Tuesday, July 20, 2010

"That's Rich"

Today is Monday, 19 July 2010.

A commenter recently wrote: “Please define 'rich'(in $), HH.”

“rich adj. 1. Possessing great material wealth.” That’s the definition in The American Heritage Concise dic-tion-ar-y, Third Edition (Houghton Mifflin: Boston, 1994), the dictionary currently nearest my chair.

Not so helpful in formulating an answer.

Most folks would agree that anyone with a million US dollars is rich. But what does that million US dollars mean?

Assets (the dollar value (DV) of everything one owns)? Net worth (the DV of everything one owns, minus the DV of one’s debts)? Investable net worth (the DV of everything one owns, minus the DV of primary residence, minus lifestyle assets (vehicles, furniture, clothing, etc.), minus the DV of one’s debts)? Or is anyone who earns a million dollars a year a millionaire? Or is anyone who earns a million dollars a year a millionaire, regardless of expenses?

In Yemen, some 18% of the population lives on less than US$1.25 per day, or less than US$456.25 per year. To someone in this group, an income of US$10,000 per year would surely qualify as “rich”.

A realtor friend informs me that a household wishing to take out a 30-year loan at 4.75% interest on a house appraised at US$1,000,000, should expect a lending institution to require an annual household income of approx. US$300,000 (assuming a 10% down payment). Would this mean that any household with an annual income of US$300,000 or more is rich?

At least a billion persons on this planet live and die without sustained access to potable water. Surely they regard the rest of us as “rich”.

During the 2008 presidential election, many agreed that the tipping point of “richness” was an annual household income of US$250,000 or more. This would qualify approx. 2% of American households as “rich”.

However, many households in this number would not consider themselves “rich”, if their annual expenses leave them with an annual net income after debts of, say, US$20,000, and an investible net worth of, say, US$40,000.

According to “wiki.answers.com”, “The average world income is about $8,000 per year (per capita). However, less than 1/4 of countries enjoy this amount or more, because the median income is only about $2,000 per year. So although the total world GDP divided by the world population equals $8,000 per year, most people scrape by with a meager $2,000 per year income.”

Shall we then conclude that any annual income of, say, ten times greater than the world annual median income, or US$20,000 or more, qualifies as “rich”? This would include approx. 80% of all US households.

“The American consumer accounts for an estimated 60 percent of the country’s economic activity. But the Top 5 percent in income earners – those households earning $210,000 or more – account for about one-third of consumer outlays, including spending on goods and services, interest payments on consumer debts and cash gifts, according to an analysis of Federal Reserve data by Moody’s Analytics.” (“Wealthy Sector of Buying Public Is Cutting Back” by Motoko Rich, The New York Times, 17 July 2010.)

Certain commentators have recently taken me to task, yea, to the woodshed, for my definitions of words such as “terror” and “coup”. As the discussion above indicates, the definitions of many terms are hardly as hard-and-fast as certain commentators might imagine. (For another example: to a Klansman, the lynching of a Black wasn’t terrorism, but self-defense by the White Race.) This is the case, not because of infernal motives on the part of certain writers, but because of the nature of the world of language, economics, politics, etc. In reality, definitions do not behave in so docile a fashion as do objects in classical Newtonian physics.

So: “rich”.

Among Americans, that class would seem to include households with a net annual income of US$90,000 or more (which includes the top 20% of earners), and households with an investable net worth of US$200,000 or more (regardless of annual income)(again, approx. the top 20%).

Of course, compared with the majority of present humanity, or with 99.9999999…% of all humanity who ever existed, almost all present Americans are “rich”.

That's rich.


Anonymous Anonymous said...

OK, so let me get this straight. Households with a net annual income of $90,000 or more (includes the top 20% of earners) are "rich." AND households with an investible net worth of $200,000 or more (regardless of annual income)(again, approximately the top 20%) are "rich." Is that "and" or "or"? In other words, to be "rich" must households have net annual income of $90,000 AND have investible net worth of $200,000? Or one or the other? That's "rich"? Just checking.

