Opinion

Felix Salmon

The whining rich

By Felix Salmon
September 20, 2010

Todd Henderson’s whine about how he’s only scraping by on $450,000 a year in his million-dollar Chicago house is causing quite a stir in the blogosphere. (Tyler Cowen says that “this number seems not to be true”, but Henderson isn’t clarifying things, and it’s very hard to come up with a substantially lower number which would result in his family still paying “nearly $100,000 in federal and state taxes”.)

Tyler says that the rich have just as much right to whine as the poor, which is a fair point. But it’s also reasonable to examine this particular law professor’s argument closely. For instance:

If our taxes rise significantly, as they seem likely to, we can cut back on some things. The (legal) immigrant from Mexico who owns the lawn service we employ will suffer, as will the (legal) immigrant from Poland who cleans our house a few times a month. We can cancel our cell phones and some cable channels, as well as take our daughter from her art class at the community art center, but these are only a few hundred dollars per month in total.

Here’s Brad DeLong’s fantastic response:

The big expenses in the Henderson family budget–their $60,000 a year in contributions to tax-favored retirement savings vehicles, their $25,000 a year savings building home equity, their $55,000 for housing, their $60,000 in private school costs, even their $10,000 a year for new cars–are simply out of reach for the overwhelming majority of Americans…

By any standard, they are really rich.

But they don’t feel rich. They have a cash flow problem. When the bills are paid at the end of the month, the money is gone–and they feel that they have to scrimp…

Professor Henderson’s problem is that he thinks that he ought to be able to pay off student loans, contribute to retirement savings vehicles, build equity, drive new cars, live in a big expensive house, send his children to private school, and still have plenty of cash at the end of the month for the $200 restaurant meals, the $1000 a night resort hotel rooms, and the $75,000 automobiles. And even half a million dollars a year cannot buy you all of that.

But if he values the high-end consumption so much, why doesn’t he rearrange his budget? Why not stop the retirement savings contributions, why not rent rather than buy, why not send the kids to public school? Then the disposable cash at the end of the month would flow like water. His problem is that some of these decisions would strike him as imprudent. And all of them would strike him as degradations–doctor-law professor couples ought to send their kids to private schools, and live in big houses, and contribute to their 401(k)s, and also still have lots of cash for splurges. That is the way things should be.

The first thing to note here are Henderson’s priorities: for him, it seems, it’s more important to spend $60,000 a year on retirement savings, and to send his kids to private school, than it is to have a cellphone. That alone marks him out as very unusual among Americans, most of whom will spend money on a cellphone long before they send their kids to private school or put that fifty-thousandth dollar into their retirement savings.

And in reality, I doubt that a four-point increase in the tax that he pays on any income over $250,000 is going to stop him from hiring someone to mow his lawn. And it’s certainly not going to make him give up his cellphone.

But what’s very clear here is that Henderson doesn’t feel rich. As DeLong says, he’s not comparing himself to the hundreds of millions of people who earn less than him: instead he’s comparing himself to the handful of people who earn vastly more than he does. People who don’t seem to worry about money at all. Who have multiple houses. Who charter jets. He looks at those people and thinks that they are rich, and that therefore he, with his monthly budget, isn’t.

There’s no doubt that people earning $250,000 or more are rich. The simple ability to dismiss a whole class of expenses as “only a few hundred dollars per month in total” makes you rich.

But by the same token, many rich people don’t feel rich, and so describing them that way gets their backs up. And in fact it’s good that the rich don’t feel rich: it means they have more incentive to keep on earning and producing and adding value.

So maybe we shouldn’t be so rude about the likes of Todd Henderson: without rich people constantly striving for extra dollars, America would be in an even worse position than it is. But equally, we shouldn’t take their pleas seriously.

For most people, “rich” starts at roughly double whatever their own household income is. It’s the hedonic treadmill: you race towards it, but you never achieve it — even when you’re living in a million-dollar home and pulling down something north of $400,000 a year. Or, I daresay, when you’re living in a $4 million home and making $1 million a year. It’s just that above a certain income, people (Ben Stein, of course, always excepted) tend to have the good sense not to whine in public about how hard their life is.

Update: Henderson has now taken down his post, saying that an “electronic lynch mob” has “caused untold damage to me personally”.

