Wednesday, February 29, 2012
Does More Money to Fewer People Work?
In articles appearing on both Bloomberg.com and the Wall Street Journal's website, some One Percenters are complaining about how their quality of life is suffering during the Great Recession.
Even though their salaries average between $350,000 and half a million, one guy in Manhattan can only afford to garage one of his two Audis at $500 a space per month.
Another guy is contemplating pulling his daughter out of venerable $32,000-per-year Poly Prep academy in Bay Ridge, Brooklyn.
Still another poor soul in posh Brownstone Brooklyn, where the streets are lined with multi-million-dollar row houses, has resorted to scouring coupons in the Sunday paper for bargain salmon.
However, perhaps the most bizarre quote from Bloomberg's article is this narcissistic tale of delusional tragedy:
“'People who don’t have money don’t understand the stress,' said Alan Dlugash, a partner at accounting firm Marks Paneth & Shron LLP in New York who specializes in financial planning for the wealthy. 'Could you imagine what it’s like to say I got three kids in private school, I have to think about pulling them out? How do you do that?'”
As if the public schools in the New York City and Westchester County neighborhoods where these people live are only for the riff-raff. Or that drugs, teen sex, and bad parents never afflict private schools.
Granted, metropolitan New York's cost of living has been atrocious for a long time. Nobody who wants to live in - or close to - Manhattan should expect anything different. Even most of Brooklyn had gotten priced out of reach for the middle class long before the city's post-9/11 renaissance. Even its bad neighborhoods, where grunge, graffiti, and gangstas are now part of the chic urban aesthetic.
Still, obviously, living within one's means in metropolitan New York should not be as difficult as these One Percenters make it seem. Especially not with their incomes. Maybe what's really happening here isn't that $350,000 doesn't go as far as it used to, as much as it is people who earn that kind of money thinking they should be getting so much more from it.
Yet here's a funny quirk of capitalism: the more you earn, the more your earning power becomes, and the free market will rise to absorb as much of that earning power you're willing to flex. It can be a vicious cycle, with more money needing even more money to stay abreast of rising expectations. At some point, the wise high-income-earner will learn to curtail their expectations, and their expenses. Perhaps it says something that most of the people interviewed for these stories were employed in the financial industry, where the love of money is a requirement for their jobs.
What these One Percenters have missed in their exasperation is that they're still far better off than many people who earn a fraction - not even a tenth - of these Wall Street salaries. If people earning $350,000 a year need to downsize, something tells me they still won't be moving to a three-bedroom split-level in Staten Island, among the proletariat. What they're really mad about involves the irrefutable fact that the same materialism that has driven them to outspending their generous incomes is the materialism that everyone else in their cohort has let propel them to the same financial excesses. In other words, enough rich people have outspent themselves as each one of them drove up prices against each other.
You'd think that since these people are in the finance industry, they'd know how such market forces work.
There is one area where it's hard to not sympathize with these high-income earners, however. One of them reports that almost half of his income is consumed by city, state, and federal taxes. You have to be pretty jaded to not consider that an excessive tax rate. When Republicans start complaining that liberal Democrats want to penalize the wealthy with more high-end taxes, this is the problem they're protesting.
It would be easy to use the scenario poised by these disgruntled One Percenters as proof that money can never satisfy. And no, money can never satisfy most people. But it's not their salaries with which these people are dissatisfied; instead, it's the way market forces have erased all the perks they thought their salaries would purchase.
The reason market forces have done that probably lies in the fact that even richer people are spending even more lavishly on the same trappings of success. Raising the bar even higher for everyone hoping to get some slice of the economic pie.
And that, my friends, is the reason why America's widening gap between the high-income-earners and low-income-earners is so problematic. When people on the lower rungs of the One Percenter club start feeling the economic pinch, how bad must things be at the base of that ladder, where the rest of us live?
More money to fewer people doesn't seem to be the answer after all, does it?