|There has been both an unprecedented rise in the wealth of
the super rich in the US over the past several decades as well as
a simultaneous increase in the amount of domestic and foreign
Whether by design or coincidence the two amounts are about the same. Effectively the US has borrowed from the world and given the money to the wealthy. Here are the details.
|The table shown below and the following calculations give an
approximate amount of the wealth going to each sector of US
Mean Wealth Holdings and Income by Wealth or Income Class, 1983-2001 (In thousands, 2001 dollars)
|A. Net Worth|
|% of gain||32.8||31.2||12.6||12.6||89.2||9.4||2.0||-0.6||100.0|
|B. Financial Wealth|
|% of gain||51.9||23.9||10.1||9.1||95.0||5.7||1.2||-0.9||101.0|
|% of gain||28.4||13.5||10.6||14.4||67.0||17.4||10.1||7.9||102.3|
|Source: author's computations from the 1983 and 2001 Surveys
of Consumer Finances.
For the computation of percentile shares of net worth, households are ranked according to their net worth; for percentile shares of financial wealth, households are ranked according to their financial wealth; and for percentile shares of income, households are ranked according to their income.
Data Source: Levy Institute
My calculationsWealth increase over the period:
Households in 2000 is about 106,000,000
So top 1% = 1,060,000
Population 1983 234,000,000
Population 2000 276,000,000
Households in 1983 is about 90,000,000
Wealth in 1983 is 900,000 X 7,796,000 = 7,016,400,000,000
Wealth in 2001 is 1,060,000 X 12,692,000 = 13,453,520,000,000
Gain in wealth by top 1% = 6,437,120,000,000 ($6.3 trillion)
During the period from 1983 to 2001 the debt of the US (not in
constant dollars) went from $1.3 trillion to $5.8 trillion.
DiscussionAs a rough measure we can say that the rise of wealth of the super rich account for about 80% of the rise in the combined debt, and the rest can be attributed to the wealth increase of the regular rich.
The issue is not whether the rich "caused" the debt, but what the effect on the US economy will be as a result of these changes. The effect will be the same as if they were deliberately responsible. The wealth benefits accrued to between one and five percent of the population and the burden to repay the debt will be shared by all. When this happens in developing countries the IMF intervenes and forces draconian increases in taxes and cuts in social services.
By absorbing all the growth in the economy for themselves the top tier forced those in power to fund social, infrastructure and military programs by borrowing. Not only did the "trickle down" theory not hold, but the "shrink government" plans turned out to be false as well. There is no consensus to eliminate or substantially alter social welfare programs so the attempt to strangle them by running up debt failed. The consequences will not be as anticipated. Since the US is probably strong enough to resist IMF pressures to service its debt by the usual prescriptions it is left with the only option that governments have recourse to in this situation: inflation and devaluation of the currency.
The results won't be pretty.
AppendixHere is some of this data presented graphically (courtesy of Ben Tower).
A discussion on the difficulties with implementing a better distribution of wealth in this related essay.