Sunday, March 15, 2009
As the 'Villain and others have pointed out, the collapse in value of all assets other than cash has crushed the net worth of the Baby Boomers. It has also had a disproportionate impact on the rich and near rich.
The number of American households with a net worth of $1 million or more, excluding the value of their primary residence, fell 27% to 6.7 million in 2008 from an all-time high of 9.2 million the year before, according to a report from market research firm Spectrem Group.
"America has a lot fewer millionaires than when this economic crisis began," said George Walper, president of Spectrem Group, in a written statement.
But don't weep only for the 2.5 million fewer millionaires. The report, which is based on surveys of 3,000 affluent households, also showed the number of both multi-millionaires and aspiring millionaires plummeted last year.
Affluent households, defined as those with a net worth of $500,000 or more, declined 28% to 11.3 million from 15.7 million.
And, of course, it has only gotten worse since the beginning of the year.
I was unable to find data on the distribution of wealth recent enough to reflect the last year's collapse in asset values, but the information we do have points to a significant narrowing in the previous disparity between rich and poor. To the extent that Americans, mostly Democratic Americans, believed that the gap between rich and poor was a bigger problem than the absolute prosperity of the poor, I suspect that on the final crunching of the numbers social scientists will discover that most of the widening of the last couple of decades has been suddenly erased. Well, there's one problem solved!
We await the headlines with bated breath.
The distribution of wealth is always a statistical concept. The bottom is always zero. The top, on the other hand has no limit. I believe also that when all the dust has settled, the "working wealthy" of THTV fame will continue to be paid, while the unproductive will continue not to be paid. When the entire pie has finally to the Obamanians' satisfaction, the top earners will be not quite as wealthy, but the bottom will still be zero. I doubt that the government can actually really change the shape of the curve by putting lead boots on the drivers of the economy. The poor will also be poorer. The bottom will still be zero. Nice work Barack.
How about this premise: that the very rich (Wall Street) and Congress (through Fannie and Freddie) bet the 401(k)'s and retirement accounts of the next several levels down, put that money on red, so to speak, it came out the other way, and now many are the poorer for it? Many of these people lived within their means, didn't live big, saved and invested, and what do we get for it? Continual bashing from Congress about these folks having too much, when at the same time Congress expects these folks to create jobs and lead us out of the depression. Talk about whiplash.
I think the very concept of putting capital at risk suggests that those who put more at risk will make more in flush times and be hit harder in bad ones. While there will be numerous exceptions to both trends, the overall tendency is strongly intuitive when you thnk about it.
Therefore, whenever times are good we will have progressives bemoaning the fact that the rich are being unfairly rewarded; and whenever they are bad, blaming the rich for making it so.
At the phrase "crushed the net worth of the Baby Boomers", I have to share the thoughts I immediately had.
Let us start with the fact that the voting age was nationaly lowered to age 18 in 1971. It can be noted that said Boomers were all about taxing and redestributing wealth in the late sixties and early seventies. Let's see, that would make them.... ages 15 to 28 or so for all that. Then, suddenly, with Prop 13 in California and then Mr. Reagan, came a major anti-tax mentality for the next 15 to 20 years. Let's see, that makes the Boomers.... ages 25 to 50 or so... RIGHT in their prime wealth production years. Interesting. Now, as they approach retirement.... HO!.... it's redistribution mania all over again! Hooda thunk?
Want another, smaller one? Let's take a look at the drinking age. "For almost 40 years, most states voluntarily set their minimum drinking age law at 21. But at the height of the Vietnam War in the early 1970s, 29 states began lowering their drinking age to more closely align with the newly reduced military enlistment and voting age. And of those 29 states, no uniformity in age limits—drinking ages varied from 18 to 20..."... "by 1983, 16 states voluntarily raised their drinking age back to 21... President Reagan signed into law the Uniform Drinking Age Act mandating all states to adopt 21 as the legal drinking age within five years. By 1988, all states had set 21 as the minimum drinking age.."
Now the page quoted here attributes this to accident rates, no small factor.... but ain't it just damn convienent? When the boomers hit that 18 area, they get themselves the vote, vote for lower drinking ages, and when they are all safely past 21.... Bingo!.. the age goes up again. One more, Hooda thunk!
Are we tired of that self-loving, narcisstic, full-of-themselves Generation Only yet? (the one it has been said is the first generation in American history to consume more than it produced?)
People are waking up.
Only if you're some sort of statist, and define nation consumption/production in terms of government spending.
I don't know the right answer, but obviously the difference between the size of the private economy before the baby boomers came to productive adulthood and today should be taken into account.
RE: "Consumed more than produced". I must go on record as having heard that statement, I can't remember where, and I am unable to back it up. I actually pondered that line before I submitted the post, and, possibly in hindsight, I should not have said it. I find it highly plausible, but if someone comes along and says otherwise I would not dispute the point.