Luxury Beliefs Death Spiral

The latest shiny objects among the elites are not so much cars and jewelry, but fanciful beliefs that allow them to show they care. But such beliefs often come at great expense to the disadvantaged.

The domestic life of most classes is relatively shabby, as compared with the éclat of that overt portion of their life that is carried on before the eyes of observers.
—Thorstein Veblen

It used to be that the wealthy elite distinguished themselves through so-called Veblen goods. Ostentatious displays like a big house or fancy car once sufficed to show you were a member of the upper crust. But times have changed. Today, to run among the elite, you have to show you care—with an emphasis on show.

If you believe social theorist Rob Henderson, today’s elites hold luxury beliefs. Such beliefs cost little to hold and often benefit the holder by improving her reputation in the in-group. So she’s likely to hold all manner of bizarre views. Most of these views will seem crazy to the plebs until they realize adopting them is a ticket to the cocktail party. 

“The chief purpose of luxury beliefs,” writes Henderson in Quillette, is to indicate evidence of the believer’s social class and education.”

Henderson notices that the indirect costs of luxury beliefs are often borne by the poor and middle class, financially or in terms of direct consequences. But thanks to social media, telegraphing your virtue is cheaper than a carton of McDonald’s french fries, despite costly effects on the rest of us.

Bottomless Idealism

“Starting salary for a teacher should be $125K and go up to $300-400K,” writes a Facebook connection who wants desperately to preen and peacock his goodness. 

Even though the average teacher salary in America ($65,090) is higher than the mean personal income ($57,143)—and teachers work fewer than 190 days per year with hours similar to other workers—the well-to-do can afford to think that starting teachers ought to make mad money. In most states, though, teacher salaries are funded by sales or property taxes, which disproportionately hit the poor and middle classes.

“No Human Is Illegal” reads millions of yard signs in wealthy enclaves. 

But as the denizens of Martha’s Vineyard will tell you, it’s cheap to put up a yard sign. Caring for real people who turn up in your community with nothing is far more costly. 

Let them eat Brownsville
—Martha’s Vinyard

Forty-four hours after Florida Governor Ron Desantis’s stunt to fly fifty Venezuelans to the sanctuary island, Martha’s Vineyard's elites (median income $82,857) sent the immigrants packing. It was purportedly because those elites lacked the “infrastructure” to help. Of course, the people of Brownsville, TX (median income $40,924) can relate. 

Even if one thinks, as I do, that we can set up policies that will do more to welcome and place immigrants, there is no doubt that the current immigration regime is a mess. Those fifty poor Venezuelans will almost certainly end up in poor areas with strained infrastructures.

Apparently, some humans are illegal. 

“This idea that you spend money on an education as a cover charge to a career should be laughed out of the room,” tweets one virtuous soul cheering on the Biden Administration’s constitutionally spurious debt-forgiveness plan. Instead, this Tweeter writes, education should “form and complete them as people.” 

The idea is that in Utopia, higher education should be available to everyone for “free.” It’s one thing to hold such views. It’s quite another to figure out how to pay for it. Never mind that the cost of autodidacticism, educating oneself, is already close to zero. 

Luxury Beliefs are Cheap for Now

The problem with luxury beliefs is that they’re not just for the rich anymore. These beliefs trickle down to everyone at a steep discount as non-elites try to emulate elites. 

The problem with luxury-belief emulation is people tend to vote their beliefs, especially when there is no direct cost to doing so. But that means aggregate costs balloon and those costs get shifted to taxpayers or added to the Treasury’s tab.

When most people read that the US debt to GDP is more than 130 percent, their eyes glaze over. But to put this into perspective, only three developed countries—Greece, Lebanon, and Japan—have higher ratios. And there is growing concern any one of these countries could start a sovereign debt contagion, particularly in a world where there is about $300 trillion in debt floating around but only $100 trillion in economic output per year. 

Poor Man’s Truths

I don’t know whether Rob Henderson would approve, but I’d like to propose a corollary to the concept of luxury beliefs: poor man’s truths. Where luxury beliefs are cheap to hold but expensive overall, poor man’s truths might be socially costly to hold but track reality better—including any indirect consequences to the poor and middle class.

BELIEF MATRIX

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One major poor man’s truth is an idea that contradicts all the luxury beliefs currently swirling around: austerity. Short of any major institutional change, the U.S. federal government has reached the stage where it must stop spending increases or risk calamity. Unprecedented debts loom as dark storm clouds over the republic, but not enough want to discuss it. Austerity ain’t sexy. It certainly doesn’t make you friends at cocktail parties or on K Street.

Imagine you have a friend who makes $40,000 yearly in salary after taxes but also carries $300,000 in various debts. He would have a hard time ever paying down his debt, and it’s not clear that any rational person would loan money to him again. If he could set aside $1.515 monthly to pay his debts at 6 percent interest, it would take him 77 years and two months. Now, the U.S. federal government, though only roughly analogous, operates at a scale that is as complicated as it is humongous. Our government currently doesn’t include setting aside money to pay its debt. It merely services interest on the debt. So, if the federal government were your “friend,” you might want to offer a socially costly poor man’s truth: stop spending increases.

The Death Spiral

Every time parties change power, the winners spend-spend-spend to buy back the cronies they lost when they were out of office. Politicians do this by greasing the palms of their favored constituencies and special interests. We used to call that corruption. These days, we call it politics, as we have become inured to the idea that the government has two departments:

Do Something and Gimme Gimme.

Otherwise, it’s just another day for power brokers to indulge those enlightened few who are happy to hold all manner of nutty beliefs, even though they threaten any number of devastating socio-economic scenarios—as debt heaps upon debt and inflation lingers.

For those rare politicians with a conscience, the bind looks like this: Voters, even those who have moved right, still think the role of government is to help people. But decades of government ‘assistance’ have gotten us into this sorry state, as more than 60 percent of federal outlays are for healthcare and welfare transfers. ‘Free-market fundamentalists’ have always argued that the only way for a people to get wealthy is to create wealth in a system of private property, undistorted prices, profit-or-loss, and sound money. 

There is no other way. But most voters don’t realize this. 

To repeat, most think the role of government is to help people, especially in hard times. According to the left-leaning Center for American Progress, a 2021 poll indicates that “American voters want the government to play a strong role in securing basic living standards for all people.” Assuming this poll is valid, voters will expect more help as matters worsen. If politicians offer more largess, they risk default, or the Fed will have to print money. Printing money causes inflation, and that’s just as painful as a new generation is learning. 

If politicians cut government spending, precisely what they need to do, voters would likely turn on them. If politicians don’t cut much, Americans will stay mired in recession (or worse) and turn on them anyway. 

The only way the authorities can get us out of this mess is to be straight with voters. Instead of lying and spending, politicians must become standard-bearers of values most people have forgotten: working hard, saving, creating value, and looking out for your neighbor. And they will have to do so at the risk of losing power.

A question remains. 

Short of welcoming the brutal circumstances that would force everyone to experience the immediate pain of decades-long cost shifting and debt spending, how can we reduce the social costs of sharing poor man’s beliefs? And how can we raise the social costs of luxury beliefs?

I wish I had an easy answer. 

If we don’t figure it out, we’ll all suffer mightily—except, that is, the elite. They’ll be in the best position to absorb the costs of any coming crisis. Indeed, they will be well positioned to continue thriving on a vampiric system that feasts on the lifeblood of the poor and middle class.

This article is a chapter excerpted from Underthrow. A version appeared at AIER.