More on that Chicago Professor

Here’s Brad DeLong’s fantastic response:

The big expenses in the Henderson family budget–their $60,000 a year in contributions to tax-favored retirement savings vehicles, their $25,000 a year savings building home equity, their $55,000 for housing, their $60,000 in private school costs, even their $10,000 a year for new cars–are simply out of reach for the overwhelming majority of Americans…
By any standard, they are really rich.

But they don’t feel rich. They have a cash flow problem. When the bills are paid at the end of the month, the money is gone–and they feel that they have to scrimp…
Professor Henderson’s problem is that he thinks that he ought to be able to pay off student loans, contribute to retirement savings vehicles, build equity, drive new cars, live in a big expensive house, send his children to private school, and still have plenty of cash at the end of the month for the $200 restaurant meals, the $1000 a night resort hotel rooms, and the $75,000 automobiles. And even half a million dollars a year cannot buy you all of that.

But if he values the high-end consumption so much, why doesn’t he rearrange his budget? Why not stop the retirement savings contributions, why not rent rather than buy, why not send the kids to public school? Then the disposable cash at the end of the month would flow like water. His problem is that some of these decisions would strike him as imprudent. And all of them would strike him as degradations–doctor-law professor couples ought to send their kids to private schools, and live in big houses, and contribute to their 401(k)s, and also still have lots of cash for splurges. That is the way things should be.

The first thing to note here are Henderson’s priorities: for him, it seems, it’s more important to spend $60,000 a year on retirement savings, and to send his kids to private school, than it is to have a cellphone. That alone marks him out as very unusual among Americans, most of whom will spend money on a cellphone long before they send their kids to private school or put that fifty-thousandth dollar into their retirement savings.
And in reality, I doubt that a four-point increase in the tax that he pays on any income over $250,000 is going to stop him from hiring someone to mow his lawn. And it’s certainly not going to make him give up his cellphone.