March 28, 2013

How much land do rich people use up?

From the Washington Post:
As income inequality in the United States has soared and median wages have flatlined since 1980, economists have spent a lot of time debating why the top 1 percent have done so much better than everyone else. Is policy to blame? The decline of labor? Technology? 
An equally pressing question, though, is what those increasingly hefty incomes at the very top mean for the lives of everyone else. And a big, newly revised paper (pdf) by the University of Chicago’s Marianne Bertrand and Adair Morse finds that there is a connection, but not a happy one: The gains of the rich have come alongside losses for the middle class. 
As the wealthy have gotten wealthier, the economists find, that’s created an economic arms race in which the middle class has been spending beyond their means in order to keep up. The authors call this “trickle-down consumption.” 
The result? Americans are saving less, bankruptcies are becoming more common, and politicians are pushing for policies to make it easier to take on debt. 
If that argument sounds familiar, it’s because Cornell economist Robert H. Frank has been making this case for years. Those at the top are spending more on fancy goods and bidding up the price of homes. In response, the slightly-less-rich have been spending more to keep pace. That pressure, in turn, eventually ripples down to the middle class — where incomes have stagnated of late — in what Frank calls “expenditure cascades.” 
“What you think you need depends on the context you find yourself in,” Frank said in an interview. “And standards tend to be local. When most of the income gains are going to the very top, the people around them feel relatively poorer and spend more because of that.” 
What Bertrand and Morse have done is put together a detailed empirical case that “trickle-down consumption” really is occurring in cities and counties around the United States — and that it’s responsible for roughly one-fourth of the decline in household savings rates since the early 1980s. 
“Middle income households would have saved between 2.6 and 3.2 percent more by the mid-2000s had incomes at the top grown at the same rate as median income,” they conclude. 
But how does trickle-down consumption actually work? One way is through housing. In cities like New York, the wealthiest are competing for the most valuable apartments and bidding up prices — which has broader ripple effects. What’s more, as those at the top buy bigger and bigger houses, those below them have moved to buy up bigger houses too. (Frank has noted that the median size of a new single-family house in 2007 was 2,300 square feet, or 50 percent bigger than in 1970.) 
That’s just part of the story, though. In areas where incomes of the top 10 percent are growing, Bertrand and Morse found, the supply of businesses and services that cater to the well-off also increase. Swankier bars replace cheaper bars. Expensive restaurants replace cheap restaurants. Whole Foods nudges out the local grocery store. And less-well-off residents end up spending more at these places. 
There also seems to be a “keeping up with the Joneses” effect. As wealthier Americans spend more on things like expensive preschools or fitness clubs or even fashion, their middle-income neighbors start spending more on these goods too — without cutting back elsewhere.

I'm all in favor of economists finally thinking about the cost side of inequality instead of just obsessing over the income side. Yet, this analysis seems largely backwards to me. No doubt it's true to some extent, but it seems to be missing the larger point of who is truly expensive for middle class people to share a metropolitan area with. Instead of Trickle Down consumption, what we see is more like Push Up consumption.

When a Whole Foods opens in your neighborhood, it doesn't actually nudge all the crummy grocery stores out of business. I drive past a Whole Foods all the time to get to the Jon's grocery store frequented by ominous flatheads from Omsk. Yet, Whole Foods is nicer than Jon's.

The real problem is not when you get more for what you pay more for (e.g., Whole Foods over Jon's), but when you have to pay more for the same old thing (e.g., a house with a yard in a safe neighborhood with a good public school).

Let's consider some major costs. 

Do the 1% bid up medical care costs? Facelifts, certainly. They don't demand a lot of diabetes treatment, however.

Do the 1% bid up education costs? Manhattan kindergartens, no doubt. Private colleges to some extent. In the big picture, though, this doesn't seem all that significant.

Do the 1% increase transportation costs? The 0.05% get the 0.1% drooling over private jets that they can't afford. But as for cars, some, but really, it's hard to spend over $100,000 on a car. There are plenty of people who waste money buying or leasing more expensive cars than is prudent for them, but it's more like the 25th percentile aping the 5th percentile. 

Let's think about the Big One, real estate costs. How much metropolitan land do the top 1% take up for their houses and yards? I was going to say 10%, but since many of the 1% live in a small number of urban areas with relatively small lot sizes (e.g., New York, San Francisco, Los Angeles), it may well be less on a national scale.

I've spent most of my life living in Los Angeles and Chicago between really rich people on one side and poor people on the other. One thing I've noticed is that the rich don't really take up all that much room. 

When I go for a hike in the Hollywood Hills, for instance, I often walk by an imposing gated estate that other hikers assert is owned by some major movie star: Will Ferrell is the most popular claim. But it looks like about 4 to 8 acres, most of that steep hillside. 

Last year I taking out the trash when I heard a whoop-whoop-whoop from overhead. I looked up and there was the Marine Corps One helicopter carrying the President to his fundraiser at George Clooney's house, around the corner from the supposed Will Ferrell manor. To be precise, Obama's helicopter was on its way to an airport to land, from which Obama's motorcade would wind up into the canyon. Clooney's house is 7,354 square feet and his estate is 3.16 acres, and apparently doesn't have a big enough lawn to safely land a large helicopter upon.

I'm trying, but I'm having a hard time feeling really oppressed by the fact that George Clooney's house is about as big as my yard. That doesn't strike me as unreasonable.

Now, you could get me riled up over the unconscionable injustice of Clooney owning his Lake Como mansion in the Italian Alps instead of an average person, like, say, me. I could totally picture Comrade Sailer leading an enraged mob to evict Class Criminal Clooney from his Lake Como house and requisition it for the private use of The People, as personally embodied in Comrade Sailer.

But the fact that Clooney owns a bigger chunk of the San Fernando Valley than I do seems pretty ho-hum.

Now, the San Fernando Valley is 260 square miles. The rich take up the southernmost fringe, generally on mountain land that is expensive to build on and rather inconvenient to live on unless privacy is your foremost concern. The flat parts of the San Fernando Valley vary slightly in climate, but, really, it's all about who your neighbors are. And almost the entire Valley is in Los Angeles school district, so getting your kids in with good peers requires intricate feats of gamesmanship.

Granted, the environmentalism of the rich raises land prices by ruling out land for development, thus lowering the supply of housing and raising housing costs. But, I also like to go for hikes, so I understand the tradeoff.

I'm trying to think of how many personal golf courses there are in the Los Angeles area. Having a golf course in your yard is pretty extravagant, but then Los Angeles has always had a lot of extravagantly rich people, so this is an interesting measure of how much metropolitan land extremely rich people use up. 

Offhand, I can think of four small backyard golf courses in the L.A. area. Bob Hope, who was a real estate tycoon in his spare time, had a one-hole golf course at his house in Toluca Lake. Jerry Perenchio, former owner of Univision, has a 10-acre golf course in Malibu. There's a small par 3 course in a coastal canyon farther out toward Zuma Beach. And I believe I've read that Will Smith has a one hole course on his property at Sherwood. No doubt there are some other miniature personal golf courses in the L.A. area that I'm not aware of (and there are several in Palm Springs, 125 miles away), but this isn't really Downton Abbey.

And, rich people's kids don't overwhelm your public schools.

What's really expensive for middle class families are poor people. Middle class people move to upscale school districts or send their kids to private school to get them away from poor people. New exurban developments have excessive house sizes to try to keep the public schools upscale.

The real problem with the rich is that they dominate political thinking on questions like immigration. Keeping Up with the Bloombergs ideologically is politically disastrous for people in the middle. 

106 comments:

Cail Corishev said...

Sounds like the middle class gets squeezed from both sides. The poor take money from them in ways that are mostly involuntary, through welfare, crime, and lower property values. The rich take money from them in ways that are partly voluntary -- trying to keep up with the Joneses, as this article talks about -- and involuntary -- environmental regulations making land scarce, cheap immigrant labor driving down their wages, and other Utopian spending projects.

It's the same old struggle of top and bottom against the middle, whether the top and bottom are coordinating their efforts or not.

Pink Arrow Gal said...

keep smooching rich behind, steve, and someday you will make it to the top!

Anonymous said...

Here's the average income in Souterhn Californai, Ventura 72,000, Orange 71,000, San Diego 63,000 and La a mere 56,000. Most folks are either the Mexican immirgants or their kids, Hollywood and Beverly Hills is a small group. Ventura which people don't think as having rich people and it does also have Mexicans has higher average income. Steve, moved to Ventura.

