Are the rich just like us? In one sense they are – they eat, sleep and defecate just like everyone else. They love, cry and die – just like everyone else. But when you’re dealing with policy – no, they aren’t just like everyone else. It’s fashionable (one of those evergreen fashions) to argue that the policies that benefit the rich, benefit everyone. There are certainly policies that benefit everyone, but there are few policies which primarily benefit the rich which are to everyone’s interest. Let’s run through this in a bit more detail.

Rich
Most rich people get most of their money from investments – also known as unearned income. So when investment income is taxed at a lower rate than earned income (what you get on your paycheck), which it is – then those who rely primarily on earned income are being taxed at a higher effective rate. This is a deliberate policy choice.

When jobs are outsourced, the profits still flow back into the hands of US investors. While many people own stock and bonds (especially through pension funds) this disproportionately benefits the rich because the rich (as noted above) disproportionately receive their money from unearned income.

When the domestic economy does badly, but corporate and general investment profits are up – the rich do fine because the cost of things they want (like servants) goes down as supply goes up. Those few people they do deign to employ cost less.

When tax changes are made that are less progressive (moving to fees or flat taxes, for example, and away from income tax) it benefits the rich – because they earn more money and regressive taxes benefit those with more.

When asset appreciation is only taxed at death it benefits the rich, because much of their net wealth is only taxed when they die.

When estate taxes are gotten rid of – it benefits the rich (or rather their children).

When public schools are defunded it benefits the rich. Their kids aren’t going to them anyway, and now they don’t have to pay for your kids to go there.

When capital flow laws are relaxed it benefits the rich. Do you need to move a million dollars out of China in a few minutes to get an extra .1% overnight return? No?

When the spread between inflation rates and the interest rate is high it benefits the rich, because most of them are creditors. It hurts the middle class and the poor – because they are debtors.

When bankruptcy laws are tightened it hurts the poor and the middle class and helps the rich.

The Middle Class

When jobs are plentiful, it benefits the middle class. But if you’re already middle class and you keep your job, but others are losing theirs, you can win relatively – especially if prices are dropping relative to your salary.

When jobs pay well and are keeping up with inflation, it benefits the middle class.

When house prices go up it benefits the middle class – because they have the majority of their money in their houses – that’s their savings account. It hurts the poor, because they can’t get housing and it hurts the subset of the middle class that doesn’t yet have a house, because they can’t get one.

When medical care prices increase it hurts the middle class because their employers stop paying for it, pay for less or leave the country to a domicile where either the government provides it (Canada) or they don’t have to provide it.

The Poor

When rent, food or fuel costs go up it hurts the poor because they spend most of their income on those three things. It hurts them disproportionately compared to the pain to the rich.

When the economy doesn’t produce new jobs it hurts the poor because they then can’t get jobs, especially the long term poor who are only hired when those with more recent experience are used up.

When medical care becomes more expensive it hurts the poor, because they can’t afford it. So they live in pain, or with chronic diseases, and get treated only when it’s close to mortal and they can’t be turned away.

When mandatory sentencing for blue collar crime goes in, it hurts the poor because more of them commit crime and it takes away their husbands and their sons.

When some drugs are made illegal while others with psychoactive effects are legal but prescribed only to those who can afford both price controlled drugs and doctors prescriptions it hurts the poor.

Yes Virginia, the rich are different…

…not because they are better or worse than us, not because they are bad people, but because they have different interests and different incentives and they live in a world that is different from the one the middle class or the poor live in. Policies that enrich them could enrich everyone. There are policies and economies that help everyone. From 1945 to around 1970 the rising economy made everyone better off equally – the rich, the middle class, the poor. Everyone prospered together.

It can be that way, but it doesn’t have to be. You can make the pie bigger – or you can make your slice larger. Over the last thirty years Americans have fought over the pie. Warren Buffett once noted that if there was a class war then his class was winning. There is a class war and the rich are indeed winning - and it is one of the things that is slowly destroying the United States.

Everyone can be prosperous. But everyone can’t be rich. Choose what sort of society you want – or have others choose for you.