Quibbling with Headlines

September 22, 2012

Comments

If one can’t quibble with a headlines on a blog on a Saturday morning, when can one?

A CNN Money piece called “Kinda Rich and Really Rich” is made up of two graphics which summarize the 2011 taxes for the Obamas and the Romneys.

The Obamas reported a total income of $790,000 and the Romneys reported $13.7 million.

Now, there is no doubt that the Romneys are substantially wealthier than the Obamas (and this observation is a shock to no one). Still, the following occurred to me when I saw the piece:

First, to called almost $800,000 a year simply “kinda” rich is to downplay the amount of money in question. This is firmly 1% territory and therefore calling it just “kinda rich” is inaccurate. I know I am over-analyzing, but this strikes me as part of the way Americans tend to broaden the definition of middle class to the point that we really don’t understand income and wealth distribution in a meaningful way. And yes, I know that that term “middle class” was not used, but “kinda” does mean “not quite” or “almost” and if one is only almost rich, then one is upper middle class.

Second, it came across as trying to make the Obamas sound more normalish than the Romneys. While it is true that the Romneys live in especially rarified economic circles, I think it is silly to even hint that the Obamas have incomes that anything other than rich.

Really, what we have here is a rich family and an extremely wealthy family.

14 responses to “Quibbling with Headlines”

john personna

September 22, 2012 at 9:04 am

We took a real wrong turn when we started treating single-year income as a measure of wealth.

Those are both really good incomes, enough to make you wealthy pretty quickly, but the conflation runs deep. Mr. Romney had an income of $13.7 million while sitting on hundreds of millions. The later defines both his wealth and his ability to pay for all kinds of things, including car elevators and taxes.
john personna

September 22, 2012 at 9:10 am

Interesting. There is a “celebrity net worth” page.

Obama: $11.8 Million (rich)

Romney: $250 Million (super-rich)
john personna

September 22, 2012 at 9:12 am

(The interesting thing is that once you hit those levels of worth, neither of those guys need income, ever again. That is what separates the wealthy from the working joe, and what is totally obscured in any income-based wealth discussion.)
john personna

September 22, 2012 at 9:31 am

I know I multi-post, but my column inches aren’t that bad …

Very related:

There’s a concept in economics called the diminishing marginal utility of money. Loosely put: if you give a £20 bill to a homeless dude, it will make his day—it’s worth a bunch of hot meals or a hostel bed for a few nights. If you give £20 to an average wage earner, it’s nice but not a game-changer: it’s worth a couple of cinema tickets or a round of drinks at the pub. And if you give £20 to a billionaire they probably won’t know what to do with it—they have employees to carry the money around for them, and anyway, they earn more in the time it takes to open their wallet and stash the bill than the £20 note is worth. They’re losing money by taking it!

Be sure to catch the last lines of the article.
Murray

September 22, 2012 at 9:36 am

My favorite euphemism remains blue-collar-worker do designate income levels for which non-whites are simply … poor.
Rafer Janders

September 22, 2012 at 10:05 am

@john personna:

(The interesting thing is that once you hit those levels of worth, neither of those guys need income, ever again. That is what separates the wealthy from the working joe, and what is totally obscured in any income-based wealth discussion.)

Exactly. There’s one level when you may be very, very well-off, but you can’t sustain your level of spending if you lose your income stream (say, a law firm partner, or a managing director at a bank).

And then there’s a higher tier, where you’re basically living off your dividend, interest and other investment income without eating into principal, and even if you do work, you aren’t dependent on your labor to sustain your standard of living.
john personna

September 22, 2012 at 10:09 am

Lots of good reads this morning:

American has had hugely wealthy presidents before — think of Teddy Roosevelt and his distant cousin, Franklin D. Roosevelt; or John F. Kennedy, beneficiary of father Joe’s fortune.

