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It ain’t easy being rich

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I had to keep checking to make sure I wasn’t actually reading the Onion:

But Ms. Chemtob’s clients are concerned all the same, she said, because their incomes have shrunk, say, to $2 million a year from $8 million, and they know that their 2008 bonus checks are likely to be much less impressive.

One of her clients recently confessed that his net worth had decreased to $8 million from more than $20 million, and he thinks that his wife will leave him. He has hidden their fall in fortune by taking on debt to pay for her extravagant clothes and vacations.

“I literally had to sit there and tell him that he had to tell his wife that she had to stop spending,” she said. “He was actually scared she would leave him because their financial situation changed so drastically.”

Don’t stop there, it gets even better. I almost dropped my monocle reading this:

THEIR spouses could leave them when they discover that their net worth has collapsed to eight figures from nine. Friends and business associates could avoid them as they pass their lunchtime tables at Barney’s or the Four Seasons. And these snubs could trickle down to their children.

“They fear their kids won’t get invited to the right birthday parties,” said Michele Kleier, an Upper East Side-based real estate broker. “If they have to give up things that are invisible, they’re O.K. as long as they don’t have give up things visible to the outside world.”

The horror:

“A year ago, he would have only flown Gulfstreams,” Mr. Sullivan said. “Now it’s moving to the point where he’s flying Beech jets and Learjets.”

And perhaps the best excuse for going off your diet, ever:

ONE Wall Street executive, Ms. Bauer said, snacks on nuts in her office all day to manage the stress of potentially losing her position, while another confesses to inhaling four bowls of cereal at 10 p.m. Even their sex lives are suffering, Ms. Bauer said, because of the stress or because the weight gain makes them feel unattractive.

Her clients blame the economy for their out-of-control waistlines.

“The number one concern that they have is the state of the financial market,” she said. “There definitely is a correlation between the stock market and weight gain.”

Suffice to say, the lack of perspective these people have is simply mind boggling. These people are everything that’s wrong with the US economy right now, and a good chunk of what’s wrong with our culture as a whole.

Written by Eric

June 3, 2008 at 5:23 pm

Inequality and the Presidency

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Via Dani Rodrik, this graph:

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In a nutshell, under Republican Administrations, the richest see their incomes grow the fastest, and the poorest see it grow the slowest – inequality increases. Under Democrats, every income group gets richer faster, with the poorest seeing their incomes rise the fastest – five times faster than under Republicans. Wow.

The graph comes from Princeton political scientist Larry Bartels’ new book, soon to be released. Now quoting Rodrik:

Bartels shows in his book that this difference is not a statistical artifact or a fluke.  It is not the result of Democrats coming to power during better economic times, or of Republicans reining in the unsustainable excesses of Democratic administrations they replace. (It turns out that the same pattern prevails even when a Republican president is succeeded by another Republican.) These numbers are real and they are the outcome of partisan differences in policy. So if you are one of those who have bought the story that income distribution is the result of pure market forces and technological changes, with politics playing no role–think again.

I haven’t read the book, so for the moment I’m just taking the data at face value, and assuming that Bartels did his homework and controlled for all other variables. But the idea here isn’t new; Paul Krugman has argued often and convincingly that inequality is tied to public policy, especially under the Bush Administration.

The idea that the President has such an influence on policy, which in turn has such an influence on the economy and income distribution is a pretty profound one with some pretty disturbing implications – that’s an insane amount of power vested in one individual. But to be honest, I don’t have the faintest clue what might be done about that and consequently won’t say any more on it.

A more direct and obvious question though (which Rodrik asks) is why the hell do people vote Republican? Like, ever?

There have been a multitude of theories put out there. Thomas Frank put forward the most compelling theory in What’s the Matter with Kansas?, arguing that Republicans use social issues (like abortion and gay marriage) to get people to vote against their own economic interests. Krugman argued in Conscience of a Liberal that it comes down to good old fashioned racism. In my view there’s no silver bullet explanation – politics and voting behavior are complex beasts.

Given that the Republican party isn’t even able to significantly improve the economic outlook for the very wealthy compared to Democrats, it does beg the question of why even that group supports them, given economic history. They’ve got to be fooling themselves before they get around to fooling the lower classes that vote Republican – and that’s damn interesting.

Written by Eric

April 1, 2008 at 6:54 pm

Posted in Economics, Politics