White House Playbook: Arbitrary Numbers and Financially Ignorant Sloganeering

President Obama this Tuesday stated his case for increased taxes on “the rich” as part of his solution to balance the deficit. “Keep in mind,” he assured the American people, “that under a balanced approach, the 98% of Americans who make under \$250,000 would see no tax increases at all.”

I have a very basic question that I am not sure anyone has pressed Mr. Obama to answer: Where did this figure of 250k, north of which one is considered by him to be among “the rich” even come from? Its very roundness tells me that it was the result not of a detailed actuarial analysis but rather some sort of arbitrary caprice that only those completely isolated from any private sector experience can conjure up. I almost get the feeling it was something as off-hand as: “Hey 250k sounds right to me. Nice number. So whattya think?” Sure write it in there.

Consider: if you are living in Little Rock, Arkansas and make \$249,000 according to the president you are not “rich” and thus do not need to kick in more. Yet if you live in, say, New York City and make \$251,000 you are “rich” and so it’s time to ante up. Is that how it works? Again I ask: what is so magical about \$250,000? Why is the cut-off not \$246,500 or \$310,231? Isn’t anyone curious about how this man creates economic policy?

Let’s look at it this way. Someone in the New York metro area making \$251,000 need only make \$100,000 to garner the same standard of living in Little Rock, Arkansas. For instance, a family of four searching for a two-bedroom apartment in Manhattan can expect to pay anywhere from the low end of \$2,100/mo in Harlem to \$6,700/mo+ in Tribeca. (That of course makes the two kiddies double up in one room). In Little Rock you can find a comparable apartment for an average of \$700/mo. New York’s low end is three times Little Rock’s average. (This standard of living discrpency, in fact, serves as an indictment of the unfairness of our entire messed up tax code but I digress.)

So again I ask where does this \$250,000 level come from?

Am I the only one who would like to see the methodology that prompted Mr. Obama to conclude that \$250k is universally “rich” across the entire landscape? Just the very neatness of this number and the lack of any tax rate increase that takes into account zip code shows that this man still has little understanding of the way things really work. This is the classic symptom of the ideologue + academic wonk formula.

Furthermore, as if Mr. Obama does not show enough ignorance when it comes to what numbers really mean, in the very next sentence he changes his tune and offers this: “What we’re talking about under a balanced approach is asking Americans whose incomes have gone up the most over the last decade – millionaires and billionaires – to share in the sacrifice everyone else has to make.” So who will be targeted for higher taxes, the \$250k+ crowd or the \$1mm+? Make up your mind and tell is who in Obamaland who are “the rich” exactly? Are they people who make 250k or those who make four times that amount and higher?

One facet of public discourse that makes it hard for me to watch addresses like his is that once a platitude sticks, it cannot be shaken off the hand (“kinder gentler nation,” “compassionate conservatism,” “hope and change,” etc.) And the latest arrow drawn from the Obama class warfare quiver is the phrase “tax breaks for millionaires and billionaires” as if these two decidedly different groups are somehow one in the same. Heck even a well-read historian hit me with this “millionaire and billionaire” phrase on Facebook today. Let me explain something. The difference between a millionaire and a billionaire can be summed up in this handy illustration: If you have one million dollars and you spent one dollar a second on a 24/7 cycle you would have enough to last you eleven and a half days. If you had a billion dollars and spent it one per second, you would be dropping down George Washingtons every day, day in and day out, month in and month out, for the next thirty-one and half years before you finally exhaust your bank account. That is what 1,000 times more really means. The phrase “millionaires and billionaires” sounds nice because it’s catchy, indeed it rhymes, and thus fits well into the teleprompter-in-chief’s modus operandi. But to even utter millionaire and billionaire in the same breath as part of a single class is the mathematical equivalent of comparing a foot stool to the Empire State Building…literally.

Many so-called “millionaires” are classified as such not by annual income but rather by net worth. They are often small business owners who, though on paper are worth seven figures, cannot just sell their business and go liquid. They also employ anywhere from 50% to 60% of the workforce depending on how you classify them. And many, in fact, take home less than \$250,000 a year in compensation at times. The business comes first. Conversely, many households that bring in \$250k+ (especially that 4-person family crammed into that 2-bedroom Manhattan apartment) don’t have even close to a million dollar net worth. So though the rhetoric strikes a chord in the Sherwood Forest of Obama’s core constituency, the truth is that individual household situations are much more complex and varied than Obama’s blanket “millionaire” classification implies…and most millionaire-next-door types hardly live the lives of a billionaires. (I mean, I doubt many of them have \$99,000,000 in their passbook savings account that was shown to be the case for one East Hampton billionaire when he left his ATM receipt at the machine a month back).

So, on behalf of those who live in the most expensive areas of the country (often because in this economy that’s where the jobs are) I want a more detailed explanation from the president as to why he thinks it will be easy for us to cut back on our spending in other areas to support an even higher tax bill, but it is impossible for the Federal government to do its own cutting so that I needn’t pay more at all. I want to know why I am “rich” but someone making just shy of a quarter stick per annum in inexpensive Arkansas is middle class. I want to see the formula he used for coming up with a \$250,000 cut off point…if one even exists at all. And finally, I would just like to ask does he even know the difference between a millionaire and a billionaire? And if not, quit lumping them together. Honestly, it looks foolish and reeks of blatant and unapologetic class warfare. Uniter indeed!

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