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Laura Rowley Money & Happiness

Laura Rowley, Money & Happiness

Is Your Spending Immune to 'Social Contagion'?

by Laura Rowley

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Excellent (356 Ratings)
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Posted on Thursday, August 16, 2007, 12:00AM

Bill Gates lives in a house 20 times larger than mine. Frankly, that doesn't bother me. Robert H. Frank thinks it should.

Frank, a Cornell University economist, is the author of the new book "Falling Behind: How Rising Inequality Harms the Middle Class." In it, he examines how the rise of an uber-class, with its extreme earning and consuming patterns, is hurting middle-class Americans.

A Widening Gap

First, a look at the wealth gap: Between 1949 and 1979, U.S. incomes rose more or less across the board with economic growth, Frank writes. Incomes of the bottom 80 percent of wage-earners, in fact, grew faster than the top 1 percent. But since 1979, the top earners have dominated wealth gains.

For example, in 2005, the top 1 percent of Americans saw their incomes rise 14 percent to $1.1 million on average, while the incomes of people in the bottom 90 percent fell 0.6 percent, according to an analysis by Emmanuel Saez of the University of California, Berkeley, and Thomas Piketty of the Paris School of Economics.

The top 10 percent -- households earning more than $100,000 -- collected 48.5 percent of all reported income in 2005, up from 33 percent in the 1970s and the largest share since the historical peak just before the Great Depression. The top 1 percent garnered 22 percent of all reported income -- double the share they received in 1980.

Context Is Everything

The wealth gap is problematic, Frank argues, because the ultra-rich are shifting the frames of reference that govern spending by the rest of us. "The economist Richard Layard once wrote that in a poor society, a man can tell his wife he loves her by giving her a rose," Frank wrote me in an email. "But in a rich society he must give a dozen roses. People's spending patterns are always strongly influenced by local context."

Personally, one rose is just fine with me, and I truly don't want Bill Gates' five-acre compound unless it comes with free housekeeping (my kids would find a way to despoil all 40,000 square feet in about five minutes). And while I admit to occasional envy of the mansions in the next town, I also know what affording one requires: endless hours of toil on Wall Street or in the corporate skyscrapers that tower over midtown Manhattan's shadowy canyons. A bigger house means a bigger mortgage, taxes, utilities, maintenance -- and less control over my time.

While Frank acknowledges that many people similarly ignore the lifestyles of the rich and famous, "spending at the top nonetheless affects how much middle-class people have to spend to achieve basic life goals," he argues. This happens through a multi-stage process he calls "expenditure cascades."

The Mansion on the Hill

Consider housing. "Top earners have more money, so they build bigger mansions," Frank notes. "The middle-class doesn't care, but the new mansions shift the frame of reference that defines what people just below the top consider desirable or necessary. So people just below the top build bigger.

"Their spending, in turn, affects others just below them," he adds, "and so on, all the way down the income ladder. As a result, the median size of a newly built house in the U.S. is more than one-third larger now than in 1980, even though real median family earnings have scarcely risen since then."

Unfortunately, there's a clearly defined link between neighborhood housing prices and school quality. "And so most middle-class families work longer hours, save less, borrow more, and commute longer distances in order to meet community standards on housing expenditure," Frank points out.

Cascading Contagions

Expenditure cascades also occur in automobiles, clothing, and college tuition. "Tuitions have been growing in part because of the consumption amenities universities now feel they must offer to remain competitive for students with the best academic credentials," he suggests, citing state-of-the-art climbing walls, gourmet food courts, and luxury apartments.

Even the $10 million coming-of-age parties for children of the super-rich have launched an expenditure cascade, Frank argues. He may have a point. I find myself spending $150 on birthday extravaganzas at gymnastics facilities for 20 kids, when my own childhood parties consisted of a home-baked Betty Crocker cake and rousing games of musical chairs and "drop the clothespin in the milk bottle."

Decades of research underscore the power of social contagion. Peer effects have been found in a variety of settings, with both negative and positive consequences. Aside from the obvious -- overspending to keep up with the Joneses -- a recent study in the New England Journal of Medicine found that obesity spreads through social ties. If a friend becomes obese, you have a 60 percent higher chance of similar weight gain. The closer people are in a social network, the stronger the effect.

