At first glance, I was skeptical that there was any meaningful policy point to be made about Rep Paul Ryan’s taste for expensive wine but I’ve actually reconsidered that view. Consider.
The essence of Paul Ryan’s political agenda is to reduce spending on domestic social programs in order to create budget headroom for reduced taxation of high-income individuals. One obvious critique one could make of this agenda is that it will seriously imperil the welfare of the least fortunate. But it’s also worth noting that Ryan’s agenda is likely to accomplish much less to improve the welfare of the most fortunate than you might think at first glance. After all, why would a bottle of wine cost $350 to buy? In part, that’s because fine wines are costly to produce. But that doesn’t explain the really really expensive wines of the world. It’s not like the grapes are fertilized with diamond dust or something. Very expensive wines are very expensive for the same reason that beachfront land and original copies of the Magna Carta are expensive. They’re rare. This has important implications. If you move to Hollywood and become a rich movie star, you’ll suddenly be able to buy beachfront property in Malibu. But if movie stars as a whole get richer, this doesn’t change the fact that there’s only so much beach in Malibu. All that happens is it gets more expensive.
But the same token, if every rich Manhattanite gets a tax cut from Paul Ryan there will be some increased overall consumption by rich Manhattanites. But you may find that there’s surprisingly little. You’re going to see an awful lot of bidding up of the price of supply-constrained commodities. Suddenly, the same bottle of wine is selling for $425. The main real world consequence of this is going to be to make it more difficult for middle class families to engage in the occasional splurge purchase. Like most people, I every once in a while go out and do something expensive that someone richer than me might do frequently. If the rich people all get richer, then they’ll bid up the price of those rich guys activities and put them further out of the reach of the middle class.