folks would stop to think about it, their list is equally as long. Taxes? A small fraction of those blessings. Man up, professor – look around you. You were blessed and you made choices. Try for some gratitude and contentment.

  17. Kate McKee
    on October 3, 2010 at 11:44 am | Permalink

    1) Let’s clarify the relationship between wealth, income, and assets. Wealth = high assets, not high income.
    2) There are many professional couples who make $100K-$300K who never really become wealthy. They choose to inflate their standard of living and maintain the same proportion of debt, rather than live at a more modest standard of living debt-free. It’s not that doctors are necessarily more status-conscious than everyone else, but they have easier access to credit and can thus make spectacularly catastrophic financial mistakes. Young physicians finish residency and feel the urge to celebrate by buying themselves a treat. But the treat isn’t a copy of _Heavy Rain_, it’s a trip to Hawaii or a bass boat. Two cars, cable TV, etc. are hardly appreciating assets, and I suspect this lawyer/physician couple indeed is NOT wealthy by my definition in #1, but rather is living paycheck to paycheck.
    3) Medical education debt is real and crushing. You don’t have to feel sorry for doctors, but please understand $250,000 of debt, to be repaid in 10 years, is >$2000 per month. There is a student loan interest tax deduction, but it’s only for a few thousand dollars a year, there’s a marriage penalty, and, guess what, it phases out for six-figure incomes.
    4) I’m very hesitant to criticize another couple’s school choice for their children. That said, certainly putting three kids in Chicago private school is not cheap, and a family for whom education is a priority should expect to make sacrifices in other areas.
    5) Let’s look at the flip side. The “poor” may have lower incomes, but in America, they have more assets than ever before. Just yesterday, the AAP president reported that more families in America have >= 7 TVs than have 1 TVs. A few weeks ago, as I was counseling a teen regarding her weight, her mother announced, “We could get some fresh fruits and veggies. After all, we get $956 per month in food stamps.” The Medicaid/Escalade phenomenon is real. And why? Entitlement programs are income-based, not asset-based — because our society assumes that no one has saved enough of anything to make a difference. And, in looking at published personal finance statistics, I think that’s a fairly accurate assessment.

  18. on October 3, 2010 at 4:45 pm | Permalink

    I certainly understand and can appreciate that school debt is real and can be onerous, and that the median debt for new doctors is about $100-150k. But given access to great earning power, my sympathy drops if they don’t manage their finances well.

    The quoted doctor/physician are not living paycheck to paycheck. They have a “few hundred dollars in discretionary income” after bills, and after contributing to retirement accounts.

  19. Strega
    on October 5, 2010 at 1:48 pm | Permalink

    “Entitlement programs are income-based, not asset-based”

    No, they aren’t. The value of resources like savings or cars are counted when determining if a household is eligible for aid. There are a few possible exemptions — if the family owns their home, or if a vehicle is a source of income. Here are the eligibility guidelines for SNAP (food stamps).
    http://www.fns.usda.gov/snap/applicant_recipients/eligibility.htm
    Medicaid and TANF also consider resources, not just income.

  20. Kate McKee
    on October 5, 2010 at 7:37 pm | Permalink

    @ Stephen: I missed the bit about the retirement savings; that does cast it differently.

    @ Strega: You reference the federal guidelines for food stamps, which, as printed, appear fairly restrictive. If you drill down:

    1) Most states don’t follow the federal guidelines for asset testing. Maybe the South won after all, and we have what Cordelia Vorkosigan described as fifty-three different sociopolitical culture dishes. ( The data for eliminating asset testing seems pretty sparse, although I understand the rationale. Ever tried to figure out how much homeowner’s insurance you need?)

    2) Your citation uses the term “countable resources” — look at what’s excluded. You can have all the TVs, handguns, fur coats, rental real estate (!), and bling you want — as long as it’s not liquid, it doesn’t count as a resource. You can only keep 7 commodity cards at the end of a round of Civilization, so, hey, you might as well spend it on some tech.

    As far as other entitlement programs:
    Medicaid: Most, if not all, states opted to waive asset testing in 1996 under Section 1931 rules, certainly for women and children.

    As for Medicaid asset tests for adults: Why do you think “Medicaid trusts” are such a sought-after estate planning tool?

    SCHIP is entirely income-based, with no asset testing in any state AFAIK.

    WIC has always been income-based with no asset tests.

  21. Strega
    on October 6, 2010 at 10:17 pm | Permalink

    “You can have all the TVs, handguns, fur coats, rental real estate (!), and bling you want — as long as it’s not liquid, it doesn’t count as a resource.”

    Per your own link, rental real estate “which annually produces income consistent with its fair market value” is excluded. Because that’s already being counted as income for the household. The fact that you noted that rental properties were excluded while omitting the details that made that sensible makes me suspect you’re arguing in bad faith so: sorry, I’m out.

  22. Kate McKee
    on October 8, 2010 at 12:03 pm | Permalink

    Of rental properties that generate fair market income, yes, the income is counted in the income test. Income is income, not an asset. The income-generating rental property still is not counted as an asset in the asset (“resource”) test. Thus my original assertion that entitlement testing evaluates income, not assets.

    I’m sorry you think I’m arguing in bad faith. It seems fairly straightforward to me.

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