It’s back: the old “but what about the families struggling to get by on $400,000?” storyline. This time we get a slightly more sophisticated version of the trope courtesy of The Washington Post’s Megan McArdle, picking up on a New York Times conversation between Gail Collins and Bret “bedbug” Stephens. But while McArdle frames her take on the issue as an explanation of why people might feel that $400,000 isn’t so much money even though they are—technically speaking—in the top 2% of household incomes in the U.S., ultimately, this is yet another justification for that thinking.
And I’m sorry, but there can be no justification for the view that people making $400,000 a year are just scraping by. Even in Manhattan, as expensive as it is.
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Data on Manhattan specifically is hard to come by, but according to a DQYDJ calculator, $400,000 gives you a household income in the 96th percentile in the New York City area. That drops to the 94th percentile in the San Francisco area. Nonetheless: “I’m only richer than 94 out of 100 people” is not the sob story some people seem to believe it is.
The inspiration for McArdle’s column came from Stephens and Collins over at the Times, whose exchange McArdle presents an extremely partial view of. In her description:
Stephens argued that a couple with a combined income of $400,000 a year doesn’t necessarily have a lifestyle we’d describe as “rich”: “They’re scrimping to send their kids to college, driving a Camry, if they have a car at all, and wondering why eggs have gotten so damned expensive.”
“Granted,” said Collins, which was the most fascinating part of this exchange.
Oh my heavens, not a Camry!
McArdle’s takeaway from the muted response to this exchange—which I’d suggest might be because the readers of the Times’ “the conversation” opinion feature are not a terribly online bunch—is to ask, “How have liberals gotten so comfortable with the idea that $400,000 a year — more than what 98 percent of the population makes — is really just a middle-class income?”
She then goes on to make an argument predicated on the notion that “liberals” think $400,000 is a middle-class income. McArdle doesn’t dwell on the fact that Stephens was the one making this argument, or that Collins followed her “Granted” with “although a middle-aged couple living in, say, Toledo, might have a different outlook. As much as I adore Manhattan, I don’t think its housing costs should be a template for national tax policy.”
The conversation Collins and Stephens were having, you see, was Stephens arguing that people are reasonably worried about the IRS funding to increase audits on high earners, because the earners who might be audited as a result were really just middle class. Collins was, in her very polite, New York Times liberal talking to a conservative colleague kind of way, pushing back on his argument, defending the IRS funding that will, she pointed out, not just audit the wealthy but provide better customer service to the non-wealthy.
So McArdle is starting with a slightly dishonest presentation of what she’s responding to—she has to find a way to take a shot at liberals, after all. But what about the substance of her argument on those pitiful $400,000 households?
Somewhat surprisingly, she goes in a perceptive direction, noting that the people in the stories about struggling top-five-percenters are always parents, and for a reason. It’s not just that tuition is a major expense (be it for college or for the private K-12 schools that people in these stories always seem to believe are non-negotiable for their precious offspring), it’s that they are concerned about ensuring that their children don’t slide down the class ladder in the precarious U.S. economy. This is a very good point—it’s just the execution that’s suspect.
Today’s $400,000 earners are strivers, she writes, climbing their way to the top rather than secure in their position of significant family wealth, and “many worry that their offspring will be downwardly mobile, which leads them to spend virtually all of their outsize disposable incomes on preparing the children to become star performers in the next round of competition.” That is necessary, in this mindset, because children who aren’t star performers will have to either rely on generational wealth or a political solution that shifts the incentives and risks. According to McArdle:
Unfortunately, generational wealth is an impossible dream for even most highly educated people for the very reason that it’s so attractive: the competition for scarce slots at a limited number of highly selective colleges (and the schools that feed into them) that function as the gatekeepers to the 2 percent, or the 3 percent, or the 10 percent. This zero-sum bidding war will consume any amount of extra money a normal professional can earn, because there is always something else you could be doing to give your kid a better shot at a good school and a good life — another tutor, another consultant, another enrichment program.
This paragraph has … issues.
First, generational wealth is not a term that applies only to families where the children will never have to work for a living. Generational wealth can mean graduating from college without loans. It can mean getting enough money for a down payment from an inheritance or gift. These and a thousand other forms of aid that middle-class and upper-middle-class parents give their children are generational wealth, and they make a real difference in people’s lives. In short, all of the people McArdle is describing here are passing on generational wealth—the question is if they understand that or if they are so focused on people who make more than them that they can’t see it.
(McArdle herself, by the way, went to an elite New York City private school and the University of Pennsylvania. She is an insider on the kind of class mindset she’s writing about here.)
These conversations about $400,000 families rest on a well-documented phenomenon in which people compare themselves to those who have more, rather than those who have less. So sure, you own an apartment or a townhouse in New York City and your kids go to private school and you take a couple vacations a year. But maybe you can’t afford to redo the kitchen in that home you own, and you are aware that your kids’ classmates’ families are donating more to the private school than you are (and, yikes, what if that means preferable treatment), and at best you rent a place in the Hamptons for a couple weeks rather than owning a vacation home. That’s the mindset we’re talking about, one in which the feeling is always of scarcity because there is always someone with larger piles of money.
And this: “This zero-sum bidding war will consume any amount of extra money a normal professional can earn ...”
Again, people in the top 2% or even just the top 6% are not “normal professionals.” They are extremely abnormal!
McArdle is making an important point here about parental anxiety, but it’s Megan McArdle, a woman who began her public writing career under the pseudonym Jane Galt, so there’s a gross Ayn Rand-flavored conclusion to her political argument. That conclusion is basically that this poor-me mindset is the only reasonable response to increasing economic inequality, because “government cannot give them what they crave: a low-effort way to ensure that their kids never fall out of their world.” Government, you see, will only ever produce average results on the whole.
Thus, the unsolvable dilemma of the broke 2-percenter. If you would be satisfied knowing that your child had a secure but unremarkable life managing a Walmart in some exurb, the government could probably guarantee that. And, with a solid six-figure income, you could probably prepare them for that world without any government assistance. But then, if you could be satisfied with a solid ordinary life, you probably wouldn’t have spent decades working overtime and delaying gratification in order to make it into the 2 percent.
Raise your hand if you think that the kind of life people have on $400,000 a year in Manhattan or San Francisco represents delayed gratification. And yes, those people are by and large in careers that demand long hours. But you know what? Nurses work long hours. Workers in Nabisco cookie and cracker factories work long hours. Freight rail workers work long hours. Fast food workers who have to work multiple jobs to pay the bills work long hours. Working long hours is not the unique province of people who get paid hundreds of thousands of dollars a year to do it and then whine about how hard they have it.
McArdle, the former Jane Galt, sees economic inequality and contempt for “a secure but unremarkable life” as natural and desirable. If you’re making $400,000 a year, you must in some form be worth it, in this worldview, and therefore your wishes for your children matter more than those of people with less money. Never mind the generational wealth that is very likely to have gotten you to that point to begin with—she’s not dealing in realities about how medium amounts of wealth confer advantages, only in acknowledgment that for a very few people, large amounts of wealth make striving unnecessary. This defense of the $400,000 club is all about the view that it’s better for a tiny number of people to be very wealthy, a huge number of people to be poor or near-poor, and a small but vocal number of people to be only moderately wealthy and clamoring to get into the very wealthy category than for a majority of people to be secure but unremarkable in a society with less wealth concentrated at the very top. Don’t mistake it for anything but that.
And if you ever find yourself in the top 10% of national income distribution and you feel inclined to argue that your personal financial struggles should be the basis upon which tax policy is made, please shut up.