wealth – Sheila Kennedy

When You’re Rich They Think You Really Know

I typically listen to music when I’m trudging on the treadmill, and my preference is for tuneful songs with lyrics I can understand. (I’m old!).

I’ve previously posted about the insights and real wisdom often conveyed by musical lyrics, especially a favorite line from Fiddler on the Roof’s “If I Were a Rich Man.” Tevya sings that, if he were rich, the men of the town would all call on him for advice; he then sings “And it wouldn’t matter if I answered right or wrong. When you’re rich, they think you really know.”

As Trump assembles an administration of very rich men, we are about to see the fallacy that Tevya identified play out in real time.

Americans have a long history of confusing celebrity with competence and wealth with intellect. Those with eyes to see have always recognized that Trump himself is a deranged ignoramus with a bloated ego. Before Elon Musk bought Twitter and turned it into “X,” he’d been able to maintain a reputation as highly intelligent partly because few people knew that–like Trump–his fortune began with an inheritance, and that he’d purchased Tesla–not invented it.

The United States is about to be governed (or ruled) by a whole cohort of equally clueless rich White guys, and the most pertinent question is how much damage will they do? These are, after all, the “captains of industry” who think they know more than they do, who don’t know what they don’t know, and who are unlikely to listen to people who have actual expertise in economics and/or a wide variety of public policies. (As Tevya would say, “they think they really know.”)

Paul Krugman recently considered that conundrum in a newsletter titled “Never Underestimate the Ignorance of the Powerful.” He began by reproducing one of Trump’s “Truth Social” posts, in which the incoming President proposed substituting tariffs for income taxes. “Tariffs” Trump posted, “Will pay off our debt and MAKE AMERICA WEALTHY AGAIN.”

I don’t know about you, but I’m still extremely unsure what the incoming president will actually do about trade. The Smoot-Hawley level tariffs he promised during the campaign would be disastrous, but sometimes I think he may have at least a vague sense of the damage those tariffs would do, so what he’s really aiming for is an extortion scheme — one in which most companies would secure exemptions via political contributions and/or de facto bribes (e.g. buying Trump crypto.)

But then he’ll come out with something like the Truth Social post above, and I’ll be reminded that wealthy and powerful people like Trump or Andreesen or, of course, Elon Musk are often far more ignorant than policy wonks can easily imagine.

As Krugman reminds us, Trump very publicly disdains expertise, and Musk “appears to get what he thinks is intelligence from random posts on X.”

Krugman attributes this intellectual defect to “the arrogance of success.”

In the academic world there’s a familiar phenomenon sometimes called “great man’s disease,” in which a successful researcher in one field assumes that he (it’s usually a “he”) is so much smarter than experts in other fields that he doesn’t need to pay attention to their research. Physicists make confident, deeply ignorant pronouncements about economics; economists make confident, deeply ignorant pronouncements about sociology…

This kind of arrogance presumably comes even more easily to men of great wealth. After all, if these so-called experts are so smart, why aren’t they rich like me?

As Krugman also notes, wealth and power attract hangers-on who will tell the great man what he wants to hear. “There are wealthy men with enough humility to accept constructive criticism — I’ve met some of them. But such men don’t seem likely to play a role in the incoming administration.”

When Trump or Andreesen ask why we can’t go back to the McKinley era, when the government subsisted on tariffs and didn’t need an income tax, their problem isn’t failure to understand the revenue function; it’s failure to appreciate the simple fact that in the 1890s America barely had a government by modern standards.

Sure, tariffs could pay for a government without Social Security, Medicare and Medicaid, at a time when even the military was tiny. But the constituency for returning to that kind of small government consists, as far as I can tell, of a couple of dozen libertarians in bow ties. And the kind of government we have now needs a lot more than tariffs to pay its way.

Bottom line: we’re about to discover the real downsides of a kakistocracy…

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Telling It Like It Decidedly Is

Last Sunday, Washington Post contributor (and one of my go-to opinion writers) Jennifer Rubin addressed one of my long-time pet peeves. Okay, not the longest peeve, but prominent since the 2016 election: the evidently widespread, naive belief that very rich people are smarter than the rest of us.

I’ve previously quoted a stanza I love from “If I Were a Rich Man”–the one in which Tevye says that, if he were rich, the important men in town would call on him, “posing questions that would cross a Rabbi’s eyes.” And we know he understands the way the world works, when he follows up with “And it wouldn’t matter if I answered right or wrong. When you’re rich they think you really know.”

Rubin’s essay underscores that observation.

