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October 15, 2009


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The quote from the Harvard researcher is just one more example of the class warfare being waged by the intellectual elites in our society. Our President demonizes "obscene profits" of the healthcare industry when their net profit margin is only 3.3%.

George W. Bush had his "war on terror". This administration, and some of its ideological contemporaries have their "war on profits". Don't people realize that profits equal spending, which equals more jobs and higher wages?

Re: Golden parachutes

If you consider that the average blue collar worker is typically given 2 weeks severence at best, several months severance is a golden parachute in that they would have enough to survive until they find another job to pay the bills.

Politicians always talk about taxing the top 2% wealthiest when they actually will tax the top 2% incomes (talk, but when they actually tax, it's about 50%).

"Does everyone at Harvard hate people who earn a decent salary?"

Where in the world do you get that from?

Jim --

Read the next sentence.

I suspect that stats on income are easier to locate than stats on net worth. Thus, "wealth" is judged by the most accessible statistic.

Also, why the quibble? The 2 stats must provide data that are roughly comparable.

ie if you have a lot of wealth, you'll also have a lot of (investment) income even if you don't have a job. If you pull in a relatively high salary one year, you probably will continue to do so for most years of your entire working life. Exceptions might include students, pro athletes, musicians, actors, and novelists. But most people aren't any of those things for very long.

MC --

"If you have a lot of wealth, you'll also have a lot of (investment) income even if you don't have a job."

Many high-net-worth individuals are invested to minimize income (because they pay enough taxes on their regular incomes already) and maximize capital appreciation.

The MBA road to riches is always what it appears to be. I do have an MBA and while it helped me get my current position as a payroll software analyst (making ~ the median income) it certainly isn't the golden ticket it used to be. Here is an article from Businessweek about it.

I just don't see any "hate" in what they said. I read the whole post and the entire article.

Saying that low/middle class people are hit harder by unemployment than those "at the top" who get "golden parachutes" doesn't come close anywhere near close to "hate". I just don't see how you get that interpretation at all.

Maybe they DID mean "severance" instead of "golden parachute". So? Isn't that just an error of semantics like "wealth" versus "income"?

How does mediocre journalism or poor choice in words equate to "hate"?

Nobody said anything bad about high income people. I think you're reading tone or emotion into this article where there is none.

And where exactly is there any indication of "hate" by "everyone at Harvard"?

Jim --

Read what I said -- "Seems like I see a lot of comments along this line from them." There's no indication other than this. It's anecdotal -- based on my recollection. If you're looking for citations you won't find any. I didn't claim that -- so why should I try to prove it -- and, more to the point, why are you looking for that?

And if it helps you, look up the definition of "hate." There's more than one meaning and intensity to it and you're taking the most-aggressive option.

They'd probably label me as one of the people "at the top", and I certainly didn't get a golden parachute when I was laid off last year. I was in the mid-$80s and got all of four weeks severance. I hate this class warface crap.

Another way to look at this is that the higher up you are the more difficult it can be to find another job. By nature of the fact there will be more people at the bottom of the organization than at higher levels, there just aren't as many positions for a high or even mid level person to fill. When I was searching I found numerous positions for staff accountants but only a handful of supervisor/manager level positions similar to what I was in before. Granted, if you are higher up you should have had the foresight to put more into an emergency fund, but the idea that this has been no big deal for the upper middle class is ridiculous.

If a drop of $1,860 in median annual income is sufficient for "wiping out a decade's worth of gains to hit the lowest level since 1997", then those "annual gains" were apparently on average in the neighborhood of three-tenths of one percent per year!

Re: " more example of the class warfare..."

Life is regressive. (So sayeth George Will.)

Life is class warfare. (So NOT sayeth George Will.)

Just consider pricing: Goods are priced out of reach of the poor because people with more money are able and willing to pay more for those goods.

Now that the economy is in the tank, I am seeing a lot of affordable deals which simply weren't affordable while the economy was rolling ahead.