On the upside, a decision by one person to join his employer's retirement savings plan clearly influences coworkers' decisions to do so, according to a study by Saez and co-researcher Esther Duflo of MIT. In addition, people are more likely to invest in the stock market if there's a high participation rate by their neighbors, according to a study by Jeffrey Brown of the University of Illinois and three co-researchers.

Tax the Rich?

Birthday productions notwithstanding, Frank says conspicuous consumption isn't the main problem: "The middle class isn't struggling because they're trying to buy Gucci handbags and Prada shoes. They're struggling because they can't meet their mortgage payments on a house in a safe neighborhood with good schools. But the ultimate reason for that struggle is the expenditure cascade launched by higher incomes at the top."

Clearly, even if many Americans are discomfited by the wealth gap, they aren't protesting in the streets. Harvard business school professor Rafael Di Tella, who conducts research on the legitimacy of capitalism, says it's because most Americans believe the United States offers a level playing field of opportunity.

"People don't see income differences as the source of the problem," Di Tella says. "The CEO may be making a ton of money, but if he's super-sharp and intelligent, that's [seen as] merit-based. People are willing to undergo unbelievable differences in income as long as they think it's fair or legitimate."

Frank argues that rising inequality isn't legitimate, and he'd like to scrap the income tax system in favor of a progressive consumption tax, to discourage the rich from constantly upping the ante. "By exempting savings from tax, it would be a powerful incentive to save more," he argues. "High rates on the highest consumption levels would also attenuate the expenditure cascades that have been putting pressure on middle-income families."

Fueling Polarization

I'm not convinced that a tax-code change is in order. The first step is for people to recognize the power of social contagion and immunize themselves: Take responsibility for your consumption choices, and base them on your own values rather than what the people above you are doing.

On the other hand, there's little doubt that the cost of housing, real estate taxes, health care, and college educations are escalating much faster than middle-class incomes. And, as Alan Greenspan noted back in 2005, we ignore income inequality at our own peril.

"In a democratic society," he said, "a stark bifurcation of wealth and income trends among large segments of the population can fuel resentment and political polarization. These social developments can lead to political clashes and misguided economic policies that work to the detriment of the economy and society as a whole."

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  • Chris - Monday, August 20, 2007, 1:39PM ET  Report Abuse

    • Overall: 5/5

    Good point, but fails to mention the consequences of energy overconsumption. All these 3k-9k square foot McMansions being build suck up a lot of electricity and natural gas, and guess what has happened to the prices of these commodities now that demand has gone up? All these luxury SUV's on the road have reduced average fuel economy over the years and again we have demand and price going up. It is basic economics and it affects even those who are not obsessed with conspicuous consumption. Replacing income taxes with taxes on energy would solve a dozen problems at once, including pollution, national security, urban sprawl, and the declining middle class.

  • nildiv - Monday, August 20, 2007, 2:53AM ET  Report Abuse

    • Overall: 3/5

    Like the article... I don't know when Americans will understand that they consume a lot more ( of everything ) then they need. I've lived in other parts of the world and I've seen people living with half of resources what avg. American have and are still healthy and happy. we just like to consume more. That's what it is. I think part of the problem is, consumer credit. in many countries, there is no consumer credit. it gives false impression about what you need and what you can afford. there was a time when borrowing money was considered a bad idea. ( at least socially ). Now it's other way... it is the only way to be ahead in this game. Hope one day we will realize values in old systems.

  • cianan - Monday, August 20, 2007, 12:59AM ET  Report Abuse

    • Overall: 5/5

    This is the type of stuff one writes when they move beyond "ordinary" biography.

