The wealthiest 400 American individuals own more than the bottom 150 million Americans (1 Viewer)

superchuck500

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The 400 richest Americans — the top 0.00025 percent of the population — have tripled their share of the nation’s wealth since the early 1980s, according to a new working paper on wealth inequality by University of California at Berkeley economist Gabriel Zucman.

Those 400 Americans own more of the country’s riches than the 150 million adults in the bottom 60 percent of the wealth distribution, who saw their share of the nation’s wealth fall from 5.7 percent in 1987 to 2.1 percent in 2014, according to the World Inequality Database maintained by Zucman and others.

Overall, Zucman finds that “U.S. wealth concentration seems to have returned to levels last seen during the Roaring Twenties.” That shift is eroding security from families in the lower and middle classes, who rely on their small stores of wealth to finance their retirement and to smooth over economic shocks like the loss of a job. And it’s consolidating power in the hands of the nation’s billionaires, who are increasingly using their riches to purchase political influence.
https://www.washingtonpost.com/us-policy/2019/02/08/wealth-concentration-returning-levels-last-seen-during-roaring-twenties-according-new-research/?utm_term=.8a4512147c3c

See also:
http://fortune.com/2019/02/08/growing-wealth-inequality-us-study/


If this isn't a giant warning sign for all of us, I don't know what is. Four hundred people is a very small number. A Boeing 777 seats an average of 400 passengers. In America today, those 400 passengers on a single commercial airplane have more wealth than the bottom 150,000,000 people. With the US population somewhere around 325 million, this means that 400 people (.00025%) have more wealth than 46% of all Americans . . . nearly half.

Even the most dogged "boot straps capitalist" has to recognize that this kind of dramatic concentration of wealth is not the product of toil and hard work, of "individual exceptionalism" - it is structural . . . it is a product of a system that rewards the few (for mixed reasons, some with merit, some without), but it continues to pile reward upon reward. To illustrate, one way that massively wealthy people make income (i.e. "yield" or "return") is by "investing" large sums of money in financial instruments ("fixed income") that serve as lending pools for lenders. For example, a car manufacturer's financing arm will offer several points of return for investors to place large deposits that the financier than uses fund loans to consumers. The consumer then pays a factor of two or three times the yield to the investor to account for overhead and profit to the finance company. In other words, often when regular consumers (sometimes part of the 150,000,000) take a loan to buy something, that money is effectively being borrowed from a massively wealthy individual who gets a couple of percentage points or more in interest for it. Using this example, you can see how a CEO of a car company could make tens of millions in annual income while the technician or middle-manager at the same company lives paycheck to paycheck . . . and then pays the CEO to borrow money to buy the things they need. This is a product of economic structure and it allows wealth to passively compound on itself until it reaches an escape velocity - it will never be fully used by the individual or anyone in his or her family for many generations. We have begun to hear political talk about "structural change" - and this is what they're talking about. This kind of wealth concentration is not sustainable . . . the concentration of resources among the few to the detriment of the many ends civilizations.

It should be obvious to anyone, but there are only two things that keep the 150,000,000 people from taking wealth away from the 400 people: one cynical and one idealistic. The cynical is that the wealthy have enough resources to pay to keep the 150,000,000 people down. Wealth is able to purchase security (everything from the obvious gated homes, hired security, to the more subtle, laws and institutions that protect that wealth). Wealth is able to purchase influence to keep the structure in place by laws and other 'legal' means. The other thing keeping the 150,000,000 people from taking wealth away from the 400 people is the idealistic: the 150,000,000 believe in the system. As long as the masses still buy into the system, they're willing to work within that system and not seek redress outside of it through chaotic means.

You don't have to be particularly smart to see that wealth can only purchase so much security. If 150,000,000 people agree to do something, there's nothing the 400 people can do to prevent it - that number of people, or even a fraction of them, could overwhelm any security measure (short of mass death by military means) bought by that wealth. So really, it's the belief in the system that keeps it all together. Some of that belief is well-founded, well-intended, justified, and valuable. Some of that belief is the product of an ideology where the wealthy have convinced many of the 150,000,000 that the structure is not broken and suggesting it is is somehow un-American or "mentally ill". Regardless of why the belief exists, it is the the single thing that perpetuates this thing we call America.

