The richest 10% of households now represent 70% of all U.S. wealth 70 points by smacktoward 22 days ago | hide | past | web | favorite | 81 comments

 How do you take into account negative wealth? If 20% of americans have zero or negative wealth, and you need the positive wealth from the 20th-40th percentiles to make up for the negative, do you say the bottom 40% account for zero percent of U.S. wealth? Or do you just call negative wealth zero for these purposes? How's the calculation work?I'm asking because I'm wondering whether it's "the rich are too rich" vs "debt is getting crazy" or somewhere in between.
 Money is debt.Imagine an island with two residents. Alice and Bob. There is no difference between these two scenarios:1: Alice has 1 seashell. Bob has 0 seashells.2: Alice has 0 seashells. Bob has 0 seashells. Bob owes Alice a seashell.Either way, Alice can go to bob and exchange her wealth for an apple. In scenario 1, she gives him a seashell. In scenario 2, she pays by voiding his debt.Either way, Alice owns 100% of all wealth.
 Isn't scenario 1 equivalent to3: Alice has 0 seashells. Bob has 1 seashell. Bob owes Alice a seashell.Once all the accounts are settled by Bob paying Alice the seashell he owes her, it becomes scenario 1, so this seems a better match for scenario 1 than scenario 2 does.
 Maybe.What I wanted to emphasize is that a dollar "In the bank" means nothing else then "The bank owes you a dollar".And banks do not lend money they don't have. And where do they have it from? From other customers.Ergo: Your \$1 in wealth is someone elses \$1 in debt.
 > And banks do not lend money they don't have.Actually that is exactly what banks do. You go to the bank and take out a loan, they credit your account with \$1000 and then you owe them \$1000 and they owe you \$1000. The thing balancing the cash in your account isn't some other customer's cash, it's the debt you owe them. The amount of physical cash in their vault as a result of you taking out the loan hasn't changed at all.They're required to have a certain amount of cash in reserve to cover cash withdrawals, but that amount is not 100%.
 I agree with that, but it doesn't answer the question of how to account for negative wealth in a X% of americans own Y% of wealth calculation. In scenario 2, Bob has negative net wealth. In scenario 3, Bob has zero net wealth (which is why 1 and 3 are equivalent, not 2).Supposing we had a scenario where once all accounts are settled, Alice has 2 seashells, and Bob had -1 seashells, does alice have 100% of all wealth? 200%? (Equivalently, Alice has 1, Bob has 0, and Bob owes Alice 1)(edit for everyone else: this thread is confusing because I changed my comment to respond to founderling's edit, but founderling responded to my original comment before I changed it... ¯\_(ツ)_/¯)
 `````` Alice has 2 seashells, and Bob had -1 seashells does alice have 100% of all wealth `````` Yes. Bob has no buying power at all.
 They go hand in hand, and are not mutually exclusive, instead often feeding one another in myriad ways.Housing is an obvious one - the rich accumulate capital, the gross inequality reduces the market for the "good" kinds of investment capitalism is purported to promote - small business creation, innovation, etc - so without opportunity - and wealth inequality diminishes opportunity society-wide - the rich will instead find other avenues to grow their slice of the pie. Buying politicians for tax cuts like were seen last year, speculative housing bubbles because of the few things that are scarce and nobody can opt out of land occupancy is one of them (and the poor want to move towards opportunity, almost exclusively found in cities in the modern era, where land capture can be made its most lucrative), stock buybacks in corporations, etc.So housing prices go up, lack of collective power means the working class see no wage increases, debt has to increase to maintain lifestyle. Higher debt means less potential for upward mobility and the lenders are almost exclusively the rich - so you are constantly making short term loans where the interest is diverted from your productive gains right in the pockets of creditors.But its not just housing. There are dozens of nigh independently influenced aspects of living in the US that are impacted by wealth disparity and the distorting effects its concentration have on liberty, prosperity, even security. But almost all of them cause increases in debt because as you get relativistically poorer the fixed costs of life go up and you cannot opt out of them.
 In other terms, top 1% owns 32%, leaving 38% for the 9% below that.
 > The national homeownership rate for the first quarter of 2019 was 64.2%, according to the U.S. Census Bureau. That is below the historic average of 65.2%, which dates back to the 1960s.Ugh I really wish we stopped caring so much about homeownership. Misguided pro-homeownership policies got rates unusually high in the mid 2000s, reaching almost 70% by 2005. It had no impact on wealth equality and almost certainly made the Great Recession worse, if not causing it entirely.
 The people who care about home ownership are either trying to justify/maintain the value of the home they own, or they’re trying to sell you a home.Since there’s such a large number of renters, what happens if we just convince them to ignore the non-renters?
 So we know that this distribution is bad for the economy, and these trends generally precede a recession or depression.We also know that the policies that fix this, namely a wealth tax and or extremely high taxes on the wealthy generally don't produce the results you want (the ultra-rich tend to find ways to avoid said taxes so only the minor-rich end up paying).So what do we do?
 I'm pretty sure that higher taxes in general do reduce inequality. Inequality is far smaller in Europe than in the US, smaller still in Scandinavia.
 This is caused by at least two things. First, as noted, crushing the little rich with high taxes. Second, the ultra rich just hide their money (funny how everyone memory-holed the Panama Papers) so it doesn't show up in the figures and count toward inequality. US mega-rich have less incentive to hide their money, in fact some US states are seen as tax havens, so the figures here are more honest.Also, there are European countries like Germany with an income distribution pretty close to the US.
 Yep, but IMO Germany has done a better job of controlling major costs which leads to less stress, ie housing and health care are much lower costs there IMO.
 It's also what you do with the taxes..
 Barring legislative capture by the rich (which happens a lot because of their distortedly large influence) just taking money out of their pockets does a lot to remedy a lot of the negative consequences of such high inequality. They could tax the rich, straight pay off federal debt obligations, and society would be healthier for it.Wealth inequality is more about the influence money has in both micro and macro-economic and social contexts than "I want what they have". Its no different than how other monopolizations work - the more of a supply you hold, the more distorted the market is around you. The same applies to money. Except money impacts all aspects of society, all markets - it gives you a greater voice in government, gives you influence over the lives of upwards of billions of people, etc. Just taking away that power from private individuals is often by itself a net positive for liberty.
 There is less cognitive ability diversity in Scandinavia than the US. Given the extreme correlation between intelligence and workplace performance, it would be expected in a locality with high levels of variance in intelligence.
 I'm not so sure that there is less cognitive ability diversity in Scandinavia, given this >> https://en.wikipedia.org/wiki/Great_Nordic_Biker_War
 Make the tax code simpler. Eliminate all deductions. Have the government distribute grants for R&D, home ownership, childrearing or whatever other behaviors they want to incentivize — there’s no reason all these programs need to be administered by the IRS.
 Why do you think such distributions generally precede a recession or depression? I don’t see the causality here as clearly as say a yield curve inversion. And follow-up, why is that bad instead of just expected?People have more purchasing power and access to goods/services than ever before. Perhaps the relative ubiquity of smartphones is the most emblematic sign of this. Put another way, things are better than they’ve ever been and even in the last ten years, quality of life has improved in many ways. So is there really a problem?
 > things are better than they’ve ever been [...] So is there really a problem?That's begging the question. Things are better for you, but is the improvement across the board or did the rich getting richer screwed over some people and made them even poorer?
 This argument is laughable. We all have smartphones so serious wealth inequality is OK? These days having a phone is a near requirement.
 I don't have a comment on inequality generally, but what's your point specifically about a phone being a requirement?Toilets are also a "near requirement" in any meaningful sense that phones are a near requirement. But toilets (and sewage more generally) are obviously quality of life improvements over what humans had in previous epochs of history.Stated more succinctly: hasn't it always been common for major improvements in quality of life to eventually become the default, rather than the exception? Or am I misunderstanding your point?
 How is it a requirement? I have friends that don’t have a smartphone as well. Or cable. Or Netflix. And yet lots of people who seem upset at the state of things happily spend on all these same unnecessary goods and services. If anything it points to the fact that these things are more important to them than things people are claiming are necessities or “rights”, such as healthcare.
 People have access to smartphones because a smartphone is the ultimate loss leader.Give someone a smartphone and Internet connectivity, and all of a sudden, they are a customer waiting to happen.Point being, look at what is not ubiquitous. Housing, ability to get medical care, financial security enough to start a family...Focusing on Net Access, and possession of the most powerful tool known to Marketing is an absurd metric from which to argue that systemic economic inequality isn't a problem.
 It’s a luxury item that costs hundreds of dollars. People choose to spend money on it instead of these other things. People spend money on a lot of things that aren’t strictly necessary. So I don’t see why it is absurd.Edit: also is housing actually in a bad shape or is it just that housing in the most desirable locations isn’t universally accessible to every income group?
 Maybe iPhones and flagship androids are considered luxury items, but is the \$40 Tracphone from 7-11 really a luxury item?Or maybe it’s that anyone without a contact number and internet connection is at a huge disadvantage in our society in 2019?
 > Why do you think such distributions generally precede a recession or depression?Here is a good meta-analysis of the research on it:
 To be clear, that article is about mental health, not economic depressions.
 Ha! You’re right. Wrong article.
 Prices are actually skyrocketing, but only for things you need.
 [citation needed]You don't fix this through income redistribution. You fix it by offering free/cheap education, healthcare, etc. this generally requires taxes and, yes, the wealthiest should bear the most.But it's not about taking from the rich and giving to the poor. It's about creating opportunities for the poor.
 > You fix it by offering free/cheap education, healthcare, etc.That's just income redistribution with a middle man. To be clear, I'm all for those things and I think they will help, but don't pretend it's not income redistribution, which mostly hits the mini-rich and not the ultra-rich.
 Yes, it's also redistribution -- but you redistribute a very small part to get growth which is what does the trick...
 Start with things like better voter rights and then hold politicians accountable. I constantly see companies breaking rules and getting hit with paltry fines. And this happens for a bunch of reasons but one of them is that a lot of politicians don't bother chasing after these things because the companies drag them out and put out enough spin that it doesn't become worthwhile for punishment to be given such that the behavior is stopped.
 Which exact voting rights are missing at the moment?
 A day off to vote for one thing.And lots of small things like making it easier to vote, more polling places so that people aren't waiting around for 5 hours, better civics education in highschool so that young people know how to engage with their local party, clearer and standardized ballots, etc.
 The ability to vote? When a state decides to close down numerous polling places, it increases the burden to vote. People at some places had to wait 2 or more hours on line to vote, and that's disenfranchising. You may technically have a right to vote, but if the government puts up too many roadblocks it's in practice a prohibition
 Opening more polling place will increase the number of voters, but I'm afraid won't increase the quality: new stream of voters will be as prone to demagoguery and rhetorics as existing ones.
 That's a complete non-sequitur. Your question was:> Which exact voting rights are missing at the moment?And the answer, as reported in various places, is that the right to vote is for all intents and purposes non-existent for people in certain areas. Voter disenfranchisement is a real and documented thing. Polling places are shutting down, which puts an undue burden on people who don't have the luxury of taking the day off or getting out of work early.You might appreciate a tech example: if Facebook doesn't actually remove all of your data, just "deactivating your account" while keeping the data stored on their servers, do you really have the option to opt out of Facebook?
 It's not a non-sequitur if you follow his chain of logic, which is focused on improving outcomes, and not simply on expanding voting for its own sake:1. Are voting rights missing? (Gather information) 2. If they are missing, would adding these specific rights improve the quality of voting? 3. If the answer is no, then the fact that certain rights are missing is less relevant.You clearly disagree with him, because you see expanded access to the vote as a good in and of itself. That's a tenable position, but not everyone agrees with it (I certainly don't), and so it's good to see where others are coming from.tldr; Some people think that more voting always = good, some people are more consequentialist.
 preommr asserted that we might see better outcomes with better voter rights.AlexTWithBeard did not make the claim you seem to be making now. He specifically asked what rights are missing, as if the status quo allows everyone to vote.I'm arguing that voter disenfranchisement and other roadblocks lead to a situation where technically people have a right to vote but in practice have difficulties.You can argue about the quality of the vote, but we are currently not in a position where everyone who is eligible to vote actually has an opportunity to vote. Having to wait many hours on a business day to vote is malicious compliance.The nonsequitur here is conflating "is it necessarily better if everyone can vote?" with "does everyone have the right to vote?", which are fundamentally different questions
 We do nothing special, and have a recession/depression cycle.
 People tend to die during those events due to lack of access to food and health care. So that may not be the best solution.
 Top tax bracket increase. For 40 years the top tax bracket was not less than 70% and for 10 years in that time the top tax bracket was not less than 90%. Basically, don't be a hoarder. If you really think you can spend your money better than the government, grow or start a business and take a tax deduction which will permit you to avoid the tax.And in that same time period, most people did that. The incentive worked. Not many people paid 90% rates.And the U.S. middle class wage growth was the envy of the world, it was the world's largest creditor nation, and we built massive amounts of private and public infrastructure.But then we reverted to a neo-feudal and prosperity theology model. People either have to understand these things, and understand that voting matters, or the inequality will get worse and at a certain point civil society will break. It's automatic. Violence is the most successful corrector of wealth inequality humans have yet invented. Rational liberal types keep wanting to build something different, but plutocratic illiberals keep successfully convincing just enough people that being a hoarder has merit, is a right, or brings you closer to a deity, etc.These are very old ideas, it's all very old history, none of it is original.
 I'm aware that the top tax rate was that high, and as you correctly note, almost no one paid that rate. But that's not because they were starting businesses. It's because they lobbied for a ton of loopholes in the tax code. The ultra-rich will stay ultra-rich through regulatory capture. Sometimes the mini-rich will benefit as a side effect.
 >During the times when those rates were in effect there were so many deductions that nobody with an accountant actually paid them.Quite a lot of people with accountants paid the highest tax bracket rates during the Clinton era, and the ~70% rates prior to the Reagan era.>It wasn't just that business expenses were deductions, people were deducting their homes and personal vehicles and everything.I agree the system is gamed to favor things wealthy people perceive as good for them, and have been successful at convincing enough of the political participants that it's good for the country generally.We're unlikely to see a federal reserve policy change. It's becoming increasingly clear the relationship between the stock market and interest rates, and the economy and possibly the politics will not accept an increase in rates. Even the most recent attempt at doing so caused an immediate backlash, even if it's good policy. If there's a recession, how do we combat it by lowering already low interest rates?Solving the political problem first also has difficulties. How do we get a more representative political class, when it functions on money as if politics is a product that you can buy? Establish only living persons can contribute a thing of value to a campaign, and perhaps even only citizens can do so? That would take a constitutional amendment, as the Court has ruled that corporations have free speech rights and money is free speech.Instead of borrowing \$2 trillion in cheap loans in exchange for infrastructure assets, the political class chose to borrow \$2 trillion for tax cuts primarily for the wealthy. So it isn't just poor people going into debt to buy things.De-feudalizing this system by either politics or law is going to be very difficult. And that leaves something economically breaking in order to compel some kind of political change, whether non-violent or otherwise.
 What is pretty much missing from almost all articles about the top N% having M% of some resource where N < M is a discussion of what percent the top N% should have.Note that unless everyone should have exactly the same amount of whatever resource is under discussion, then the answer to that question is not N should equal M, because that is mathematically impossible.
 > What is pretty much missing from almost all articles about the top N% having M% of some resource where N < M is a discussion of what percent the top N% should have.This involves a value judgement that goes beyond reporting the facts that the article does. You'd have to go to the op-ed section for that.Piketty has some ideas in his book:And even given the topic, and the book's length, I found it quite readable. Highly recommended.
 Is this really a surprise? The 2008 bailouts were specifically targeted in a way that benefited the richest 10% of households disproportionately. Monies in the tax cuts and bailouts of companies were used for buying back stock [1], creating gains for those who owned stock but not for the other households that don't own sizable stock portfolios.
 Honestly thought it would be worse than that?
 According to this, the top 1% control 32% of the wealth (and the bottom 90% about 33%, a bit hard to see on the graph).According to the previously discussed Bloomberg piece (about Zucman and Saez), the top 0.1% of taxpayers own 20% of US wealth, the top 1% control 39% (and the bottom 90% have 26%).So, it might be worse.EDIT to add: Bloomberg piece discussed here: https://news.ycombinator.com/item?id=19991496
 The "the share of wealth among the richest 1% increased to 32% from 23% over the same period." finding is maybe worse.
 It probably is worse, because by definition no measure can include hidden wealth.Hiding wealth is not quite as easy as it once was. Thanks to financial transparency legislation and the pressure the US has mounted on the international banking system, simply dumping money in to a Swiss bank account isn't as effective as it once was.I'm frankly surprised that such measures were successful in countries that are run largely by and for the wealthy, and they are one of the developments that keeps my customary pessimism about the way the world is heading in check.Still, the ultra wealthy still have the resources to hire some very smart and creative people to hide their wealth in other ways.
 It is probably worse if you would compare wealth distribution globally. Those statistics only represent distibution in USA - 1st world country and currently the biggest economy in the world.
 It's wild that neither this article nor the research paper it's based off of seems to define the absolute dollar value of those quantile cutpoints.
 Well if 10 percent of the population contributed to 70 percent of the world's wealth then this is fair. Without the 10 percents leadership the world would not be what is is today.Think about it, you're just an engineer. Anybody can build something trivial like a rocket ship, a super computer or a large hadron collider. However, not everyone has the leadership skills to actually inspire you build that rocket ship. That's why CEOs are so rare. If we weren't giving the majority of Americas wealth to these CEOs there wouldn't be any technology in the world today because nobody is around inspiring the engineers build this stuff. So this wealth inbalance makes perfect sense. The amount of skill involved with inspiring people vs building a light speed drive is incomparable, only the CEO can inspire engineers to build such a thing. If you hire 10 CEOs instead of 10 engineers and pay them 90 percent of Americas wealth you'd be accumulating so much leadership skills and potential into a single company that you won't even need the engineers anymore... The technology will just materialize from excess inspiration.
 The Pareto principle strikes again!
 Pareto's Distribution
 Is the Pareto distribution the way it is because on every time step the tail ends have exponentially more ability to pull away? Is there some sort of statistics concept that models time variation of distributions (first derivative?) or their acceleration (second derivative ?)
 No. There is quite a bit of income mobility in the US, and these types of reports never really explore it. Instead, they leave you with the idea that the top 10% today are the same people that were there 10 years ago. Which is false.
 Figures like yours usually come from just comparing today's 10% to the 10% from earlier date, and just saying "new entrant" vs "existing entrant". But a new entrant from the bottom 10% would be more interesting than a new entrant from the second 10%.You can get a more holistic view using, say, quintiles: (grabbed off Wikipedia)42% of children born to parents in the bottom fifth of the income distribution ("quintile") remain in the bottom, while 39% born to parents in the top fifth remain at the top.[5] Only half of the generation studied exceeded their parents economic standing by moving up one or more quintiles.[5] Moving between quintiles is more frequent in the middle quintiles (2-4) than in the lowest and highest quintiles. Of those in one of the quintiles 2-4 in 1996, approximately 35% stayed in the same quintile; and approximately 22% went up one quintile or down one quintile (moves of more than one quintile are rarer). 39% of those who were born into the top quintile as children in 1968 are likely to stay there, and 23% end up in the fourth quintile.[5]Children previously from lower-income families had only a 1% chance of having an income that ranks in the top 5%.[7] On the other hand, the children of wealthy families have a 22% chance of reaching the top 5%.[7]
 Social mobility in the US is, by now, smaller than in many other developed countries, IIRC.EDIT to add some sources:> The key observation, based on a growing body of research, is that when it comes to upward social mobility, the U.S. is truly exceptional — that is, it performs exceptionally badly.https://www.nytimes.com/2019/02/28/opinion/ivanka-trump-soci...> Although the discovery of America’s low mobility, compared to similar countries, is relatively new, it turns out that mobility’s been low for some time.http://www.msnbc.com/msnbc/us-social-mobility-problem> A new study indicates that from the 1980s to the 2000s, it became less likely that a worker could move up the income ladder.
 It's hard to compare, you have perfect mobility when everyone is dirt poor. In the USA it's possible for people to get really rich, so measuring how many from the very bottom make it to the very top is not a good metric; especially when composing to other countries whose top is in the middle. So if you compare mobility between income ranges you will find the US to be more mobile.
 Every country has a rich upper class.
 You need 10 million to be in the top 1% in the US and 700k to be in the top 1% in the UK. There's a big difference between going from 0 net worth to 700k than to 10 million.
 Not only is this shifting the goal posts, it’s also whataboutism.This is a distraction from the problem of wealth concentration and lack of mobility in the United States by saying: Yeah, well, you’re richer than the Haitians, so quit whining. Being part of the largest economy in the world, I would certainly hope the poorest in my country, would be better off than the those in the least developed country in the Western Hemisphere.
 10 years is a pretty big time range, and so you’d expect to see generational effects to show up. (i.e. people fall off the list, because they’re dead.) But this does highlight two important points: intergenerational and intragenerational mobility.https://en.wikipedia.org/wiki/Socioeconomic_mobility_in_the_...WRT intergenerational mobility, the US does quite poorly when compared to other modern economies, with a very strong correlation between parental wealth and the child’s wealth. For instance 42% born into the bottom quintile, stay there in the United States, but only 25% remained in Denmark. 8% rose to the top in US, but again, 14% did in Denmark.Intragenerational mobility in my opinion is a bit of a red herring. Often you’ll hear someone trumpet some number about people moving from one group to another in a single year, but you have to look closer to the reasons why. Some people are just on the cusp of the cutoffs and so will bounce around it. Others are experiencing temporary outlays, and will very quickly return to their original levels. Unless the person’s move has some stickiness, along with some large absolute change, it’s meaningless noise.
 It's fuzzy, but you can take the probability density function (PDF) of a random variable with a pareto distribution. That sort of matches what you're asking for, with regard to taking a derivative to find the probability of the random variable falling into a range of probabilities over time.
 A little bit of googling seems to indicate that the total household wealth in the US was \$86 trillion as of 2015, and there are 127 million households in the US, so the average household has \$700k net worth. If you have more than that (and many people in tech do), then you are a beneficiary of inequality, not a victim of it, and you don’t have the right to whine about the billionaires hoarding all the wealth at your expense.A surprising number of upper middle class yuppies love to act like they are downtrodden proles just because they have less money than Jeff Bezos.
 Now do it with the median.
 The point of using the average is to evaluate the hypothetical where all the wealth in the country were distributed evenly (and many of the people who claim to be victims of inequality would actually be worse off in a truly equal society).
 The average wealth is the 84th percentile wealth. If everyone became worth \$677k, 84% of people would be better off (inflation aside).
 That is true, but people in the 90th, and 95th and sometimes the 99th percentiles still complain about how oppressed they are because billionaires exist.
 As always, someone has failed to understand that averages are a poor statistical indicator of, well, anything.
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 You are not inherently a "beneficiary" simply because you're coming out marginally ahead in an unfair system anymore than a pretty girl at Auschwitz used as a rape slave living for 1 year instead of 1 week average for plain girls before being gassed is a "beneficiary" of inequality because she lives longer. Yeah, I went Godwin on you. Your original comment was unnecessarily confrontational against people as a class who have not only done nothing wrong, but many of whom may be actively trying to fix things.
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 "Yuppie"? Guess again: by your own stated cutoff dollar amount, I'm in the "victim" group. Unless you want to rethink that cutoff.

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