  • John - Sunday, August 19, 2007, 10:30PM ET  Report Abuse

    • Overall: 4/5

    Read The Bible li'l Dudes, It's all there, we have lost sight of what is REALLY important....All you you need is Love

  • Yahoo! Finance User - Sunday, August 19, 2007, 5:04PM ET  Report Abuse

    • Overall: 5/5

    PROBLEM: Dont ask the government to fix this. It is a social problem. Actors and entertainers wouldn't make so much money if the rest of us didn't watch that junk. It boils to down to values. If we value bling then the system will get set up to give us that. Greed has always been present and is needed in a capitalist system. We just can't let those who choose not to invest in themselves through education and other personal growth opportunities complain about those who have and who make more than them. What you do with your money is a choice-not something that should be regulated.

  • KirtS - Sunday, August 19, 2007, 11:42AM ET  Report Abuse

    • Overall: 3/5

    the article is interesting enough, to see how liberals view the world. but who cares about the inequality, i don't. many people work hard to be in the top 10%, many don't. life isn't fair. that's news. what we can't do is put forth policy that leads to everyone being equal financially... that's called socialism, and we'll all be living in cardboard boxes, equal... will that make you feel better.

  • Yahoo! Finance User - Saturday, August 18, 2007, 1:53PM ET  Report Abuse

    • Overall: 4/5

    Ah, what a volatile topic. The biggest problem is not what the wealthy do with their money (since when does rich = evil anyway?). The problem is with the wannabe-wealthy people who are greedy and impatient and care what others think about them. If someone has money, then it's their business how and when they spend it. After all, it's not like you can take it with you. Credit has been too easy to get and people have been misusing it, ignoring their personal responsibility to actual repay this borrowing and depending on the government to bail them out when they can't. This is just wrong. If you screw up financially, it's your own fault and the rest of us shouldn't have to pay for your mistakes. If you want something, you should save your money to buy it. Period. I make over $100K, yet I drive a modest car and live in a modest house that actually has equity in it. My income doesn't actually qualify me as wealthy here in the Boston suburbs, where the cost of living is very high. But here is where the high-tech jobs are, so here I'll stay. My cell phone is 10 years old. My TV is 8 years old. I don't own an iPod or a Tivo. I could afford them, but I don't need them. I invest my savings and live within my means. Sure, I spend money to go on occasional vacations, but I still shop for bargains. I might treat myself to some new computer components once in a while and I did buy high-end appliances when I remodeled my kitchen, but I do actually cook a lot and I (and my brothers) did most of the remodeling work, so I saved lot of money there and have a kitchen that a real joy to work in. It's all about moderation. I have an uncle that has always worked very hard, making a modest income. 20 years ago, he started investing, sticking with mutual funds and large-cap stocks. Today, he has nearly a million saved up. He grew up poor and had no special advantages other than a strong work ethic and financial discipline. Anyone can do it, they just have to live below their means. Until the average American stops caring about what Paris Hilton and company are up to and what they're buying this week, we'll continue to see this income gap. Taxing people who have worked hard to earn more is not the solution. It's unfair to say that because I've sacrificed and worked hard to get through college and now can make a comfortable living, that I'm somehow evil and must be punished for this with higher taxes. What kind of incentive is that for people to work hard? I grew up poor and have worked very hard to get where I am. If I choose to enjoy the fruits of my labor, well that's my right and the right of everyone who has reached that level that is arbitrarily called "wealthy." I don't spend foolishly, though some do, but it's their money and they can do with it what they like. If those who can't afford it choose to emulate them, that's their own fault. Blaming the wealthy is not the answer. Besides, if wealth is so evil, why do so many people strive to become rich? Sounds like sour grapes to me.

  • taopraxis - Saturday, August 18, 2007, 12:13PM ET  Report Abuse

    • Overall: 4/5

    Creative, independently minded, freedom oriented, people are rare. The rest, the "sheeple" of the world, tend to be overworked, in debt, and busy to a fault for a simple reason: Appearances, what other people think, are what matter most to them. They need this game structure, for they are imitators, not innovators. They want to conform and expect others to do so. They are the "team players" of the world. Everyody gets what they want. If people's priorities change, the world will go along. For now, the rich can abuse their positions of power and the sheeple will do nothing because the latter imagine life without a paycheck to be a fearsome thing. They are afraid. Anyone who wants to can live below their means, save some money, and take control of their own future. So, what are people doing? Borrowing their way to luxury at the cost of their personal freedom. Conclusion: People want luxury and they care little for freedom. I know. I retired 15 years ago when I was 41, and I can count on one hand the number of my former bourgeois acquaintances who could comprehend that decision.