Truth said...

Steve, come on; That rich people take up more space is not the point, the ultimate point is that rich people control the space that they do not occupy, and that poor, and middle class people do.

Anonymous said...

Keeping up with the Jones was worst in Orange than LA, since the population is 43 percent white versus La's of a mere 28 percent. South OC had the Ladera Ranch problem of big bouses with million dollar price tag, La mainly had it in the beach cities.

Anonymous said...

Most of the Hollywood bunch are not as interested in illegals than your average businessmen. The Hotel/Resort area of Anaheim is more for the legalization of illegals than Hollywood. Also the OC Register mention about a OC Jantorial firm that supports illegals by giving them jobs. It companies like these that support the illegal population even more so than the real well to do. The OC Register which is Libetarian and does make the big bucks like the LA Times has supported the legalization of illegals for many years.

Anonymous said...

You have to look at land value rather than acreage.

Anonymous said...

In my town the rich do have larger homes. They also own most of the rental property and keep them filled with illegals. They tried to frame the mayoral candidate who opposed the "invite the drug dealing criminal alien policy" with multiple felonies.

The real estate folks sit on houses they can't rent to keep prices high. Houses were going for much less before the invite the thugs/lock up the houses plan hit.

They screw us six ways from Sunday on property not just the homes they buy.

Anthony said...

In Oakland, the poor generally take up more space than the rich (top 10%, not sure about top 1%). East Oakland and South Oakland are mostly single-family houses, and even in the hispanic neighborhoods, there aren't more than two families per. The upper-middle class live in condos by the lake, or in houses in the hills which have slightly larger, and much steeper, lots.

Anonymous said...

Jesus, do we have to see the fake hot chick? Ban her/him for fucks sake.

Socially Extinct said...

I don't think this article is unreasonable. In fact, I like that it abandons the usual liberal (blame the rich) and conservative (blame the poor) tropes. In fact, I think the only people who would take exception are the ideologues at either end of the spectrum who feel betrayed by its refusal to humor their argument.

The article merely points out the gravitational pull on the economy and values that the publicized and romanticized lifestyle of the "1%" has on both the middle class and the poor. Ever seen a ghetto mama with a toy dog breed in her purse!

Shouting Thomas said...

So, it's somebody else's fault if people screw themselves up with excessive debt because they feel compelled to keep up with the Joneses?

I'm having trouble buying into that concept.

Pink Arrow Gal, I don't think Steve is looking to "make it to the top."

Anonymous said...

You're right, Steve, it's not the rich who are bidding up resources (think of it like the physical concept of 'momentum' ie the product of mass and velocity, but in this acse it's income per head multiply number of people), the fact is that the real rich are but few in number and thus the 'product' of their income doesn't have a real tangible effect, but on the other hand, the poor are legion and in that nasty English phrase 'as common as muck'.
- Granted that the 1% control a whopping percentage of America's actual wealth stock, but bear in mind that this is fixed as investment somewhere or the other and illiquid, and is therefore invisible ie a shitload of microsoft stock amounting to a paper calim on the fixed assets of microsoft.
Anyhow, as Richard Branson once said no matter how rich you are you can only eat one lunch. No matter how Croesus like they are, there is a physical limit to how many cash eating activities can be packed into a day and this sheer glutting of the gluttons provides the physical, speed-of-light like wall to conspicuous consumption.
But the hordes of peasants (mostly imported these days cortesy of The WSJ and The Economist TM), are a different kettle of fish however. Basically in numbers and sheer offensiveness they exert a 'richness' far greater than any cash kind. You're talking of living human bombs, termites (they chew up physical assets and covert it to poop), here. Although it's not Christian, the great unwashed are destroyers and infesters and aphid like.
In terms of offensiveness to the Beefmen of this world there is little to choose between the unwashed and the 15, only that the unwashed eat up your hoouse from the inside, leaving you with a pile of insectoidal poop - and a big tax claim (or elf styled entitlement), on your pocket. the 1% on the otherhand, are merely the unspeakable in pursuit of the uneatabble, to quote the good sage St. Oscar of Wilde.

ConantheContrarian said...

"The real problem with the rich is that they dominate political thinking on questions like immigration. Keeping Up with the Bloombergs ideologically is politically disastrous for people in the middle."

Steve, you are a genius, you magnificent bastard. I am going to steal this thought whenever and wherever I can.


Harry Baldwin said...

Why are you restricting your land-use survey to cities? John Malone owns 2.2 million acres. Ted Turner owns a hair less, still listed as 2.2 million acres, as big an area as Yellowstone National Park, spread across seven states.

Here is a list of the 25 biggest landowners in the US.

Well-to-do people like to retire in states like Maine or Vermont, driving up the cost of the most desirable land and creating resentment among locals by pushing their (generally) liberal values. Buying up 100 acres of wooded land and then posting it "no hunting" when locals have hunted there for generations creates a lot of ill will.

kurt9 said...

Of course the phenomenon is real, especially with regard to real estate. The solution is a tax on fixed assets, first residence excluded, rather than an income tax.

The benefit of this tax policy is that it would promote investment in productive enterprise which, by definition, benefits all of society. At the same time, it discourages investment and speculation in fixed finite assets such as real estate. This would help to moderate increases in the price of real estate, keeping it more affordable to the masses.

JayMan said...

"What's really expensive for middle class families are poor people. Middle class people move to upscale school districts or send their kids to private school to get them away from poor people. New exurban developments have excessive house sizes to try to keep the public schools upscale."

What Keeps 'Em Up at Night

:)

Anonymous said...

I live in Silicon Valley, confined in the east by San Francisco Bay and confined in the west by extremely expensive hillside homes. From these hills to the ocean lay forests and ranches that are increasingly being set aside as natural preserves, the result of which is a more limited supply of land which help drive up housing prices. Everyone not already owning homes complain about housing costs. Everyone also approves of the land set asides and various environmental initiatives that ensures continual increases in housing costs.

Anonymous said...

For a very long time most civilizations had sumptuary laws, for example: "In the Massachusetts Bay Colony, only people with a personal fortune of at least two hundred pounds could wear lace, silver or gold thread or buttons, cutwork, embroidery, hatbands, belts, ruffles, capes, and other articles."

They are a direct attack on consumerism and limit the damage of the urge to "keep up with the Joneses". If the Joneses (and you) legally can't upgrade their car then you will be less in debt.

Anonymous said...

Jon's is not crummy, Steve!!! Much better prices than Wholefoods, and it doesn't reek of incense and moral superiority. BTW they are now in a fierce competition with another Armenian owned chain, Super King. Both are pretty similar but Jon's is less crowded and has a more interesting selection of foreign alcoholic beverages (and customers.)

Dunnyveg said...

Speaking of land, as in acreage, it too has become the province of the wealthy. I live about two-and-one-half hours outside of Austin, Texas, the nearest city of any size. Yet people with money have bid up land prices to the point where local residents can no longer afford to buy acreage; they have once again become peasants. The most common group buying large tracts? Doctors.

james wilson said...

As von Hayek pointed out, the multi-millionare cannot do a fraction of the damage to me which a petty bureaucrat can on a whim.

Anonymous said...

Steve, you are correct only with regard to california. Your cost of living is high because you choose california. If you lived in the suburbs of minneapolis you would find spectacular public schools and housing costs one quarter of what you are used to

Anonymous said...

Michael Moore is hard working and only needs a Canadian film editing crew rather than a US one which explains why he is in the 1%.

Anonymous said...

The future ramifications of the mortgage meltdown may include (in some areas) an increase in HUD or Sec 8 houses (that have been foreclosed on and purchased by various government agencies) that will be popping up in various exurbs and suburbs, far away from where these units usually exist.

If 2 or 3 houses on your street feature the vibrancy of multiple adults living therein, coming home in the wee hours of the morning -on a daily basis- thumpin' their bass loud enough to wake you two hours before your alarm goes off, you might find that the vibrancy has enriched you so much that you'd like to move someplace else, even further out, bidding up homogenous real estate even higher.

Anonymous said...

What's really expensive for middle class families are poor people.


But the reason we have so many poor people is .. the rich people want there to be a lot of poor people.

Anonymous said...

