A new report this week estimated that among billionaires alone, the surging market accounts for a $1.1 trillion increase in wealth since the pandemic began in March. This windfall happened during a time when our democracy faced, in Trump, an existential threat, and when millions of Americans were devastated by Covid-19 while we were safely ensconced in second homes doing mostly non-essential jobs.
We’ve just lived through the term of a President who many of us in America’s top 1% bracket — defined in 2020 as having a net worth of at least $11 million — vehemently opposed even though we got richer during his administration.
Will the Democrats among us now have the courage to wholeheartedly support one who works hard to make us pay more taxes? Will we recognize that the nation needs our cash to rebuild and that the system that has been so good to us must be reengineered in the interest of fairness in politics, education, health and employment, as well as to repair our degraded social relationships and rebuild some semblance of national solidarity?
The next four years are critically important to the future of our nation and our world. The Democratic coalition that defeated Trump is fragile and could fall apart if its wealthiest members balk when asked to bear the financial costs of the economic programs required to keep it together. Let’s hope we prove up to the challenge of putting our money where our mouths have been. The alternative would be a disaster.
Doing the right thing will not be easy. Giving even a little of it up will be hard given the endowment effect and the deep connection many of us feel between net worth and self worth. However, here are some things that we should keep in mind to make it easier to do what’s right:
Don’t take tax increases personally. Yes, we are pretty smart, have mostly worked hard and played by rules which very, very few us had any hand in making. We’ve also had some luck. But this is not about personal virtue; it’s just about money.
Recognize that the deck has been stacked in our favor. Many of us — particularly those working in and around finance — have been paid, directly or indirectly, by taking a slice off the top of markets (e.g. equity, debt, derivatives) that have been driven to record highs largely by wage repression and socialized interest rates. We’ve been able to double dip by investing — it has been hard to spend all our income — in the market. The market (including reinvested dividends) is 26 times higher than it was in 1980 after adjusting for inflation. Most of those gains have gone to the 1%.
Stay calm. Proposals to raise tax rates can sound scary to the wealthy, but there is no need to pack our bags for Switzerland, Florida or some other tax haven just yet. Policy makers will be hesitant to make sudden changes that could tank the stock market, increase interest rates or depress asset prices given the collateral damage it would do to the middle class through their mortgage-financed homes, student loans and 401(k)s. Despite a few crazy days in 1987, 2001 and 2008 — thank God the Fed bailed us out every time — it has been a slow and steady rise to the top. The return trip will be no different.
Become our higher selves. This may be just the nudge those of us with more than enough money need to try new and better things: taking a new job, volunteering, learning the piano, or spending more time with our kids and grandkids.
Hold our heads high. One important task of politics is to arrange society so that people can pursue their own projects without doing wrong, injuring others or benefiting from their misfortune. But many of us have benefited from the misfortune of others who have suffered from awful things like wage repression, leveraged buyouts, reckless lending to consumers. A more balanced policy environment will make it easier to go to work with our heads held higher.
Relax about the kids. It’s only natural to worry about our kids and grandkids, but we know that too much money can be bad for them and we’ve still got plenty to help with college or medical bills if the need arises. Given how close we are to the top, regression to the mean guarantees that most of our kids will be significantly less wealthy than us. So a world less skewed to the wealthy will be better for them. And though technology-driven creative destruction has been brutal for many people, it’s created job opportunities among winner-take-all companies like Amazon and Google that our well-educated, well-connected children are strongly positioned to compete for.
Don’t fall for the rhetoric. Our success since 1980 has not been “capitalism,” and policies less friendly to us are hardly “socialism.” Let’s not embarrass ourselves by regurgitating the simplistic economics that we learned in college. The recurring crises of the past decade have left those simplistic notions largely discredited.
Go out with a bang! The world needs our money, so if we don’t want to lose it, let’s use it! Let’s give it away, invest it for real impact (e.g. climate, crumbling infrastructure, healthcare, social justice, etc.), or just go on a massive spending spree at a time when the economy could use the boost.
Keeping these things in mind will make it easier for us to embrace the obvious things that Joe Biden should do: raise our taxes, take explicit steps to shrink the finance industry (just like gambling and cigarettes, the growth of finance has been self-evidently bad even while being good to many of us) and establish new norms that emphasis fairness, median income growth and well-being rather than the stock market, GDP growth and the Forbes billionaires list.
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