Macro Roundup

"...But Professor Markovits also claims that meritocracy is as painful for the people on the top rungs of the ladder as it is for those lower down. “The elite and the middle class are not coming apart,” he writes. “Instead, the rich and the rest are entangled in a single shared and mutually destructive economic and social logic.” The idea of meritocracy has long been used by the rich for self-justification. Now it is becoming fuel for their self-pity. The raw competition for success, so the argument goes, hurts the winners as much as the losers: It is “mutually destructive.” But this is not true. By any objective measure, the rich are doing just fine. They are wealthier and healthier than ever. Economists at the Brookings Institution found that the top 10 percent of male earners born in 1940 can now expect to live to the ripe old age of 88, 12 years longer than male earners born the same year in the bottom 10 percent. This is not to say that successful people are immune to life’s difficulties and strains. But there is no moral equivalence between the stress of a senior executive staying up late to polish a presentation for a client and the stress of a retail worker unsure if she will get the shift she needs to make rent...."

Richard Reeves, "Now the Rich Want Your Pity, Too,"New York Times, October 5, 2019, https://www.nytimes.com/2019/10/05/opinion/sunday/rich-meritocracy-pity.html

If the wealthy are so stressed out, whose fault is that?

Seems like it’s getting tough at the top. The winners in America’s meritocracy are suffering. Children in affluent homes are being hothoused through childhood, stress-tested into elite schools and colleges, and pushed to the brink of suicide or breakdown. Their highly educated mothers and fathers are putting in long hours in their chosen professions: money-rich, perhaps, but time-poor.

The whining of the wealthy is getting louder.

Their new complaint is that they, too, are suffering at the hands of “the system.” The system in question is the same meritocracy that in many cases has elevated them to their high perches. True, they have most of the money, wealth, power and opportunity. But they are working very hard for these advantages and they are working just as hard to secure them for their children.

Staying at the top, it turns out, is exhausting and expensive work. Perhaps sick of being cast as villains, some of the rich and successful have decided to declare themselves victims.

The latest diagnostician of this elite malaise is a Yale law professor named Daniel Markovits. In his widely discussed new book, “The Meritocracy Trap,” he shows correctly how the ideology of meritocracy hurts the millions of people who don’t make it to the top. The idea that successful people deserve the economic rewards flowing from that success is a pernicious myth.

But Professor Markovits also claims that meritocracy is as painful for the people on the top rungs of the ladder as it is for those lower down. “The elite and the middle class are not coming apart,” he writes. “Instead, the rich and the rest are entangled in a single shared and mutually destructive economic and social logic.”

The idea of meritocracy has long been used by the rich for self-justification. Now it is becoming fuel for their self-pity.

The raw competition for success, so the argument goes, hurts the winners as much as the losers: It is “mutually destructive.” But this is not true. By any objective measure, the rich are doing just fine. They are wealthier and healthier than ever. Economists at the Brookings Institution found that the top 10 percent of male earners born in 1940 can now expect to live to the ripe old age of 88, 12 years longer than male earners born the same year in the bottom 10 percent.

This is not to say that successful people are immune to life’s difficulties and strains. But there is no moral equivalence between the stress of a senior executive staying up late to polish a presentation for a client and the stress of a retail worker unsure if she will get the shift she needs to make rent.

The problems of the affluent are not systemic. They are self-inflicted. Well-heeled Americans have persuaded themselves that the stakes are high in every race in life. Especially when it comes to their children, the good is never good enough. Their children must have the best: the best preschools, the best high schools and the best colleges.

And they are willing to make sacrifices. George Packer reports in The Atlantic that affluent New York parents sleep on the streets to be first in line to enroll their children for nursery school. “I feared that I’d cheated our son of a slot by not rising until the selfish hour of 5:30,” he writes. But sleeping rough is nothing compared to the length parents will go to in order to get their children into an top-notch college, as opposed to, say, a good public university.

The financier William McGlashan was one of the parents accused of gaming the system in the recent college admissions scandal. In a series of calls wiretapped by the F.B.I., Mr. McGlashan discussed photoshopping pictures of his son to make it appear that he was a football player to help him gain entry to the University of Southern California. At one point, Mr. McGlashan lamented, “The way the world works these days is unbelievable.” But that is not the way the world works: It is the way he was working the world.