Agreed, I live in flyover country ( NE Ohio ) and even here there are some pretty impressive mansions, but they generally don't sit on 800 acres of land ( Unless they are rich farmers out in the middle of nowhere ), more like 4 or 5 at the most. The biggest ones often sit on lakefronts with other comparable homes, their actual yards are probably half the size of a typical middle class suburban house of decades past.

There are also lots of upper middle income neighborhoods where all the houses are 3000-4000 sq. and up foot range at least and the yard is small enough to completely cut in 15 minutes with a push mower. I have a friend who lives in one and he has so little land outside his large house that that is exactly what he does every weekend during the summer. His house is typical of the neighborhood, none of the homes in his lot or any others around it have large yards, quite the opposite. The upper and upper middle trade off outdoor space for indoor space for their flat screen TV's and designer kitchens. They really don't hurt the middle class or lower middle class economically. It's the poor and criminal being moved into working class and lower middle class areas through section 8 housing that forces those people out and too overpay for the privilege of average public schools elsewhere that leads to problems. The best way to ensure that doesn't happen if you are lower middle class is to live near enough to the upper middle class who will fight any attempt to insert section 8 people into the area anywhere near them.

Anonymous said...

The finding seems to say the pressures from the rich is more psychological than material.
It's not so much that the rich make middle class life harder but that middle class, in wanting to be rich-ish, over-spend money they shouldn't.

There is some truth to this. I remember in the 1970s, a lot of affluent people were like regular Americans too. They too went to family restaurants or non-fancy steak houses.
But since then, there's been a tremendous expansion of fancy eateries where you pay lots of dough for some raw fish on a clump of rice. And it just won't do anymore to go to any steakhouse. You gotta go to THE steakhouse.
Or take coffee. In the 70s, everyone, even the rich, drank the same kind of coffee. Now, there's all this fancy stuff. So, even people who don't have much money spend $5 on coffee during lunch break since it's the thing to do.

1950s was an affluent time but the social standard was middle class suburban life that wasn't too fancy. People were keeping up with the Joneses but Joneses played bridge and maybe had a bigger TV set.
Nowadays, Joneses could have all sorts of expensive gadgets--that have to be changed every year to keep with the latest products--and travel all around the world.
In the 1950s, to be middle class meant being like the folks in Father Knows Best. Affluent and comfy but not fancy.

The 60s and 70s had a kind of leveling effect because of the counterculture. It was groovy to be authentic and natural, so even rich folks grew sideburns and tried to look natural and 'with it'.

But then, things really began to change in the 80s when affluence became more haute, guilt-free, and shoot for the skies. So, the stakes were higher if you wanted to keep up with the fancy folks.

Also, in the past, most people got married and they spent a lot of money on family and kids.
But as fewer people got married in the 80s, they made more money as they spent more time making money and then spending that money to show off.

In the 70s, my mom used to watch the Mary Tyler Moore Show, and that was the image of success and privilege.
In the 2000s, you gotta be like the Sex and the City girls to be relevant. In the late 80s and 90s, I knew plenty of girls who maxed out their credit cards right out of college to live the 'life'.

Anonymous said...

Keep in mind that lots of small businesses--especially restaurants--and family farms hire immigrant labor. So, it's not just about the rich and their insatiable hunger for cheap labor. All businesses, even or especially the small(that work under the radar), wanna hire cheap labor.
If you run a hotdog joint, would you rather docile Mexicans or angry blacks?

Anonymous said...

'Bigots' often have big guts to tell the truth.

a very knowing American said...

" 'Ah, what a fine fellow!' exclaimed the Chief. 'He has gained much land!'

Pahom's servant came running up and tried to raise him, but he saw that blood was flowing from his mouth. Pahom was dead!

The Bashkirs clicked their tongues to show their pity.

His servant picked up the spade and dug a grave long enough for Pahom to lie in, and buried him in it. Six feet from his head to his heels was all he needed."

from "How much land does a man need?" by Leo Tolstoy

Anonyia said...

In my town the public parks seem to be either for poor people or for rich people. Most white people won't go to the parks primarily frequented by Mexicans/Blacks (most of them), however the largest park, which features lots of hilly forest land and trails, has recently been converted into a dog park. Guess who is obsessed with letting their pampered dogs off leash to wonder around beautiful parkland? Rich people. I no longer have any desire to go there to hike or exercise, lots of the dogs are annoying and aggressive. Worse yet, the one other decent park in town might as well be a dog park, because all the rich people let their pets run wild there too. I think they like animals better than people.

Anononymous said...

"why the top 1 percent have done so much better than everyone else."

Because if they didn't do better then they wouldn't be the 1%.

The top 1% will always, by definition do better than everyone else. Same way the bottom 20% will always be in poverty.

Anononymous said...

"Those at the top are spending more on fancy goods and bidding up the price of homes."

Oh, so thats why houses cost more.

Anononymous said...

Rich people are pretty boring. Golf courses, really? Why can't they do something interesting like make an artificial lake and sail on it in replicas of roman galleys?

Anononymous said...

"Your cost of living is high because you choose california."

Same post from 2100:

Your cost of living is high because you choose United States. If you lived in Hudson Bay Territory you would find spectacular public schools and housing costs one quarter of what you are used to.

Anonymous said...

As von Hayek pointed out, the multi-millionare cannot do a fraction of the damage to me which a petty bureaucrat can on a whim.

Von Hayek did not live next door to mexico.The rich have kept the wealth from productivity gains of the last 40 years.

Crawfurdmuir said...

What really bid up the price of residential real estate from the early 1990s through 2007 was not rich people, but rather government-subsidized lending to people who would otherwise not have been able to buy property. The collapse in real estate prices has brought housing prices back down to what they were around the time the government-encouraged subprime lending binge began.

Similarly, I believe that what has bid up the price of higher education was not rich folks getting legacy admissions for their kids - they have been doing that since the nineteenth century without a parallel effect. Rather, government subsidized education loans, Pell grants, and the like, have set lots more money in pursuit of the same limited resources. The resultant education bubble has had a comparable effect in education as in housing - too many people who have borrowed more than they can afford to repay.

And indeed, the people who have suffered from this are what was once known as the middle class - i.e., the true bourgeoisie, people who own small businesses or practice the learned professions, and not the jumped-up wage and salary earners who are called middle class but are more properly working class. Certainly the average small business owner, doctor, or lawyer cannot afford things today that persons of comparable income and social status did in (say) 1925. The upper-middle class used to have household servants and sent their children to boarding schools. Now these are available only to the very rich.

Luke Lea said...

Right, I was going to say that the Frank analysis wasn't persuasive. A lot of the overspending in the oughts was caused by artificially low interest rates caused by trading with China.

Trade, immigration, and automation: that is the trifecta that is hammering the working and middle class. All three effect the supply and demand for labor and capital -- adversely for labor and proversely (?) for capital.

I think we all know what the answer is for immigration. For automation it is statuatory limitations on the length of the work week (six hour day) and for trade it is either income redistribution or tariffs. There are no other answers.

kurt9 said...

Real estate is the biggie. Wealthy people tend to buy up lots of land. Land is often bought for investment purposes and is a major form of speculation on the part of the wealthy. The problem with this is that it drives up the cost of real estate in desirable places, making it less affordable for those who are not wealthy.

Replacing the income tax with a fixed capital asset tax, first residence exempted, could be a solution to this dilemma. It would help to reduce the speculation in fixed, finite assets (such as land) while encouraging the wealthy to invest in productive enterprise, which does benefit the rest of society.

Corn said...

"Yet people with money have bid up land prices to the point where local residents can no longer afford to buy acreage; they have once again become peasants. The most common group buying large tracts? Doctors."

True dat. As a rural resident, the increase in land prices have driven me nuts. I believe a land value tax should be implemented.
It also would be nice if the games in the stock market and the Fed would stop so the rich would feel safe investing in something other than real estate, but that's a whole other can of worms.

Anonymous said...

"economists have spent a lot of time debating why the top 1 percent have done so much better than everyone else. Is policy to blame?" - Seriously? Is it really that difficult?

"As the wealthy have gotten wealthier, the economists find, that’s created an economic arms race in which the middle class has been spending beyond their means in order to keep up. " - This however is the politically correct dogma for why everyone stopped saving around the same time that wages stopped growing. Of course they have to blame the rich, and not the desire to stay away from section 8.