  • tex - Saturday, August 18, 2007, 10:46AM ET  Report Abuse

    • Overall: 1/5

    Uuk! political liberal propaganda posing as advice. A progressive consumption tax is nothing more than a money grab of 20-25% on any savings one might have managed to scrap together, just a awful idea. As for old Al Greenspan, don't believe anything he says. He should be in federal prison instead of the lecture circuit. "Get an adjustable mortgage" is also something Greenspan said, and his comments and policies on lending and interest rate will lead to more Americans losing their home than Katrina.

  • BULLDOG - Saturday, August 18, 2007, 10:13AM ET  Report Abuse

    • Overall: 4/5

    Personally, I don't care what the rich do. I don't care if they have a bigger house or a newer car. I have a nice house, my vehicles are paid for, I have no credit card debt and I LIVE WITHIN MY MEANS. I have money in the bank and am not worried about the latest mortgage crisis. The problem IS concpicuous consumption and the sense of entitlement in this country. In WWII, President Roosevelt urged all Americans to sacrifice and save. President Bush urges Americans to spend and consume! Credit card companies send out pre-approved offers willy-nilly knowing naive Americans will send them in and use these cards. Cards with high interest rates and before they know it, they are $50,000 plus in debt! Delaying gratification until you can afford it is gone in this country. Self-sacrifice and will-power is non-existent. Bush's economic policies have done more damage than Reagan's or Carter's!!! You can have all the comprehensive financial education you want...until people learn discipline it will be for naught!!! Tell me what a family of 3 needs with an 8,000 square foot house or bigger??? The housing market is artificially inflated and it is the fault of big banks and big business that are not regulated. These so-called exotic mortgages are the product of some Republican brainchild who thought them up to get even richer. Come on people WAKE UP!!!!!!!!!!!!!

  • Michael H - Saturday, August 18, 2007, 3:02AM ET  Report Abuse

    • Overall: 4/5

    Good article. Here are my thoughts on some practical solutions to the ever widening chasm between rich & poor. One thing that NO ONE has mentioned so far is: PROVIDE COMPREHENSIVE FINANCIAL EDUCATION IN THE SCHOOLS!!!!. Most people, and even a lot of educated people are clueless about how devastating credit card debt, car loans, & oversized mortgages really are. I think it's also true we need a few other reforms to make life better for the middle class & Poor: PUT AN END TO ENDLESS SUBURBAN SPRAWL AND BUILD TRANSIT ORIENTED COMMUNITIES. This of course, is a long term solution, which Americans tend to resist as if it were the plague because it's not something that can be done in 5 minutes. This would reduce the need for cars and make us less dependent on fossil fuels and those sheiks in the Middle East. Another solution: DON'T JUST FOCUS ON GETTING EVERYONE HEALTH INSURANCE....BUT FOCUS ON MAKING THE TOTAL COST OF HEALTH CARE MORE REASONABLE FOR EVERYONE, THAT MEANS THE TAXPAYERS, TOO! Just about every other rich country on the planet does health care cheaper and better than the US. I'm not a big advocate of government sponsored health care. But surely there must be some lessons we can learn from other parts of the world about more cost effective health care practices & procedures. Another thing....FOCUS ON GETTING THE COST OF EDUCATION, ESPECIALLY COLLEGE EDUCATION, LOWER. The authors of "The Two Income Trap" advocate this. When political liberals like these authors admit that colleges and universities are wasting a lot of money, you KNOW it must be really bad! I also agree that we Americans need to get real about comparing ourselves to others. We can create a "culture of frugality" instead of a "culture of consumption". The middle class do not need to remain powerless lemmings. The middle class of previous generations STRESSED FRUGALITY and saving. Starting with the Baby Boom generation, frugality went out the window. We can have that culture again if we so choose. When we're finally tired of being stressed out and broke, we'll change. One other thing....WATCH LESS TV!!! We need to recognize how damaging the TV really is. It encourages people to buy a bunch of crap they really don't need. Even the TV shows themselves portray "middle class" people as having more than most middle class people can really afford. Perhaps we should have tax increases, but only as a last resort. If we find a way to control runaway health care and education costs (which we're going to be FORCED to do at some point, anyway), there will be less need for tax increases on the "rich" in the first place. Tax increases always end up rolling "downhill" to the poor and middle class anyway. Exhibit A of this would be the "Alternative Minimum Tax". It started in 1969. It was initially assessed on the "rich". Now it hits more and more middle income earners because it isn't adjusted for inflation. People who think taxes on the rich don't eventuallly hit the poor and middle class are living in denial. Despite the Bush tax cuts, government tax revenue as a % of GDP has actually INCREASED since Bush took office. That's because there are more rich people earning more money, so overall, incomes are being taxed at a higher rate. I bet not many people knew this!!!