Affluent parents devote extraordinary resources — money, time, string-pulling, to getting their kids into College A, which is infinitesimally better on some measures than College B. The first 18 years in the lives of the children of these parents have become an expensive, extended college preparation course.

It is surely true that this imposes enormous stress on the child or young adult in question, and possibly on the whole family. As one remedy, Mr. Markovits suggests that highly selective schools should “modestly increase the number of rich students” admitted, in order to “relax competition among rich applicants.” This is a regressive proposal, but it flows naturally enough from a concern about the plight of the overstretched children of the elite classes. To be fair, he also wants them to admit more poor and middle-class students, by expanding their class sizes.

There is nothing wrong with parents spending a lot of money on their children. If they want to pay for them to attend a highly selective private college, religious institution or small liberal arts college, it’s their money. The problem is not so much that rich people are spending as much as they are on these goods — although that, too, is absurd. It is that they have begun to feel burdened by these costs and everything that leads up to them, all of which they have convinced themselves are unavoidable.

The broader political danger is that the affluent will become even more resistant to paying the higher taxes that are necessary for redistribution or better public services because they feel under such financial pressure themselves — forgetting that, unlike the pressure the poor face, it is self-inflicted.

I have some better — and cheaper — ideas to improve the lives of the rich. If you are spending thousands of dollars and thousands of hours cultivating your children to get them into the most selective institutions: Just stop. Your kids will be just fine attending a good public university. And everyone’s life will be more relaxed in the meantime.

If you are a professional working yourself sick in order to make a big salary: Just stop. Nobody is forcing you to work such long hours. Maybe you will only be rich, as opposed to superrich. But you’ll be O.K.

If you are a homeowner with a huge mortgage that you took on in order to live in the very best neighborhood: Just stop. There is no law that says you have to live in the most expensive ZIP code you can afford.

Because, you see, nobody is making you do these stressful, expensive things. It is not a trap. It is a choice. If you don’t want to be stressed out, stop making decisions that will stress you out. It is probably true that rich Americans are making decisions about their lives and their children’s lives that are resulting in more stress and more spending — and so more stress. But it is also true that they could be making different choices. They are not powerless.

People with money, power and education have the privilege of being able to lead a good life without too much stress and insecurity. If they choose to throw that away in the pursuit of some ideal of perfection, well, that’s on them. Their stress is entirely the result of their own decisions. The very least they could do is refrain from asking for sympathy from everyone else.

Will get Saez/Zucman's data from the book if you would like, they seemingly foreshadow this chart in a paper they presented @ BPEA early this fall. Have a copy in the queue will send you if you would like

In that they seem to be referring to marginal, not effective rates. Here is the relevant language

"...The three traditional progressive taxes—the individual income tax, the corporate income tax, and the estate tax—have weakened. The top marginal federal income tax rate has fallen dramatically, from more than 70% between 1936 and 1980 to 37% since 2018. Corporate taxes (which are progressive in the sense that they tax corporate profits, a highly concentrated source of income) relative to corporate profits have declined from about 50% in the 1950s and 1960s to 16% in 2018. Estate taxes on large bequests now raise little revenue due to a high exemption threshold, many deductions, and weak enforcement.2As a result, when combining all taxes at all levels of government, the US tax system now resembles a giant flat tax. All groups of the population pay rates close to the macroeconomic tax rate of 28%, with a mild progressivity up to the top 0.1% and a significant drop at the top-end, with effective tax rates of 23% for the top 400 Americans..."Emmanuel Saez and Gabriel Zucman, "Progressive wealth taxation," Brookings Papers on Economic Activity, September 5, 2019, https://www.brookings.edu/bpea-articles/progressive-wealth-taxation/

Seem untruthful to say the rich paid 70% in 1950. Is this marginal or average? Is it tries. These guys have proven unreliable. The Rich Really Do Pay Lower Taxes Than Youhttps://nyti.ms/2AOevjf