Bloomberg Businessweek - USA (2019-05-27)

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whichoftenfailtoidentifyenoughoftheveryrichest,ordata
ontheestatetax,whichhasgotteneasierandeasiertoavoid.
ZucmanandSaezstartedwiththeIRS.Theagencyopens
itsdoorstoresearchersunderstrictconditions,andonly
Saez,a U.S.citizen,wasallowedinsidea facility,wherehe
downloadedanonymizedstatisticsuptotheextremeend
oftheincomescale.Theduothentranslatedthedatainto
wealthestimates.Saezhadhadtheideafora while.“Iwas
doubtinghowthatcouldactuallybedone,becausethereare
somanycomplications,”hesays.“AndthenGabrielcame
along.”Witheachassetclass,fromequitiesandrealestate
topensionsandinsurance,theypainstakinglyestimatedthe
relationshipbetweenincomeandwealthintheU.S.,check-
ingandtweakingbasedondatafromexternalsources.
Theyfoundthatsomethingcataclysmichappenedaround
1980.AsRonaldReaganwaswinningtheWhiteHouse,the
top0.1%controlled7%ofthenation’swealth.By2014,aftera
fewdecadesofboomingmarketsandstagnantwages,thetop
0.1%hadtripleditsshare,to22%,a bitmorewealththanthe
bottom85%ofthecountrycontrolled.Thedatashowedthe
extentoftheproblemandtheabsenceofa solution:Inthe
aftermathofthefinancialcrisis,whilemiddle-classAmericans
wereburdenedbyjoblossesanddebt,therichhadswiftly
resumedtheirparty.Wealththathadvanishedfromfinancial
marketsafterLehman’scollapsehadreappeared,doubling
andtriplingtheportfoliosofwell-offinvestors.
Someeminenteconomists,includ-
ingtheUniversityofChicago’sAmirSufi
andNobellaureateandNewYorkTimes
columnistPaul Krugman, endorsed
thefindings,butotherswereskeptical.
Thenewnumbersweremuchhigher
than previous estimates, including
thoseoftheFederalReserve’sSurvey
ofConsumerFinances,whichis based
ondetailed responses provided by
Americansandis widelyconsideredthe
bestmeasureofU.S.wealth.
ThedisputesoverSaezandZucman’s
methodologywerehighlytechnical.Fed
economistssaidtheBerkeleypairwere
underestimatingtheinvestmentreturns
theveryrichwereearning,whichhad
thecounterintuitiveeffectofoverestimatingthefortunes
from which theydrewtheirincome.SaezandZucman
rejected that criticismbutmadeotheradjustmentstotheir
method and updatedthenumberstoreflectrevisedmac-
roeconomic data.Theirestimateofthe0.1%’swealthshare
dropped a coupleofpercentagepoints,toabout20%,stilla
startling figure.Then,in2017,theFedreleaseda surveyincor-
porating methodsit saidbettercapturedthewealthofthe

veryrich;thecentralbankcitedZucmanandSaez’sworkin

anaccompanyingpaper.Itslatestfiguresshoweda jumpin

inequality,withthetop1%’ssharerisingfrom36%in 2013 to

39%in2016,matchingthepair’sestimate.

Atconferencesandseminars,Zucman’speersstilloccasion-

allysoundbaffledbyhiswork.Economistsoftenaimforpre-

cise,unassailableconclusions,buthe’s“comfortablegettinga

‘roughjustice’answertoa question”if it helpsfillina biggap

inknowledge,saysReedCollegeeconomicsprofessorKimberly

Clausing,anexpertoncorporateprofitshifting.“Iadmirethe

factthathe’swillingtolookattheseharderquestions.”Saez

saysZucman’s“definingcharacteristicis thathe’snotmoored

tothetraditionaleconomicmodel.”Intheend,Saezadds,

“thatgiveshimtremendouspowertomakeprogress.”

E

conomistsargueoverthetimingandsizeofthe

U.S.’sinequalitysurge,butfewdenythebroader

trend.Weliveinanageinwhichtherichestman

inmodernhistoryis reducedbydivorcetomerely

therichestmanaliveandinwhicheventhemostgenerous

billionairescan’tgiveawaymoneyfasterthanthey’rebring-

ingit in.Thedebatenowragingis overhowinequalitydeep-

enedtothisextentandwhat,if anything,todoaboutit.

Ononehandarethosewhoarguethatgreatwealthis

somehownatural,theresultoftechnology,globalization,

andpro-growthpoliciesbestowing outsizerewardson

thesmartest andmostresourceful.

Returningtopostwarmarginaltaxrates

of70%orhigher,theysay,woulddis-

courageinnovationandhurttheecon-

omy.KenGriffin,a hedgefundmanager

whomadenewsinJanuarybydropping

$360millionontwoabodesinLondon

andNewYork,toldBloombergNews

thefollowingmonththatsuchtaxhikes

wouldrepresentattemptsto“destroy

thewealthcreatorsofoursociety.”

Othersseethesetypesofproposals

asnecessarytoaddresstheeconomic

andpoliticaldistortionsthatleadto

wealthstratification.Inhercampaign

announcement, Warren described

PresidentTrumpas“thelatestand

mostextremesymptomofwhat’sgonewronginAmerica,

a productofa riggedsystemthatpropsuptherichand

thepowerfulandkicksdirtoneveryoneelse.”Evensome

billionaireshavegottenthereligion.InApril,RayDalio,

founderofBridgewaterAssociates,theworld’slargesthedge

fund,calledthewideningU.S.economicdividea “national

emergency”that,leftunaddressed,willleadto“someform

ofrevolution.”

Shareofwealthwithinselect

countries, 2014

◼Top0.1% ◼Bottom50%

U.S. Russia China France

100%

50

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Bloomberg Businessweek
WHERETHEMONEYIS
May 27, 2019

“THE WEALTH IS NOT VISIBLE IN PLAIN SIGHT—IT’S

VISIBLE IN THE DATA”