The Power of America's Dynasties

Let's open this posting with two definitions:

Plutocracy: - a state or society governed by the wealthy.

Oligarchy: a small group of people having control of a country or organization.

Now, let's look at three quotes:

"Of all forms of tyranny the least attractive and the most vulgar is the tyranny of mere wealth, the tyranny of a plutocracy."

Theodore Roosevelt

"We’ve been saturated with cultural images and a kind of cultural deification of wealth and those who have wealth. They present people of immense wealth as somehow leaders, oracles even. We don’t grasp internally what an oligarchic class is finally about, or how venal and morally bankrupt they are. We need to recover the language of class warfare to grasp what is happening to us. And we need to shatter this self-delusion that somehow if, as Obama says, we work hard enough and study hard enough, we can be one of them."

Chris Hedges - The Pathology of the Super Rich

"The screen of great fortunes without apparent cause is a crime forgotten, for it was properly done."

Honore de Balzac

Now, let's take a look at America's plutocracy, thanks to a recent publication entitled Billionaire Bonanza 2018 by Chuck Collins and Josh Hoxie at the Institute for Policy Studies.  According to the authors and apparent to the rest of us is that wealth has become increasingly concentrated in the hands of very few Americans.  

Here are two interesting comparisons:

1.) Minimum wealth required to make the Forbes 400 wealthiest Americans: In 1982, a wealthy individual needed at least $75 million ($200 million in today's dollars) to be part of the Forbes 400; this has risen to $2.1 billion in 2018 meaning that 204 American billionaires didn't even make the 2018 list.

2.) Total wealth of the Forbes 400 wealthiest Americans:  In 1982, the combined wealth of the Forbes 400 wealthiest Americans totalled $92 billion ($242 billion in today's dollars) compared to $2.89 trillion in 2018.  This is more than the entire GDP of Great Britain, the world's fifth largest economy.  The average wealth on the 2018 Forbes 400 list is $7.2 billion, up 7.5 percent from 2018

Half of the total wealth of the Forbes 400 can be attributed to just 45 individuals with three individuals, Jeff Bezos, Bill Gates and Warren Buffet owning a combined $348.7 billion, more wealth than the bottom half of the country combined and more than the combined wealth of 4 million typical American families.

In recent years, we've repeatedly heard about the "one percent".  According to an analysis by Emmanuel Saez and Gabriel Zucman, the top one percent of Americans consists of 1.6 million families with a net worth of at least $3.9 million which own 42 percent of the nation's total wealth.  The top 0.1 percent consist of 160,000 families with a net worth of at least $20.6 million which own 22 percent of the nation's total wealth.  The top 0.01 percent consist of 16,000 families with a net worth of at least $111 million which own 11 percent of the nation's wealth.  In contrast, the bottom 90 percent of American households own 23 percent of America's total wealth, about the same amount as the top 0.1 percent.

One of the greatest concerns about wealth in the United States is the existence of wealth dynasties.  Of the 400 wealthiest people in the United States, 136 have inherited their wealth from a previous generation (including the current president).  Here is a complete listing of the wealth of the top 15 dynasties which have total wealth of $618 billion:

The Walton, Koch and Mars dynasties have seen their wealth go up by nearly 6000 percent over the past three decades at the same time as Main Street Americans have seen their median household net worth stall and decline.  Here is a table showing the top three wealth dynasties and how their wealth has grown over the decades since 1982:

Let's close this section of this posting by looking at the world's wealthiest individual, Jeff Bezos.  Mr. Bezos of Amazon/Washington Post fame has total wealth of approximately $160 billion with his fortune rising by $78.5 billion in the last year alone.  To put his wealth into context that we can relate to, a full-time worker at Amazon making $15 an hour would have to work for 2.5 million years to make as much money as Mr. Bezos made in the last year alone.

Now, let's look at the wealth statistics for Main Street America.  Median household wealth in 1983 was $84,000 in 2018 dollars and has actually dropped to less than $82,000 in 2018.  While median household wealth did rise to a peak of $127,000 in 2007, the Great Recession wiped out these gains and Main Street America has not experienced wealth growth despite the soaring stock market, dropping unemployment and relatively healthy economic growth.  God help us all when the next recession hits!  In addition to stagnant wealth, 19 percent of American households have zero or negative wealth, up from one in six households in 1983 and 40 recent of households could not come up with $400 in emergency funding.  The average wealth of the bottom 40 percent of Americans dropped from a meagre $6900 in 1983 to a frightening negative $8900 in 2016.

