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Jewish World Review Oct. 17, 2000 / 18 Tishrei, 5761

Amity Shlaes

Amity Shlaes
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Consumer Reports

The split personalities of America's super rich

Some of those who made money during the 1990s are in danger of denying the same economic opportunity to others -- BACK IN 1986, a bipartisan tax reform threatened to prune away many of the special breaks for specific groups contained in the US tax code. Wall Street sent its warriors to defend the precious loopholes - it was particularly worried about tax-exempt municipal bonds.

Among those doing battle was a Goldman Sachs executive, who warned that the early version of the legislation endangered "the very concept of tax exemption". The name of the man chosen to represent Wall Street was Jon Corzine.

Fast forward a decade and a half. The same Mr Corzine has now stepped down from the co-chairmanship of Goldman Sachs, and is a multi-millionaire. He is spending a good share of his fortune trying to be elected as a senator for New Jersey. In speeches, he attacks the federal government for caving in so often to "special interests who wield the power of their money". This is despite the fact that his campaign is all about the power of money. He is outspending his opponent - a fortune-less Republican - by a factor of 10.

What is it about America's newly prosperous that makes them seem like split personalities? What makes them turn so flamboyantly against their own kind, particularly as they get older? The shift seems almost religious. The impulse to turn pure and to compensate for years of greed is a strong one - the same feeling that inspires many senior citizens to try to "die broke".

David Brooks, author of Bobos in Paradise , a book about America's new wealth culture, says the expiatory attitude is rooted in the 1960s. Then, many of today's millionaires were rebellious students. The fact that they have become even richer than their parents embarrasses them no end. "In England, people who become rich are often Essex Man types, self-made men who resent the cultured aristocracy," says Mr Brooks. "In America, they are university educated sophisticates who want to show that just because they are rich they are not crass Donald Trump wannabes."

The fear of the crass is particularly among the new internet rich, who went from zero to megawealth in a matter of years. Rather like Hollywood actors who have risen rapidly from obscurity to stardom, many of them wonder whether they really deserve their private jets, and their third homes. So they go to great lengths to prove their anti-materialistic bona fides.


Whatever the reason for it, the rich split personality is on the rise. A 1998 study sponsored by the non-partisan National Journal looked at 100 of the richest towns in America. It found that in the course of the previous five presidential elections, the Democratic share of the vote increased from about 25 per cent to 41 per cent.

Indeed, Mr Corzine is not alone this year in having to face awkward questions. In the Washington state Senate race, the e-entrepreneur Maria Cantwell is spending $5m of the cash she earned through the explosive free market expansion of her company, RealNetworks, to campaign on a platform of "managed growth". Ms Cantwell says she also wants to fight to put the "interests of constituents before those of powerful lobbyists" - although she is using her own cash to lobby voters to back her.

The important question is what happens after the campaign if such approaches become policy. What will be the effect on the economy, and the chances of others enjoying the same prosperity as these new politicians? One has to wonder whether they are - deliberately or inadvertently - shutting the door of economic opportunity behind them.

Consider Mr Corzine. His platform promises a string of "universals" so long it could have been penned by Clement Attlee, the post-war Labour prime minister. They include universal health care, universal long-term care, universal quality public education, universal gun registration and, perhaps most important, "universal access and opportunity". The last category comprises issues of consumer and citizens' rights - keeping auto insurance cheap and ending race discrimination. In other words, making lower earners more comfortable.

But when it comes to a policy most likely to allow millions of others to climb the economic ladder - the privatisation of America's Social Security public pensions scheme - Mr Corzine turns hostile. Under reforms supported by Republicans - and a number of Democrats - the government would allow workers to shift a share of their Social Security payments into individual investment accounts.

For the first time, many modest earners would become shareholders - in other words, get a peek into the world of Goldman Sachs. Yet Mr Corzine is vehement in his opposition. "I am opposed to my mother being forced to invest and manage a private Social Security account," he insists.

Mr Corzine's split personality may be more dramatic than most, but it is not untypical. White House tax policy in the past decade has been split policy, writ large. The administration made a great show of raising the top marginal income tax rates in 1993. The rich must pay their share, insisted Robert Rubin, the former Treasury secretary and fellow partner with Mr Corzine in Goldman Sachs.

Yet the truly rich were not the worst affected by the switch, for much of their money comes as capital gains. The bigger losers were employees, whose income comes mainly in the form of wages. The administration later cut capital gains, a decision that favoured the Goldman Sachs crowd. But it insisted - for "equity's sake" - on leaving the top income tax rate in place.

This is not to say Republicans cannot be split souls too, or that Republican businessmen haven't deployed their fortunes to make their way in politics - witness Steve Forbes, the independent presidential candidate. But at least the Forbes of American politics enjoy an advantage that the Bobos who aspire to public office do not. In their efforts to appeal to the electorate, they do not have to deny their own careers.

JWR contributor Amity Shlaes is a columnist for Financial Times . Her latest book is The Greedy Hand: How Taxes Drive Americans Crazy and What to Do About It. Send your comments by clicking here.


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© 2000, Financial Times