Simon in London said...

"The real problem with the rich is that they dominate political thinking on questions like immigration. Keeping Up with the Bloombergs ideologically is politically disastrous for people in the middle."

Agreed, I guess - for a certain sort of rich, our 'Metropolitan Liberal Elite' or your 'Hollywood Liberals'. But these guys don't really need to be really rich, just enough to be insulated. The young liberal Evening Standard journalists spewing out their poison on the Tube to 1.6 million home-returning Londoners every evening are clearly from the privileged classes, but frequently complain that they can't afford to buy their own homes.

The people who make life miserably expensive for me are the children of Somali refugees and suchlike, who require me to send my one child to private school. The traitors who let the Somalis (et al) into my country and who destroyed Britain's state education system are significantly richer than the average person, but few of them are really wealthy.

Anonymous said...

Real estate is the biggie. Wealthy people tend to buy up lots of land. Land is often bought for investment purposes and is a major form of speculation on the part of the wealthy. The problem with this is that it drives up the cost of real estate in desirable places, making it less affordable for those who are not wealthy.

Yes, this is why you have to look at real estate price, not area. The wealthy might not buy up all the empty land somewhere in the middle of nowhere and thus that empty land may be cheap and available, but it's not necessarily economically viable for people to live there.

Anonymous said...

"Dick Morris Says He Is Working On An RNC Ad Aimed At Latinos"

http://mediamatters.org/blog/2013/03/28/dick-morris-says-he-is-working-on-an-rnc-ad-aim/193336

"Dick Morris is working with Republican National Committee Chair Reince Priebus on a new television advertisement that will include Preibus seeking to attract Latino voters, Morris revealed during an appearance in New York City Thursday.

Speaking at the Poli Conference, a political consulting event for Latin American campaign professionals, Morris said the ad will feature Priebus reaching out to "those Latin Americans who've come to the United States to help us build our country, to help harvest our food, to help make our economy work and [Priebus'] message is 'welcome, we need you, you're making our country younger, more prosperous, harder working and we need you for the future.'""

pat said...

Right on! The ability to not be jealous over a rich man's wealth is a sign of maturity.

We hear people complain that Obama is too powerful. Maybe, but I contemplate the power of Augustus. When he called Herod the Great to his villa there were only three people in the room - Herod, Augustus and the guard. If Augustus didn't like Herod's answers he would be strangled on the spot.

The first thing that crossed my mind when I walked in the Pitti Palace was, "Bill Gates isn't rich, this is rich". Modern societies are are all leveled. The recent increase in income inequality is minor. Everything how is egalitarian.

BTW you are quite wrong about the cost of cars. The Bugatti Veyron costs about $2M. They can't build enough. Jay Leno has several cars that cost more. When I got my share of the Obama stimulus I wanted to finally get a Ferrari but alas I only got $85,000 - not nearly enough. Watch Wayne Carini on the Velocity channel. He attends auctions each week where there are cars sold for millions.

I use to have some rich friends. Marjorie and Dieter had houses on five continents. She used to constantly complain about our other friend Gordon Getty. She thought he had too much money. It never bothered me. I was only upset because I thought he was sleeping with my wife.

Albertosaurus

Pink Arrow Gal said...

Simon in London said...
"The real problem with the rich is that they dominate political thinking on questions like immigration. Keeping Up with the Bloombergs ideologically is politically disastrous for people in the middle."

Agreed, I guess - for a certain sort of rich, our 'Metropolitan Liberal Elite' or your 'Hollywood Liberals'.
======================


Agreed. I agree with sailer that the minorities are a drag on the middle class. But they are a drag in so many more ways than just 'welfare queens' etc. The thing that sailer and the other paleocons do is focus on demonizing a certain type of upper class liberal that you point out above here--the yuppies.

yes, the yuppies are liberal hypocrites who benefit from mass immigration. The paleocons pound this point home again and again. But what the paleocons ignore is the super-rich, people with tens of millions, hundreds of millions, etc. THESE rich really own the majority of corporate shares. Corporate america is owned and controlled primarily by the super rich. Their corporate puppets own the land, for the most part.

And the paleocons pretend like the super rich are not even there, for the most part.

Maybe the super rich are funding various paleocon sites (and liberal sites too) for the purpose of continuing to divide the white working class by enforcing ideological apartheid, and by that I mean maintaining purity of right vs left platform planks: making sure that certain zillionaire-friendly core planks of both sides (right vs pseudo-left) remain pure and unmixed. For example, making sure that the super-rich are not maligned or demonized on the Right, and making sure that nonwhite/immigrants are idolized on the pseudoleft. As long as these two core planks are maintained on their respective sides and not inter-mixed or muddled, the zillionaire-friendly
core policies held by both sides will remain inviolate. For example, suppose the paleocon sites were to start exposing the zillionaires for what they are (as the pseudoleft now do). Then what would happen? Well, there might be GOP politicians elected who would join forces with the Dems and then enact higher tax rates on the super-rich. That would be bad for the super-rich.

As another example, suppose the liberal sites like DU and Kos were to start advocating for reduction of mass immigration and the end of affirmative action. Well, then there might be Dem policitians elected who would do away with mass immigration and affirmative action, which would raise wages because the supply of labor would decrease. That would hurt corporate profits and rich investors would lose money.

So the paleocon sites and the lib sites maintain ideological purity: any mixing and matching of planks from the other side will get you banned, for the most part. Or at the very least, other posters will call for your banning, calling you a commie or a racist etc.

And really this sort of ideological purity can be maintained by controlling the 'thought leaders' at the very top. Get those in line and the rest of them will fall in line without even be paid off. It's all monkey-see, monkey-do, all the way down.


DR said...

Excellent analysis Steve.

Think of all the excellent real estate in the Bronx that could be used by upper-middle class Manhattan commuters. Instead they're forced to live four or five times as far away from their Midtown offices, in New Jersey, Long Island or Staten Island. And they still pay very high housing costs.

The vast majority of the residents of the Bronx have no need to live in such close proximity to the most expensive and productive land in North America. Their proximity is not only a menace for the borough of the Bronx, but for Manhattan as well because of spillover effects.

If the 80%+ residents of the Bronx dependent on government assistance were relocated to say an empty patch of land in the middle of West Texas, or even the outlying wilderness of Pennsylvania on the edge of the NYC metropolitan area, there would be virtually no loss to Manhattan's economy. Then many people could save drastically on their commute and aggregate real estate prices would fall.

Truth said...

"I was only upset because I thought he was sleeping with my wife."

He was, Al, I watched one day...she told me that you were vertically gifted but horizontally challenged.

Dutch Boy said...

It's not just saving less (you can't save what you don't earn), it is borrowing more than puts the middle and lower classes in a bind. The system of usury always channels wealth from the bottom and middle to the top. It is thus the rich and their malignant system of outsourcing jobs, insourcing cheap labor and keeping the economy going with usury that are the problem. Of course, usury is a stopgap that merely disguises the wealth shift until the debt can't be repaid (as in 2008), then the economy crashes and we resume the downward cycle.

Anonymous said...

http://www.americanthinker.com/2013/03/the_gop_outreach_that_dare_not_speak_its_name.html

Ray Sawhill said...

When the financial collapse of 2008 happened, I was dumbfounded to discover how much debt many middle-class people had taken on. Why didn't they live in smaller houses, drive less snazzy cars, and send their kids to state schools?

Cail Corishev said...

Rich people are pretty boring. Golf courses, really? Why can't they do something interesting like make an artificial lake and sail on it in replicas of roman galleys?

No kidding. I've said this before, but rich people today have no imagination at all. Where are the life-size chessboards with live players (and elephants and horses) and a tower hundreds of feet high for the owner to play from? Why isn't a manned mission on the way to Mars yet? Why hasn't some patriotic American billionaire built a replica of the World Trade Center somewhere else, twice as high with anti-aircraft guns on top, to show the terrorists they didn't win?

I can think of at least 6 books I've always wanted to see made into movies, so I'd spend whatever it took to make that happen. I'd also write Mel Gibson a blank check to make a movie, as long as he promised it'd piss the right people off even more than Passion of the Christ did.