But belief in a system, "faith", is impermanent - it can come crumbling down, even quickly - and human history shows those moments to be chaotic, violent times of upheaval that bring about the restructuring that was necessary to return that belief, that faith into co-existence in a peaceful society. The alternative to chaotic, violent dismantling of structures that perpetuate the concentration of resources is by peaceful, incremental means. We clearly have a structural problem in America and we have two choices: we acknowledge it and begin the process of peaceful, incremental adjustment, or we allow it continue until the masses lose faith and take matters into their own hands. There might not be a critical time where the fork in the road is obvious - we have to choose to do this based on the evidence we have before us and thoughtful consideration of what it means. Just because a factor that yields the structural problem is a long-held tenet of what we believe makes us who we are as Americans doesn't mean we cling to it while the walls come crashing down.

Something has to change.

 
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Zztop

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I think a lot are aware.. I seem to recall a couple years back a few hundred or so billionaires signed a petition to have their taxes raised (or maybe it was to not have them lowered). Theres this piece written by Warren Buffet back in 2011 stop coddling the super rich
 
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superchuck500

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I think a lot are aware.. I seem to recall a couple years back a few hundred or so billionaires signed a petition to have their taxes raised (or maybe it was to not have them lowered). Theres this piece written by Warren Buffet back in 2011 stop coddling the super rich
Yet, in 2018, the Republican tax package doubled the estate exemption. It used to be approximately $5.5M per individual and $11M per couple. For 2019, it's $11.4M for individuals and $22.8M per couple. I'm not railing against estate tax exemptions, I'm pointing to the example of how recent times have only seen reinforcement of the perpetuation of wealth among the few.
 

guidomerkinsrules

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If a centerishist like Chuck is saying this...

The essential problem is not just that it’s tilted so much, but that the wealth is static (horded)
If those 400 put that money back in more dynamic, less predatory ways; it would be better for everyone- not necessarily great or fair, but much better
 

Saint_Ward

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If a centerishist like Chuck is saying this...

The essential problem is not just that it’s tilted so much, but that the wealth is static (horded)
If those 400 put that money back in more dynamic, less predatory ways; it would be better for everyone- not necessarily great or fair, but much better
Hey, someone had to build that super yacht, run it, fuel it, build the road to get to it, etc...
 
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superchuck500

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If a centerishist like Chuck is saying this...

The essential problem is not just that it’s tilted so much, but that the wealth is static (horded)
If those 400 put that money back in more dynamic, less predatory ways; it would be better for everyone- not necessarily great or fair, but much better
I'm not only a centrist, but a clear financial beneficiary of the structure. It doesn't take hundreds of millions to reach financial escape velocity: you can earn 5% pretty easily with minimal risk - so if you have $20 million invested, you can make $1 million a year in return and as long as you don't spend the full million you're going to make more the next year because your principal has increased . . . and it compounds into perpetuity. And spending a million dollars a year (ex-housing or business startup) is exceedingly hard to do unless you're living an exceedingly lavish lifestyle. And that's just looking at it through the $20M/$1M lens . . . the wealth of the top 400 or even 4,000 is dramatically more.

It appears to be horded because there's just nothing the person or family could ever do with that much money - it's in the system, for the most part. It's funding loans and other investment . . . but the structure allows a few private individuals to fund system liquidity and benefit even further from having the vast wealth that they already had.
 

50_Saint

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Okay Chuck, so what do we do without having unintended consequences?

No one seems to have this solution.
 

JimEverett

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The thing is that it is not an American problem. Its happening across the industrialized world as well as the industrializing world (perhaps even more so there).
So that strikes me as meaning the cause of this concentration does not come from anything unique to U.S. policy except to the extent that that policy has been adopted by the rest of the industrialized world.
 
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superchuck500

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Okay Chuck, so what do we do without having unintended consequences?

No one seems to have this solution.
There are solutions, what has to change is the willingness to accept consequences.

For one, we could look at ways to reward greater harmony among labor, investment, and executive compensation. Instead of a blanket reduction in corporate tax rates, establish target ratios for executive compensation and non-executive wages that, when met, reduces tax rates on earnings. And, to give shareholders skin the game, also allows for preferred treatment on dividends. There is a theoretical sweet spot where the financial benefit to the company and shareholders will prompt behavioral changes. As long as the numbers work, the behavior is likely to follow.

