A little rich

There is, alas, a kernel of truth that has passed undigested inside this buffalo dung; hedge fund managers donate heavily to Democrats, and seem to be getting what they pay for.

The proposal to which the op-ed refers, making hedge fund folks stop pretending their ordinary income is capital gains, is not dead, according to Charles Schumer, only sleeping. If Schumer and the Democrats leave this so-called “loophole” (actually misinterpretation of tax law) intact, they will show themselves to be the “party of the rich,” for there’s no justification for it, and it is nothing more or less than government welfare for the rich.

Pelosi is heavily influenced by the west coast techies. Rubin-o-nomics is “reverse Robin Hood” in full blossom.

The Cuomo-Krugman interview (Guardian America last week) had an interesting aside on who represents the hedgies and wher their campaign contributions land.

Going way back to Russell Long and Wilbur Mills, the Democrats have been adept at creating their own set of loopholes and blaming all loopholes on the GOP.

So, I gather that Mr. Franc, the Heritage Foundation, and the Republcian Party are calling for an increase in taxes on the rich? That’s a surprising development . . .

I have a lot of respect for the Financial Times – they do a better job in my estimation than any other newspaper of preserving a high quality of debate and are usually quite scrupulous about factual detail.

I wouldn’t put it quite this way. There is a pretty steady stream of nutty right-wing guest opinion pieces. (Although the departure of Amity Schlaes from the regular op-ed rotation was a considerable addition by subtraction.) There are problems in their news coverage, too. Even in financial coverage, there are too many stories which read like poorly digested corporate press releases. The standards are even lower for political coverage, especially of the United States. It’s just that the competition, particularly in America, is far worse.

I say: The Financial Times is the worst paper in the world — save all the rest.

I have seen it postulated that party affiliation tends republican in voters who in wealthy range, and tends democratic among voters who could be described as “very rich.” I have no idea if this is accurate (a survey in “Elite Traveler magazine isn’t a gold standard…). All data I have seen suggests that party affiliation tends Republican in upper income brackets, but I have seen no data that provides a good breakdown of $200K a year vs. $500K vs. the $10M hedge fund guy. Has anyone seen a decent study on this topic?

Henry –

I don’t think we disagree. The regular right-wing op-ed contributors are not so bad (post Shlaes), as these things go. But the guest op-eds are too often given over to really worthless right-wing lunatics.

“when a Heritage Foundation vice-president proposes a piece to you, et numeri ferentes”

et numeros ferentes, please!

(in fact, you technically ought to have ferens instead of ferentes too, but that would pretty well ruin the reference)

It’s not just congressional districts — individual voter party affiliations have changed:

http://pewresearch.org/pubs/451/money-walks

Money sentence:

“But at the very top — among the 7% of voters with household incomes of $150,000 or more — Democrats once again run even (33% Democrat vs. 31% Republican).”

Other interesting bits:

“While much of the shifting balance among affluent voters reflects changes in the national mood, two important demographic changes among high income voters are related to the parties’ fortunes. First, members of minority groups constitute a greater share of high-income voters than at any time in the past. The proportion of top-income voters who are black, Hispanic, or from another racial minority background has doubled from 10% in 1995 to 21% today, while the proportion who are white has dropped from 90% to 79%.

Secondly, a greater share of top-income voters have a post-graduate education than in the past — 35% up from 24% in 1995. In general, Americans with post-graduate training are more likely to be Democrats than those with four-year degrees or who attended but did not complete college.”

slocum, that’s misleading. if you click through you see that democrats do much better among the lowest income groups than they do among the income group identified in your quote.

Slocum, the trend is towards more voters of all classes identifying as Democrats and less as Republicans. It’s pretty clear that the reason for this is not that the Democrats have become more attractive.

Wouldn’t you expect that a Congressman representing a wealthy DISTRICT would be attentive to that districts needs, whether or not the voters who support him are wealthy. Hence, Shumer supports the hedge-fund industry because it’s good for his district.

Well, the thing is, it’s one thing if you know that a lot of the rich hedge fun managers in your constituency probably vote GOP, and tend to give more to that party than to the Democrats. You can probably live with that. It’s a different thing altogether to actively piss off all these rich people — and risk goading them into actively trying to do everything in their power to defeat you. I tend to be a bit cynical, and I suspect that, for the vast majority of politicians, “what’s good for my reelection prospects” easily trumps “what’s good for my district.”

Hi,

Debating how to tax the inordinate income of a small group of rich people is a country club sport. Both the Democratic and Republican parties in the U.S. are right-wing conservative parties. No major U.S. political party represents the real economic interests of the under-class.

Have a nice day!
Antti

Far from embarrassing, this episode may reflect a dawning Democratic awareness of whom they really represent. For the demographic reality is that, in America, the Democratic party is the new “party of the rich”.

thomas, is your point that this statement is consistant with franc believing that the democrats are also the party of the poor? this is not an obvious reading, it seems to me.

At least one group of conspicuously rich people has always been reliably liberal: Hollywood. There are any number of reasons for this. The movie industry at its inception was disproportionately Jewish, it employed artists, some of whom were gay or immigrants, and it absolutely depended upon freedom of expression.