In politics, rich people write checks to PACs and buy a politician or two. Whoopie. For maybe $100M, you could gather up a bunch of "Obama is a Muslim," "Here's what the symbols on your dollar really mean," and "The Real Story of Waco" type videos from YouTube, burn them to DVD, and send a copy to every home in America. For what would be peanuts to a billionaire, you could hire a camera crew to film 24/7 at a major crossing point on the Mexican border, log the traffic and interview the interlopers, and broadcast it online and on any network that'll take it.

But no, they play golf on courses somewhat nicer than regular ones, drive cars somewhat nicer than regular ones, and live in homes somewhat nicer than regular ones. Mostly they use it to keep poorer people at a distance. How exciting. Wealth is wasted on the rich.

Harry Baldwin said...

I no longer have any desire to go there to hike or exercise, lots of the dogs are annoying and aggressive.

That's why some of us carry walking sticks. Just point the end of the stick between his eyes and he will keep his distance. The only time I had to actually hit someone else's dog was when it attacked my dog.

Anonymous said...

When the financial collapse of 2008 happened, I was dumbfounded to discover how much debt many middle-class people had taken on. Why didn't they live in smaller houses, drive less snazzy cars, and send their kids to state schools?

Elizabeth Warren demolished the myth that middle-class people were in debt due to lavish lifestyles:

http://www.huffingtonpost.com/elizabeth-warren/america-without-a-middle_b_377829.html

"The crisis facing the middle class started more than a generation ago. Even as productivity rose, the wages of the average fully-employed male have been flat since the 1970s.

But core expenses kept going up. By the early 2000s, families were spending twice as much (adjusted for inflation) on mortgages than they did a generation ago -- for a house that was, on average, only ten percent bigger and 25 years older. They also had to pay twice as much to hang on to their health insurance.

To cope, millions of families put a second parent into the workforce. But higher housing and medical costs combined with new expenses for child care, the costs of a second car to get to work and higher taxes combined to squeeze families even harder. Even with two incomes, they tightened their belts. Families today spend less than they did a generation ago on food, clothing, furniture, appliances, and other flexible purchases -- but it hasn't been enough to save them. Today's families have spent all their income, have spent all their savings, and have gone into debt to pay for college, to cover serious medical problems, and just to stay afloat a little while longer."

Anonymous said...

"It's the same old struggle of top and bottom against the middle, whether the top and bottom are coordinating their efforts or not."

Oh, they're coordinating alright. They vote Democratic.

Anonymous said...

Pink Arrow Gal said...
keep smooching rich behind, steve, and someday you will make it to the top!

Steve - You're nearly unassailable. Your opponents have stopped their frontal assaults and are reduced to subversion.

This one's mighty cute!

Ray Sawhill said...

Anonymous -- I'm sympathetic to the plight of the American middle class -- heck, I'm one of the. But I don't know where Warren is getting her figures.

Check this out: Average square footage of an American house in 1974: 1660 sq feet. In 2010: 2392 sq. feet. I'm bad at basic arithmetic, but that looks to me like an increase of around 30%.

And check this out: Average household size in 1970 was 3.1 people. Average household size in 2007 was 2.6 people. That's a decline of, what, something like 18%?

In her article, Warren says, "By the early 2000s, families were spending twice as much (adjusted for inflation) on mortgages than they did a generation ago -- for a house that was, on average, only ten percent bigger." Yet as far as I can tell, in that time-stretch, average house size increased by 30% while the average number of people in a household declined by 18%. Sounds to me like a lot of people were taking on an amount of debt that their parents didn't take on because they insisted on living in a lot more square footage than their parents did.

Warren's article doesn't jibe with my everyday experience either. I've got loads of middle-class acquaintances who own multiple nice cars, who live in McMansions, who have remodeled their kitchens to look like TV cooking-show sets, and who insist that they have no choice but to send their kids to ritzy private colleges.

Anonymous said...

It took me a while to understand why rich people in SF, Marin, Atherton, NYC support massive immigration. Its because there's downside for them. 10 thousand Chinese/Mexicans/etc. aren't going to move to Marin or Atherton, they can't. They can't afford it, and even if they could there's no room for them. So if you live in one of them "protected" wealthy areas, not only do your real estate holding skyrocket but you get cheap better quality nannies, gardeners, etc. - Its a win-win for them.

Polyhedron said...

"Truth said...

"I was only upset because I thought he was sleeping with my wife."

He was, Al, I watched one day...she told me that you were vertically gifted but horizontally challenged."


Don't worry, Truth's mom isn't too picky

Whiskey said...

Steve, online high schools offer a way out of this problem. I've seen ads for something like Capistrano Private Online schools on Channel 9 news, so California with high costs and the huge desire to avoid your kid in the underclass of Mexicans and the Thunderdome of Blacks ought to be ground zero for online high schools.

There is not much learning going on HS anyway, online offers the ability to scale great teachers in the way that physical delivery cannot. Plus, your kid gets personalized instruction, as you noted computerized drill stuff, delivered to him and her. Sports clubs, martial arts, music and other after school stuff takes care of the socialization.

This is not trivial. The steam engine and trains in both London and New Orleans created the first suburbs; travel was reliable and rapid enough to get out of the (literally, before sewage treatment and with horse-drawn carriages) stinking cities in the first place. Meaning a choice between rural isolation and urban squalor.

Svigor said...

Don't worry, Truth's mom isn't too picky

I take exception to that remark, sir.

Svigor said...

So, it's somebody else's fault if people screw themselves up with excessive debt because they feel compelled to keep up with the Joneses?

I'm having trouble buying into that concept.


Yeah, I just hear or read about how much debt people have and laugh at their stupidity. People are always showing me their bling on borrowed dime and I just smile and nod and compliment them like I give a shit. Show me your savings account, your retirement account, your portfolio. That might impress me.

Brolin said...

i hate to say this but the rich tend to play a role in equalizing status and wealth in the world. you see, certain groups or classes would like to differentiate themselves from the poor by promoting discriminatory policies that favor them over the poor masses. these folks feel particularly entitled.

Anonymous said...

Yet as far as I can tell, in that time-stretch, average house size increased by 30% while the average number of people in a household declined by 18%. Sounds to me like a lot of people were taking on an amount of debt that their parents didn't take on because they insisted on living in a lot more square footage than their parents did.

First of all, you're using different figures from Warren. You apparently picked figures from 2010, while Warren uses figures from the early 2000s. And even if we go by your figures, they've been outpaced by the rise in mortgage payments.

Warren's article doesn't jibe with my everyday experience either. I've got loads of middle-class acquaintances who own multiple nice cars, who live in McMansions, who have remodeled their kitchens to look like TV cooking-show sets, and who insist that they have no choice but to send their kids to ritzy private colleges.

You're from Manhattan, aren't you? I don't think your everyday experience or acquaintances are representative of the middle class.

Anonymous said...

Yeah, I just hear or read about how much debt people have and laugh at their stupidity. People are always showing me their bling on borrowed dime and I just smile and nod and compliment them like I give a shit. Show me your savings account, your retirement account, your portfolio. That might impress me.

Who do you hang out with? Blacks and white trash?

Cail Corishev said...

Anonymous -- I'm sympathetic to the plight of the American middle class -- heck, I'm one of the. But I don't know where Warren is getting her figures.

I wonder too. I live in a small, mostly middle-class, middle-America town. Most of the new construction in my lifetime (starting about 1970) has been in new subdivisions. The houses may not have been all that large in the 70s, but by the 90s, lots of 2000 square-foot houses were going up. On the other end of the scale, in the middle of town where the houses are older and smaller, many have been demolished as the hospital and college have expanded. A common complaint, especially from young couples, is that no one is building small starter houses anymore. And of course, mortgage lenders urge people to borrow for as much house as they can get.

I dunno, I guess the numbers from the cities are different and overwhelm what's happening in the towns, because here it's very obvious that home size has increased a lot more than 10%, probably closer to 50%. Fortunately, home prices haven't climbed as much here in the sticks as they have in the cities.

Anonymous said...

I wonder too. I live in a small, mostly middle-class, middle-America town. Most of the new construction in my lifetime (starting about 1970) has been in new subdivisions. The houses may not have been all that large in the 70s, but by the 90s, lots of 2000 square-foot houses were going up. On the other end of the scale, in the middle of town where the houses are older and smaller, many have been demolished as the hospital and college have expanded. A common complaint, especially from young couples, is that no one is building small starter houses anymore. And of course, mortgage lenders urge people to borrow for as much house as they can get.