  • UC Berkeley Grad - Friday, August 17, 2007, 9:32PM ET  Report Abuse

    • Overall: 1/5

    She's clearly been told be her editor to trash this guy's book - just look at the opening line of this article. From the very get-go, she frames the issue from the point of view of someone who is wealthy, and the clear message is that income inequality doesn't bother her, and it shouldn't bother you. Income inequality is a real and growing problem. According to The Economist, the average CEO made 60 times the salary of the average employee in 1965. Now that number is up to 400 times the average salary. These executives have clearly done fantastically well. And the wealthiest 10 percent in this country now own 80% of the US stock market (so Bush's reduction in dividend taxes from ordinary income at 35% down to only 15% was a huge break for a very small minority of folks in this country who *really* don't need a break). They're already fabulously wealthy. (Even Warren Buffet said it was immoral that his secretary pays at a higher tax rate than he does on her income.) And contrary to popular opinion, this country is not a meritocracy. The Economist ran an article earlier this year pointing out that you're five times more likely to end up wealthy if you're born into a wealthy family than if you were to start poor and try work your way up. Wealthy folks have the deck stacked in their favor from before pre-school. They go to better schools, have smarter parents, more money for SAT-prep classes, and they're better connected. The media loves to talk about "rags to riches" stories where someone from humble beginnings works hard and becomes a huge success (e.g. anybody seen Will Smith's "Pursuit of Happiness"?). But then it's not surprising that the media (even allegedly liberal Hollywood) likes to push these implausible, warm-fuzzy, feel-good stories, because the media is *also* owned by rich people. And rich people benefit by reinforcing the myth that there's a level playing field in this country, because this myth fools the non-rich into believing that the rich "earned" their good fortune. While it's true that many wealthy people are hard-workers, you'd be hard-pressed to convince anyone sensible person that the rich work 400 times harder or are 400 times smarter than everyone else. This article tells me that Americans aren't upset about this rising inequality -- but I can only wonder who they're talking about. The average folks I know are fuming about this issue. And their anger on this issue is only slightly less than their anger on immigration, or being lied to by our president to get us to invade foreign countries. Income inequality is a huge issue in this country that has a LOT of people riled up. Don't listen to this author when she tries to convince you otherwise. And just remember this one thing, she's on the payroll of a very wealthy person who has a vested interest in trying to get you to believe that income inequality is a "non-issue."

  • Yahoo! Finance User - Friday, August 17, 2007, 9:26PM ET  Report Abuse

    • Overall: 5/5

    It's not the cost of maintaining the mansion that's the problem (assuming you can afford it) - it's dealing with the household helpers - maids, etc., and all the loss of privacy. A lot more trouble just for more space.

  • Yahoo! Finance User - Friday, August 17, 2007, 9:10PM ET  Report Abuse

    • Overall: 5/5

    I think the author did an excellent job of reviewing another authors work, and although she clearly points out Frank's "slipperly slope" logic (as one astute reviewer also noted), she also makes her disagreement with some of his ideas explicit (Fueling Polarizations, para 1).