“The idea of a self-made American billionaire is the super-sized version of all other self-made myths, and outlandish to the point of being at least mildly insulting,” BSchools.org, a blog about business schools, explained. “Individual achievement still deserves recognition. But these things don’t operate in a vacuum — and massive wealth is never solely attributable to the actions of a single person.”

As we have learned again and again this year, sometimes the self-appointed “genius” billionaire is simply a crank, a con man or a beneficiary of familial wealth and luck.

Rubin proceeds to elaborate. There’s Donald Trump (currently facing four criminal indictments and civil liability for exaggerating wealth that was built on inheritance and inflating his property values), Sam Bankman-Fried (facing a lengthy prison sentence for fraud), and of course, Elon Musk (who has now lost more than half of Twitter’s value, and most recently “self-incinerated in a now-viral interview in which he crassly told off advertisers.”)

When outside the protective shell of sycophants and propagandistic media, these characters often reveal themselves to be petulant, deranged and shockingly out of touch with reality.

Rubin explores the historical bases of this very American enchantment with individualism, including the myth of the cowboy, and his celebration by Movement Conservatives, who–as Heather Cox Richardson has pointed out– saw that cowboy as “a hardworking white man who wanted nothing of the government but to be left alone to work out his own future,” .

President Barack Obama in challenging the myth (“You didn’t build that”) attempted to remind these characters that they’ve reaped the benefits of government (which builds the infrastructure, educates the workforce, ensures public confidence in medicines, etc.); for that he was demonized as somehow un-American and anti-capitalist. The episode underscored the degree to which American oligarchs and their political surrogates depend on delusion and denial.

This myth lives on, in large part because the uber-rich are adept at self-promotion, which our celebrity culture gobbles up. “Portraying themselves as rugged individuals who overcame poverty or ‘did it on their own’ remains an effective propaganda tool for the ultrawealthy,” wrote former labor secretary Robert Reich. He continued, “Billionaires say their success proves they can spend money more wisely and efficiently than the government. Well they have no problem with government spending when it comes to corporate subsidies.” And the lure that the ordinary person can achieve the same ends — if they just work harder or put forth the next clever idea — holds a certain attraction while discouraging policies that seek to equalize the playing field (e.g. a progressive tax system, public investment in education).

Rubin’s essay reminded me of my favorite Elizabeth Warren quote:

There is nobody in this country who got rich on their own. Nobody. You built a factory out there – good for you. But I want to be clear. You moved your goods to market on roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory… Now look. You built a factory and it turned into something terrific or a great idea – God bless! Keep a hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

Are there people whose drive and intellect allow them to achieve more than their neighbors? Of course. But individual achievement is either limited or facilitated by the legal and economic systems within which that individual expends his or her effort. And–as Rubin’s essay also reminds us–financial status doesn’t necessarily reflect wisdom or virtue or the possession of other admirable qualities.

Some people are admirable. Some are not. One’s finances, however, are rarely an accurate indicator.

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Red States, Blue States…

The battles over abortion are highlighting some previously under-appreciated differences between life in Red and Blue states. Those differences include health outcomes as well as economic circumstances..

As Jennifer Rubin summed it up in the Washington Post,

If you live in a red state, your risk of getting and dying from covid-19 is higher than in blue states. On average, your life span is shorter, your chance of living in poverty higher, your educational attainment lower and your economic opportunities are reduced relative to blue-state residents.

There are–as Rubin also acknowledges– policies being pursued in Red states that are increasingly persuading people to decamp and live elsewhere: If they have a choice, “diverse” workers–LGBTQ+ folks, women and members of minority groups with skills needed by high-tech businesses– frequently choose to live in places they find welcoming, or at least safe. (As we saw when Indiana passed RFRA, unlike Republican politicians, local business enterprises understand that they are significantly disadvantaged in unwelcoming states. Low taxes– accompanied by a corresponding lack of public amenities and a poor or mediocre quality of life–simply aren’t enough to attract either new business or the skilled workforces on which those local enterprises depend.)

Red states like Indiana that have participated in the unremitting right-wing attack on public education tend not to produce the educated workforces that appeal to companies looking to relocate. Those disadvantages have produced the significant differences between Red and Blue state economies. As the Brookings Institution has reported,

To be sure, racial and cultural resentment have been the prime factors of the Trump backlash, but it’s also clear that the two parties speak for and to dramatically different segments of the American economy. Where Republican areas of the country rely on lower-skill, lower-productivity “traditional” industries like manufacturing and resource extraction, Democratic, mostly urban districts contain large concentrations of the nation’s higher-skill, higher-tech professional and digital services.

