A little rich

by Henry on November 6, 2007

The Financial Times, for reasons best known to itself, serves up this steaming heap of buffalo dung from Heritage Foundation Vice-President for Governmental Affairs, Michael Franc, on its op-ed page.

A legislative proposal that was once on the fast track is suddenly dead. The Senate will not consider a plan to extract billions in extra taxes from mega-millionaire hedge fund managers. … 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”. 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. …Democrats now control the majority of the nation’s wealthiest congressional jurisdictions. More than half of the wealthiest households are concentrated in the 18 states where Democrats control both Senate seats. …

Soon this new political demographic may give traditional purveyors of class warfare the yips. To comply with new budget rules, liberal Democrats on Capitol Hill are readying a tax increase of at least $1,000bn over the next decade. Ms Pelosi says she wants to extract all of this from “the wealthy”. When has a party ever championed a policy that would inflict so much pain on its own constituency? At what point will affluent Democrats crack and mount a Blue State tax rebellion?

A hint to the people at the Financial Times (a group whom I usually hold in considerable esteem): when an op-ed’s argument rests on a statistical fallacy so howlingly awful that it’s obvious to someone like me, it’s not a good idea at all to publish it. More generally, when a Heritage Foundation vice-president proposes a piece to you, et numeri ferentes, especial attention to the basis of those figures is not only warranted but necessary. If it is true that Democrats tend to represent richer districts, both basic logic and an elementary grasp of statistics should tell you that this does not imply that they represent richer voters. Indeed, not only does it not imply this, we know that it isn’t true. See further Andrew Gelman et al.

Do richer voters still support Republicans? If so, how can we understand the pattern that the Democratic do best in the richer “blue states” of the Northeast and West, while the Republicans dominate in the poorer “red states” in the South and between the coasts? … The Republicans have the support of the richer voters within any given state but have more overall support in the poorer states. Thus, the identification of rich states with rich voters, or more generally, the “personification” of so-called red and blue states, is misleading. For example, in the context of the Brooks quotes above, within an “upscale” area that supports the Democrats, the more “upscale” voters are still likely to vote Republican. … The pattern that richer states support the Democrats is not a simple aggregation of rich voters supporting the Democrats.

And so on. 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. This makes it all the more odd that a piece like this, which is better suited for publication in an introductory statistical textbook as a particularly egregious cautionary example of the fallacy of aggregation, could have made it in. Better filters please.

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1

David 11.06.07 at 4:09 pm

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.

2

bi 11.06.07 at 4:25 pm

Since when should any party be serving _only_ the rich people in its own constitutency? This must be the most transparently shameless attempt at justifying making the rich richer.

3

David in NY 11.06.07 at 4:26 pm

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.

4

JP Stormcrow 11.06.07 at 4:33 pm

mega-millionaire hedge fund managers

I would gloss his argument as “in the modern kleptocracy the have-mores are the universal base“.

He is clearly misusing the statistics, but political equivalent of the Willie Sutton answer does apply to all of our national-level politics to some extent:

Why do you pander to rich people?

Because they’re the ones with the money.

5

save_the_rustbelt 11.06.07 at 4:33 pm

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.

6

Thomas 11.06.07 at 4:39 pm

The Democrats “represent” their constitutents in exactly the sense Franc uses it. “Represents” doesn’t mean “is supported by.”

7

rea 11.06.07 at 4:42 pm

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 . . .

8

dsquared 11.06.07 at 4:43 pm

Henry, can you see a post by me? I just put one up and it’s sort of vanished.

9

aretino 11.06.07 at 5:13 pm

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.

10

Henry 11.06.07 at 5:37 pm

dsquared – dunno what happened to it – not in the moderation queue either (and I’ve been at a meeting, so haven’t touched anything. Thomas – read what you’re commenting on before you make boneheaded assetions please. Aretino – I will agree heartily in re: the departure of Amity Shlaes – but most of the people who are there at the moment on the right are vastly better than, say, those at the Washington Post. Clive Crook is usually pretty interesting, and even Caldwell occasionally has something worth saying.

11

baa 11.06.07 at 5:47 pm

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?

12

kharris 11.06.07 at 5:59 pm

Even simpler. Even simpler. The implication in the article is that Democrats have become the party that represents the most rich people. Just coincidently, since House districts are established based on population, Democrats very likely became the party that represents the most people of at about the same time they became the party that represents most of the rich people. Even if we did not have a fairly reliable indication that the rich still vote most often for Republicans, we had reason to doubt the implication that Democrats had somehow come to represent the rich disproportionately.

There are enough problems with this “rich people like Democrats best” argument that I have a hard time believing the editors were hoodwinked.

13

aretino 11.06.07 at 6:12 pm

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.

14

Barry 11.06.07 at 6:23 pm

Hnery: ” This makes it all the more odd that a piece like this, which is better suited for publication in an introductory statistical textbook as a particularly egregious cautionary example of the fallacy of aggregation, could have made it in.”

To paraphrase Orwell, there are some ideas which only a political science professor or an economics professor are incable of comprehending (no offense): The Financial Times is aimed at the rich, the near rich and those who probably have an actual chance at becomming rich. Of course they’ll publish spin, BS and flat-out lies which serve the interests of those. The only reason that they have any truth at all is that those groups do need to keep some contact with reality.

The Wall Street Journal editorial page has been almost pure lies, spin and literal insanity for over 30 years now, and probably wasn’t that much better before Bartley took charge. Meanwhile the news pages remained solid (Murdoch might end this split personality, with a total break from reality).