This focus on housing size is a red herring. People haven't been demanding larger houses. They've been demanding affordable houses in safe areas. Smaller houses in cities or in inner suburbs are much more expensive than large houses in the outer suburbs.

Anonymous said...

"...drive cars somewhat nicer than regular ones..."

Maybe the cars are "nicer" but new model cars all pretty much look the same to me. I can only tell them apart by the logo on the trunk or the hood ornament. Shite, even the Kia's are all teched up, just like your crazy-priced MB...

Steve Sailer said...

I was at an In-n-Out Burger a couple of years ago, and a fellow pulled up in his brand new (paper plates_ Rolls Royce. It looked like a slightly bigger Hyundai Sonata.

Ray Sawhill said...

Anonymous: "This focus on housing size is a red herring. People haven't been demanding larger houses."

Where do you get this? I've followed architecture and urbanism for decades, and the pressure from middle-class customers for more square footage (and for ever more checklist "features" -- Palladian windows, huge tall foyers, three-car garages, fancy kitchens for people who never cook ...) has been just about the biggest theme of residential development. What with banks coaxing them into tricky mortgages, a lot of people have simply bought 'way more house than it turns out they can really afford.

"You're from Manhattan, aren't you? I don't think your everyday experience or acquaintances are representative of the middle class."

I generally hang out in arty urban circles, but I spend about half the year in the suburbs and countryside of California, Arizona and central-western New York. I see a pretty good cross-section of mainstream American life.

Matthew said...

Interesting that the decline of the middle class began at precisely the time of forced integration + mass immigration - late 60s/early 70s. Since that time the rich have been waging a war against the middle class, and for two simple reasons: a) they pose the biggest threat to the power of the rich; b) unlike the poor, they have money to steal.

Aside from real estate, I don't think keeping up with the slightly richer explains much of the increase in consumer debt. More and more people are single, and singletons spend more money, more irresponsibly - generally trying to attract the opposite sex. I did when I was single (though, oddly, I found my wife after rediscovering frugality).

People often end up mimicking friends and colleagues who spend money they don't have. Your co-worker Joe Blow takes his girlfriend to Hawai'i, and thus you assume you should be able to afford a trip to Hawai'i - nevermind that Jow Blow only could afford it because he maxed out his credit card and is ass deep in debt.

Wanna help the middle class? Make revolving credit harder to obtain, and reduce welfare programs. That way people who are spending and behaving irresponsibly won't be able to compete with those people trying to do the right thing. Mass immigration, generous welfare benefits for the irresponsible, and easy credit have all been hell on the middle class.

Steve Sailer said...

I remember somebody in marketing research told me about 1990 that the 60614 Lincoln Park zipcode in Chicago that was Yuppie Central in the 1980s led the country in credit card debt per capita.

Anonymous said...

Where do you get this? I've followed architecture and urbanism for decades, and the pressure from middle-class customers for more square footage (and for ever more checklist "features" -- Palladian windows, huge tall foyers, three-car garages, fancy kitchens for people who never cook ...) has been just about the biggest theme of residential development. What with banks coaxing them into tricky mortgages, a lot of people have simply bought 'way more house than it turns out they can really afford.

You must be thinking of the upper-middle class, not the middle-class. The middle-class does not drive architecture and urbanism trends.

You don't seem to understand that size is not the driver for real estate prices. Location is. Older, smaller houses in older suburbs that are closer to the cities tend to be more expensive than houses in further away suburbs and exurbs, even if the houses further away are bigger. People first and foremost want affordable suburban housing in decent, safe neighborhoods. Many middle class people can't afford to live in the older suburban areas that are closer in to cities and have smaller houses. The only places they can afford that close in are usually dangerous neighborhoods. Many of them would prefer to live in the closer in suburbs with smaller houses because their commutes would be shorter.

Anonymous said...

Financial deregulation and spread of gambling made things worse.

Internet bust and housing bust did real damage.


Ray Sawhill said...

Anonymous -- We're either talking at cross purposes or you're so addicted to your one point ("location drives real estate prices") that you can't hear anything else, whether it's a fact or not.

Look, you've heard of the term McMansion, right? There are millions of them around the country. It's a standard way for American development to take place these days. And it's part of the definition of a McMansion that they're "too big." Here's a few facts about them from a recent Bloomberg article:

"New single-family homes built last year were still 49 percent bigger than those built in 1973 ... and it’s worth remembering that family sizes have shrunk over that period."

These aren't generally houses for the upper middle class. They're generally houses for middle-class people who are trying to live like upper middle class people.

You write that "People first and foremost want affordable suburban housing in decent, safe neighborhoods." That may or may not be true, but what an awful lot of people have been doing is buying Too Much House in boring McMansion developments.

The Bloomberg article would seem to confirm what I was saying about Elizabeth Warren's article, by the way: at least where the average size of American houses goes, her facts are off. I like Warren generally and I'm glad she's causing some trouble in D.C., btw. But I don't know where she's coming up with some of her assertions. The middle class is certainly being hit hard, but they have bigger houses, fancier kitchens, more cars AND more debt than they used to have. Is it crazy to suspect that if they had fewer cars, more modest homes, and more basic kitchens they'd be carrying less debt?

Anonymous said...

Anonymous -- We're either talking at cross purposes or you're so addicted to your one point ("location drives real estate prices") that you can't hear anything else, whether it's a fact or not.

It's simply a fact that location drives real estate prices. A studio apartment in Manhattan will be more expensive than a mansion in Antarctica.

These aren't generally houses for the upper middle class. They're generally houses for middle-class people who are trying to live like upper middle class people.

How are you defining "live like upper middle class people"? The upper middle class isn't defined by size of house. Lots of upper middle class people tend to live in smaller houses in tonier neighborhoods, not in McMansions in the middle of nowhere. If middle class people were trying to live like the upper middle class, why wouldn't they be going deeper into debt to live in smaller houses in more prestigious neighborhoods.

But I don't know where she's coming up with some of her assertions. The middle class is certainly being hit hard, but they have bigger houses, fancier kitchens, more cars AND more debt than they used to have. Is it crazy to suspect that if they had fewer cars, more modest homes, and more basic kitchens they'd be carrying less debt?

She's done the math and written a book about it. You don't even dispute her point regarding mortgage payments, which is that they've significantly outpaced the increase in housing size. The middle class is spending less on luxuries and more on necessities like housing and medical costs.

Anonymous said...

First we need to figure out the real cause of income inequality.

Graph 1 http://i.imgur.com/uDJiHqf.jpg

This chart is from the UK and demonstrates a massive decline in wealth disparity from 1800-1930. Presumably the industrial revolution allowed workers to become more productive. NB: this was before the days of unions, welfare and an overbearing government. Far from the liberal narrative about factory workers living terrible lives, the lower classes did quite well.

Graph 2
http://i.imgur.com/GENqH3z.jpg
demonstrates a massive increase in wealth disparity when the US terminated the gold standard. I posit the federal reserve prints up a bunch of money and gives it to rich bankers to gamble on Wall St. The Wall St. crowd does quite well, but by the time the money reaches average Joe, money's value is inflated away. Not to mention Joe is likely to save money in a bank, rather than invest in hedge funds thus he is punished much more by artifically low interest rates and inflation.

Pink Arrow Gal said...

one of the biggest factors in the increase in spending is the increase in credit availablity. One big reason credit is more available than more because of the high degree of computerization. When a potential debtor is more easily found, credit is more available.

DR said...

For everyone complaining about how immigration prices out the middle class, here's a simple solution: move. There's plenty of places in the continental US with dirt cheap housing, plentiful jobs and next to no immigration.

Go to Boise, Salt Lake City, Burlington or Pierre. All have strong economies, and lots and lots of land to keep home prices cheap.

Increased population may be hurting the middle class in California, but it begs the question: why do the middle class stay in California?

In my general observation, the biggest thing that holds middle class professionals from moving to a place with a much lower cost of life is cultural. They realize that Boise is much cheaper than L.A., but they simply can't bring themselves to move out with a bunch of "hicks from sticks."

They then rationalize this with some empty excuses about a lack of culture in Boise, as if they're attending the Philharmonic on a weekly basis.

For people like this ultimately they have no one else to blame but themselves. Sure you can blame certain political forces for raising the cost to live in certain towns, but when there's plenty of other towns, with essentially infinite jobs and land combined with free mobility, there's no excuse.