Obviously the concentration of wealth in the United States is having a significant impact on governance, particularly at the federal level where Congress functions largely on the backs of donations from the some of the world's wealthiest individuals like Sheldon Adelson and the Koch family members.  Additionally, media owners like Jeff Bezos can play a significant role in swinging public opinion, propagandizing American voters to see things through his viewpoint.  These are but three examples of how America's plutocracy/oligarchy are controlling the narrative that drives Washington during both Democratic and Republican administrations.  These individuals have had an obvious impact on the implementation of legislation, particularly as it relates to taxation of their incomes and their estates.

I would encourage you to watch this interview with Chris Hedges which will provide you with an excellent summary of the plutocracy/oligarchy that is developing in the United States and its impact on American society and politics:

Since I opened this posting with a quote, let's close it with another quote that nicely summarizes the plight of Main Street Americans:

"The central issue is we’re developing into a plutocracy. We’ve got an enormous number of enormously rich people that have convinced themselves that they’re rich because they’re smart and constructive. And they don’t like government, and they don’t like to pay taxes.”

Paul Volker - former Chair of the Federal Reserve

The Growth of Income Inequality in America

While discussions about income inequality have pretty much faded from page one, a recent study entitled "Billionaire Bonanza" by the Institute for Policy Studies suggests that, if anything, inequality is getting worse in the United States.  Here are some highlights from the report authored by Chuck Collins and Josh Hoxie.

Let's start by looking at how the inequality and wealth situation has changed over the past three decades.  In 1982, to enter the Forbes 400 list of the most wealthy Americans, one needed to have $75 million in assets which equates to $189 million in 2017 dollars.  In 2017, an American needed to have assets worth a minimum of $2 billion.  As well, in 1982, the combined wealth of the 400 Americans on Forbes list was $92 billion or $231 billion in 2017 dollars.  The combined wealth of the entire Forbes 400 list in 2017 was $2.68 trillion or 12 times the total in 1982 (in 2017 dollars) which is the same wealth that is held by the bottom 64 percent of Americans or 80 million households.  

The wealthiest 25 individuals in the United States own assets worth a combined $1 trillion.  To put this number into perspective, these 25 people hold more wealth than the bottom 178 million or 56 percent of all Americans combined.  Here is a list of the 25 wealthiest Americans and their net worth:

You will notice that the combined wealth of the three richest Americans, Bill Gates, Jeff Bezos and Warren Buffett is $248.5 billion.  This is more wealth than 160 million Americans or 63 million American households, roughly half of the U.S. population.

Wealth in the United States is not evenly distributed when looking at ethnicity/race.  Here is a table showing how wealth varies for each of the four groups that represent the American melting pot:

As you can see, median and average wealth for white households is far higher than it is for black, Latino and other households.  A significant part of this disparity is explained by the difference in home ownership rates among the four groups; in June 2017, 71.8 percent of white Americans owned homes compared to 45.5 percent of Latinos and 42.3 percent of African-Americans.

Now that we've looked at America's wealthiest, let's look at the other side of the coin with data from the Federal Reserve's Survey of Consumer Finances.  A median American family has a net worth of $80,000 (excluding the value of their family car).  Over 19 percent of American households have zero or negative net worth and are classified as "underwater".   The "underwater" designation is not evenly distributed across the United States and varies significantly by ethnicity/race:

African -Americans - 30 percent underwater

Latino - 27 percent underwater

Other - 24 percent underwater

White - 14 percent underwater.

These households face significant problems since they are unable to even survive a short-term unemployment situation.  

While we often hear about the "top one percent", who are the "worst of the worst" or the bottom one percent?  To be included in the 1st percentile, a household must have a negative net worth of more than $101,000.  In combination, these households have a combined negative net worth of $196 billion compared to the $33.4 trillion in wealth held by the top one percent of households.

A great deal of this wealth inequity can be attributed to the tax system in the United States.  Since many of the wealthiest Americans gained their wealth through the founding of publicly traded companies, the current tax policies that favour capital income (i.e. capital gains on stock transactions) over wage income work in their favour.  In contrast, here is what has happened to median real wages for wage and salary earners since 1989:

Here is the same data showing the year-over-year percentage change in real wages:

As you can see, for much of the nearly four decade-long period, real wages actually declined meaning that workers did not stay ahead of inflation.