Are these "rich" folks - however defined - the "elites" who always and everywhere exploit the "masses"? Define "masses" please. Are they everyone else? Are the "masses" exploitable because they are not "rich"?

Wow... $90,000 is "rich". That's something, huh.

BTW, I agree with your next-to-last statement that "...almost all present Americans are 'rich'." Lots of material wealth, and the freedom to enjoy it. Rich indeed.

3:21 PM  
Anonymous HH said...

Sorry if I didn't achieve the clarity I thought I had. "Rich" is judged by meeting one of two criteria: either the income minimum, or the investable (i.e. liquid) net worth minimum.

The question of "elites" and "masses" is as complex as the question of "richness", and will need column length to address. Please be patient for it, as I run a continuing backlog of topics, and try to be responsive as quickly as possible to comments and questions such as yours.

Thanks for taking the time to read, think, and respond. The world needs more of that.

4:08 PM  
Anonymous Anonymous said...

A number of respondents were asked to specify what annual income it takes for a family of four to be considered “rich” or “upper income.” The results: 21% named a figure less than $200,000; 51% named a figure between $200,000 and $499,999; 20% named a figure between $500,000 and $999,999; 7% named a figure of $1 million or more. (Highest tax bracket for 2009 starts at $372,950 in annual income for a single filer.)

Like Potter Stewart’s definition of “pornography” (I know it when I see it), “rich” is truly a term that often defies definition. Personally, I believe that “rich” (not confusing income and wealth) connotes luxury. Although “rich” may be when one has sufficient passive income (investment income) to live QUITE comfortably - that is, without being obliged to EARN income. Further, I believe that “rich” is largely subjective, and dependent upon a number of factors - age, earned income, investment income, demographics, and many others.

Regarding regional factors, “rich” depends in large part on what part of the country you live in. Cost of living and purchasing power parity can vary greatly. It can cost a lot more to live in New York City than Omaha, Nebraska. If you make $80,000 - $110,000 per year, you can live in a nice suburban four-bedroom house - but not near NYC, Boston, Los Angeles, Washington, D.C., San Francisco, Chicago or other expensive cities.

Assuming that you’re the sole income earner for a family of four, you'll live well enough, but you certainly won't be rich. You'll have two cars, but they won't be luxury vehicles and one won't be new. You'll vacation in the US, not Europe or other distant destinations. You won't have to shop at Penney's and Sears, but you'll use the coupons for groceries, and save the high-end shops for very special purchases. You'll need to save up for major purchases like getting the house painted or replacing the roof, and paying for your kids' college will mean taking out loans like everybody else.

And what about if you have an autistic child? Insurance doesn’t cover therapy, meds, etc. Or what if you’re underinsured and have a child who’s chronically ill? Or what if your pet develops a heart condition, cancer, or other illness (ALWAYS expensive)? Or what if your pet has a traumatic injury (hit by a car, etc.) and incurs unanticipated vet bills? An income of only $90,000 just isn’t going to handle it. At all. That ain’t rich.

Regarding that portion of your post that harkens back to earlier posts and comments respecting defining terms such as “terror” and “coup” and your new example involving the KKK’s lynching of blacks… I believe that you have unwittingly proven WDR’s point respecting “terrorism.” The Klansman’s lynching of Blacks was ABSOLUTELY terrorism - that is, the use of terror as a means of coercion and intimidation - directed toward Blacks and white “n*****-lovers”, in general. They used violence (or threat of violence) to inculcate fear, in Blacks and others, in order to achieve their ideological goals. Their “shenanigans” were classic terrorism - conducted precisely for the purpose of achieving their political, religious and ideological goals. Generally, their threatening or killing of Blacks was not for any “personal” gain, but for a larger, more universal purpose. They were, in essence, one of the first pseudo-fundamentalist religious terror organizations, much akin to the al-Queda and the Taliban of today. Gotta go with WDR on this one.

12:58 PM  

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