Land Rich and Cash Poor
Montana Congressman Denny Rehberg is catching some flak for complaining that he's "struggling like everyone else" despite a net worth in the millions.
Montana Congressman Denny Rehberg is catching some flak for complaining that he’s “struggling like everyone else” despite a net worth in the millions.
“I’m a small businessman. My wife is a small businessman. You know she hasn’t taken a salary in ten years? She has not, as a result of the business, because we are struggling like everyone else… with the economy,” Rehberg said.
“What’s your net worth?” an audience member interjected.
“I am land rich and cash poor; like ranchers, and farmers and small businesses throughout Montana,” Rehberg said. “I have the same struggle. I have no employees. And we have the same struggle because we have the ability to borrow the money but the problem is, in our particular case, if you don’t have the ability to pay back the loan, then you don’t — then what’s the reason to go to the bank and borrow the money?”
Ryan Reilly observes:
It’s certainly possible Rehberg finds himself in cash crunch. But his own most recent financial disclosure form, which covers 2009, shows Rehberg with a self-reported net worth of between $6,598,014 and $56,244,998, according to the Center for Responsive Politics. That made Rehberg the 23rd richest member of Congress (by another count he was 25th richest member of Congress and the 14th richest member of the House). Based on their analysis, Roll Call pegged him as the 23rd richest member of Congress.
A closer look at his disclosure form from calendar year 2009 suggests Rehberg has millions of dollars of equity in the agricultural properties he owns. His farm and ranch land was valued at between $11.5 million and $56.75 million, and his total assets were worth somewhere between $12.2 and $57.5 million.
Steve Benen adds:
I can appreciate his limited cash flow, but what I hope Rehberg — who routinely votes against the interests of the middle class and working families — can understand is that most families in Montana and nationwide don’t have this kind of vast wealth to lean on. They have limited cash flows and they don’t have millions of dollars in land.
As for the notion that Rehberg is “struggling like everyone else,” when your net worth is as high as $56 million, you’re not really struggling, and you’re not really like everyone else.
Matt Yglesias takes it a step further:
I think accepting this kind of principle into our public discourse is a mistake. If you have $2 million in cash in the bank, that makes you rich because with $2 million you can buy $2 million worth of goods and services. If instead of $2 million in cash in the bank you have $2 million worth of Treasury bonds, that makes you rich because you can exchange it for $2 million in cash with which you can buy $2 million worth of goods and services. Or if you have $2 million worth of Apple stock, that makes you rich because you can exchange it for $2 million in cash with which you can buy $2 million worth of goods and services. And by the exact same token, if you own $2 million worth of land, that makes you rich because you can exchange it for $2 million in cash with which you can buy $2 million worth of goods and services.
Since people with progressive political views often live in parts of the country where land is very expensive, I think they sometimes get unduly sympathetic to the view that land wealth somehow doesn’t count. But I promise you that it does! Being “house rich and cash poor” is a way of being, well, rich since unlike an actual poor person you are the owner of a valuable asset that you can exchange for money. That’s what being rich is.
Well . . . no.
Granted, the notion that Rehberg is “struggling” in the same sense as constituents drawing a weekly paycheck–or not drawing a weekly paycheck–is silly. Even if he’s legitimately having problems keeping the bills paid, it doesn’t come off well. But it’s simply not the case that “net worth” directly translates to living standard.
Let’s take three people, each earning $100,000 a year in annual income. One lives in a $200,000 house in Birmingham, Alabama. Another lives in a $1 million condo in midtown Manhattan. The other lives on a $3 million ranch in Missoula, Montana. All three own their property free and clear. It’s not at all clear that we’ve listed them in increasing order of prosperity.
The first two are at roughly the same place in relation to median home prices where they live. They’re much better off than their same-town cohorts without those real estate assets, since they don’t have rent or mortgage expenses. But, presuming that their income is contingent on them living where they do, they really don’t have assets that they can cash in. So, they’re both in the same current position as against one another. Indeed, the fellow in Birmingham is likely better off in terms of buying power, since taxes and prices are considerably lower than in Manhattan.The Montana rancher is harder to compare. He’s certainly much further ahead of the local median than the other two. But he’s likely to have much more extensive expenses, too, since his homestead doubles as a business.
Matt is of course right that assets can ultimately be translated into money. When they retire, the fellows in Manhattan and Missoula could sell off their places and –assuming they hold present value — move to Birmingham and be in a substantially improved position over the guy who’s lived there all along. But the condo and ranch aren’t the same sort of asset as a T-bill or Apple stock, which are pure investments. Instead, they’re a home that one lives in and a business that serves as one’s basis for earning a living.
But, yes, belying Rehberg’s case, they’re assets. If he’s having trouble making ends meet on his Congressional salary because the expenses on running his ranch are bleeding him dry — and the ranch is still somehow worth millions of dollars and not leveraged with bad loans — he has the option of selling off the ranch and getting back into the black. The average American salaryman doesn’t have that luxury.