But here’s the difference. These men were champions of the working class and the poor, and were considered traitors to their own class. Teddy Roosevelt railed against the “malefactors of great wealth,” and he busted up the oil and railroad trusts.

FDR thundered against the “economic royalists,” raised taxes on the wealthy, and gave average working people the right to form unions — along with Social Security, unemployment insurance, a minimum wage, and a 40-hour workweek.

But Mitt Romney is not a traitor to his class. He is a sponsor of his class. He wants to cut their taxes by $3.7 trillion over the next decade, and hasn’t even specified what “loopholes” he’d close to make up for this gigantic giveaway.
Rafer Janders

September 22, 2012 at 10:12 am

This illustrates another problem in our income tax code, which is that, given that the top tax rate starts at around $250,000 a year, we’re basically treating the person who makes that level of income the same as people who make $2,500,000, $25,000,000, $250,000,000, or even $2,500,000,000 a year (and in fact, since the wealthier you are, the more likely it is that your income derives from capital gains, the more favorable tax treatment you get).

It’s saying, in effect, that a mid-level law firm associate, accountant or dentist should pay the same tax as hedge fund managers, NBA superstars, or investment bank CEOs, which means that we as a society are leaving a lot of money on the table. I believe that we need more distinctions at top tax levels, have added step-ups kick in when you hit income multiples of the current top tax rate.
john personna

September 22, 2012 at 10:18 am

@Rafer Janders:

Yeah, and (close to home) an engineer with 2-3 good years income in a lifetime is taxed during those years like someone who makes that much for 20-30 years.

BTW, this guy thinks Obamacare will cost the Romney’s another $500,000 per year in Medicare taxes. I wonder if $500K is “hurts” to Mr. Romney or “throw it in the street?”
Rafer Janders

September 22, 2012 at 10:25 am

@john personna:

The difference between the Obama and Romney wealth levels becomes a bit starker when you imagine what that would translate into as interest income. The current top rate you can get on a savings account is, let’s say, around 1% (actually a bit lower, but simplified for discussion purposes). What does that translate into as income?

Obama: $118,000 a year. A very good income, but not spectacular.

Romney: $2,500,000 a year. Spectacular.
john personna

September 22, 2012 at 10:31 am

@Rafer Janders:

Yeah. One shorthand I like is the 3% rule. It says that you can look at your retirement portfolio, assume cautious income in line with the last 75 years, something like 7% nominal, and set a save spending rate at 3%.

So with $12M your safe spending rate, never working again, is $360K per year.

With $250M you can blow off $10M every year and not worry.
NInfa Carpenter

September 22, 2012 at 12:49 pm

Being “Kinda Rich and Really Rich” is a big statement. Obama didn’t make as much money as Romney. Mitt Romney made more money and has been working his ass off and made his money. Nothing wrong with working for your money. Obama made his money as an attorney. So, here’s a timeline of how Barack Obama went from middle class to a multimillionaire. Is never been a crime to have a legitimate business in USA. Leave you with this statement: A lot of people are born rich, with extensive inheritances and lavish trust funds. However, others come about their fortunes through brains, intuition and a lot of hard work. These are self-made millionaires.
rudderpedals

September 22, 2012 at 1:18 pm

@NInfa Carpenter:

never been a crime to have a legitimate business

WRT Mr. Romney, the law takes time to catch up with new crimes. That’s when it’s not being subverted by the wrongdoers. Not having a felony record is a good thing in a presidential candidate but its absence doesn’t legitimize the looting-based business model.
Jeremy R.

September 22, 2012 at 2:21 pm

@NInfa Carpenter:

Mitt Romney made more money and has been working his ass off and made his money. Nothing wrong with working for your money. Obama made his money as an attorney.

While Obama’s been continuously employed in a number of positions (community organizer, civil rights attorney, directed large scale voter registration drives, served on a number of boards of directors, con law senior lecturer, state senator, senator, president), being an author is what made him truly wealthy. Romney’s been essentially unemployed for the past six years.