Let's close this posting with this quote from French economist Thomas Piketty, author of "Capital in the Twenty-First Century":

"All large fortunes, whether inherited or entrepreneurial in origin, grow at extremely high rates, regardless of whether the owner of the fortune works or not. To be sure, one should be careful not to overestimate the precision of the conclusions one can draw from these data, which are based on a small number of observations and collected in a somewhat careless and piecemeal fashion. The fact is nevertheless interesting.

Take a particularly clear example at the very top of the global wealth hierarchy. Between 1990 and 2010, the fortune of Bill Gates -- the founder of Microsoft, the world leader in operating systems, and the very incarnation of entrepreneurial wealth and number one in the Forbes rankings for more than ten years -- increased from $4 billion to $50 billion. At the same time, the fortune of Liliane Bettencourt -- the heiress of L'Oréal, the world leader in cosmetics, founded by her father Eugène Schueller, who in 1907 invented a range of hair dyes that were destined to do well in a way reminiscent of César Birotteau's success with perfume a century earlier -- increased from $2 billion to $25 billion, again according to Forbes.

In other words, Liliane Bettencourt, who never worked a day in her life, saw her fortune grow exactly as fast as that of Bill Gates, the high-tech pioneer, whose wealth has incidentally continued to grow just as rapidly since he stopped working. Once a fortune is established, the capital grows according to a dynamic of its own, and it can continue to grow at a rapid pace for decades simply because of its size. Note, in particular, that once a fortune passes a certain threshold, size effects due to economies of scale in the management of the portfolio and opportunities for risk are reinforced by the fact that nearly all the income on this capital can be plowed back into investment. An individual with this level of wealth can easily live magnificently on an amount equivalent to only a few tenths of percent of his capital each year, and he can therefore reinvest nearly all of his income. This is a basic but important economic mechanism, with dramatic consequences for the long-term dynamics of accumulation and distribution of wealth. Money tends to reproduce itself." (my bold)

The Personal Wealth of Congress

When it comes to a wealth-divided America, Congress is no different.  A yearly report from the Center for Responsive Politics looks at the 534 Members of the House and Senate and assesses each members' net worth and assesses the concentration of wealth for 2014.  The data used by CRP is gleaned from the financial disclosure forms filed by all Members of Congress in May 2014 which report their assets for the year ending December 31, 2013.  Here are some of the more interesting statistics:

1.) The median wealth for a Member of Congress in 2014 was $1.1 million.  This is significantly higher than the median wealth of $56,355 for an American family unit (2013 data).  Here is a graph that shows how the median wealth for a Member of Congress has risen from around $800,000 in 2007 to its current level:

By way of comparison, the median net worth of an American family unit declined by one-third between 2007 and 2013.  Over that same time period, the net worth of a Senator rose from $2.3 million to $2.8 million and the net worth of a member of the House rose from $708,500 to $843,507.

2.) In 2013, the 533 Members of Congress who had filed their financial disclosure forms were worth a total of $4.3 billion, equivalent to the wealth of 76,000 typical American households.  Here is a pie chart that shows the percentage of Congress' total wealth that is controlled by each percentage of members:

The 53 richest Members of Congress owned nearly 80 percent of the estimated wealth held by all members.  This is similar to the 76 percent of national wealth that is owned by the top 10 percent of households.  The top 1 percent of members control $1.442 billion in assets or 32.8 percent of the total.  The next 4 percent of members control $1.375 billion in assets or 31.3 percent of the total.  The next 5 percent of members control $627.1 billion in assets or 14.3 percent of the total.  In sharp contrast, the bottom 40 percent control only $21 million in assets or 0.5 percent of the total. 