  • Yahoo! Finance User - Friday, August 17, 2007, 7:03PM ET  Report Abuse

    • Overall: 2/5

    yeah tax the rich so they will not buy luxury items, then all the workers who make those luxury items won't have jobs. Brilliant idea. The problem is much greater than this article. We have a dollar that has lost 50% of its purchasing power in the last 10 years. This idea that everyone has increased their wealth is myth. Only perhaps the top one percent, and make no mistake, they plan to keep it that way. There is no question that Americans are enamored by bobels and trinkets and that does eat away at the little wealth they have, but until we begin to use sound money or money is backed by gold and not taxpayers, we will always be at the feet of the federal reserve and its private owners. The federal reserve is neither Federal or a Reserve. They print paper and call it money and charge americans an :interest" to use it. Nothing in our society is more corrupt than this. Nothing.

  • Yahoo! Finance User - Friday, August 17, 2007, 5:43PM ET  Report Abuse

    • Overall: 3/5

    Somebody said in a review that only way to be rich is to save money. It is like this, one guy came home from work gasping for breath and told his wife that instead of taking the bus home he ran behind the bus and saved two dollars. His wife said you moron, you should have ran behind a cab and saved $20! Its like this, when you buy cheap your bank balance doesn't go up, it decreases unless you save that money in a special account WHENEVER you buy "cheap" so that you have something to show for at end of the year. The only way to be rich is to MAKE money. Walmart is not doing social service selling at reduced prices to make people rich. They are in business. We are ametuer buyers in professional marketing world. Get finacially educated and increase your networth.

  • Bill - Friday, August 17, 2007, 5:23PM ET  Report Abuse

    • Overall: 4/5

    Ah, Laura... as smart as you are beautiful *sigh*. You might want to look into www.fairtax.org.

  • William - Friday, August 17, 2007, 4:55PM ET  Report Abuse

    • Overall: 5/5

    Yahoo Finance is guilty, too. How many times do I see articles on the front page about how the super-rich are spending their money? In the past few months I've read articles here about million dollar cars, private jets, personal chefs, and even a $700,000 pen for god's sake. A lot of what is written in those "wealth porn" articles is so far beyond the means of even "normal wealthy people (people worth $5 million or so) that it's not even funny. What is the point of showing people something they can never have, even if they work and save for two entire lifetimes? The middle has gone missing. My favorite example is the design and remodelling shows my wife likes to watch. You get a choice of 2 extremes: either they show you how great a house can be if you do a $250,000 remodel, or they show how to remodel a room with a $500 budget (and on those shows they almost always "find" a large, gorgeous antique desk or bookcase "in the basement" that "just pulls the whole room together). Where are the shows for the people with 25-50K remodeling budgets? My income and assets put me right at the "top 10%" line. My inflation adjusted salary hasn't changed in 5 years, and I WANT to see taxes increase for people with higher incomes. Why? Because there is only so much money out there, we need money to maintain roads, bridges (!), schools, provide police and fire protection, inspect our food, process our passports, equip our military properly, and general build and maintain the infrastructure of our society, and the people with the most money are the ones who can afford to pay extra. Why do the super-rich complain about taxes so much? Because it's the only expense that impacts them in any meaningful way. Gas prices doubled? If someone is making 10 million a year, even if they drive a Hummer 100,000 miles a year it's not going to make a difference to them. The cost of private school for their kids doesn't register. If the cost of college goes up at double the rate of inflation and will be 80k per year in 10 years, it won't matter to them. They can afford the best health insurance and any medical procedure, so if healthcare costs rise 12% per year and insurance premiums rise a similar amount while coverage is continuously reduced, they do not care. What they care about is if someone comes along and says "we're raising your tax rate by 10 percentage points." BAM! You just took away a million dollars. Taxes are the only thing that can hurt them to that extent, so they fight them tooth and nail. The claim is always that the extra taxes will be "wasted." Maybe some of it will. But what would they do with it? Buy a 10,000 sqft house instead of a 9,000 sqft one? Buy one of those million dollar cars from the Yahoo article? Maybe some would donate to charity, endow a chair, or seed some important company, but recent experience suggests that in most cases the money that could otherwise be used to benefit society would instead probably just be pointlessly and flagrantly wasted.

