Tuesday, May 26, 2009
Greg Mankiw (Harvard University, Department of Economics) takes Supreme Court nominee Sonia Sotomayor to task for saving little ($50,000 - $115,000) of her $179,500 yearly salary as a Second Circuit Judge:
I once wrote a short paper called The Savers-Spenders Theory of Fiscal Policy based on the premise that there are two types of people: Some save and intertemporally optimize their consumption plans, while others live paycheck to paycheck, spending their entire income as soon as it's received. Sometimes readers of the paper think of the two groups as rich and poor, but that interpretation is wrong. Some people with low incomes manage to scrimp and save (I always think of my grandmother), and some people with high incomes spend most everything they earn. ...
My grandmother would have been shocked and appalled to see someone who makes so much save so little.
Judge Sotomayor has only roughly $100,000 in savings, but look, she is (I gather) a single woman with no children. She has a life tenured position where her salary is paid by the United States and which she can be fired from only with serious cause. She makes only $179,000 per year but it is as secure as a job can be. She has a generous judicial pension plan that will kick in as soon as she has enough years of service .... [W]hen you take Sotomayor's human capital and circumstances into account, there is nothing wrong with her balance sheet. Sure, she could have another $500,000 tucked away, and that would be nice. But why should she? ... She has a guaranteed job for life with very generous retirement and health benefits, and any day she decides she wants to be a millionaire, all she has to do is pick up the phone. ... I think Mankiw should ease off.