Why McCain's Wealth Matters

So McCain is rich. Or, his wife is rich, and that makes him rich too. Wasn't there some movie where Dudley Moore was engaged to a women with megabucks, and he kept getting drunk and introducing her to people as my 'financier' (instead of fiancée)?

For all the ink spilled over this last week, two related issues were under-explored, the latter of which is especially important: what's 'rich,' and why does it matter? What does McCain's wealth, and the way he talks about it, reveal about his ability to be a successful president?

On the first point--what means 'rich'?--there's no simple answer, no line in the economic sand that divides the rich from the rest. I'll get to the income data in a second, but they're only of marginal help here.

For one, there's tremendous geographical variation. If your family income is $100,000 in a rural area of a low-income state, you're well off. That income in Manhattan arguably puts you in the middle-class.

This example also suggests that there's a relative component to "rich." To be rich means you breath the rarified air in the upper reaches of the income scale. In a series of recent revealing remarks, McCain said he thought an income of $5 million made you rich. There's no doubt that's true, but if that's your income cutoff, almost nobody's rich.

The often-cited work of income analysts Piketty and Saez (see Table 0) reveals that admission to the top 1% of the income scale will run you a cool $375,000. Too many common folk there for your taste? Then you'll need about $600K to move up to the top half of the top 1% (i.e., the top 0.5%).

What's that? You want to roll with some serious money? It'll cost you $2 million to break into the top 0.1% (the top tenth of the top percent), and $10.5 million for the top 0.01% -- the top one-hundredth of the top one percent, average income: $30 million.

So yes, Cindy's $100 million in wealth, inherited from her family business, puts the McCain family solidly up there in the narrowest sliver of the richest of the rich. But numbers like these only give you an upper bound. Certainly, there are more rich people in America than those who reside in the 15,000 households of the top 0.01%.

My research on income class has led me to take a less quantitative approach to the question of who's middle class, rich, poor, etc. I think it has much to do with your choices and your access to opportunities.

Rich people's choices are generally not constrained by lack of income (boy, that sounds really obvious, but read on). Years ago when I worked with poor clients in New York City, I remember someone telling me they thought about cost before making a long-distance phone call.

Move up the "choices chain" and you get the picture. Middle class people tend not to think twice about a phone call, but a baby sitter, dinner, and a movie, is not a slam dunk right now, what with prices up and incomes down. And speaking of the price of transportation, vacations don't become "stay-cations" for rich people. Their choice set isn't constrained that way.

These choices may sound kind of trivial, but of course, there are real life-changing opportunities at stake here. One of my favorite -- well, least favorite, really -- factoids to make this point has to do with access to higher education. Once you control for cognitive ability, high-testing, low-income kids have the same (low) college completion rates as low-testing high-income kids. We do not, my fellow HuffPosters, reside in a meritocracy.

(If I may shamelessly tout my own work with colleagues at EPI, please read our forthcoming chapter on income mobility from the new State of Working America, out Labor Day -- though I'll see if I can get the mobility chapter posted here ASAP. It's a tour through this critical question of how challenging it is for people to get ahead given the mobility barriers they face these days. To us, this strikes at the heart of a basic American economic value. We may not believe in equal outcomes in this country, but we sure believe in equal opportunities. And the data on inequality and mobility suggest this basic value is under siege.)

Oh, and yes, if you don't know how many homes you own, you're definitely rich. (When I told my sister about this McCain gaffe last week, she responded: "Well, I don't know how many pairs of shoes I own." See...it's all relative.)

Which brings us to he who would be president. I understand and appreciate the urgency in campaigns to frame your opponent. In this case, the Obama team jumped quickly and effectively on these gaffes to paint McCain as elite and out-of-touch. But beyond the campaign politics, what do these statements, and more pointedly, his wealth, say about McCain as president?

After all, FDR was rich, and his empathy and energy devoted to helping the have-nots was boundless. Lots of politicians who came from humbler backgrounds but ended up rich, like Bill Clinton, John Edwards, or for that matter, Barack Obama, also built a policy agenda to offset the status quo regarding inequality and opportunity. Is it simply that rich Democrats get this in a way rich Republicans don't?

Perhaps so, though I'm sure there's lots of exceptions. Problem is, I don't think McCain is one of them. It is important to view his comments in the context of his agenda, which is as unempathic as his gaffes. As I pointed out last week (see Figure 1 here), his tax plan delivers by far the biggest boost to the average incomes of the richest households; Obama's plan does the opposite. McCain really does double-down on Bushonomics, which takes the inequities inherent in today's market outcomes, and injects them with a dose of steroids.

