As a policy matter, the surge in middle-class second-home buying means that the second-home mortgage deduction may not be the “sop to the rich” that it may at first glance appear. Picture an aspiring politician with a populist impulse. He’s looking for new issues to appeal to middle-class voters, and he calls for eliminating the second-home mortgage deduction because he assumes it was planted in the tax code by and for the wealthy. To his surprise, he’s ticked off a bunch of very ordinary people, who then send him 5 million pieces of complaint mail. People are passionate about their homes, including their second homes. There is a lot of potential in organizing second-home buyers—they have product needs like bill-paying, revolving credit, and insurance—and they have political needs like low interest rates and high home appreciation.

  On a societal level, the second-home buyer trend also represents a rejection of the 1990s philosophy of putting your savings into the stock market instead of your home. Now, it goes into your homes. This shift will make Americans less liquid, Social Security more dependent again on real estate values, and perhaps promote more savings. Unlike the stock market, though, the real estate market depends almost entirely on leverage to succeed.

  Moreover, with millions of middle-class Americans having tied up their savings in real estate, there is suddenly a profound new interest in what the Federal Reserve might do. Beyond the business and government elites, did anyone used to care who the Fed chair was, and what his cryptic pronouncements meant? Now there are millions of regular people whose financial stability depends on those quarter-percent increases and decreases. If the Fed gets it wrong, policymakers can expect anger from new quarters. It’s a whole new group of people intent on something, ready to lash out if this interest feels threatened. And if the Fed is not careful, it could raise interest rates and push a lot of middle-class people into bankruptcy who bought second homes on credit, but find they can’t pay the two mortgages.

  The American Dream used to be two cars in every garage. Now it’s two garages for every car.

  Modern Mary Poppinses

  College-Educated Nannies

  With more and more Moms working, there has been an explosion in the child care industry. The demand for nannies has gone through the roof, nearly doubling in the past fifteen years. This has bid wages up, increased competition, and also created a new class of nannies: the well-educated nanny.

  Often coming from families with lots of children and missing the excitement of that kind of household, this well-educated nanny takes full control of the kids while Mom is at work, perhaps under the supervision of a nannycam.

  The role of nannies in the upper class has changed from mother’s helper, when Mom was at home; to primary caregiver during the workday (until preschool kicks in) and afternoon caregiver after that. Even in the toniest of families, women are choosing to go back to work, and this is creating demand for a new kind of nanny.

  The formal nanny system is really from Europe, but Americans have been entranced with the idea, especially in pop culture, for decades. Mary Poppins, the 1964 film about a nanny who literally blows into town and shows children how to find magic all around them, is to this day the biggest Oscar-winning movie in Disney history. In the fall of 2006, it was made into a multimillion-dollar Broadway extravaganza.

  The Sound of Music, in which nun-in-training Maria leaves her convent to care for a widowed Austrian’s seven unruly children, is one of the most popular American films of all time.

  In the 1990s, the hit series The Nanny, starring Fran Drescher as the jilted lover/cosmetic saleswoman who ends up caring for the children of a wealthy British Broadway producer, was wildly successful, ultimately playing on four continents.

  And the two nanny shows of 2005—Fox’s Nanny 911 and ABC’s Supernanny—both of which reaffirmed the stereotype that hefty British schoolmarms know more about childrearing than hapless American parents ever will—pulled in millions of viewers each week.

  These pop culture nannies are well groomed and respected by their employers, and for the most part considered their emotional and intellectual equals. Indeed, both Maria in The Sound of Music and Fran in The Nanny end up marrying the men who hired them—raising from subtext to story line the idea that nannies are as worthy and as cherished as Moms.

  Of course in real life, nannies aren’t always revered the same way. According to Domestic Workers United, a New York City–based advocacy group, most in-home workers are low-income, poorly educated, or both. Many are illegal, and care for other people’s children because the informality of home-based hiring helps them fly under the radar of the immigration authorities.

  Now there’s nothing new about the fact that there might be a gap between popular culture and reality. What is new is that after all these years, fact is actually inching closer to fiction. Increasingly, upscale, college-educated Americans who can compete elsewhere in the workforce are choosing to stay home with other people’s kids. The industry is as yet too unregulated to have precise data on this. But two things are happening. First, there is an intense desire on the part of well-heeled parents for nannies with a college degree. Second, there is an increasing interest on the part of college graduates to help raise well-heeled kids. They are having their own children later, so their availability during the post-college years, when they previously would have been taking care of their own kids, has skyrocketed. The irony is that these nannies delay having their own families in order to take care of someone else’s.

  From the parents’ point of view, well, there is little that many upscale parents today wouldn’t do to help prepare their child for adulthood, from fighting fiercely for private school admission, paying for tutoring for IQ and other tests, and coaching aggressively toward top athletic performance. About 25 million Moms are in the workforce now, compared to just 13 million in 1970. Something like 1 million households now employ nannies, with the greatest proportion of them being high-income. If you’re an upscale parent who can get someone to discuss Shakespeare with little Ashley while preparing her peanut butter and jelly—well, who wouldn’t want that?

