The Wall Street Journal
By: Robert Frank
December 27, 2011
Will 2012 be the next "1932" for the wealthy?
For the American wealthy, the year 1932 always conjures The Nightmare Scenario.
It was the year of reckoning both financially and politically.
After the 1929 crash and anemic recovery, American voters rose up in a wave of populist anger and sought to bring down the powerful cartels and plutocrats that they blamed for the country's ills. Labor unrest was rife. In 1932, thousands of war veterans marched on Washington to demand their promised cash bonuses.
The year 1932 was the year Huey Long, "The Kingfish," became a U.S. senator and launched his "Share Our Wealth" crusade, announcing that 4% of the American people own 85% of America's wealth. (Today it's closer to 60%). Long proclaimed, Michael Moore-like, that new limits had to be placed on the nation's millionaires and billionaires:
"Giv'em a yacht! Giv'em a Palace! Send 'em to Reno and give them a new wife when they want it, if that's what they want. [Laughter] But when they've got everything on God's loving earth that they can eat and they can wear and they can live in, and all that their children can live in and wear and eat, and all of their children's children can use, then we've got to call Mr. Morgan and Mr. Mellon and Mr. Rockefeller back and say, come back here, put that stuff back on this table here that you took away from here that you don't need. Leave something else for the American people to consume."
The same year, FDR was elected President and pushed through a tax increase on the wealthy that included a hike in the top rate to 63% from 35%.
The year 1932 was also the year that many of the wealthy recorded their biggest losses, as the "false bottoms" of 1930 and 1931 finally caved. In 1929, there were 413 Americans earning more than $1 million a year. In 1932, there were only 20, marking a 95% decline.
It was, in short, the annus horribilis for the American rich - both politically and financially.
Will 2012 mark a replay? It's unlikely in politics, but financially, anything is possible.
Obama is no Huey Long, of course. His proposed tax hikes on the rich are more Clinton than FDR. Yet the big fear among the wealthy is that the election-year political rhetoric will fan the flames of the Occupy movement and create another historic assault on the wealthy, where the rich are universally vilified by the public, taxed more by Washington and targeted in the broader culture.
There are already signs of this coming true. The Occupy movement is planning a new phase of "guerilla" tactics next year. Coverage of inequality and anger against the wealthy have reached a fever pitch (even if inequality is actually declining). New York has led the way to raising taxes on the wealthy, after promising not to. And even the Republicans are using "wealthy" as the ultimate insult against each other.
But the likely reality is that when it comes to policy, 2012 won't come anywhere near 1932. National politics may shift slightly to the left next year, they won't go as far as 1932. In the end, Americans care more about growth than inequality.
The real risks for the rich are in financial markets. As we've seen among today's High-Beta Rich, financial markets make or break today's big fortunes. Given the recent volatility, the real risk of a return to 1932 lies in the stock market - not in Washington.
Do you think 2012 will bear any similarities to 1932 for the rich?