Conatus said...

http://www.theatlantic.com/international/archive/2011/09/map-us-ranks-near-bottom-on-income-inequality/245315/

The Gini Coefficient explains a lot of where we are, internationally. We are a top heavy country. Why is that? The most obvious explanation is that since 1965 we have a New Elite who only care about themselves. They do not feel commonality with the Middle Class and they are comfortable with hedge fund managers making over a billion dollars a year. That is one thousand million dollars. I don't think the one thousand million dollars came from "adding value" to our lives. If the world was fair the Medical profession would be reaping these monetary rewards for they HAVE added much value to our lives since 1965.
The corollary to the New and Uncaring Elite is Reaganomics. His ideas provided the rationale for the existence of billionaires. The mere peep of resentment about the over-the-top remuneration usually provoked this response:
"Shut up and quit complaining about all the money the billionaires make, it doesn't matter how they made it. Are you a man?"

Why do our CEOs make hundreds of times the average workers while Japanese and German CEOS make forty times the average worker? Our New Uncaring elite is the role model for our high earning CEO honchos. This mindset works it s way down to the upper middle class who are comfortable paying peon wages for back breaking labor. The minimum wage in Australia is fifteen an hour. I vote for Fauxcahontas(Elizabeth Warren) proposal of over twenty for the minimum wage.

Another factor in the Gini's upward inequality dance is the New Elite's enthusiasm for immigration. You can't dilute the American income pool with 12 million sub ten thousand earners and expect the Gini Coefficient to stay in the thirties.
But billions a year for hedging currencies? Why does anyone need to make multiples of one thousand million dollars a year? It is a pissing contest for our new masters, I propose an anti-Reagan salary cap of nine hundred and ninety nine million dollars a year.

Matthew said...

"There's plenty of places in the continental US with dirt cheap housing, plentiful jobs and next to no immigration. Go to Boise, Salt Lake City, Burlington or Pierre. All have strong economies, and lots and lots of land to keep home prices cheap."

WTF? Do you have any clue what you're writing about? Hispanics are 11.2% of Idaho's population, not much behind the national average of ~15%. I was going to cite data for Boise specifically, but they don't include stats for the metro area, which is 3x larger than Boise proper.

Salt Lake City is 22% Hispanic, with Utah at 13%. Utah was 91.2% white in 1990 but only 80.4% by 2010. Having recently seen the race data of every school district in the state, I can promise you it's still headed south. Even districts regarded as "white" have a surprising number of Hispanic students, with the numbers dramatically worse in the lower grades.

Pierre has all of 14,000 people, while Burlington metro has only 110,000 - not exactly realistic options for most people.

Matthew said...

"The Gini Coefficient explains a lot of where we are, internationally. We are a top heavy country."

Generally speaking, contrary to the nonsense spewed by many free-market, open borders quacks, lower inequality corresponds with nicer countries, while higher inequality with the worst countries. Europe, Japan, and South Korea have low levels of income inequality, while the US ranks down there with all the vibrant African and South American countries

"They do not feel commonality with the Middle Class and they are comfortable with hedge fund managers making over a billion dollars a year."

And those billion-dollar-a-year hedge fund managers pay taxes at cap gains rates that are half what they'd be if their earnings were taxed as normal income, which they should be. If you're a $200 million/year hedge fund manager, you'll pay ~$80 million in taxes at normal income tax rates, but only $40 million. Invest $1 million/year in political donations to keep those tax rates low - and get several of your nearest-and-dearest hedge fund buddies to do the same - and it generates a return well worth the price of investment, with little to no risk.

Anonymous said...

For a very long time most civilizations had sumptuary laws, for example: "In the Massachusetts Bay Colony, only people with a personal fortune of at least two hundred pounds could wear lace, silver or gold thread or buttons, cutwork, embroidery, hatbands, belts, ruffles, capes, and other articles."

Of course the law also has the interesting side effect of making the said articles cheaper for property owners, who happened to pass these laws. As well as enabling them to cheaply advertise their wealth: If even people worth less than 200 quids wearing generic belts [Oh, the scandal!], they better gird themselves with apple's iBelt. If you levying moral taxes, why not levy them on everyone: why didn't they ban lace, ruffles or capes altogether. No normal man wears them now, and no one is dying from ruffle deficiency.

You cannot legislate morality, but legislation may effectuate buggery, bastardy, and all the rest.

Cail Corishev said...

This focus on housing size is a red herring. People haven't been demanding larger houses. They've been demanding affordable houses in safe areas. Smaller houses in cities or in inner suburbs are much more expensive than large houses in the outer suburbs.

Of course that's true; my two-story house on an acre of land cost less than an apartment in Manhattan. But the argument isn't that housing is more expensive some places than others; it's that middle-class people in all places have increased the amount of income they spend (and borrow) on housing.

My impression -- which I have no facts to back up -- is that the causation may have run from the debt to the houses. A common way for people to buy a house, at least those I've talked to, is to go to the bank first and see how much they'll loan you based on your income and credit rating, and then start looking for houses in that range. The reasoning is that that keeps you from falling in love with a house and then finding out you can't afford it. But it also tends to encourage people (and their realtors who get a percentage) to spend at the top end of their ability.

If lots of people are walking around looking for houses with a $200K promise in their pocket, builders will focus on houses that cost that much. In my area, that'll buy you a 2000-square-foot McMansion with 4 bedrooms and 3 baths in a subdivision, so that's what they build and that's what people buy.

The same money could build you a cozy 1200 square-foot bungalow with higher quality non-McMansion construction, gorgeous hardwood floors, all the best appliances and cabinets, and money leftover for great furniture. But it doesn't seem like many people do that; they focus on getting as much floor space as possible and the rest is secondary. If most people wanted high-quality smaller homes, that's what builders would build, but it's not.

One factor may be that it's faster to slap together a 2000-square-foot McMansion on a large open lot in a subdivision than it is to construct a small, unique, high-quality home on a small lot in an older part of town -- especially with low-skilled immigrant laborers. I'm told that most drywall is put up by illegals today, for instance. They can slap up a house full of drywall in a hurry, but if someone wants to spend money on old-fashioned plaster or some fine wood paneling, the build may grind to a halt while you bring in someone skilled in that.

Cail Corishev said...

You write that "People first and foremost want affordable suburban housing in decent, safe neighborhoods." That may or may not be true, but what an awful lot of people have been doing is buying Too Much House in boring McMansion developments. -- Ray Sawhill

Right. Location may be their first concern, but once they select a location, they still have a choice between a small house that they could pay off in 10-15 years, or a larger one that will stretch their credit rating to get a 30-year mortgage. If people were demanding the former, subdivisions would be filling with the same kind of small ranches and bungalows that the neighborhoods built 50 years ago are filled with. They're filling with McMansions -- on yards that will take 5 hours to mow -- because that's what people are asking for.

My town is 93% white and 90% above the poverty line, so it's practically all safe neighborhoods. The most gorgeous, oldest mansions are actually right in the middle of town, and there are perfectly safe neighborhoods around them that would put you within a 10-minute drive of work and shopping. There's only one school district, so that doesn't play into it. If people pass up those "urban" neighborhoods for McMansion subdivisions, it's not to flee crime or bad schools. It seems to be some combination of wanting a bit more floor space, a bigger yard, and just thinking new is better.

My dad likes to say everyone wants to be a farmer, or at least think of himself as one as he looks out over his land. I think there may be something to that, when I see these people tooling around on their lawn "tractors," mowing an immaculate fairway-looking lawn that could support a ton of beef cattle.

Cail Corishev said...

For everyone complaining about how immigration prices out the middle class, here's a simple solution: move. There's plenty of places in the continental US with dirt cheap housing, plentiful jobs and next to no immigration.

Not quite. I live in one of those areas: right smack in the middle of the country, rural small towns (the nearest city is two hours away), 93% white. But they're already showing up here. Ten miles down the road is a hog farm that I'm told hires illegals. A friend in construction tells me all the drywall teams are Spanish-speaking these days. One of the Catholic churches has a Spanish Mass on Sunday, and that's not just for the families that run the 3-4 Mexican restaurants in town (and those folks speak enough English to serve customers anyway).

Down the road an hour there's a town with a turkey processing plant, and they have a much larger Mexican population, so it's an open secret that the place hires illegals. (In theory, a company could hire only legal Mexican immigrants, of course, but that would kinda miss the point.)