  • AlwaysCorrect - Friday, August 17, 2007, 4:30PM ET  Report Abuse

    • Overall: 4/5

    Good review of his book, but I will definitely have to say I find his reason to be flawed. Take this test, substitute "slippery slope" with "cascade" and you'll see his logic. Consumption taxes against the rich won't work unless all assets (including financial) are taxed, and who wants to pay another tax on their next purchase of stock? There's no evidence that higher taxes create a more "equal" distribution of income, but there's plenty of evidence that shows it creates nanny states full of entitlement. All of the expenses he cites as skyrocketing are skyrocketing for other reasons in addition to the causes he suggests. Among these, and most importantly, is the huge surge in demand relative to the weak growth in supply. He should also address how "equal" it is for the top 2% of income earners pay the overwhelming majority of taxes in this country. Fairness is the great paradox of economics, and we'll see peace in the middle east before we see an end to this argument.

  • Michael C - Friday, August 17, 2007, 4:29PM ET  Report Abuse

    • Overall: 5/5

    I've been thinking the same thing for a long time, trying to figure out why I felt so poor after decades of economic growth. This puts the answer I've been searching for right on the table. Thanks a lot!

  • KD - Friday, August 17, 2007, 4:26PM ET  Report Abuse

    • Overall: 5/5

    I'm in total agreement with HTS58: overall this was a good article. My hard work and savings habits are in direct opposition to those of my inherited family. In this era of blended families, the bio-parents often feel compelled to try to outspend eachother on the child - which in turn leads to a reinforced sense of entitlement on the part of that generation who continually have everything given to them, on a sterling silver platter no less. I know what is needed to get by, from my military service and my younger days, and I know what is comfortable and not lacking for any essentials, but I recoil at the constant drumbeat to spend, spend, spend like the folks in the gated mansion country club communities. People should be happy with what they've EARNED, and live accordingly, rather than try to live like an oil tycoon on a middle class salary. Gotta get real, folks!

  • Yahoo! Finance User - Friday, August 17, 2007, 4:25PM ET  Report Abuse

    • Overall: 4/5

    Greenspan is a wise man!

  • likeyourstory - Friday, August 17, 2007, 4:08PM ET  Report Abuse

    • Overall: 5/5

    Very nice, down-to-earth article on excesses for all of us.

  • Andrew - Friday, August 17, 2007, 4:05PM ET  Report Abuse

    • Overall: 4/5

    Good article on outlining how the perception of "status quo" gets inflated by the rich. You could easily judge class envy by MTV Cribs or Lifestyles of the Rich & Famous. But that doesn't explain the whole story here. People have a choice. I don't buy the argument that more expensive house = good schools. If you want the benefit, then buy a lot in a good school district and build a smaller, less expensive house. Oh wait, it would look out of place? It's embarassing that Americans are so concerned about their neighbor's perceived prosperity, and about how their neighbors perceive them in return. Get over yourselves. No more cash-out refis to buy Lexus or a vacation in Tahiti. Stop running the rat race and understand that the same things are still important--spending time with your kids, living in a house you really own, enjoying life with your family and friends. That Lexus... it's hurting you more than it helps, but you just don't realize it.

  • Yahoo! Finance User - Friday, August 17, 2007, 4:03PM ET  Report Abuse

    • Overall: 3/5

    Frames of reference are shifting - but not just because of the very rich. They're shifting primarily because there are more upper middle class people who want more things. The challenge, as Laura Rowley suggests, is to resist this when you can't afford it or don't really want it, and find schools that work for your kids even if they aren't the top-scoring schools. I see lots of middle class families living in smaller homes close to my city (Wash., DC) and sending their kids to diverse schools that they like. However, most of them also have added on second stories and new wings that larger families never had when I grew up here in the 50s. I totally disagree with Robert Frank's tax-the-rich scheme. The government's role should not be to redistribute income but to create economic conditions that promote growth and prosperity for all who are willing to make a fair effort. That means low, flat-rate taxes. Those high taxes he favors for "the rich" ALWAYS make their way down to the middle class. You can always scapegoat the rich by finding someone poorer. By the way, how did Laura Rowley manage to find a gymnastics party for 20 kids that ONLY costs $150? She must live in a "low-cost" area!

