The disparity issue has been with us since the onset of the industrial revolution. In the 19th century, Karl Marx predicted capital would eventually become concentrated in the hands of the few. More recently, French economist Thomas Piketty, in his bestselling book, “Capital in the Twenty-first Century,” “confirms” the Marx prediction.
How correct are Barack Obama and Thomas Piketty? Has the Marxist prediction been realized? Have the well-to-do exploited the less well off? Has wealth become the domain of the few? Are many impoverished because others are successful?
The first problem is no reliable wealth data exists. People do not by and large report their net worth or make it public. They do report income. Piketty and his associates therefore rely principally on tax returns to extrapolate net worth. The method is not without its problems.
Most Americans’ principal asset is their home, the equity of which represents capital. About 65 percent of all Americans live in the house they own; half own it free and clear of debt. The sale of those principal residences falls for the most part outside of taxable income reporting and thus beyond the Piketty calculations.
Similarly, retirement accounts, such as 401-Ks, IRAs and the like, go largely unreported for tax purposes. Vested pension rights also lie beyond the scope of reportable income. The lack of dependable data that would demonstrate who owns what renders any argument calculating wealth disparity virtually useless.
When the disparity lobby howls, it is principally about income or lack of it. A poll taken about 10 years ago asked persons not in poverty what they understood “living in poverty” to mean. A majority defined poverty as homelessness and hunger.
The facts create a different picture. In 2007, the United States Census Bureau reported there were 37 million living in poverty, as the government defines it. That same agency now reports the number living in poverty increased to something in excess of 45 million. Definitions of what constitutes poverty change.
While there is material hardship, poverty in America does not for the most part involve being destitute. As of 2005, 43 percent of those “living in poverty” own their homes compared with about 65 percent of the population as a whole. The average home of those “in poverty” is a three-bedroom structure with one and a half baths, a garage and porch or patio, with a median value of just under $100,000.
Consider the following numbers: 80 percent of those living in poverty have air conditioning; the average person defined as living in poverty has more living space than the average person in virtually every major European city; 75 percent of those in poverty own at least one car and one third of those have two; 97 percent own at least one color television and half of that number have two or more.
Politicians trafficking in “envy” advocacy or “class warfare” rhetoric have a vested interest in voters not knowing what it means to live in poverty in the U.S. The darkest impressions are helpful to get working Americans to support government redistributionist programs. Forty-eight million Americans now get food stamps, yet we as a nation make virtually no effort to find out who they are, what they have or on what they spend their food “money.” We assume they need food stamps because they are “living in poverty.”
When assessing where we as a nation stand economically, it would be far more reliable to focus on what people have. Just because Bill Gates has billions and Barack Obama millions does not mean the 99 percent are without assets or income.
The modern economy (i.e. private enterprise in a competitive market system) has raised the standard of living for just about everyone. That is the critical fact that undermines the whole “disparity” claim.
Dan Joy is a lawyer in Marietta.