Many of these differences have been apparent for years–and as the Brookings report noted, they have recently been accelerating. But that’s not all. As Rubin writes,

And then came the abortion bans. Thousands, if not millions, of women of childbearing age might reconsider their residence if they want to avoid the potentially life-threatening bans — or if they simply want to be treated like competent, autonomous adults.

There are signs the reality of forced-birth laws are registering with those most affected. Reuters reports: “The U.S. Supreme Court’s decision in June to overturn the 1973 Roe v. Wade case that legalized abortion nationwide has some students rethinking their higher education plans as states rush to ban or curtail abortion, according to interviews with 20 students and college advisers across the country.” While the evidence is anecdotal at this point, “in the wake of Roe’s overturn, college counselors said abortion has figured prominently in many conversations with clients, with some going as far as nixing their dream schools.”

Lest you be tempted to “pooh pooh” the effect of Dobbs on the college choices of talented young women, I have an example close at hand. My granddaughter–an excellent student–immediately removed Texas’ Rice University–an otherwise highly desirable school– from her list of schools to consider. She’ll attend the University of Chicago, in Illinois, a pro-choice state.

The Times reports that blue-state governors have begun “depicting their abortion rights policies as a business advantage, reinforcing the appeal of the wealthier and more progressive states that many businesses opt to call home in spite of their taxes.

In fact, multiple data points confirm that, among other things, the GOP’s cult ideology decreases life expectancy and keeps many women out of the workplace. It also contributes to the “brain drain” that sends a state’s college graduates to places with more educated populations and a higher quality of life. And if you don’t think any of this really makes a difference in individual life prospects, Brookings will disabuse you of that belief

With their output surging as a result of the big-city tilt of the decade’s “winner-take-most” economy, Democratic districts have seen their median household income soar in a decade—from $54,000 in 2008 to $61,000 in 2018. By contrast, the income level in Republican districts began slightly higher in 2008, but then declined from $55,000 to $53,000.

Underlying these changes have been eye-popping shifts in economic performance. Democratic-voting districts have seen their GDP per seat grow by a third since 2008, from $35.7 billion to $48.5 billion a seat, whereas Republican districts saw their output slightly decline from $33.2 billion to $32.6 billion.

Retrograde public policies have real-world consequences. And those consequences are substantial. Indiana has long suffered the economic and health results of an unhinged and provincial legislature, but it’s about to get much, much worse.

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Wealth and Power

For the last few years, there’s been a good deal of debate over the growing gap between the rich and everyone else.

We’ve all seen the numbers: the top 1% of Americans own 43% of all the nation’s wealth, and the next 4% owns another 29%. Meanwhile, 80% of Americans share only 7% of the nation’s total wealth.

That bare fact is troubling enough–disparities of this magnitude typically generate resentment and often lead to significant social disruptions–but the reasons for that gap are even more worrisome. The truth of the matter is that money buys access and power. Poor folks don’t have lobbyists, they don’t make significant political contributions. To use academic jargon, the poor lack “voice.” Meanwhile, the rich have megaphones.

Look at the proposals to cut the deficit–a deficit caused primarily by two ill-considered wars (wars that “coincidentally” enriched a number of major corporations) coupled with massive tax cuts for the wealthy. Programs at risk include things like early childhood education, low-income housing programs, community health centers, family planning and job training–all programs that assist poor Americans. It’s estimated that cuts to these programs will “save” 44 billion dollars (save is in quotes because most of these are short-term savings with significant long-term costs). Meanwhile, the recent extension of the Bush tax cuts to the richest 2% of Americans cost the treasury 42 billion a year. Changes to the estate tax–dubbed the “death tax” by opponents–cost another 11.5 billion.

Let me be very clear: I accept the argument that confiscatory tax rates dampen innovation and entrepreneurship. And I not only accept, but heartily endorse market economics. I’m a capitalist and make no apologies for that. But American tax rates are at their lowest levels in fifty years, and one would have to be delusional to believe that returning the top rate to 39%–the rate during the Clinton administration–would discourage investment. What is even clearer is that we have abandoned markets in favor of crony capitalism. Large employers and the wealthy have used their clout to game the system; they have effectively bought tax and other advantages that have had the effect of protecting them from the very market forces they so piously invoke. Instead of a genuinely free market, where businesses compete on a level playing field, we have an economic oligarchy–an Animal Farm where some are much more equal than others.

This state of affairs is bad for the economy in the long term. It is worse for social stability and democratic institutions.

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