President's choice of words deflates support
By Gary Silverman, CFP®
In a speech back in May (sorry, it takes me a while to write these), President Obama gave a speech at Georgetown University. The event was a discussion on the causes of poverty and programs to fight it. I’m going to take him to task for something he said. But first, let me tell you where I agree with him.
The President pooh-poohed companies who pay their CEOs 1000 or 2000 times the average wage of a worker at their company. I, too, think this, while perfectly legal, is rather stupid. Needing to be paid $7,250 per hour is a bit beyond motivational. (Note to self: See how I can pay myself 1000 to 2000 times what I pay everyone else.)
The President said that a gap is growing between the wealthiest Americans and the poorest, and that’s a big problem. He’s right; and the middle-class is being stretched thin in the process. I believe this is a rather natural process that society eventually corrects (sometimes in some sort of civil war), but as of this moment, we are in the midst of it.
In this speech, the President targeted hedge-fund managers to represent the uber-rich. He feels they should be taxed more—fairness demands it. While we can argue what “fair” is (and we have in previous columns involving taxes), I agree that those managers make stupidly large amounts of money from their clients for what are usually mediocre returns and pay much lower taxes than most of us because of a loophole. I agree that loophole needs to be closed.
So you see, on most points of his speech, I agree with the President. What I take issue with is a simple little phrase that reflects an attitude I’ve called him on before. In the speech, he equated those hedge-fund managers (who, as a proxy, represented the super-rich in the speech) as “society’s lottery winners.”
The lottery is a form of gambling that is based entirely on luck. It involves a tiny, inconsequential investment for a chance at instantly becoming one of the super-rich. And while I am sure that some rich folks got there purely by luck with an inconsequential investment I can assure the President that the vast majority of them did not.
Rather than luck, they got the education they needed (self-taught or otherwise). They took many risks with their money and their reputation. They worked incredibly long and hard hours. They cultivated relationships with people and organizations. They often failed, dusted themselves off, and started again. And they had some luck. Note the word some.
Working incredibly hard does not guarantee success. Yet depending on luck to make you rich is a fool’s errand. We can reasonably argue about our tax system, income inequality, and CEO pay. But please let us not equate business success to buying a lottery ticket.
This article was published in the Times Record News on August 30, 2015.