From this perspective, the problem isn't that he's rich. It's that his wealth is part of a package that strongly suggests he can't relate to the economic struggles faced by so many people from households that don't reside in the top "fractiles" of the income distribution. And if you can't relate, you're much less likely to craft and move a policy agenda that will help, a shortcoming we've seen much too much of in recent years.

This whole dust up reminded me of a CNBC spot I was on with Phil Gramm when he was still McCain's top economic advisor. He was going on about the supply-side, trickle-down nonsense that fits ever so neatly into these guys view of wealth. Arguing his case, Gramm said something like, "I've never been offered a job by a poor person. Have you?"

If government helps rich people, so goes this mythology, they'll unleash a torrent of economic activity that they're sitting on now because tax rates are too high. Cut the regulations that bind them, the taxes that squelch their incentives, and they'll not just lift their own economic fates, but those of the least advantaged as well.

The evidence, of course, points precisely in the opposite direction, but, and here's the kicker, these folks are impenetrable to evidence, and I fear their privileged positions make them so. Their wealth insulates them from reality in a way that you don't see from the other rich folk noted above.

It's not just that McCain can't relate to have nots, it's that he doesn't really want to. He wants to pull the levers that Phil Gramm and others tell him work best, and since he doesn't relate to folks who know very well how many homes they own -- though they may be uncertain whether they'll own them next month -- he lacks the motivation to question whether these levers actually work.

I don't care how much money our president has (though the seven homes thing really does seem beyond the pale given today's housing climate). But I deeply want him or her to understand the economic plight of those with less, and the evidence regarding the policies allegedly designed to help. When their wealth operates like empathy-killing blinders, then that wealth is a problem...a big one.

To listen to McCain last week, and to do so while poring over his policy agenda, really does suggest the dangerous degree to which he's out-of-touch. The Obama folks are right. We'd better work to keep him out of yet another house: the white one on Pennsylvania Ave.

Comments

[Oakknollfarm]

A few years ago, it the wealth of John Kerry did not matter much to the Dems; what a difference a few years can make. Now, John McCain's wealth matters? Kerry's wealth far surpasses McCain's; Kerry and his wife, $1 billion; McCain and his wife, $100 million. Just because I'm a helpful guy - I want to let you know that is a factor of 10.

[Malaki33]

You know,

as I thought more about my post earlier it made me think.......1% of americans that pay taxes are Paying 40% of all the united states taxes......thats right folks 1% of 300 million people...yet some seem to think they should pay more....I am far from rich I make 61,000 dollars per year, and am in the 23% tax bracket...and I am not screaming "the rich need to pay more, more, more".....and I am one of the ones the DEMS say will be helped by a Democratic President...Whenever the DEMS speak they speak on 3 subjects......Taxes, Global Warming, the War........arent there other things going on that need attention? Obama can't even tell us how he is going to "change" but cannot seem to tell us how....Interesting indeed...It's all Lip service folks I gurantee it.....look at all the promises our "do nothing congress" made to us before they were elected.....since then, we have....sent even more monies to the "WAR" which they vowed they would never do......have had fuel prices go through the roof.........and LOOK FOLKS THE SOLDIERS ARE STILL IN IRAQ....didnt they promise they would be brought home!...go DEMS!...congress writes the bills....writes the laws......Not the president...remember that

[Malaki33]

IBCNY,

Where someone who graduates any college or university class standing is means absoulutely nothing in the real world...the fact is they graduated, and I applaud them all regardless of class standing......it's what they do after the graduate that makes him/her a viable member of society in whatever field they choose to work in. I happen to know someone who graduated Fi beta cappa from Harvard who now is unemployed, (made a pretty serious accounting error which got him fired), at the same time I know someone who went to Brown university barley graduated and is currently working as a CFO for a internet company. At least McCain graduated, got commisioned, and served honorably. I was in the Military and like you have lost some too (my grandfater was shot down in WWII, he was an aviator). Historically DEMS have given service members and the Federal employees that support them nothing for raises, and denied the Military monies for necessities(while in war and in peace)..I will NEVER support that ever. All that being said have you looked at OBAMAs Tax plan? and Like I said in an earlier post, we the consumers are going to pay for those high taxes I assure you of that, because as one person on here pointed out, cooporations and wealthy people are going to look out for themselves.

[Mildmannered]

"While the bankruptcy filing rate for those under 55 has fallen, it has soared for older Americans, according to a new analysis from the Consumer Bankruptcy Project, which examined a sampling of noncommercial bankruptcies filed between 1991 and 2007.The older the age group, the worse it got — people 65 and up became more than twice as likely to file during that period, and the filing rate for those 75 and older more than quadrupled."

These should be and I hope they are solid Obama/Biden voters.

[Harmony1812]

I am a single mother of a super smart 17 year old hoping to go to college and one day get a car. We am surviving on my disability check. This year I will lose the extra $500. a month we get for him from social security and the extra $300. a month that we never get from child support as well as his health care that I paid 130. a month for. Believe me, I understand economics better than McCain and Bush and the filthy rich.

[Malaki33]

Harmony,

Having super smart children makes it easy to go to college, there is alot of federal money out there for these situations and scholorships all one needs to do is apply(I sent out 150 appications for grants each semester)........I not only had my semesters paid for I even had money to put in my pocket to help pay for the gas, food, and mileage to get there. There are always low interest student loans as well if the grant process does not work. As far as the car, I bought my very first one with babysitting money and my job money (1979 ford pinto wagon)....I myself am supporting a family of 5 on my 61,000 a year and even with my insurance around 10000 dollars a year out of pocket for medical expences (my wife is disabled) and we loose my Step sons Social security after this year...that being said though politicians talk a good game they are not going to do anything to fix our situation I assure you (niether McCain nor Obama) but I will still Vote for McCain.......My son Joining the Navy after he graduates this year (so i know he will be taken care of) unfortunatly my daughter (14) would not do well in the service, so she is going to have to get student loans, grants, scholorships, to pay for her college though she is not Above average so I dont think Scholorships will be an option (grants it is!)

[msquared LA]

A Question about the Hilary Holdouts. Are they (or even the Republican faithful for that matter) seriously considering that McCain is still trying to win the Vietnam War by staying in Iraq (even against the wishes of the Iraqi Government) until there is some mythological final battle that would say that the U.S. won the war the Bush administration lied to get us into. Doesn’t it bother the Hilary Holdouts that McCain has so little regard for and knowledge of the serious economic problems we face and that his economic advisors are so out of ideas that they would steer and out of touch McCain to pursue decades old and failed "supply-side" economic policies that even its architect (former Reagan Budget Chief David Stockman) admitted was a failed grand experiment? It leaves me to wonder why they would turn their backs on their principles and ignore the potential that McCain like the Bushes, will stack the Supreme Court and Federal Benches with right wing zealots, or the potential that his only means to sustain the military over-extension is to seek to reinstate the draft in order to fight oil wars.

[msquared LA]

About the Hilary holdouts. It's sad to think that these folks are so hurt by the primary outcome as to disregard their principles than to recognize that there isn't a hare's breath between the policies of Hilary and Obama. It's sad to think that they are angry over the outcome of a process to which all the primary candidates (including John Edwards and others) were also subject, and their anger would move them to vote for a Goldwater Republican who is a Ronald Reagan wanna be. It is frowned upon to suggest that any of these “principled” democrats might resist voting for Obama because of his mixed race, however, I wonder what would drive people to vote against their pocket books, their principles and their environmental future, et al, when they could vote for an extremely intelligent, former grass roots organizer, and former law professor who actually understands the issues, writes his own speeches? Who can lable "elitist" an individual who transcended his modest roots, was raised by a single Mom but worked hard to get into and graduate from Harvard and Columbia Univ. in favor of McCain whose only real interest (the “Commander in Chief test”) only focuses on running the military?

[Nina28]

You too can be multimillionaire, just send $39.99 or visit vote McCain. He'll show how to get 8 homes, tip you on insider's secrets to investments. Stay home & make money! This is a MUST have. But wait! there's more, your vote comes with a free CD on how sweet it is to be wealthy like Cindy & Me. We're not just Rich, we're WEALTHY!

Yes, it is great to be wealthy, the very wealthy should:
Do fund raisers for charities e.g. cure diseases, help needy children, save historical sites, etc.
Run reputable private companies.
PAY THEIR TAXES!

What they shouldn't do:
Apologize for being wealthy.
Pass laws & overide/veto bills to protect their own capital & the interests of a few elite members who are also WEALTHY e.g. be our Monarch.

The McCains are VERY well off, good for them. Most of our political leaders are either rich or very wealthy, but when they are so out of touch with hard working Americans, have loyal Bushies in camp, or cater to the very wealthy then pretend to be "one of the people" . No Thx.

