The Fiscal Times, a propaganda arm for Pete Peterson (although how one could tell the difference between The Fiscal Times and the ostensibly non-partisan Washington Post), has an article that purports to describe how difficult it is for the ‘average’ family that makes $250,000 per year.
If we spot The Fiscal Times most of the expenses (I’ll return to that in a bit), the article really shows the effect of hidden assumptions. Two big expenses are saving for college ($8,000) and retirement ($33,000), as well as healthcare (~$13,0000–in a nation where the median household income in $50,000. Since college and retirement are important, The Fiscal Times implies these aren’t frivolous expenses. Since this well-off family is barely breaking even, tax cuts! (Or at least, no hikes).
But from a policy perspective, there are other remedies:
1) Healthcare expenses. With real healthcare reform, we could have lowered costs for everyone. Instead, we got Romneycare.
2) College tuition. As I’ve discussed many times, colleges and universities charge what they can get away with. That’s one reason why prices have risen faster than inflation.
3) Retirement savings. I’m going to sound old school here, but many people, not just government employees, used to receive defined benefit pensions as part of their compensation (especially the upper strata). 401(k) plans are a faint comparison (by the way, they predate the new, highly mobile economy. They were, like many things stemming from the Reagan era, a way to provide tax subsidies to wealthy people for stuff they were doing anyway). Better pensions–that is, more compensation–not lower taxes is the issue here.
But like I said at the beginning, Pete Peterson and his minions don’t want to do any of these things. And the tell is the list of expenses, as Brad DeLong points out (italics mine):
At an income level of $250K/year in America today, a family owes about $65/year in all taxes–federal, state, and local; income, sales, property, and social insurance. Subtract off $1.5K/year for a gold-plated dog and $8.5K/year in “necessary” eating-out and bringing-in and you are down to $175K/year. Take off another $75K/year in savings (paydown of real mortgage principal and student loans, 401(k)s, and a college fund) and you are down to living on $25K/year per capita in consumption expenditures.
Only rich families in America today live in detached houses with spare bedrooms in high-tax high-cost areas (and get the services and amenities those buy), spend $36K/year on mortgage payments, $4K/year on clothes and dry cleaning, $8.5K/year on eating-out and bringing-in, $3K/year on gifts and holidays, $20K/year on daycare, babysitting, and summer camps–and still save $75K/year. That is what rich families in America do: that is how they spend their money. The fact that after they have spent their money and paid their taxes there is only $75K/year left for savings is not a sign that they are not rich.
Next, I’m sure, The Fiscal Times will run an article about how difficult it is for a family that makes $450,000 per year.