15

Aulus Gellius 11.06.07 at 7:28 pm

“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)

16

Henry 11.06.07 at 7:34 pm

Isn’t numerus declined like dominus???? (although thinking about it, even if so, it should be in the accusative). I will confess that my Latin is rusty(Santayana once said that it isn’t necessary to know Latin and Greek to be a gentleman, but if you don’t know them, it is necessary to have forgotten them – this is about the only way in which I qualify for said station in life).

17

Slocum 11.06.07 at 8:51 pm

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.”

18

SamChevre 11.06.07 at 9:39 pm

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.

19

snuh 11.06.07 at 10:19 pm

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.

20

Slocum 11.06.07 at 11:21 pm

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.

But what’s under discussion here is tendency of the wealthy to identify as Democrats, and there are two things that seem pretty clear:

1) There is no longer any great difference party identification among the wealthy, and

2) The trends are very clearly in the direction of fewer wealthy voters identifying as Republicans and more as Democrats.

Furthermore, wealthy supporters, being relatively few in number, are not nearly so valuable for their votes as for their contributions — and that’s equally true of both parties. Which reminds me of this Onion classic from the Clinton years:

U.S. Offers PlatinumPlus Preferred Citizenship

http://www.theonion.com/content/node/29869

21

John Quiggin 11.06.07 at 11:35 pm

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.

22

JP Stormcrow 11.06.07 at 11:58 pm

It’s pretty clear that the reason for this is not that the Democrats have become more attractive.

Does this yellow streak running down the middle of my back make ass look big? No…really… tell me the truth, I won’t get mad at you – trust me on that.

23

Jasper 11.07.07 at 12:21 am

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.”

24

Matt Weiner 11.07.07 at 12:28 am

slocum:

But what’s under discussion here is tendency of the wealthy to identify as Democrats

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. If all classes are shifting to the Democrats, then the Democrats wouldn’t really be repudiating any more of their base by taxing the rich.

This, though, seems very right:

Furthermore, wealthy supporters, being relatively few in number, are not nearly so valuable for their votes as for their contributions—and that’s equally true of both parties.

25

Antti Nannimus 11.07.07 at 1:36 am

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

26

Thomas 11.07.07 at 2:09 am

Matt repeats Henry’s mistake, for some reason. Franc doesn’t talk about the Democrat’s base, he talks about the constituents of elected Democrats. Obviously there’s some ambiguity there (how else to explain Henry’s misreading?), but that’s not enough for this lame attempt at gotcha. My reading is that Franc is using “constituents” and “represents” in perfectly ordinary ways (not as a synonym for “supporters” or “base”), and though it’s possible for these words to mean something else, if he were using them that way, he’d be making the mistake Henry thinks he’s making. What sort of interpretive principle is it to choose the reading that would make him wrong? That’s more hackish than the professionals.

27

snuh 11.07.07 at 4:25 am

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.

28

bi 11.07.07 at 8:04 am

I love how Thomas misinterprets Henry and Matt so that he can claim they misinterpreted Franc.

As far as I can see, Democrats only “represent” the rich disproportionately if one subscribes to some definition of “representation” which has nothing to do with who vote for them or which areas they govern.

29

bad Jim 11.07.07 at 8:27 am

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.

30

SG 11.07.07 at 9:20 am

Henry, just out of interest and mostly OT, do you have a taxonomy of dung which you apply to these problems? Why buffalo?

31

stostosto 11.07.07 at 9:39 am

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.

32

stostosto 11.07.07 at 10:12 am

..the mega-millionaire hedge fund managers’ unreasonable, illogical, unjustified whopping tax privilege.

Addendum: Unproductive.

33

Slocum 11.07.07 at 12:15 pm

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

34

nobody 11.07.07 at 1:23 pm

maybe they are trying to change the meaning of the word rich.. like Liberal, which now means George Will and everyone to the left of him.. now Rich is supposed to include salaried workers with adjustable mortgages that outpace raises..

either that, or

the people in Blue states are good with the economy because we are Democratic.

35

Henry 11.07.07 at 1:30 pm

stostosto – there is a completely legitimate question about whether the Democrats are too responsive to wealth. Larry Bartels has a paper that I will try to dig out later showing that there is no evidence that politicians of either party are responsive to the interests of the lowest third of the income distribution. But this is a different question from what is being discussed here – which is a specific claim about the Democrats’ important constituency being rich. I did write about the disgracefulness of the tax loophole stuff and Harry Reid last week.

Thomas – given that Franc writes specifically about the Democrats being the “party of the rich” it is eminently and abundantly clear what sense of the word “constituency” he is using here. _Please_ don’t be silly.

36

Andrew 11.07.07 at 1:42 pm

Which states would have won the last Presidential election based on voter income:

http://economistsview.typepad.com/economistsview/2007/10/rich-state-poor.html#comments

37

Thomas 11.07.07 at 1:58 pm

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.

38

stostosto 11.07.07 at 2:15 pm

But this is a different question from what is being discussed here – which is a specific claim about the Democrats’ important constituency being rich.

Actually, my point is that the way you present things, the important issue appears to be the rather irrelevant fact that this claim was published in the Financial Times. But each to his own.

39

Barry 11.07.07 at 2:27 pm

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

40

roger 11.07.07 at 3:43 pm

Henry, I’m sorry, but when hunting pundit, it is important to know their scat. You have misidentified Michael Franc’s as buffalo dung, when so obviously, that is the excrement of a feral pig. Adjust your strategy accordingly.

41

Matt Weiner 11.07.07 at 5:41 pm

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.]

42

Matt Weiner 11.07.07 at 5:46 pm

Or I could just defer to Henry’s followup.

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