It’s also been noted that the talent tends not to be as allergic to taxation as the rest of the rich, due perhaps to their perception that their good fortune had as much to do with birth or luck as virtue. (Cite needed)

We can define the Democrats negatively as the party of those who are not greedy, racist, sexist, or fearful, which doesn’t exclude a lot of fairly affluent folks.

Henry, why focus so much attention on the FT rather than the piece itself? The way you present things, the Very Very Serious Aspect appears to be a failure of authority (FT’s) to assert itself. Why not simply take issue with the article? An op-ed isn’t an editorial, you know.

Also, there is a legitimate question about whether the Democrats are indeed being Wobbled By Wealth.

And surely, the worst aspect of this entire issue is the fact that the Democrats are indeed protecting the mega-millionaire hedge fund managers’ unreasonable, illogical, unjustified whopping tax privilege.

Not really. Michael Franc claims that if the Democratic Party raises taxes on the rich, it will be “inflict[ing] pain on its own constituency.” This only makes sense if the rich are a growing proportion of the Democratic constituency; the question is not what proportion of the rich are Democrats, but what proportion of Democrats are rich.

Well, first of all the rich are increasingly likely to vote Democratic — and the trend is stronger than with poor voters for the simple reason that poor voters already were in the Democratic camp whereas rich voters have been changing their party identifications.

Furthermore, it should go without saying, but politicians care about the rich and poor for different reasons — the poor for their votes alone, but the rich more for their contributions than their votes. So the rich don’t have to form a large percentage of the Democratic base in order for the Democratic politicians to cater to them (in fact, rather obviously, the top 10% richest voters can’t form a large percentage of anybody’s base — there aren’t enough of them).

The Democrats have particular bases of support among the rich (Hollywood, trial lawyers, Silicon Valley) and they take care of them. And what about hedge fund managers? Hedge fund managers tend to be the types who contribute lavishly to both parties (and especially to whoever’s in power) so they have chits to call. Hence the inability of Congress to pass the votes to close the hedge fund ‘loophole’.

And consider AMT reform, which is linked to closing the hedge fund loophole. Democrats are keenly interested in reforming the AMT even though it affects upper income voters — because it tends to hit their upper income voters more heavily than Republican upper income voters:

“The focus on the AMT is hardly surprising, given that victims of the tax have been concentrated in high-cost urban areas such as Washington, New York and San Francisco — places that tend to vote Democratic. Rangel, Hoyer and Nancy Pelosi (D-Calif.), the presumptive House speaker, all represent states hit hard by the AMT, which is sometimes called the “blue-state tax.” To map states with the highest concentrations of AMT taxpayers is to draw bull’s-eyes over California and the Northeastern seaboard”.
http://www.washingtonpost.com/wp-dyn/content/article/2006/11/10/AR2006111001800.html

Henry, you’re right that Franc calls the Democrats the “new party of the rich.” He follows that immediately with this: “More and more Democrats represent areas with a high concentration of wealthy households. Using Internal Revenue Service data, the Heritage Foundation identified two categories of taxpayers – single filers with incomes of more than $100,000 and married filers with incomes of more than $200,000 – and combined them to discern where the wealthiest Americans live and who represents them.”

Your interpretation of “party of the rich” is no better than your reading of the rest of the piece. It seems clear enough that “party of the rich” is meant to be understood as meaning what follows. You attacked what followed as being in error, but obviously it isn’t. The only error is yours.

Anybody who thinks that the Democratic Party is the party of the rich should really go to Andrew Gelman’s blog, and check out the graphs of state distribution of votes by income category:

http://www.stat.columbia.edu/~gelman/blog/

His most recent post on party affiliation vs income is here:
http://www.stat.columbia.edu/~cook/movabletype/archives/2007/11/do_the_democrat.html

Furthermore, it should go without saying, but politicians care about the rich and poor for different reasons—the poor for their votes alone, but the rich more for their contributions than their votes. So the rich don’t have to form a large percentage of the Democratic base in order for the Democratic politicians to cater to them (in fact, rather obviously, the top 10% richest voters can’t form a large percentage of anybody’s base—there aren’t enough of them).

Ugh, I destroyed most of my reply with a cut-and-paste error. Anyway, I completely agree, but I don’t think it helps Franc’s argument. Since you don’t have to restrict your donations to local politicans, the representative from Poorsville has every incentive to chase donations from the population of Richton, just as the representative from Richton does; so it doesn’t make sense for Franc to talk about where the rich live. I also suspect that Franc would not be too comfortable with the argument “The Democrats have trouble passing economically progressive policies because the wealthiest people have the power to buy off politicians.”

I also think your point works against Thomas’s reading of Franc’s argument. In how many districts, let alone states, are the wealthiest people a decisive voting bloc? Damn few, I’d guess. Again, what we want to look at is not “What percentage of rich people live in district X?” but “What percent of district X’s constituents are rich people?”

[FWIW, according to this page the 10 richest districts (measured by overall federal income tax) are represented by 5 Democrats and 5 Republicans. Democratic-represented and Republican-represented districts have exactly the same effective tax rate.]