The Haves and the Have-Nots

[Content Note: Class warfare.]

This is a good piece on a new report by S&P which has found that "an unequal distribution in incomes is making it harder for the nation to recover from the recession and achieve the kind of growth that was commonplace in decades past."

"From my research and some of the analysis I saw from others, when you have extreme levels of inequality, it can hurt the economy," [Beth Ann Bovino, the chief US economist at S&P] said.

Because the affluent tend to save more of what they earn rather than spend it, as more and more of the nation's income goes to people at the top income brackets, there isn't enough demand for goods and services to maintain strong growth, and attempts to bridge that gap with debt feed a boom-bust cycle of crises, the report argues. High inequality can feed on itself, as the wealthy use their resources to influence the political system toward policies that help maintain that advantage, like low tax rates on high incomes and low estate taxes, and underinvestment in education and infrastructure.

This is something that it doesn't take a degree in economics to understand. Anyone who has lived paycheck to paycheck, without a social or personal safety net on which to fall back, knows that when you don't have money to spare, you don't save money. And thus the opposite is true: People with money to spare are the people who save money that they don't need to spend.

"Money doesn't buy happiness" is a thing we're told, a thing we say. And there's certainly some truth in that. But many of us who are not independently wealthy, especially those of us who have been broke and have been financially okay at different times, have probably had some version of this conversation: Sure, money doesn't buy happiness, but there is something valuable, something that feels a lot like happiness, in having enough money to meet all your basic needs.

There is a huge psychological freedom in having enough money to meet your basic needs. Call that happiness, call it contentment, call it a lack of anxiety, call it whatever feels right for you, but that feeling is the thing that money buys.

Because money buys food and shelter and clothes and healthcare and toiletries and transportation.

Money buys survival.

And if you're lucky enough to have enough money to buy your survival, then money also buys the ability to thrive a bit. Money buys education and access and opportunities.

And if you've got those bases covered, then maybe you've got some money to buy some luxury. Some relaxation. Some ability to make your life a little easier and to take time away to recuperate and rebalance.

Maybe, depending on your priorities, and your individual demands (like whether you have children), you might start saving before you consider spending on a holiday, no matter how needed it may be.

This is the place where one starts balancing whether to spend or save. Because, for the first time, you have options.

Meaningful options. Not the sort of options like: I can eat lunch today, or I can buy this magazine—because just treating myself to anything, even a stupid magazine, to make me feel like I'm worth something and that life isn't all just drudgery and survival, seems more important than an empty belly right now.

Money buys choices that don't involve empty bellies.

Once you have enough money to be making those sorts of choices, money has bought you something very important indeed. But well beyond that point, at the point where sustained affluence can make you say something like "Money doesn't buy happiness" with the jejune arrogance of a person who imagines that "this new financial adviser isn't making my money enough money" is a relatable subversion of happiness, there is too much money to be spent to buy anything meaningful anymore.

Once you can buy multiple yachts and still have plenty of money to spare, once money can buy you everything you ever wanted and then some, money loses its capacity to buy anything (for you) except more money.

The only thing left to do (besides give it away—yuck!) is hoard it. And see how much you can accumulate before the clock runs out.

That's always going to be true. And the more wealth disparity there is, the more that the middle class is eroded, the more we're left with two extremes—people who don't have money to spend, and people who have more money than they can spend.

We're increasingly a nation of people who aren't even paid a livable wage and people who are basically dragons sleeping on a giant pile of gold.

And we don't—or shouldn't—need reports to tell us the truth about what that means for our economy.

Of course wealth inequality makes recovery impossible. Of course it does.