3.) Here is a graphic showing the total value of the assets held by the 10 wealthiest Members of Congress and compares the estimated wealth in 2014 to that held in 2013:

Here is a table showing the top 15 wealthiest Members of Congress:

Representative Darrell Issa (R - California) comes in first place among all Members of Congress with an average net worth of $448.4 million.  He was the co-founder and CEO of Directed Electronics, an aftermarket automobile security and convenience product manufacturer.  Here is a graphic showing how his net worth has changed over time and compares it to the average net worth of a House member over the same time frame:

In second place among all members and first place in the Senate, we have Senator Mark Warner (D - Virginia) who had a net worth of $254.2 million in 2014.  He is a former venture capitalist and entrepreneur, founding Columbia Capital  Here is a graphic showing how his net worth has changed over time:

Now, let's look at the other end of the Congressional spectrum.  Representative David Valadao (R - California) has a net worth of negative $25 million thanks to lines of credit that he has used to fund Valadao Dairy, his dairy business in Hanford, California as we can see here:

Interestingly, according to Citizens for Responsibility and Ethics in Washington or CREW, he was considered to be one of Congress' "Most Corrupt Members" in 2013 as shown here:

An additional 20 Members of Congress showed a negative net worth.  Poor (literally) Senator Debbie Stabenow (D - Michigan) shows a net worth of only $32,500, the funds that she has deposited in her checking account as shown here:

4.) In case you were curious, like many Americans, members of Congress hold at least part of their assets in stocks.  Here is a graphic showing the number of members who hold stocks in some of America's largest companies:

Let's close this posting by looking at the salaries and benefits that are paid to Members of Congress:

Member Salary - $174,000

Speaker of the House - $223,500

President pro tempore of the Senate - $193,400

Majority Leader in both House and Senate  - $193,400

Minority Leader in both House and Senate - $193,400

Members have not received a "pay adjustment" since 2009 when their salaries were increased by 2.8 percent.  Here's a graph showing what has happened to the salaries for members of Congress since 1992 in both constant (inflation-adjusted) and current dollars:

In addition, according to CRS Report RL30064, Members of Congress also have an annual House Allowance  of between $1.299 million and $1.638 million to cover personnel, office expenses including travel costs and official mail.  Senators have a Senate Allowance that ranging from $2.758 million to $4.417 million annually.  Members are also eligible to participate in the Federal Employees Health Benefits Program and Federal Employees Group Life Insurance Program.  They also have the option to participate in the Civil Service Retirement System and the Federal Employees Retirement System.

It is interesting to see how closely the wealth distribution of the Members of Congress reflect those of the rest of the United States.  A few wealthy people at the top of the heap control the vast majority of the wealth and the the majority of members control a much smaller fraction of the total.  Other than the very obvious differences in both the average and median wealth levels, the wealth distribution sounds pretty much like America, doesn't it?    

Understanding the Mindset of America's Wealthy and Their Political Agenda

We all know that the most wealthy Americans who live among us have a far different life than we have and it is becoming increasingly apparent that they have far more control over the political agenda and politicians in particular than the "sweaty masses".  A new study of the one percent looks at how different they are from "us" and what drives their political agenda.

Let's open this posting by looking at how the Gini coefficient, a measure of income distribution, has risen  for the United States since 1967:

With a value of zero showing perfectly even income distribution and a value of 1 showing perfectly uneven income distraction (i.e. one person has all of the income), we can see that income distribution in the United States has become increasingly uneven over the past five decades.

The unprecedented study by Benjamin Page, Larry Bartels and Jason Seawright through Northwestern University and the University of Chicago looked at a sample of  wealthy Americans living in the Chicago area.  They conducted 45 minute interviews with Americans would would be considered "one percenters"; their mean wealth was $14,006,338 and their median wealth was $7.5 million.  Their average income was $1,040,140 and one-third of them reported annual incomes in excess of $1 million.

Here is a table showing the wealth distribution of the 83 participants:

The respondents to the survey had the option to either have a face-to-face meeting or be interviewed by telephone.  The questionnaire was designed to include many policy preference questions that had also been conducted with members of the general public, enabling the researchers to compare the responses of wealthy Americans to the rest of us.

Let's look at several key aspects of the survey:

1.) Political activity among the wealthy:  The study found that wealthy Americans tended to be very active in politics as shown here:

Pay attention to politics most of the time - 84 percent

Talked politics - 5 days per week (median)

Voted in 2008 - 99 percent

Attended political meetings, speeches or dinners - 41 percent

Contributed money to politicians - 68 percent

Helped solicit or bundle contributions - 21 percent

The average political contribution made by the sample group was $4,633.  It is interesting to note that over two-thirds of these wealthy Americans contributed money to politicians; this compares to only 14 percent in the general population.