There's really no place to get away from them anymore. We don't have them in the numbers to create a crime problem, and we probably do get the "good" kind of illegals -- the ones that really want work, more so than the gangs and welfare seekers. But if the middle class from California and Arizona moves here and cedes that part of the country to them, it'll only be a matter of time before the problem follows; and in the meantime, the rest of us still have to pay for the mess out there.

Anonymous said...

"It's the same old struggle of top and bottom against the middle, whether the top and bottom are coordinating their efforts or not."

The bottom aren't able make their welfare payments last until the end of the month; they certainly aren't able to coordinate anything. Luckily, the top coordinates for them...

Class warfare isn't rich v poor; it's rich v middle class, with the poor as a weapon.

Mr. Anon said...

George Clooney can call up Barack Obama or Nancy Pelosi and talk to them. You can't.

David Gelbaum can influence a major lobbying organization by writing them a 100 million dollar check. You can't.

Steven Colbert gets invited to testify before Congress on immigration. You don't.

Where the rich and connected really crowd us out is in political influence. And that counts a great deal.

rob said...

Pink Arrow Gal said...

Give it up. Every time you get clocked with one comment. Third time's a charm, huh d00d?

Anonymous said...

"Go to Boise.."

Please don't, actually.

Anonymous said...

Right. Location may be their first concern, but once they select a location, they still have a choice between a small house that they could pay off in 10-15 years, or a larger one that will stretch their credit rating to get a 30-year mortgage. If people were demanding the former, subdivisions would be filling with the same kind of small ranches and bungalows that the neighborhoods built 50 years ago are filled with. They're filling with McMansions -- on yards that will take 5 hours to mow -- because that's what people are asking for.

This isn't true. Typically you have some metro area where all the jobs are, surrounded by concentric circles of suburbs and exurbs. Price falls as you go further out. Outer suburban McMansions are mass produced in new developments in the middle of nowhere where there is no alternative housing stock. These houses are cheaper than smaller houses in closer in suburbs.

Anonyia said...


"Increased population may be hurting the middle class in California, but it begs the question: why do the middle class stay in California?"

Well, for one California is a very beautiful place. A lot of people don't realize how beautiful until they actually visit. Secondly, sure people can escape overcrowding by moving to the barren upper Midwest, but eventually the undesirable elements of the large population will follow them there.

Anonymous said...

The middle class is shrinking for the following reason:

1. Mass immigration from Mexico and Latin America took millions of "family-supporting" jobs away from natives (roofing, landscaping, deliveries of appliances, shipping, construction, etc.

2. Pat Buchanan's thesis on sending all manufacturing jobs out of US.

Rich get richer because :

1. Silicon Valley makes milionaires by the millions and Wall street makes millionaires thru crony-capitalism. (It has that has little to do with regular people or the economy). Lastly globalism make rich richer and does little for middle class.

Mass Immigration detroyed middle class the most.

It comes down to one thing...Americans are greedy and wanted that cheap labor brought home and all of products built by cheap labor abroad.

Global trade makes a few rich and the middle class loses. Cheap products from China isn't worth it, especially when everything breaks after a few month. Better buy one well-made product build in US that would last years like the old days. Tariffs needed.

I don't get this article.

Pink Arrow Gal said...

Anonymous said...


Class warfare isn't rich v poor; it's rich v middle class, with the poor as a weapon.
=======================

True, dat. So very true....

Anonymous said...

In Sausalito, rich people are content to be crowded very close together. Away from downtown it's a tangle of small, winding hillside streets. We pack 7,061 people into a land area of 1.771 sq mi = 3,987/sq mi = 6.2 people/acre.

The most expensive single-family home currently for sale costs $8 million but sits on a lot of only 5700sf = 0.13 acre. Among all current single-family listings the average lot is 1/4 acre. And these listings begin at $1.3 million!

But it's nice to be crowded alongside other rich, old, White people.

Sincerely,
Dock of the Bay

Eric said...

As the wealthy have gotten wealthier, the economists find, that’s created an economic arms race in which the middle class has been spending beyond their means in order to keep up.

There's no medicine for idiots. If you have to borrow to maintain your lifestyle it's time to tone down your lifestyle a bit.

Eric said...

Generally speaking, contrary to the nonsense spewed by many free-market, open borders quacks, lower inequality corresponds with nicer countries, while higher inequality with the worst countries. Europe, Japan, and South Korea have low levels of income inequality, while the US ranks down there with all the vibrant African and South American countries

And yet the US is a pretty nice country, all things considered. Better than South Korea or most of Europe. And we could certainly be as nice as Japan if we were willing to become a mono-ethnic country. Doesn't have much to do with money.

Anonymous said...

I suspect if crime rates were to plunge to 50's levels (the much hyped reversion to 60's crime levels isn't particularly impressive, because crime rates went up 2x-5x from the 50's to the 60's), a lot of people would be less concerned about living in rich vs poor areas. But crime being what it is, concentrated in poor areas with big chunks of our major cities being no-go zones, simple self-preservation demands some attention to how wealthy your neighbors are. San Diego's stats are eye-opening: http://www.sandiego.gov/police/pdf/2013/UCRRates1950to2012.pdf

ben tillman said...

Here is a list of the 25 biggest landowners in the US.

-- #13 The Briscoe Family owns 560,000 acres.


That's an understatement, to say the least. The Briscoes are over a million acres.

ben tillman said...

Replacing the income tax with a fixed capital asset tax, first residence exempted, could be a solution to this dilemma.

And:

True dat. As a rural resident, the increase in land prices have driven me nuts. I believe a land value tax should be implemented.

You're on the right track.

One of Bowery's ideas is that this country should be viewed as a land trust for the benefit of the posterity of the founders.

Everyone's basic homestead would be exempt from paying rent (or taxes or protection money, if you prefer). Those who want to own more land than is necessary for subsistence (i.e., valued above a certain ceiling) would pay rent to the trust.

The rental proceeds would then be distributed in equal shares to each citizen as a citizen's dividend.

Anonymous said...

"why do the middle class stay in California?" - Because it is their home.

S. Cohen said...

I recently indulged in retail therapy; that trinket looks fabulous in my new dwellings.

I wonder if I'll be allowed to hang it in my next pad.

Frances said...

I must say a lot... unless they are all living in luxurious apartment buildings. This makes it quite reasonable to look for apartments for rent in Parkland WA if you cannot afford to finance your own home.

Anonymous said...

"There's plenty of places in the continental US with dirt cheap housing, plentiful jobs and next to no immigration. Go to Boise, Salt Lake City, Burlington or Pierre. All have strong economies, and lots and lots of land to keep home prices cheap."

WTF? Do you have any clue what you're writing about? Hispanics are 11.2% of Idaho's population, not much behind the national average of ~15%. I was going to cite data for Boise specifically, but they don't include stats for the metro area, which is 3x larger than Boise proper.

Salt Lake City is 22% Hispanic, with Utah at 13%. Utah was 91.2% white in 1990 but only 80.4% by 2010. Having recently seen the race data of every school district in the state, I can promise you it's still headed south. Even districts regarded as "white" have a surprising number of Hispanic students, with the numbers dramatically worse in the lower grades.

Pierre has all of 14,000 people, while Burlington metro has only 110,000 - not exactly realistic options for most people.
Compared Salt Lake's Hispanic populaton to Houston or Dallas that are 41 percent and counties around 35 to 38 percent. Utah is only 13 percent compared to 21 in Colarado, 30 in Nevada, 29 in Arizona, 45 or 46 in New Mexico, 38 or 39 in Texas and California. Utah has a long way to go in the West but conservatives trash Utah and cheer Texas.

Anonymous said...

It took me a while to understand why rich people in SF, Marin, Atherton, NYC support massive immigration. Its because there's downside for them. 10 thousand Chinese/Mexicans/etc. aren't going to move to Marin or Atherton, they can't. They can't afford it, and even if they could there's no room for them. So if you live in one of them "protected" wealthy areas, not only do your real estate holding skyrocket but you get cheap better quality nannies, gardeners, etc. - Its a win-win for them.
Well, Costa Mesa has a lot of Mexicans and isn't a cheap placed to live but its next to wealthy Newport Beach which is the Republican wealthy, so the illegals are their maids and so forth that live in Costa Mesa.