The Duck of Minerva

The Duck Quacks at Twilight

Ducking the Issues: $97,000 isn’t as much as it used to be


December 8, 2007

Time for another installment of Ducking the Issues, where we here at the duck take a closer look at issues in the 2008 campaign.

David points out an interesting article, reporting a study by the Heritage Foundation that asserts that the Democrats are now the “party of the rich.” When combined with a discussion between Obama and Clinton in a debate in Las Vegas the other week, you end up with an interesting and revealing set of income and class dynamics at play in the presidential election.

As the Post reported:

The two front-running Democratic presidential contenders, Sen. Barack Obama (Ill.) and Sen. Hillary Rodham Clinton (N.Y.), sparred over tax policy and quickly got entangled in the question of whether someone making more than $97,000 a year is middle class or upper class. That’s upper class, Obama said. Not necessarily, suggested Clinton.

This raises a very interesting question that we often talk around but rarely discuss in the open:

Who, exactly, can afford to pay more? Who is rich?

Not me. Probably not you. Indeed, most Americans tend to identify themselves as ‘middle class’ whether they have a $50,000 or $150,000 or even $300,000+ annual salary.

The idea of who is Middle Class and who represents the Middle Class has important political implications. The Heritage study, as revealed in an FT op-ed claims that:

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.

This new political demography holds true in the House of Representatives, where the leadership of each party hails from different worlds. Nancy Pelosi, Democratic leader of the House of Representatives, represents one of America’s wealthiest regions. Her San Francisco district has more than 43,700 high-end households. Fewer than 7,000 households in the western Ohio district of House Republican leader John Boehner enjoy this level of affluence.

Now, Heritage is using this study to argue (in this op-ed) for further tax cuts, asserting that Democrats will wake-up and realize the intrinsic interests of who they really represent, thereby creating a Congressional ant-tax majority. The empirics I buy, but as we’ve recently discussed here at the Duck, its not so much the empirics as the social narrative and meaning attached to those empirics that is more politically significant and salient.

In the campaign, the politics of who is Middle Class does have important policy implications. In this case, how would the two candidates ‘solve’ the social security crisis? Who pays? Each agree with the broad Democratic narrative that those with more should pay more, while those with less shouldn’t be asked to support others until they can first support themselves. The difficulty comes in drawing the hard line between poor, middle class, and rich.

The exchange between Obama and Clinton began when the senator from Illinois said he was open to adjusting the cap on wages subject to the payroll tax. That’s the tax that the government prefers to call a “contribution” to Social Security. Under current law, a worker pays a flat percentage (and employers match it) of wages up to $97,500. Wages beyond that aren’t taxed.

Clinton responded by saying that lifting the payroll tax would mean a trillion-dollar tax increase, adding that she did not want to “fix the problems of Social Security on the backs of middle-class families and seniors.”

Obama replied: “Understand that only 6 percent of Americans make more than $97,000 a year. So 6 percent is not the middle class. It is the upper class.”

Clinton: “It is absolutely the case that there are people who would find that burdensome. I represent firefighters. I represent school supervisors.”

Online calculators allow anyone to make an instant city-to-city cost-of-living comparison. One such Web site calculates that someone making $97,500 in Washington could live just as comfortably on $67,846 in Ames, Iowa.

Both Obama and Clinton make important points. To most people—the 94% of Americans who make less–$97K / year is a lot of money. These are the people that the Democrats are supposed to represent, and Obama, trying to become the standard-bearer of the party, is trying to speak to these folks. Clinton, on the other hand, is speaking to the people she, and the party (according to the Heritage study) actually do represent. New York—especially The City—is home to many of those wealthy Americans and 97K isn’t all that much money in a very expensive urban metroplex like New York (or SF or LA or Boston or here in DC). For instance, did you know that:

The three richest large counties in the country are in the Washington suburbs: Fairfax, Loudoun and Howard. A recent survey showed that 43 percent of people in the core counties of metropolitan Washington live in households with incomes of at least $100,000 a year.

The people Clinton needs to win the race—those Northern VA suburban voters in Fairfax and Loudoun counties who now vote Democrat and have turned Virginia from a Red to a Purplish-Blue up for grabs—these folks are the ones who make the 97K and feel as if they are stretched thin.

But :

Median household income in America in 2006 was $48,201, which, adjusted for inflation, is lower than it was in 1999.

These are the people Obama needs to win over to his side to win the primary, the main-line democratic primary voters in places like Iowa, New Hampshire, South Carolina.

I think there’s maybe a follow up post to this on why the Republicans have become more anti-immigrant, diverting the economic insecurity of their lower-income constituents away from economics and onto social-cultural issues (with a security overlay), allowing them to be anti-tax, for example, by arguing that all those making over $97,000 shouldn’t pay any more into the social security fund. But this post is getting a bit long, so we’ll save that for later (though feel free to comment about it).

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Dr. Peter Howard focuses on US foreign policy and international security. He studies how the implementation of foreign policy programs produces rule-based regional security regimes, conducting research in Estonia on NATO Expansion and US Military Exchange programs and South Korea on nuclear negotiations with North Korea.