When the economy got hot in the late 80s, I saw rents go through the (figurative) roof - and my standard of living plummet. If that's not class warfare, what do you call it? ("A rising tide lifts all boats" is NOT the right answer.)

I read what you said and I already said so.

You accused "everyone at Harvard" of "hate" in relation to this article. Either thats a completely random and unrelated statement in the middle of this article for no logical reason or you think something said is tantamount to "hate" by "everyone" at Harvard.

No dictionary definition of "hate" that I can find has anything other than an intense dislike tantamount to hostility. Which I do not see anywhere in the comments here.

But I don't want to be belligerent or argue this to the point of beating a dead horse nor expect you to 'prove' your opinion. I'll just log my disagreement with you and we can leave it at that if you want.

What that article doesn't mention is that the jump in income from top 10% to top 1% is staggering, and it's even more staggering to .1%. I don't have time to look the stats up right now, but it's a *very* steep curve, not a straight line as you might naturally assume. People who are only making six figures in total comp are not "at the top" nationally.

This is speaking very broadly, but unemployment hurts lower-income workers more because salaries for most American workers have effectively remained flat for about a decade (sorry, again being a bit imprecise, as I haven't time to dig up links) when you consider inflation. (The perceived increased consumption of the past decade was funded by (a) two-income families becoming the norm and (b) credit.) The money that would go into those wages instead largely gets siphoned off to higher-paid management and finance. The lower your income, the harder it is to accumulate an adequate cushion.

Finally, "several months' severance" would be more than a "golden parachute" for many laid-off lower-income workers--it would be a miracle of Old Testament proportions. Many people get no severance at all.

I would like to recommend a book to you which might help give you some idea of where all the money gained by American increases in productivity and downsizing ends up: Barbarians at the Gate, which is about the leveraged buyout of RJR Nabisco. It's dated in the details (we call it private equity now), but I assure you the fundamental processes, and the way everyone muscles in to the trough, are much the same now. After you read it, you might well have a somewhat different perspective on the efficiency of the market and the general merit of those at the top. You could hardly ask for a more wasteful and pointless--and highly lucrative to the participants at the expense of just about everybody else--process. The book's also a cracking good read.

Jim --

Writing loses a lot in translation. I tend to write free form, as I would speak, and do zero editting (I do spell check, but I very rarely re-write anything.) So perhaps it's just a combination of flippant speech/writing and the medium used.

FYI, if it makes it more clear, I used "hate" above more like I would when I say "I hate bananas." I really don't wish death to all bananas and I don't want to see them disappear from the earth, but I do dislike them and can't eat one without gagging. The opposite end of "hate" would be along the lines of "Hitler hated the Jews." This is the version of hate you seem to be reading into the piece and not the level of dislike I meant to convey.

Hope this helps...

Flint has had major problems for many years. Consider it no accident that Michael Moore came from Flint.

I consider food stamp statistics an interesting economic indicator, one which might not always be on the same track as the economy.

Last year, while I was paying 70 percent of my income for a rented room, I received ($25/mo) food stamps. Now that the economy has gotten bad enough that affordable rent deals are coming online, I've been able to move to a cheaper room.

The downside of this is that by reducing my rent expense, I also lost food stamps. (An insidious downside of government handouts is that they can be lost by incremental individual financial improvement, leaving the individual no better off for their effort to get ahead.)

So it's quite possible for food stamp rolls to expand in an improving economy (rising rents = more ppl eligible) or to contract an a bad economy (shringking rents = fewer ppl eligible).

FMF, OK fair enough. I may have read too much into your use of the word "hate". But honestly from my perspective I don't even see "mild dislike" against high income people in what the Harvard guy said. To me I don't see what he said as anything emotional or negative against anyone.

I don't think using "golden parachute" in reference to high income people is showing dislike for them. Maybe you took that term as offensive somehow.

Please don't hate me. :)

Robert Frank at the WSJ blogs about this topic alot, and in fact he also riffed on this very same Census data report that was cited by MSNBC.
His take is that the gap between low and high income Americans is still extant, but that the rich have seen much more volatility in their incomes during the recession (perhaps meaning that their parachuts have gotten blown by the wind ;).

