The Treasury Secretary's Misperceptions About Wealth
By Treasury Secretary Jack Lew's reckoning, being a millionaire does not constitute living high above the ranks of ordinary people. Lew said last week that back when he was in the private sector enjoying six- and seven-figure pay packages, "My own compensation was never in the stratosphere."
Lew made that pronouncement as he sought to defend President Barack Obama's embattled Treasury undersecretary nominee Antonio Weiss from charges that as a financial executive, he is out of touch with the interests of regular people. Lew was seeking to cast his own lot with the ranks of ordinary Americans at a time of growing economic inequality.
But in doing so, Lew shed light on a uniquely American phenomenon — the tendency of extraordinarily rich people to cast themselves as everyday members of the middle class.
Earlier this year, for example, Hillary Clinton made headlines when, in response to a question about her personal fortune, she claimed her family was "dead broke" when they left the White House. That statement followed New York Gov. Andrew Cuomo's top aide casting those making $500,000 a year as merely upper middle class.
According to IRS data, 99 percent of American households make less than $388,000 a year, and 95 percent make less than $167,000 a year. The true middle in terms of income — that is, the cutoff to be in the top 50 percent of earners — is roughly $35,000 a year.
While Lew claims his private-sector compensation was not "in the stratosphere," the data suggest otherwise.
According to New York University records, Lew was usually paid between $700,000 and $800,000 a year as the school's vice president, while also receiving a $440,000 mortgage subsidy. Lew also earned $300,000 a year from Citigroup, with a "guaranteed incentive and retention award of not less than $1 million," according to an employment agreement obtained by Businessweek.
That agreement said that the seven-figure award would be terminated if he left for another job, but with one exception: He would indeed get the cash if he accepted "a full-time high-level position with the United States government or regulatory body." Lew was given a $940,000 bonus from Citigroup in the same week the bank received a $300 billion bailout from the federal government.
Then again, Lew is a pauper compared to Weiss. The Treasury nominee reported more than $15 million in compensation in the last two years at Lazard. Like Lew before him, Weiss would receive a massive payout from his firm if he gets a job in government.
Of course, there remains a bit of a debate about what constitutes "rich" in America. A recent New York Times poll showed 27 percent of Americans believe a family of four can be considered "rich" if its annual income is between $100,000 and $200,000, while another 20 percent say "rich" is defined as making between $200,000 and $300,000 a year.
That said, there appears to be consensus that compensation like that paid to Lew and Weiss constitutes "rich" — two-thirds of the country told the pollsters that making more than $300,000 means a household is wealthy.
While Lew's comments leave him open to charges that he is out of touch with economic reality, he is not alone, as surveys show many Americans also have misconceptions about income distribution.
A recent study by Harvard University and Bangkok's Chulalongkorn University found Americans grossly underestimate the divide between CEO and average worker pay.
Such misperceptions were recently spotlighted by comedian Chris Rock in an interview with New York magazine. Of inequality, he said: "People don't even know [about it]. If poor people knew how rich rich people are, there would be riots in the streets."
David Sirota is a senior writer at the International Business Times and the best-selling author of the books "Hostile Takeover," "The Uprising" and "Back to Our Future." Email him at firstname.lastname@example.org, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com.
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