In his early sixties with rugged good looks and a physique honed by years of surfing, Michael lives in a modest house with his wife and two daughters and is the type of person one would expect to vote his self-interest. After years of self-employment, he was forced to take a minimum wage job at a manufacturing plant during a recession in the 1990s. Although an intelligent, hardworking man, Michael identifies with the rich.
“You may think that I’ve given up, but I haven’t,” Michael says. “I am going to be rich someday.”
Although he has no plans to propel him to riches, Michael nonetheless shares a dream held by many Americans. The “get rich someday” dream is cited by many as the reason Americans vote against their economic self-interest and lend their political support to the wealthy who are creating a new American aristocracy.
The wealthiest – the top 0.1 percent, some 145,000 taxpayers with an average income of $3 million a year – are amassing wealth at an unprecedented pace according to a recent study by the New York Times. They more than doubled their share of national income to 7.4 percent since 1980, which is the highest level since the 1920s.
A few fulfill their dream. The number of those with $1 to $5 million in net worth increased by 125 percent from 1983 to 2001, while those with assets between $5 and $10 million increased 304 percent. The super rich – those with over $10 million in assets – increased by 409 percent, from 66,500 to 338,400. With his hourly wage to pay his bills, Michael can only dream of reaching these sums.
Some get rich in the technology industry where Michael works. In 2004, the 150 largest Silicon Valley companies reported record profits and earnings increases of 169 percent. The 728 top executives took home $2.1 billion, a 57 percent increase over 2003 and almost as much as the $2.3 billion they garnered at the peak of the stock market bubble in 1999. The top ten CEOs, alone, took home $578 million.
These Silicon Valley executives cannot compete with the nation’s truly rich. Nationwide, billionaires are richer and more numerous for the second year in a row, according to Forbes magazine 2005 survey. The Forbes 400 list of the richest Americans starts at $750 million and 78 percent of them were billionaires in 2004. In the past year, 69 more Americans became billionaires, which gives the country almost half the world’s billionaires. In 2004, the combined net worth of the nation’s wealthiest was $1 trillion, an increase of $45 billion in one year; they increased their wealth by $300 billion providing truth to the term “the rich get richer.”
At the same time, the common working person’s dreams of wealth become harder to achieve. Wages for most Americans didn’t improve from 1979 to 1998 and the median male wage in 2000 was below the 1979 level despite productivity increases of 44.5 percent. Despite gains made in income during the 1990s, wages are now on a downward spiral. In May, The Financial Times reported that wages are falling faster than at any time in the last 14 years. Meanwhile hidden unemployment soars as U.S. economists declare a “jobless recovery.”Borrowing leads to identification with the rich, according to economists Fabrizio Perri of New York University and Dirk Drueger of Goethe University in Frankfurt, Germany. They trace the credit surge to the widening income gap between rich and poor from 1970 to 2000. Simply put, people feel richer because they consume more. While median income rose 11 percent since 1990 – less than 1 percent a year – spending jumped 30 percent and debt increased 80 percent.
Despite working longer hours, often at lower pay, without vacation or medical insurance, Americans mimic the wealthy by going ever deeper in debt. Since 2001, they cashed out $480 billion in home equity, two-and-a-half-times more than they cashed out from 1993 to 2000. Americans now owe $766 billion in home equity loans, 74 percent increased the years on their mortgages and now owe 45 percent of the value of their homes, up from 32 percent in 1973. Financial experts contend these higher mortgage debts will make families less able to weather financial shocks and will drastically curtail retirement spending.
Recent research by Michael J. Graetz and Ian Shapiro, authors of Death by a Thousand Cuts, points out that most Americans, like my friend, live in a fantasy world, hoping to be rich someday. A 2000 Time/CNN poll found that 39 percent of Americans believe they are in the wealthiest one percent or soon will be. They even supported Bush’s abolition of the inheritance tax, which only applies to the richest two percent of American families.
Thinking like they’re rich, Americans allow their representatives to lower taxes for the wealthy and increase their share of the nation’s assets. After Bush’s tax cuts, the 400 top taxpayers now pay at the same rate as those making $50,000 to $75,000 and many of the largest corporations pay no tax at all. Unlike the average wage earner, these people know their interests: 72 percent of the Forbes richest 400 who contributed to the 2004 campaign gave money to Bush.
When F. Scott Fitzgerald said the very rich “are different from you and me,” he was right. The rich and corporations invest heavily to convince Americans to lower taxes, abolish regulations and give them free rein to amass more wealth and create a virtual aristocracy. Meanwhile, the bottom 90 percent struggle to pay their credit card bills and only dream of getting wealthy “someday.”