To be among the ultra-rich Americans – those in the top 1/10,000th (0.0001%) of income earners – your household had to have an inflation-adjusted income of at least $2,000,000 in the late 1970s. By 2007 your household income had to be at least $11,500,000 to qualify for membership in that select group.
“The trend has come to seem almost permanent,” the New York Times reported August 21.
But the page one headline on that story was: “After 30-Year Run, Rise of the Super-Rich Hits a Sobering Wall.” Those in the top one-ten-thousandth are still extraordinarily rich, but not quite as rich as before. Or so it seems.
The existence of the 30-year up-up-up trend is based on the most reliable data available -- Federal income tax returns, which were analyzed by two economists for the years up to 2007. The Census Bureau has not yet released IRS data for the 2008 or 2009 tax returns.
So how did the Times come to the conclusion that, as the title on a graphic put it, “For Decades, the Richest Pulled Away, But Since 2007, They Have Become Poorer”?
In the absence of IRS data, the Times relied on various indicators. An important one was the multi-billion dollar stock market losses suffered last year by the likes of John McAfee, founder of the anti-virus software company that bears his name.
Details on McAfee’s new circumstances served to personify the plight of the whole group at the pinnacle of the money pyramid. Poorer by $96,000,000, McAfee is now getting by on his remaining $4,000,000 by selling some of his valued possessions, including his 10-passenger jet and scenic real estate in Hawaii and New Mexico.
The chief executive of one of the country’s biggest bond traders, Mohammed Ar El-Erian, offered this analysis:
“We are coming from an abnormal period where a tremendous amount of wealth was created largely by selling assets back and forth….You had wealth creation that could not be tied to the underlying economy, and the benefits were very skewed; they went to the assets of the rich. It was financial engineering.”
Key question that the article did not answer: will the United States again stake its economic health on financial engineering?
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Friday, August 21, 2009
The plight of the super-super-rich
Posted by Robert A. Senser at 7:57 PM
Labels: economic reform, inequalities
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