Wealth-Gap Claptrap
Weicher, John C.
Wealth-Gap Claptrap by John C. Weicher Remember all the news stories and columns from last year about how the rich are getting richer and the poor poorer? Well, you can forget about them-it isn't...
...But in another way, it's disappointing that only bad news about economic inequality makes the front pages...
...This accounts for about 40 percent of their wealth...
...Those who happily blamed the Reagan tax cuts and social-program reforms for the widening income and wealth gaps in the 1980s now are trying to explain why the wealth gap was reversed under Bush, and why the income gap continued to increase in the era of Clinton tax and spending increases, before the Republicans gained control of Congress...
...In 1983, the richest 1 percent of American households owned about 31 percent of the country's total wealth...
...Until recently, the latest data had been for 1989, and these indicated a more unequal distribution...
...John C. Weicher is senior fellow at the Hudson Institute and was chief economist at OMB in the Reagan administration...
...And the poor are getting richer...
...The interesting figure is the one from 1992...
...But press attention to these numbers has been muted...
...by some, the distribution actually became more equal...
...The way to wealth, it seems, is to make it, then take care of it yourself...
...And they're doing it more or less equally...
...There was certainly a stock-market boom in the 1980s, and everyone knows that rich people own most of the stock in this country...
...This concern is now out of date, and it may never have been valid...
...Stocks are a distant third, at about 12 percent...
...Next in importance is real estate-apartment buildings, office buildings, other commercial property-which comprises about 20 percent of their wealth...
...Average wealth per household increased by about 11 percent, from $185,000 to $206,000...
...So the distribution in 1992 was virtually the same as in 1983-and, for that matter, the same as in 1963, when the richest 1 percent owned about 32 percent of the wealth...
...For 1983 and 1989, they used several methods...
...Thus, the facts-and their dissemination-are important...
...The distribution of wealth may have remained unchanged during the business cycle, but the amount of wealth did not...
...The headlines blared that the income gap (as distinct from the wealth gap) continued to grow in 1993-94, even though this is just part of a trend that started back in 1968...
...What's more, it is a disservice to the public, because the distribution of wealth goes to the heart of what we think about our society...
...In 1989, the richest 1 percent owned about 36 percent of the wealth-which sparked that spate of stories blaming Ronald Reagan for a growing "wealth gap...
...So why didn't the distribution of wealth become more unequal...
...What rich people do own, more than anything else, is their own businesses...
...The non-rich increased their holdings...
...About that "if": Every few years, the Fed conducts surveys to determine household assets and liabilities...
...In one way, it's fun to observe the reaction of liberals to the latest news about inequality...
...In 1983, the richest 1 percent of households owned 57 percent of publicly traded stock...
...By most of the methods available, the change in distribution was not statistically significant...
...Also front-page news was last week's Census Bureau report about household income...
...This comes as a surprise to many people...
...Because stock ownership became more diffuse during that vigorous decade...
...The broadest measures reveal a clear pattern: a small increase in inequality during the boom, reversed during the recession...
...by 1992, they owned less than 40 percent...
...Yes, the rich are getting richer...
...Americans have always believed that they live in a land of upward mobility, where everyone has a chance to succeed...
...in 1992, they owned about 30 percent...
...Even if inequality did increase during the long Reagan boom of 1983-89- and that's a big "if"-the increase was completely erased during the mild recession that followed...
...The purported increase in inequality under Reagan got front-page attention, but the recent evidence about wealth has been banished to more obscure pages, or ignored altogether...
...Well, you can forget about them-it isn't so...
...The total wealth of American households increased by over $4 trillion between 1983 and 1992, from $15.6 trillion to $19.8 trillion (both measured in today's dollars)-more than 25 percent in nine years...
...The notion of a growing wealth gap, really, is wrong...
...The increase from 32 percent to 36 percent-the one so widely reported-was one of the largest that could have been calculated...
...in 1989, they owned just under 50 percent...
...New research from the Federal Reserve Board finds that the distribution of wealth did not change over the last business cycle (or, from late 1982, when the economy hit bottom, to the spring of 1991, when it hit bottom again...
...These are substantial, and statistically significant, gains in a short period of time...
...And if we become convinced that this is nonsense-that the rich just get richer, while the poor are permanently barred from improving their lot- then this altered self-image is likely to have unwelcome consequences for our society and public policy...
...To discern national patterns, analysts must extrapolate information about 85-95 million households from a sample of 3,000-4,000 households...
...Mention wealth, and the first thing they are apt to think of is the stock market...
Vol. 1 • July 1996 • No. 41
