Realist, not conformist analysis of the latest financial, business and political news

Bernie, Warren, Kamala, They’re All Part Of The 1%

One of the interesting things about this mania for dropping tax returns among the Democratic runners is how many of them are part of that 1% they so rail against. Bernie Sanders, Elizabeth Warren, Kamala Harris, they’re all there, securely in the top 1% of family or household incomes for the US. They all also rail against the incomes and inequality of the one percent which must take a certain amount of mental contortion.

Sure, there are several arguments that could be used to justify all of this. Perhaps such tribunes of the people – they’re all currently in the Senate – should be in that top 1%. Why shouldn’t those selflessly devoting themselves to the public good be well rewarded?

Another thought could be that if you can’t rip off $500k a year from senior office in a nation as rich as the US then you’ve not got the financial nous to run for dogcatcher.

It is also possible to make a rather more serious point about this more general whinge about inequality. It’s as it is in the UK, it’s not about the 1% and 99% at all. Which, given that the inequality gap here hasn’t changed much over recent decades seems fair. Rather, it’s about the inequality gap between the 0.9% and the 0.1%. That has significantly changed and boy does it burn. It’s the upper middles classes whining about how some subset of the upper middle classes has pulled away.

Bernie Sanders made a $million in two of the past 3 years and $500k and change last.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]According to the returns, Sanders and his wife paid a 26 percent effective tax rate on $561,293 in income, and made more than $1 million in both 2016 and 2017.[/perfectpullquote]

As it happens entry into that 1% is $420k or so for household income.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]That puts the Sanders in the top 1 per cent of US earners, according to the Economic Policy Institute, which said families receiving more than around $422,000 a year were in that bracket.[/perfectpullquote]

So, securely in the top 1% is our Bernie. So too Elizabeth Warren. And Kamala Harris.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]In their 2018 return, Harris and her husband, attorney Doug Emhoff, listed an adjusted gross income of $1.89 million, including Harris’ Senate salary and $320,000 she made from writing a book, “The Truths We Hold.” Harris and Emhoff married in 2014, then began filing jointly. In 2018, they paid $563,426 in federal taxes and donated $27,000 to charity.[/perfectpullquote]

Entirely and securely in that top 1% there. Yet all three rail against the inequality caused by that top 1% having such high incomes. So, what’s going on here?

This is where we stop off fact and into surmise. Mine being that this is akin to what is happening in the UK. There, it’s not actually the butcher and the baker worried about how much CEOs are making. Nor professional footballers, bankers, pop stars and all the rest that rake in the millions a year. Instead it’s those other yet lower members of the 1% who whinge so bitterly.

Time was, a few decades back, that a captain of industry, a senior banker, would make a bit more money than a senior professor, – proper chaired professor at a known name university that is – than a newspaper editor or senior columnist, than a doctor, lawyer. Sure, certain professions gained greater public approbation, perhaps were first in line for knighthoods and the like, but monetary rewards among the establishment elite didn’t vary all that much. Maybe a factor of two or three. After all those actually working for a living in the harsh marketplace were going to earn more to make up for the social distaste of their being in trade.

This is actually where the biggest change in the income distribution has occurred. That top 0.1% has now soared away from the others in the 1%. Those who do well in finance or industry – and sport and entertainment but much less is said about them now – gain many multiples of what those others in the senior ranks of the professions gain. Which is exactly what galls.

What really burns of course is that at this level of expenditure much is about positional goods. Sure, and we can all have a house, up in this income level a place at the beach too. But where’s the house? Which beach? A place in the right, umm, place, is something strictly limited in supply. Which means that those desirable houses around Hampstead Heath (to think of London for a moment) are no longer going to those who have laboured in the mines of the state education system. Only bankers and software gurus can afford them now and boy aren’t they hated for it.

Sure, it’s a surmise. But one that seems to explain the available facts. Why is it that all these members of the 1% are the ones railing about the inequality of incomes between the 1% and the rest? Because that’s not what it’s about at all. It’s about the lower rungs of the 1%, those who in the past would have been reasonably financially equal with their counterparts in industry, no longer are. Thus the bitterness and the insistence upon tearing down.

Thus, also, of course the hatred of the market determination of wages and incomes. For what that market has determined over these recent decades is that the labour of a CEO, a banker, is worth more to all of us than the efforts of a politician – yea even a Senator – or a professor or a think tank wonk or a third sector worker or a civil servant. And Jeez, don’t the politicians, professors, think tankers, third sectorites and civil servants just hate and despise that market’s impartial evaluation of their worth?

Actually, the market has decided that the efforts of Sir Jim Radcliffe alone are worth more to society than the entirety of the House of Commons. No wonder they’re galled. Jeff Bezos has created more value than the entire Senate. Of course there’s hatred at this public evidence.

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