McCain's infomercial approach is this false illusion that the Rich will create new jobs because they are kind. The reality is under 2 Bushes, jobs went overseas, stock holders sold to foreign buyers e.g Budweiser. Being wealthy doesn't make one loyal to America. The Rich do what they do to protect THEIR interests. They have no obligation to create new jobs for Americans.

[CtJean]

Please read this:

Mc has a new ad out belittling the two O - children. It's running in the middle states.

Outside of the ad he commented to an interviewer that the O girls are brats.

So now he's going after children - I am so angry I can hardly type

I was taught not to hate, but I hate booosh and jon

[sfpolarbear]

That ad doesn't exist. What you read was a satire.

[TruthCA]

In addition to confusing breath with breathe, the author confuses income with wealth. In fact, uses the terms interchangeable, which they're not. McCain's answer to what it takes to be rich, in wealth terms, $5 million, probably is about right. Lot of people with retirement accounts and a primary residence worth $1 million or more total don't have particularly high incomes and are not what most would think of as rich. $100K a year in California certainly isn't rich (or more accurately, high income). Someone with $100K income could have wealth of a negative amount, zero, or a positive number. Journalists, learn some math skills, please.

[jswoody09]

After I watched Mc Cain on Leno-- joke about his housing situation and then try to tie that to his vietnam imprisonment--I realized he's simply trying to cash in on a failed mission, the lose of a multi-million dollar aircraft, and a probable bad reaction time to whatever was happenig around him when he was shot down

Only in America would we consider these to be qualifications of a military expert--how much operational experience does one get setting in jail ?

Is the person who got caught trying to rob the bank --now suddenly capable of running it ?

I just don't understand...

[Malaki33]

JSwoody,

First of all He graduated from Annapolis, then he went to flight school and became a Aviator, he flew 23 combat missions before his being captured, then had to tolerate and withstand brutal torture as a POW for many years. Its not like he went from flight scool, to his first flight ,to being shot down. There is tons of Operational experience there. You can't understand...unless you have served....if you did serve you would know this.

[jswoody09]

Malaki

most of those missions were simply to clear the forests, with little or no resistence-
and yes he did attend annapolis but wasn't anywhere near the top of his class--and lastly no human body could possibly withstand 5 years of brutal torture--please see things as they are--not what you're being told they are

[Shirl]

John Kerry was also a war hero, and served. Were you this concerned when he was swift boated

[lbcny]

Malaki33,

Yes McCain graduated from Annapolis and had a little help getting in there too.
Do you know what number he was in his graduating class? Pretty much at the
very bottom.
Do you know how many test planes he crashed?
Oh, and yes, I have plenty of family in the military and those
who have been killed in the line of fire.
So, tell me about operational experience. There are military operations and there's a big difference in understanding financial operations. Sorry about the fact that he was
a prisoner of war. He reminds us every five seconds about it. I salute him, o.k.?
I also salute those real Americans who spoke out against the war. That's courage.
And we who have families in the military don't agree with you or McCain.
Wrong guy, wrong war, wrong values.
Get off your high horse.

[ebanks84]

JM, you don't stand a snowball's chance in h*ll to win this election. NO WAY NO HOW NO MCCAIN!

[kellygrrrl]

Money can't buy ...

[larose501]

Phil Graham is still McCains' boy and we will all have hell to pay if McCain gets in! As if we weren't paying enough already!

http://www.associatedcontent.com/article/871137/the_phil_graham_philosophy.html

http://www.motherjones.com/news/feature/2008/07/foreclosure-phil.html

[David359]

Being rich is relative. Making $250,000 is a lot of money for some. But consider, that most of these people did not start making this money until their early or late forties, some left college or graduate school with tens of thousands of dollars in student loans for themselves and their spouses, some are duel income familes with child care costs, some are trying to save for their kids' education, are told there will be no social security for them and so have to count on themselves for their retirement, and have most of their money tied up in their homes. Like most people, everybody is different. Reaching conclusions about people based on a single characteristic is bigotry. Shouldn't we stop playing us and them politics?

[laire]

David359,

Your making alot excuses if you make 250,000 your doing okay, I agree it does depend on where you live. However, no one makes go out and buy a house for million dollars or have two car notes for over $1,000 etc. My point is its's not how much you make but how much you spend.

[qwr]

I see. So is being "poor" relative? If a household has to live on 12,000 a year, is it "bigotry" to call that household "poor"?