It sucks to be poor, uneducated, and underskilled in a bad economy. The striking number to me was how little,relatively to cost-of-living, the top ten percentile earn. It suggest that the polarization of wealth to the top 0.5-1.0 percent is staggering.

The rich get richer and the poor get poorer. Not a surprising fact. Great post.

Larry Summers is from Haahvahd, and boy does he sure love throwing money at the Wall Street elites.

I can attest to the fact that the Rich have been getting Richer and the Poor, Poorer ever since Bill Clinton left office. I am in the top 5%, income wise, and closer to the top based on net worth. I used to be a Republican when I worked in the Defense industry, my employer regularly recommended that we vote Republican because it was good for business. However after I retired my compassionate and lovely wife of 53 years finally convinced me to become a Democrat.

I was very happy to receive George Bush's farewell gift to me even though I didn't need it.
The gift being that we don't have to make a mandatory withdrawal from our IRAs for 2009 Thanks very much George!

Our mandatory required withdrawals from our IRAs has been the largest source of taxable income for us for the last few years. This year however for the first time I also shifted our income to being all tax and AMT exempt or tax deferred. This year my taxes will be the lowest in memory, just at the time when both my state of California, and the Federal government, need all the taxes they can get their hands on.

I really wonder where this country is heading - fighting two wars that have achieved little - the worst recession since the Great Depression, the highest budget deficits heading into the future, an exploding national debt, a falling dollar, millions of production jobs sent overseas, the highest unemployment rate since the Great Depression, and now we plan on giving everyone Healthcare whether they can afford it or not.

Not an encouraging future!


Read you regularly. Following you and Jim. Jim is is right. You went overboard here. Like your blog and will continue to read but your comment re/ havard/ was wrong. Didn't go to H, plus I have an mba; helped me get a job 30 plus years ago. Did not start at 6 figures or even the equialent.

Say "Sorry Jim" be done with it.

Have to say that FMF is right following the whole "golden parachute" thing.

Golden parachute is a derogatory term used by the class warmongers in the past few years. At first, it was used to describe the severance packages received by CEO's and the like. But the way it was used in the article, it's used to describe the "haves" that have money tucked away for a rainy day and can continue their lifestyle for a period of unemployment. Even though about everyone who writes about finances has been telling everyone to put money away for an emergency fund for as long as I can remember.

Cleveland Tourism song/video (captures the economic mood of the lowest-income large city in the nation):

"Our main export is crippling depression"...

Great stats. I would think the divide has NARROWED b/c the more you have, the more you've LOST in this recession.

Interesting stats.


"What that article doesn't mention is that the jump in income from top 10% to top 1% is staggering, and it's even more staggering to .1%. I don't have time to look the stats up right now, but it's a *very* steep curve, not a straight line as you might naturally assume. People who are only making six figures in total comp are not "at the top" nationally."

It doesn't surprise me that it's a "*very* steep curve; this is a common mathematical occurrence.

The term "asymptotic curve" comes to mind.

When I think of "the rich" I think of a relatively small group of high-profile superstar performers - professional athletes, actors, and the like...and a much larger group of (1) small business owners and (2) investors.

This economy sounds like just the recipe for high income volatility (with particularly downward potential) among small businmess owners and investors.

I agree re the golden parachute nonsense. My income places me within the top 5% (barely), but I have no golden parachute nor have I ever had one. In addition - while I have no complaints about my income, I have worked hard for many years to get where I am.

Regarding the issue of income vs. net worth as a measure of wealth, I think it's simply a matter of access to data. Information about income is reported (on your W-2 for example). Information about net worth is not reported anywhere that I am aware of.

I understand why golden parachutes get such a bad reputation, but it's part of the CONTRACT THE COMPANY SIGNS TO HIRE THE GUY IN THE FIRST PLACE. It's what they do to try to attract the best and brightest. Unfortunately, not necessarily the most scrupulous.

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