Growing wealth reignites old debate in US
Washington, January 21:
A booming US economy has led to an explosion in the ranks of the wealthy unseen in a century, creating a surging market for luxury goods as well as a new era of philanthropy, researchers say.
But some analysts say the growing ranks of the rich comes at a time of a widening gap with the poor, and highlights dilemmas on social issues such as the minimum wage, executive pay and taxes.
Forbes magazine said the US was home to at least 400 billionaires in 2006. Market research firm TNS concluded in 2005 that at least 8.9 million US households were worth at least one million dollars. This has led to a sizzling market for luxury cars like Maseratis and Porsches, as well as strong sales of yachts and luxury homes.
At the same time, some researchers point to a widening rich-poor gap, a topic of heated debate.
Steven Lagerfeld, editor of the Wilson Quarterly of the Woodrow Wilson International Center for Scholars, writes that Americans’ “enthusiastic embrace of business and the rich represents an amazing change in public attitudes.” “In the 1960s and ‘70s, business was deeply unpopular and corporations were thought to embody the soul-deadening conformity and materialism of American society,” he said.
Lagerfeld said the economic turmoil of the 1970s led to a tax-cut movement embraced by president Ronald Reagan and “a renewed appreciation of the fragility of the nation’s extraordinary wealth and the capitalist processes that create it.” But he said there are signs “that the public’s ardor for the new era of riches is flagging.” Some data indicate a wealth gap that is the steepest in decades.
Emmanuel Saez, a French economist at the University of California at Berkeley, concluded that the top one percent of US households increased its share of overall national income from eight percent in 1980 to 16 percent in 2004, the highest since before World War II.
But senior fellow Alan Reynolds of the libertarian Cato Institute said the research is flawed, and that the income inequality since the 1970s can be traced to tax rules and tax reporting.
Reynolds said the top one percent’s share of income rose from 9.1 percent in 1985 to 13.2 percent in 1988 after the top tax rate fell from 50 percent to 28 percent.
Gary Burtless, economist at the Brookings Institution, said rising income inequality since the 1980s can be seen in tax data, census reports and many other sources.
But he said that the new rich class results from wealth creation that is in many cases beneficial to the economy as a whole.
“I think it’s a good thing that Bill Gates worked hard” to create and expand Microsoft, said Burtless.
The US tax system “encourages people to exert greater energy to make more money ... This has pushed people with a great deal of talent and wealth-making capacity to work harder.” One positive aspect of the wealth boom has been a surge in philanthropy, similar to that undertaken by the Fords, Carnegies and Rockefellers decades earlier.
Aside from the multibillion-dollar programs launched by Bill Gates and Warren Buffett, at least a dozen groups received pledges of 100 million dollars or more in 2006, according to Leslie Lenkowsky of the Center on Philanthropy at Indiana University.
“Approximately two-thirds of all (charitable) giving today comes from the most affluent three percent of American households,” Lenkowsky wrote in the Wilson Quarterly.
Still, many Americans are unsettled by the rise in new wealth.