And we could also look at adjusting rates at extremely high levels. Why is the highest tax bracket at $500,000 in income? Doesn't it make sense to have one higher that kicks on over very high amounts of income? Why is the highest tax rate on estates at $1 million? Doesn't it make sense to have higher rates that kick in at very high estate values?

Yes, there will be consequences - but there always are. It's a choice about consequences and which consequences are better in the long-term with what we have to accept as clear goal of structural reorganization.
 
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superchuck500

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The thing is that it is not an American problem. Its happening across the industrialized world as well as the industrializing world (perhaps even more so there).
So that strikes me as meaning the cause of this concentration does not come from anything unique to U.S. policy except to the extent that that policy has been adopted by the rest of the industrialized world.
I think policy does matter - that was certainly the conclusion of the 2018 World Inequality Report. https://wir2018.wid.world/files/download/wir2018-full-report-english.pdf at p. 9.
 

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The thing is that it is not an American problem. Its happening across the industrialized world as well as the industrializing world (perhaps even more so there).
So that strikes me as meaning the cause of this concentration does not come from anything unique to U.S. policy except to the extent that that policy has been adopted by the rest of the industrialized world.
Not sure that's exactly true.

https://www.theguardian.com/commentisfree/2018/jan/24/fairest-europeans-inequality-surged-us-europe

It’s hard to exaggerate the difference between western Europe and the USA when it comes to inequality. In 1980, these blocs of similar population and average income were also similar in income inequality: the top 1% captured around 10% of national income, while the poorest 50% took around 20%.

Things have changed dramatically since then. Today, the top 1% in Europetake 12% of income (in the US, 20%) while the bottom 50% have 22% (in the US, 10%).

It’s often said that globalisation and digitalisation explain the surge in global inequality, but that’s not a very convincing narrative. Since the 1980s, Europe and the US have had similar exposure to global markets and new technologies. But they have differed in policies and institutional direction. To date, Europe has shown that it’s much better at keeping inequality in check.

Put bluntly, the EU has resisted the notion of turning its market economy into a market society. It has partly rejected the thinking of Ronald Reagan and Margaret Thatcher, in which market forces, in the absence of any regulation, provide the best of all worlds in areas such as education, health and wages. There are large differences within Europe, though: the UK and Ireland have followed the American path more closely than continental Europe has. Nor can it be said that recent policy changes all go in the right direction. France’s recent reforms are strikingly similar to Donald Trump’s in how they favour the rich.

That said, social healthcare systems in most European countries still guarantee universal protection for all – hardly the case in the US. Many of those countries offer free access to university. Indeed, when policymakers in Bavaria attempted to introduce university fees in 2007, a referendum later overturned the decision. A young European’s hopes of receiving higher education depend much less on his or her parents’ income than their American counterpart’s.
 

JimEverett

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That is changing the subject.

The OP was about wealth inequality, this is about income inequality.

Wealth inequality is going to be more concentrated. Thus you can have Denmark with a relatively low Income inequality while having almost the same wealth inequality as the US.

https://www.gfmag.com/global-data/economic-data/wealth-distribution-income-inequality
 
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superchuck500

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Yet, in 2018, the Republican tax package doubled the estate exemption. It used to be approximately $5.5M per individual and $11M per couple. For 2019, it's $11.4M for individuals and $22.8M per couple. I'm not railing against estate tax exemptions, I'm pointing to the example of how recent times have only seen reinforcement of the perpetuation of wealth among the few.
I have no problem exemption estates at that level, but what I do have is a problem with the loopholes that allow transfer of these enormous estates without taxation.

I have believed for years that the income tax system in our country is very good and woefully out of tune.

The flat tax we all pay on the income within the brackets seems perfectly fair. Where we are out of tune is that the brackets themselves are compressed too tightly at the bottom and do not reach far enough or high enough.

WHere we currently might have all our brackets at 400k or less with net income over 400k at 39%, I believe we should have brackets out to 100mil with rates up to 50%.

There is no reason someone making 250k should pay the same as someone making 25mil. 250k isn't enough to set up generational wealth, but the guy making 100mil or 25mil is. His income should be taxed at a much higher rate than the family making 250k.
 
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