  That demand has jacked up salaries. In 2005, the average national nanny salary was $590 a week, or $532 for live-ins. Nannies with a college degree are said to earn 20 to 60 percent more. So for a college graduate, that’s an average annual salary of about $43,000—well over the $22,000 that the average 18–24-year-old female makes coming out of school with a bachelor’s degree. More pay, less stress.

  Moreover, from the nanny’s point of view, in-home child care can be a perfect way to prepare for a career in teaching, child development, or child research. Or, dare I say it, parenting. Since fewer and fewer American women marry, and those who do delay childrearing until later and later, people who really love kids might find that nannying gives them time with some, for now, that they can really enjoy.

  And finally, as demand for and supply of college-educated nannies grows, the systems for linking them are becoming more efficient. What used to be a word-of-mouth, luck-of-the-moment, neighborhood-based undertaking is now a serious national industry. In 1987, there were forty-five nanny agencies in America. By 2004, there were 900. And what with chat rooms, electronic databases, and elaborate matching systems, there is practically no reason to limit oneself. Want to spend two years in San Francisco before deciding if you should go to business school there? Find yourself a nice local family and hunker down with the kids.

  It even turns out that there can be career growth, within the same family. Parents who have come to enjoy having a steady, warm adult around the house may not want to give her up just because the kids have outgrown her. Those with college educations who don’t aspire to business school can readily be promoted to “nanny” the parents, serving as a sort of personal assistant, managing travel arrangements, bills, research, household renovations, and other household employees. Maybe from there she moves to work in Mom’s or Dad’s company. It’s not a bad set of options.

  Maybe—like Robin Williams’s second wife—one moves from nanny to personal assistant to wife and Hollywood producer. Now that’s something.

  The rise in college-educated nannies means a couple of key things. First, the nannies have needs. Apart from a place to stand at tee-ball practice—go to any sports activity for upscale preschoolers and you’ll see the parents and the nannies gracefully self-segregated on the sidelines, with the college-educated nannies hovering awkwardly in the middle. But more broadly, the nannies need a community. A way to share both child care tips and boss-related exasperation. Something like a chat room expanding upon The Nanny Diaries, the 2002 best-selling novel (and 2007 forthcoming movie) chronicling an NYU student’s romp as the nanny for a spoiled, dysfunctional New York family.

  Employers have needs, too. Parents who think they’ve found a gold mine in a nanny who can help their kids with calculus may think twice in a few years, when (a) their private lives are splashed up on the big screen; or (b) their employee has led the drive to publicize industry-wide mistreatment, underpay, and/or overexpectations on the part of employer parents. How long, really, until there are nanny unions?

  Third, think of the other nannies. As much as Modern Mary Poppinses could threaten employers’ relatively unregulated freedom, they could pose an even greater threat to the low-income and immigrant women who have come to regard nanny work as theirs. Depending on their own industriousness, this group might either start demanding “household management” and other nanny-improvement courses, to keep them valuable to their employers in an ongoing capacity—or they might retreat to a less popular form of caregiving: the elderly. From an economic and health care perspective, this could actually be a welcome development. According to a report from the 2005 White House Conference on Aging, America needs 1.2 million more paid caregivers, including nursing and home health aides, by 2010. Maybe they’ll come from the ranks of displaced nannies.

  Here’s another thought. If it is true that when it comes to nannies, pop culture leads reality, we might also want to keep our eye out for male nannies, sometimes known as “mannies.” At the moment, men probably occupy only about 1 percent of all domestic child care positions. But to look at pop culture, you’d think it was an equal-gender calling. No fewer than nine prime-time shows in recent years have featured male nannies—including the top-rated Friends, Ally McBeal, Murphy Brown, and yes, The Nanny.

  So mannies may be coming. Nanny salaries are growing; stigmas about men doing “women’s work” are eroding; more and more single Moms want steady male influences for their children; and the rise in obese children has triggered a demand for more “athletics-focused” caretakers. It’s an atmosphere ripe for mannies. According to the British Web site www.celebrity.com, Britney Spears already has one (although the guy’s Mom insists he’s really more of a bodyguard).

  With the decline of manufacturing jobs, the expectation that women will work outside the home, and a majority of Americans at least starting college, college-educated nannies are suddenly available, and they match the new desires on the part of Moms to have nannies who reflect their own personalities and lifestyles. Child care has had an ambivalent but growing role in the American household, and the glut of college dropouts suggests that we will see a lot of previously low-skilled jobs taken by a new class of worker. (Just ask your massage therapist, hairdresser, or flight attendant the name of her sorority, or what her major was.)

  And, of course, watch out—and make sure you have a signed nondisclosure agreement—or your family’s private conflicts and shortcomings might get exposed to the world, via the cunning pen of your onetime nanny/liberal arts major from Harvard.

  Shy Millionaires

  Americans Who Live Below Their Means

  Millionaires loom large in our national imagination. Who Wants to Be a Millionaire was the most watched game show ever. We grew up on Richie Rich comic books, Thurston Howell III in Gilligan’s Island, and J. R. Ewing in Dallas. For an astounding eleven years, America watched Lifestyles of the Rich and Famous, where week after week, Robin Leach showed us how millionaire celebrities spend lavishly on cars, houses, and other trappings of Lots of Cash.