Not only are the one percent involved with the political process, they are much more likely to initiate contact with federal government officials or their staff as we can see on this graphic:

In total, 47 percent of those surveyed made at least one contact with a congressional office and 41 percent made two or more contacts of the above types.

2.) Government priorities:  Here is a table showing the percentage of America's most wealthy that feel that eleven potential problems facing the United States are "very important":

When asked an open-ended question about which issue facing the United States was of most concern, one-third of respondents listed either budget deficits or excessive government spending as the most critical issues, by far the most of any other issue.  Surprisingly, unemployment came in second place; as you will see below, the wealthy have a far different idea of how this problem should be solved and who should solve the problem.  Only 16 percent of the wealthy see climate change as a very important issue with 53 percent feeling that it was somewhat important.  When looking at the public as a whole, a survey taken in March 2011 noted that only 7 percent of respondents felt that either deficits or the national debt were the most important problems facing the nation.  It is interesting to note that wealthy Americans prefer to deal with the debt and deficit problem by cutting spending rather than through tax increases.

3.) Job and Income Programs:  Here is a table showing the differences between wealthy Americans and the general public when it comes to government intervention in both job programs and income support:

Nearly half of the wealthy Americans surveyed believe that the government must see that no American is without food, clothing or shelter, however, only one-in-five (19 percent) believe that the government should ensure that everyone who wants to work can find a job compared to 68 percent of the general public.  This is surprising given that 84 percent of the wealthy feel that unemployment is a very important problem facing the United States.  Overwhelmingly, however, the wealthy do not want to see the federal government intervene in the jobs market with only 8 percent stating that the federal government should provide a job for those who are able and willing to work but cannot find a job in private employment.  Over half (53 percent) of the general public would disagree with this attitude.

4.) Education:  Here is a table showing the differences between wealthy American and the general public when it comes to government intervention in America's education system:

Nearly 80 percent of the wealthy respondents in the survey feel that problems facing the education system are very important and 58 percent are willing to pay more taxes for early childhood education.  That said, only 35 percent of the wealthy respondents felt that the federal government should spend whatever is required to ensure that all children have access to a good public school system; among the general public, 87 percent were in favour of this policy.  Another of the larger differences can be found in the wealthy attitude toward the federal government providing universal access to college; only 28 percent of the wealthy are in favour of this policy compared to 78 percent of the general public.  I would suggest that this is because the wealthy can afford to send their offspring to any college of their choice.  One of the more interesting aspects was the attitude toward the federal government ensuring that minorities have access to schools that are equal in quality to those attended by white students even if it means that taxes will rise; only 53 percent of the wealthy were in favour of this policy compared to 71 percent of the general public.

5.) Income Inequality:  Here is a table showing the differences between wealthy Americans and the general public when it comes to income inequality and redistribution of incomes and wealth:

It is interesting to observe that, for many of the factors including "differences in income in America are too large", the wealthy among us have basically the same attitude toward income and wealth inequality as the remainder of the general public.  Where the biggest difference lies is in the involvement of government in income and wealth redistribution; only 17 percent of wealthy Americans feel that the government should redistribute wealth by imposing heavy taxes on the rich compared to 52 percent of the general public.  Only 13 percent of the wealthy feel that it is the government's responsibility to reduce the polarity in incomes between the rich and those with low incomes compared to 46 percent of the general public. 

The authors of the study noted that the political persuasions of the wealthy respondents followed a typical pattern which shows that wealthier Americans tending to be Republicans.  Of the respondents in the study, 58 percent were Republicans and 27 percent were Democrats, however, when it came to economic issues, the wealthy Democrats tended to be more conservative in their attitudes than Democrats in the general population.

Over the past decade, particularly since the Citizens United decision, it has become increasingly apparent that moneyed interests have become most important to the political process in the United States.  Unfortunately, the wealthy that live among us have very little firsthand experience with the issues that ordinary citizens face; unemployment, low wages, paying for an education, bankruptcy and home foreclosures.  As intelligent as they may be, their lack of intimate knowledge with the issues that the rest of us may face during our lifetimes colours their perspective and their political leaning.  With their political donations buying them access to policymakers that ordinary Americans can never hope for, we can easily see how government policies can be slanted to protect the interests of the wealthy while ignoring the plight of the many.

As Spock said "the needs of the many outweigh the needs of the few".  I would add, "except in the case of wealth distribution in America" or "when the government involves itself in the process of wealth distribution".