Fiscal Cliff Semantics
From watching the fiscal cliff negotiations from (very) afar, I’ve gleaned two things to date: 1) apparently, the $250k threshold for raising income taxes has now been raised to $400k (the Republicans initially insisted on $1 million); 2) we now have yet more evidence that President Obama is a lousy negotiator (Gail Collins’ NYT column today recounts Obama getting picked clean in a poker game with colleagues just after he was elected to the U.S. Senate in 2004).
Judging by the ebullient stock market, it certainly appears that there’s going to be a deal, sooner rather than later — or, if there’s not, the potential economic harm has been exaggerated.
So, one way or another, disaster is going to be averted.
But what I found most interesting about this latest political episode is the extent to which “the right” has seized control of the all-important semantics tug-of-war.
Specifically, I’m referring to how people apparently now define a millionaire.
“Millionaire” — or “Multi, Multi-Millionaire?”
One upon a time, of course, being a millionaire meant having a net worth greater than . . . $1 million.
As Homer Simpson is fond of saying, “D’ohhh!”
Today however, that definition has somehow morphed into “making more than $1 million annually.”
There’s certainly nothing wrong with that; I’d like to be in that club.
And, given inflation’s long-term toll on the dollar, $1 million isn’t what it used to be.
In fact, top earners on Wall Street can make 1,000(!) times that today, or $1 billion a year (repeat: ‘in . . one . . . year’).
But, let’s just be clear: if you’re one of those select folks who made $1 million in 2012, it’s highly unlikely that your net worth is just $1 million.
I suppose it’s possible to conjure up scenarios where someone who pulled down that amount at one point is actually broke.*
Here’s one: a lottery winner, one (five?) years later.
Here’s another: a 23 year-old pro baseball/football/basketball player who makes the “bigs” — only to sustain a career-ending injury their first year.
Such a person is highly unlikely to be a millionaire at age 24 — or any age after that.
But, those certainly aren’t the usual profiles of people making $1 million a year.
Much more common is the corporate or financial executive, whose career arc is 30 years or more, and whose income is much more stable.
Someone who made more than $1 million in 2012 very likely made that amount in 2011, 2010, 2009, etc. — and is very likely to make that several years into the future.
Income vs. Balance Sheet
I suppose someone who made that kind of money could promptly spend every dollar they earned, and in theory be worth $0.
But I doubt it.
The taxation debate in this country is sure to continue for many years to come.
So, let’s get our semantics straight now: anyone who makes $1 million in a single year is most likely a multi, multi millionaire, not a lowly “millionaire.”
The Semantics Slippery Slope
Why is any of this such a big deal?
Because semantics matter.
Once upon a time, CEO pay was defined relative to the bottom rung, i.e., how much the janitor made.
From a ratio of 35:1 in the 1950’s, that ratio swelled to 500:1 by 2000.
So what happened next?
Instead of society actually taking any steps to rein in outrageous exec comp . . . the ratio was simply redefined.
Now, it’s how much the CEO makes relative to the average worker.
Even though CEO pay continues its upward arc, the “optics” on it look better.
Per Year? How About Per Day? (Per Hour??)
Where’s all this going, you say?
If income inequality gets even worse in the future, just redefine millionaires — again — as folks who make $1 million per calendar quarter.
Or perhaps $1 million a month.
Consider this: the U.S. citizens who made the most in 2011 — several came close to $4 billion — made almost $2 million an hour.
How nice to make hundreds of millions a year — as dozens of U.S. businessmen now do routinely — and pay the same tax rate as a teacher, social worker, or cop.
The bigger lesson?
The people society has most to fear aren’t the putative leaders, but the Goebbels’ and the Gingrich’s’ and the Frank (“job creator”) Luntz’s, who frame the issues.
*Donald Trump was supposedly strolling with a reporter in Manhattan in the early 1980’s — a time when his heavily-leveraged real estate empire was in shambles due to depressed prices.
When they passed a homeless man on the sidewalk, Trump paused and said, “see that man? He’s worth $500 million more than I am.”
When the reporter gave him a quizzical look, Trump explained: ‘that man’s penniless. I owe $500 million.”