  And while some of today’s superrich—like Bill Gates and Warren Buffett—are giving away their money to charity, others—like Paris Hilton—are living tabloid lives that embarrass and fascinate us no end.

  But perhaps as a result, we have a bit of a skewed perception about American wealth. According to recent surveys, most Americans think there are far more millionaires in America than there really are—by about 4-fold. A survey done in the late 1990s—when only about 4 percent of households had net assets over $1 million—showed that the public believed that 15 percent of households were that rich. (Today, there are 9 million people in America worth $1 million or more, exclusive of their homes.)

  Similarly, most people mis-guess what millionaires look like. With Mr. Howell—or maybe Daddy Warbucks, or Montgomery Burns of The Simpsons—in mind, they picture opulent mansions, chauffeured limousines, luxury watches, and maybe some kind of faux British accent. They figure most rich people inherited their wealth, or got it through impossibly privileged circumstances, including private elementary schools and elite universities.

  But in fact, according to the authors of the best-selling The Millionaire Next Door: The Surprising Secrets of America’s Wealthy, the average millionaire in America went to public school, drives an American-made car (and not this year’s model), and received zero inheritance.

  His accent is likely as plain as his penny loafers.

  And he isn’t that interested in telling you how much money he has. Most millionaires would not be caught dead in a limo. It is the antithesis of what they believe in. Even the limo companies have had to shift to SUVs.

  According to a 2003 survey and analysis by Harris Interactive, there are actually six different kinds of millionaires—and the biggest group is the quietest one. Here are the six:

  1. “Deal Masters” (think Gordon Gekko of the movie Wall Street)

  2. “Altruistic Achievers” (think Bruce Wayne, the public face of Batman)

  3. “Secret Succeeders” (like “Citizen” Charles Foster Kane)

  4. “Status Chasers” (Scarlett O’Hara)

  5. “Satisfied Savers” (Oliver Wendell Douglas of Green Acres), and

  6. “Disengaged Inheritors” (Dudley Moore’s Arthur)

  While the cliché of the Really Rich is that they are either ambitious and domineering (like Gekko) or petty and spoiled (like Arthur)—it turns out that those two kinds of millionaires actually represent the smallest groups, together making up less than a quarter of all American rich people.

  The largest group, by far, is the Satisfied Savers, who are those millionaires who have worked hard, saved much, and live below their means. When given the choice, they identify with Ford over Mercedes; they aspire not to material gain, but to a long, healthy life; and they splurge on little to nothing. According to the authors of The Millionaire Next Door, the majority of American millionaires are not heiresses or movie stars; they are welding contractors, pharmacists, and pest controllers. They wear inexpensive watches and drive used cars. They got rich by investing well and being frugal—and now that they are rich, they still live the same way.

  One of the next largest groups of millionaires is the Secret Succeeders—those who didn’t expect their wealth, and fear at any moment they will lose it. These are the people who still shop at Target and worry that people may find out they have money. Together, the Satisfied Savers and the Secret Succeeders make up more than 40 percent of America’s rich. (But if you have the chance to choose a dinner partner, go with the Satisfied Savers. They’ll probably pick the Olive Garden over the Four Seasons, but at least they won’t stiff you with the check.)

  What is the significance of America’s Shy Millionaires—and rich people in general who live well below their means?

  Source: Phoenix/Harris Interactive Wealth Survey, 2003

  First, their presence suggests why “class warfare” polemics rarely win in American politics. (See, e.g., Al Gore, circa 2000.) Promising to give the rich their comeuppance on behalf of “the little guy” has its shortcomings when many Americans believe that they, too, can be millionaires. Class warfare language directed at people who have worked hard to get where they are is a very unpredictable way to talk to American voters. It is quite different in Britain, where privilege is presumed to be behind success, but in America, equal opportunity is one of our most cherished values.

  Under-the-radar millionaires have particular implications for the estate tax, known to its opponents as the “death tax.” As of 2006, any estate worth more than $2 million at the time of its owner’s death is subject to a tax as high as 46 percent on the portion that exceeds $2 million. A heated debate regularly takes place in Congress regarding the propriety of this tax, the size of the exemption, and so forth. While only a tiny percentage of Americans are directly affected by the tax, opposition to it has always been more popular than you’d expect, and this group might be one reason why: Shy Millionaires don’t want to flaunt their wealth, but they do want to hold on to it.

  Finally, while Shy Millionaires are evidently not good targets for opulent jewelry, designer clothing, or luxury cars, there are three places they do put their money.

  First, they invest, and many do so with the help of financial services experts. They respect people and strategies that make their money work for them, and financial planners and brokerage houses would do well to look for customers not just in country clubs but in much more pedestrian venues. Charles Schwab sponsors golf tournaments, but these millionaires spend too much time working to be found there. They are more likely at Staples and Costco, looking for a good deal.