Comments
62 comments so far | RSS Comments RSS

our tax structure is excellent. It’s because of that tax structure we have such a strong middle class…and middle class is below below earning 250k.
And our tax structure is the lowest it has been in 50 years. People paid taxes back then that were onerous, and still got rich. THe rich always have more tools to evade those taxes, and they will use them. I have no sympathy and I support the tax plan fully.

==Bob D.

Posted by REDruin | Report as abusive
 

lol, to anyone who makes over the median-currently $52000 per year-imagine what to do with less than $30,000 a year. I may pay no income tax, but I do pay sales tax, gas tax, state tax, property tax, license tax, fees the government allows all my utility bills to gather, and FICA and Medicare tax. Whats left over has to be divided among the necessities-give us a break already-Who really cares if you may have to (gasp)BUDGET BETTER. Most of us are too caught up in surviving.

Posted by Aracasil | Report as abusive
 

Typical spoiled Yuppie brat. Wah, wah, wah! Get a grip! Most of the population can’t afford to send their kids to private school, and with tuition rates going off the charts, college is even tougher. He has plenty of tax breaks that the 30k a year guy can’t utilize. I wonder how honest he is on his tax return . . .

Bob D: Just wait till not November elections are over – if the Dems have their way, we will have the highest tax rates ever! History proves their administrations always have the highest rates.

Posted by sb0623 | Report as abusive
 

Sending kids to private school could in only very few cases be considered a necessity. IMO, and in my observation as well as opinion, sending the kids to private school is an exercise in elitism, if not downright arrogance, vastly more so than an academic advantage. We have ACT scores to show that there is no significant advantage in the private schools, particularly considering that the private schools do not serve all the types of kids – the unruly, disruptive as well as those with all manner of handicaps and those that come to high school not being able to speak or read a word of English – that the public schools are required to serve and do serve.

$60,000 a year, or any amount, spent to send kids to private school is not a necessity, but in some cases may be spending one’s retirement on the illusion that it is really worthwhile and a great advantage for the kids.

Posted by ayesee | Report as abusive
 

Admittedly Todd Henderson was whining. That is a very high income he has, probably near the top 1% in America. But that doesn’t mean we should surround him like a pack of dogs and want to take his stuff by punitive taxes. It’s his. We should admire his success, not envy it. This is America.

Todd Henderson should have said:

“It’s my money. I earned it. I worked really hard. I did a lot of things for a lot of people to get that money. I am exhausted from my hard work and I want to give my kids a nice life. Go out and earn your own money. I will be happy to give you my money in exchange for services, the same way I got my money. Here is a list of services I am in the market for. Provide them and you can have my money.”

Posted by DanHess | Report as abusive
 

While we must earn money to live… must we live to earn money?

I learned long ago that to live within my means and to give to others is satisfying and enrichening. the “greed is good’ indoctrinated into students, children and now most of American society is tearing your country apart. Having what you need is good, having more is something to be thankful for.

@runsoncoffee His whine has already a detriment to his family and his job. He doesn’t ‘need’ to have you anger as well … Mr. Henderson has a new premature baby at home and the lack of sleep and stress of that made him ac ta little crazy and air his anger.

I am sure he is now well aware how the world feels about him and his blog, being he and his family received threats through the email you just revealed and it was blogged about for days after. How does it make you better then he, to hound him personally?

He took down the post, made an apology and since decided to not blog at all for the time being. Let him reflect on what happened without more threats of violence.

Posted by hsvkitty | Report as abusive
 

(enriching too…)

Posted by hsvkitty | Report as abusive
 

Plenty of commentators, here and elsewhere, have appropriately ridiculed Professor Henderson for claiming that his $400,000 (give or take) household income does not make him rich. Of course it does. ‘Nuff said. However, my comment here is not just to add to that chorus. There is another aspect of this whole conversation that has not been touched on, despite being (IMHO) really a core issue.

Let’s start on first principles, shall we?

Todd Henderson is a lawyer. Okay, fine, nothing wrong with that, I guess. But… what that means (I think tautologically) is that he makes his quite handsome living off of something called “the law”, which is simply a social/institutional construct. People like Mr. Henderson do not actually produce any wealth. I think this is a very important point to be made here, because, the way he and people like this talk, it is as if they were farmers on a plot of land, growing rice and beans and wheat and whatnot, and some government tax collectors showed up and took the lion’s share of their crop. IOW, they talk as if they actually produced something real and the government came and took it and redistributed it. But, no, this guy is a specialist in “the law”, corporate law to be precise, a completely notional thing that only has an existence because the organs of the State — the courts, the law enforcement agencies, etc. — cause this notional thing to exist. Without the State, Henderson’s skills, his knowledge of and ability to debate “the law” would have no more value than being able to debate how many angels can dance on the head of a pin.

