I was having dinner with my buddy, Mark, out in San Francisco a few weeks ago and he remarked to me how liberals never “run the numbers.” I’ve written about this in the past and completely agree with him. Their statements and policies are almost always borne of emotion, not facts and numbers. That makes for very dangerous policy and has led us to our current state of perpetual unemployment and economic malaise, despite President Obama’s doubling of the federal debt with unsuccessful stimulus spending.
One of the quantitative ruses that had Mark particularly exercised was the president’s use of the phrase “millionaires and billionaires” in his very successful strategy of class warfare that pits Americans against one another instead of aligning us all in our common goal of being a free and prosperous nation. Mark’s point, with which I heartily concur, is that it is mathematically preposterous to lump together two groups of people whose net worth differs by three orders of magnitude! For the less mathematically inclined, every zero is an order of magnitude. To perhaps oversimplify, to qualify as a millionaire, by a very crude definition, you need to have at least $1,000,000 in the bank (or other assets). To be a billionaire, you must have at least $1,000,000,000.
Let’s put this incredible ruse into its proper perspective. Let’s see what it actually takes to become a millionaire. I bet you think it requires a Harvard MBA and a plumb job on Wall Street, right? Not so fast. I ran the numbers. I considered the case of two school teachers who start teaching in Montgomery County Maryland (where I live) at age 23, with a Masters degree. At some point, these two teachers marry each other and become a couple with two working school teachers. The starting salary, according to the MCPS website for these teachers is $51,000. I assumed a modest 2.5% annual salary increase, very low by today’s standards of government largess. I further assumed that the teachers saved 10% of their salaries per year (I would hope they would save at least that much) and that they could get 5% annual return on their investments. Again, a reasonable assumption over a 30 year career. I made no other assumptions about their ability to build wealth. For example, this analysis completely ignores the fact that they would probably buy a house, leveraged with debt backed by wealthier taxpayers (via Fannie and Freddie), that would increase in value and significantly add to their net worth. So, to be clear, this is a very conservative estimate.
My analysis shows that when our school teacher couple turns 54 years old, they are millionaires. And, recall, my assumptions are conservative. I will positively guarantee you that this couple never once felt wealthy or millionaire-ish during that 30 year career. Yet, the reward for their hard work in public education is that they get lumped in with Donald Trump as a “millionaire and billionaire.”
Just for the hell of it, because I am a nerdy Excel jockey, I asked my model to calculate what it would take to become a billionaire. The math is painfully simple. Using the same assumptions on savings and growth, one would need a starting salary at age 23 of $102,000,000 ($102 million) per year to become a billionaire by age 54. The largest sports contract in history belongs to Alex Rodriguez, who makes $27.5 million per year. He won’t even come close to becoming a billionaire on that paltry salary, especially because he didn’t get it until he was 33 and it’s tough to play baseball til age 63 anyway.
Folks, we will never get anywhere in solving the big problems confronting our nation when we work at cross purposes. In my lifetime, I have never seen a president so hell bent on dividing us – by class, by race, by party, etc. – than the man in office now. It doesn’t help to make up spurious mathematical groupings like “millionaires and billionaires.” It just further polarizes us and makes it impossible to work together to find real solutions. Taxing “millionaires and billionaires” is a political maneuver, not a solution. I would love to see this president, just once, drop his partisan bullshit and try to solve a real problem. I can help him run the numbers.