Sunday, November 27, 2011

Megan McArdle's Class Skirmish

It's not often I read or contemplate Megan McArdle. She is one of the reasons I stopped subscribing to the Atlantic - I can read James Fallows online - but is such a low-hanging piece of fruit that parsing her word salad is just too easy to be fun. In the spirit of Thanksgiving, though, I followed TBogg's link to her WSJ review of two books, Shiny Objects by James K. Roberts and Against Thrift by James Livingston. I haven't read the books, so I am commenting on her review of them. If I misunderstand the authors' points, it's because I'm relying on McArdle's reporting of them. You could parse her review sentence-by-sentence, but life is too short, so I'll just make a few points.

McArdle tells us For decades, Americans have wallowed in credit, shunned savings and delighted in debt. In 1982, the personal savings rate was 10.9% of disposable income, by 2005 it had fallen to just 1.5%. It has since rebounded, but remains a measly 5%. What she doesn't tell us is that wages for most Americans have stagnated over that time period. Collectively, we have dipped into the equity in our houses - the only asset most of us possess - to maintain our consumerist lifestyle. For some, assuredly this fueled some foolish choices on spending for vacations or higher-end clothes and gadgets, but for many home equity has been the only source of funds for home maintenance, necessary automobiles, and education.

[Roberts] still exudes that particular sanctimonious anti-materialism so often found among modestly remunerated professors and journalists. Ooh, Megan does snark. For Megan, money is the measure of worth, and those "modestly remunerated" must just be jealous of her toys.

One of the running themes of the economist Robin Hanson's excellent blog is that arguments like the ones found in these books are actually an elite-status proxy war. Class warfare! Which, as we all know by now, is only a bad thing if the peasants are attacking the nobles.

Mr. Livingston . . . claims that the "Bush tax cuts" caused the housing bubble by leaving those over-saving rich with too much money to play with even though three-quarters of the lost tax revenues stayed in the hands of people making less than $250,000 a year—the de facto threshold for "rich" established by the Obama administration. According to the Census Bureau, 2.6% of families earned $250K or more, in 2009 dollars (, and there are 111,806,000 households (publication 2-9.xls at Let's say the Bush tax cuts returned $1 million in total (I'm using round numbers so it's easy for Megan to follow.) 2.6% of households shared $250,000, and 97.4% shared %750,000. The rest of my work is shown below:

111,806,000 X .026 = 2,906,956.
250,000 / 2,906,956 = .09, or 9 cents each

111,806,000 X .974 = 108,899,044
750,000 / 108,899,044 = .01, or 1 cent each

Multiply those pennies by the number of millions the Bush tax cuts returned, and it's obvious who got enough money to play with, and who got enough to pay a few bills. I'd look up the actual number, but I've already spent more time on this than McArdle deserves.

Do read TBogg's post and the excellent comments! They focus on McArdle's framing device for her review - her purchase of a $1500 food processor - and properly eviscerate the pretentious twit. Anyone who needs a $1500 food processor to make bechamel is not a cook, and anyone who can't use a calculator is not fit to be an economics and business editor.

No comments: