OK

This may have escaped some people's notice on the NYT website.  Princeton economist Uwe Reinhardt takes on Michael Barone's recent assertion in the American Enterprise Institute's house journal that the United States public is rejecting progressive politics because

we are once again, as in the days of the early republic and not in the heyday of the Progressives and the New Dealers, a republic of property owners. Most Americans have accumulated — or will, during the course of their working years, accumulate — significant amounts of wealth.

Reinhardt takes exception to Barone's characterization of the distribution of property in the US, and if you join me over the flip you'll see he has the goods on him.  Completely, totally, and irrefutably.

Reinhardt uses actual data to demonstrate his argument, and I recommend you head over to his article to see the graphs for yourself, but here's a brief summary of his main points.

First, he looks at the income sources of people over the age of 65, divided into income quintiles.  His data show that for the bottom forty percent of the people in this age group fully 83% of their income comes from Social Security.  Income from assets, which one would expect to be high among people who per Barone have "accumulated... significant amounts of wealth" over their working years, in these economic groups accounts for less than 4% of their total income.  In the middle twenty percent of the population, 63% of total income is from Social Security and only six percent is income from assets.  In fact, it is only in the upper quintile, the richest twenty percent of the elderly population, that income from assets comes close to Social Security as a percentage of total income, 18% vs. 19% respectively.  A huge percentage -- 40% -- of income in this income group, in fact, comes from earnings, which leads one to wonder whether we are actually talking about wealthy people here.

In sum, for sixty percent of the US population Social Security provides the dominant share of their income after the age of 65.

Reinhardt then proceeds to look at the distribution of income and wealth among the population aged 65 and older.  Working with data produced by the Federal Reserve, he reproduces Lorenz curves for net worth and income from the late 1980s to the early 21st century.  The curves show two things: first, the distribution is skewed heavily towards the upper end of range.  As Reinhardt puts it:

If we pick, say, the number 80 on the horizontal axis and draw a vertical line above it until it cuts the curves labeled "net worth," and if we then draw a horizontal line to the vertical axis on the left, it will mark about 15 percent to 16 percent on that axis. This means the bottom eight deciles of the population, arrayed from low to high in terms of wealth owned, own only about 15 percent to 16 percent of the national’s total household net worth, while the remaining wealthier 20 percent of the population own 85 percent or so of the nation’s total household net worth, and so on.

That's for net worth, which if we truly were a nation of property owners you would expect to show a more calibrated distribution.  The curves for income distribution show a similar result, with 80% of the population receiving 38% of the income and the top 20% receiving the remaining 62%.

The second thing the curves show, though Reinhardt is too polite to mention it, is that the curves have been skewing right over the last twenty years.  Barone wants us to believe that today, as opposed to some time in the not so distant past, property ownership in the United States has increased, has become more broadly distributed.  The data, in fact, show that exactly the opposite has occurred, that property ownership and income distribution have become more concentrated since the late 1980s.

Reinhardt reproduces one final chart, this one showing the distribution of income and wealth in 2007 for the top 1% of the population, the top 20% of the population, and for the bottom 40% of the population.  These numbers are simply astonishing.

The top 1% of the population of the United States holds nearly 43% of the nation's net worth, when excluding homeownership from the calculation.  The top 20% (which, of course, includes the top 1%) holds 93%!  The bottom 40%, for their part, actually have a negative net worth, to the tune of minus 1%.  If we allow the poor people to count their homes, the picture gets a little bit better -- but not much.  In this calculation, the top 1% holds about 35% of the nation's wealth, while the top 20% hold 85%.  The poor folks at the bottom are still in negative numbers, but it's now a decimal -- "only" -0.2% of the nation's net wealth is in the hands of the bottom 40% of the population.  Finally, Reinhardt's chart also looks at the distribution of income.  Here, the top 1% receive 21% of the nation's income, the top 20% receive a little over 61%, and the bottom 40% receive just under ten percent of our wages and salaries.

A nation of property owners my eye.  Barone needs to go back to school and learn some basic math.

Originally posted to litho on Fri Jul 30, 2010 at 06:52 AM PDT.

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