This, to my mind, is the real problem with the stale libertarian claptrap that people like Henderson engage in. People like Henderson do not create any wealth. Their income is entirely based on extracting wealth from the people who really produce real, tangible goods and services. Granted, due to the existence of a labyrinthine judicial system that is entirely a creation of the State, a person who can help people (or corporations, but corporations are people too, right?…) navigate said system has a valuable marketable skill.

However, that somebody has a marketable skill (due to a set of social/institutional arrangements) does not mean that this person actually produces any wealth. You can easily realize this by asking yourself weather a nation could become wealthier by investing in educating more corporate lawyers. Obviously not. A nation can become more wealthy by training more engineers, more scientists, and simply skilled technical people of different types. Yet no society can become richer in aggregate by training more lawyers. (Though it can probably become poorer…)

So this guy specializes in this unproductive wealth-extracting activity, and I guess, is fairly good at it, so he teaches it at a top law school, but has so little _real_ understanding of his role that he complains essentially that the wealth he produces is being redistributed to unworthy, unproductive people. (Except the unworthy, unproductive people, by and large, are actually the people who do all the real work, like collect the trash and stack the supermarket shelves etc. etc….)

In short, while I see people calling Professor Henderson all kinds of names, why don’t people simply ask him pointedly what wealth he produces that is being redistributed. After all, that is the basis of his grievance, is it not? If the esteemed professor had to admit that he actually does not produce anything (i.e. Nothing, zip, nada, screw-all…) then would he not just have to concede that his supposed grievance only exists in his own mind?

Posted by revusky | Report as abusive
 

Another of my favorites, Congresswoman Michele Bachmann said, “I don’t know where they’re going to get all this money, because we’re running out of rich people in this country.” Actually, we have more billionaires here in the U.S. than all the other countries in the top ten combined, and their wealth grew 27% in the last year. Did yours? Truth is, there are only two things that the United States is not running out of: Rich people and bullshit. Here’s the truth: When you raise taxes slightly on the wealthy, it obviously doesn’t destroy the economy — we know this, because we just did it — remember the ’90′s?
================
Top Savings Accounts Savings Accounts

Posted by johnsonv2k10 | Report as abusive
 

So we need to 1st make it so the richer you are, the higher the tax rate for you is. And remove all fancy deductions and loopholes too. Then we need to refurbish old factories or build new ones that make products that run on renewable energy (bring back some of the things China and other countries make for us now; the American flag, clothes, electronics), and put people to work at at least oh about $16.00/hr. This creates demand, which lifts all boats, eventually, especially if regulations keep the Corps. in check. We need to also remove the sucking sound that is Wallstreet, where money produces money and generally nothing else of real value. We need to remove super-high usery rates on consumer credit. Ah heck I could go on and on about the things that are not being addressed, let alone fixed, to improve the life liberty and the pursuit of happiness of everybody making less than um say about 200,000/ yr., but I have to go back to my machine in the plant.

Posted by mjimih | Report as abusive
 

is bleating about “untold damage an oxymoron?” In Ireland the rich whiners are rolling their eyes at having to take 8 holidays a year instead of ten and telling the poor that “we must all tighten our belts” The really rich ones have fled to Switzerland and South of France with their gardeners driving trucks full of paintings and antiques abroad by night !

Posted by phrage | Report as abusive
 

I can’t understand how our taxation is “fair” when supposedly 40 percent or more of US citizens actually pay no income taxes. So why should there be a group that is allowed to reap the benefits that taxes provide, pay nothing and still be allowed to vote for ever more benefits and ever more taxes on the “rich”? Part of our problem is there are a whole lot of folks who don’t have any “skin” in the game, so of course they are happy to let the government increase taxes on those better off than they. Maybe they should raise taxes on the rich, but for each $10,000.00 in income taxes you pay, you get an extra vote?

Posted by zotdoc | Report as abusive
 

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