November 30, 2010--The Joneses

Later today the incoming congressional leadership will meet with Barack Obama to see if there is any hope of their working together over the next two years.

At the top of the agenda are two items--Senate ratification of the START treaty that would limit Russian and American nuclear weapons and the about-to-expire Bush tax cuts.

Securing 67 votes in the Senate, even if they try to do it during the lame duck session, seems unattainable as the GOP appears to be continuing to play partisan politics with anything proposed by Obama though there is the likelihood that both sides will make a deal about taxes. It is hard to imagine that if the Bush rates were to lapse on January 1st because the Republicans are dug in regarding the portion of them that benefits the rich, if hard-pressed Americans see their taxes rise as a result, they will blame and punish the Republicans. I am thus hearing that a compromise is forming through which Clinton-era tax rates will phase in for Americans making a million of more per year. Less than one percent of the population.

In a column in the Sunday New York Times, Robert Frank argues that the rich, no matter how one defines them, will still have a good economic life even if they have to pay a little more in taxes. That is, if all of the rich have to ante up equally. (Article attached.)

He says it is all psychological. Since the wealthy spend a good deal of their discretionary money on goods and services in order to maintain appearances and keep pace with the consumption habits of those with whom they are in conspicuous competition, if next summer they can rent a house in the Hamptons with 5 bedrooms instead of 6 they will somehow figure out how to handle this version of reduced circumstances.

After reading this, if true, I felt a lot better about things. Up to then I had been worrying about the super rich. But now I am feeling assured that they will be all right. That is unless their seaside cottage has only 4 bathrooms.