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The Rich Are Different

Once upon a time in America, people earned their way to the middle class by picking fruit. The idea was that if you worked hard enough, you might one day own an orchard. But even owning orchards is no ticket to the middle class anymore; in modern America, the way to wealth is to own a hedge fund that manipulates fruit futures, occasionally ruining orchard-owners and putting orchard workers out of a job.

Nor do I exaggerate. The richer the CEO, the meaner the company; the richer the person, the more ruthless they become. From the NYT:

More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent. (Emphasis mine)

Only an idiot could still think poor, working, minority Americans caused the financial crisis by taking advantage of lenders. This kind of profligate stupidity is why millionaires have a higher effective tax rate than the poorest Americans. They deserve it because so much of their income is wasted on being rich.

I know, I know — the rich “invest,” which creates jobs. At least, that’s what we’ve been told over and over again since 1980. The reality, of course, is that wealthy people consume more (see above chart) but this doesn’t necessarily translate into jobs. If it did, the Bush tax cuts would have caused the largest hiring boom in decades rather than the weakest recovery of the modern era to that point.

Just look at the financial crisis that deregulation frenzy ushered in. Mortgage salesmen were rewarded for creating new mortgages; unhelpful speed bumps like “credit rating” and “employment” and “assets” were gradually removed from the process of buying a home. No Income, No Asset (NINA) loans were mortgage brokers asking customers to please lie to them.

Why? So they could sell your mortgage to become a tranche  resold to suckers as AAA-rated good-as-cash investments. A few people made out like bandits, but plenty of real estate moguls had spent so profligately they were left with nothing.  The crash of 2008 was money making money out of money out of thin air until all that wealth destroyed itself.

This arrangement has been titled “capitalism,” and its primary characteristic is the ability of one person to negatively affect the lives of millions without paying any price. But whenever the bottom 99% of us resent that status quo, we’re engaging in un-American “class warfare.” See how that works?

Of course, the act of writing the preceding paragraph makes me a “communist” or “socialist.” And since socialism has failed in every place it has ever been tried (except for Canada, France, New Zealand, Italy, Spain, Poland, etc) you should stop paying attention to anything I write. See how that works?

But I’m not against rich people or people becoming wealthy. I don’t even want a socialist paradise (whatever that is). The rich are allowed to be different — in fact, I expect it; no one can behave exactly the same if you give them millions of dollars — but the rich are not allowed to be better or more worthy for having greater net worth.

That would be un-American.

More importantly, the rich have a greater responsibility to society because their actions have a greater impact (see above chart). Complaints about a lost work ethic ring hollow when the most well-off Americans have none: we’ve become a nation earning $7.50 an hour, and it’s my observation that the least-earning are generally the hardest-working.

The same is true of “respect for the contract,” a phrase used to water-down Obama’s mortgage relief proposal until it serves practically no one. The “cramdown” provision, which would have allowed bankruptcy judges to reset the terms of mortgages, was eliminated on the altar of a principle that simply doesn’t apply to the class of people most responsible for the problem.

Adding: Investment firm Scorpio Partnerships estimates (PDF) the world’s wealthiest are sitting on $10 trillion in savings. That’s a whole lot of stimulus sitting in accounts waiting for the rich to invest; they don’t behave according to libertarian economic theory. The best argument for letting the Bush tax cuts expire is that government would be investing that money where the rich are not. (H/t to HuffPo)

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