  • ThorpeS - Friday, August 17, 2007, 4:03PM ET  Report Abuse

    • Overall: 5/5

    Very good article. What most people refuse to do is scrimp and save, put off instant gratification, and invest the proceeds. After 20 years of this and delaying marriage until 40 I don't have to worry about a buget. I still do as this is now ingrained. I have step-children and it has been a real struggle to temper their and their mother's expectations. Everyone thinks it should just be handed out. I am afraid this ruins their chance to be truly independent and resbonsible for one's situation. People MUST realize that their decisions will affect their lives. If you make foolish decisions they will come back to you later. People should make their children independent!

  • JENNIFER C - Friday, August 17, 2007, 3:49PM ET  Report Abuse

    • Overall: 5/5

    I have scratched my head in wonder over the past few years as I watched couples that earn far less than my husband and I buy bigger homes in nicer neighborhoods, new cars, and spend without thought. And they think we're struggling because we live in a blue collar neighborhood. Well now it seems the sh!t is hitting the fan. If people would just live within their means to begin with (including retirement planning) a lot of the cute old neighborhoods in our cities WOULD still have good schools and more curb appeal. I agree that we are a GREED driven society. But you can use the greed as a motivating factor to save for the future if you're smart.

  • Yahoo! Finance User - Friday, August 17, 2007, 3:38PM ET  Report Abuse

    • Overall: 5/5

    Great article, withstanding the quote from Greenspan. When are people going to stop listening to this guy...he hasn't been right about anything in 8 years. He wants to be a celebrity more than a legitimate economist. I realize this is completely off topic, but it made me feel better.

  • Kristen - Friday, August 17, 2007, 3:28PM ET  Report Abuse

    • Overall: 4/5

    I totally agree that people are spending more than they should (beyond their means, especially given the need to plan for the future and the unexpected). However, the person who commented that America is the source of this problem doesn't know their history. Even in the first century A.D., there was written that "the LOVE of money is the root of all kinds of evil." Even the ten commandments address not coveting one's neighbor's belongings. This is not a new problem. What IS relatively new is the pervasive "entitlement" attitude. It is found among the poor in America as well as the middle class and rich. It is the attitude that one is "special" and doesn't have to work, scrimp, and save to afford luxuries (luxuries which range from Cokes to BMWs and granite countertops). I believe that TV is responsible for much of the pull people feel toward acquiring more goods; even ignoring the commercials, almost every TV show contains implicit advertising of things one doesn't have. When I taught seventh grade at an inner city school, I saw every day the "entitlement" kind of attitude from my students. They thought that the government owed them, not only the opporutunity for an education, but good grades, and an apartment, food, etc. when they either dropped out or graduated. They never saw what they received as above-the-norm, much less above-what-they-deserved. Contrast that to my grandfather's attitude. As an immigrant to the U.S. from Germany during Hitler's rise to power, he felt hugely grateful for the opportunity to live and work in the United States... and to pay taxes! After he finally retired when he was 70, in insufficient health to continue working even part-time, and began to draw Social Security, he confided in me that he hated to have to accept this money from the government (despite his having paid into the Social Security system for decades) and that he didn't even draw enough to pay taxes; he had always felt like it was an honor to pay taxes in the United States. It was his goal in life to always give more than he received. If everyone had that kind of attitude, we wouldn't have the "gimme, gimme, I don't care if I can afford it" problems of people living beyond their means.

  • Grunge45 - Friday, August 17, 2007, 3:26PM ET  Report Abuse

    • Overall: 5/5

    This draws attention to a pernicious possible destroyer of our society. To return to a "lord of the manor" set up that used to exist hundreds of years ago would only lead to eventual violence, and a loss of our freedoms. It is too bad that there are large segments of our society that does not understand this.

Showing comments 6-35 of 107<< PreviousNext >>
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