The Wealthiest 5% Grabbed Most of the America’s Gains

It's easy to start filtering yourselves into the camps of "the rich are too rich, tax them!" or "the rich earned their money, you have no right to take it away!". Then you can yell at each other from across great echoing divide until the sun grows dark.<p>The sad fact is that America is no longer a country that makes things, and as a result we no longer find ourselves in a position to employ people in positions that are actually worth a damn. Or that pay a salary worth a damn.<p>We still make some things. Software. Circuit designs. Entertainment. Product design (to sell things to ourselves). Pharma. People who work in these areas are paid well.<p>Oh, and the financial industry. Which, despite demonstrating a wonderful ability to make itself mountains of cash, has failed to demonstrate how it benefits the rest of the country. (obviously, its ability to provide lines of credit is valuable, but we had that long before investment banking came to dominate the entire financial industry)<p>I remember reading Snow Crash for the first time and coming across this line:<p><pre><code> There's only four things we do better than anyone else: music movies microcode (software) high-speed pizza delivery </code></pre> and thinking "what an alien dystopia that future must be".

I know this is wealth and not income, but I get sick of the media (and politicians) using the "top 1%" or "top 5%" label.<p>When it comes to income, the top 1% includes an attorney making $250K and a hedge fund manager making $10M. I imagine its similar for wealth. My guess is that distribution curves spike somewhere past the 1% mark.<p>Maybe I'm biased because I barely make the cut and don't want to pay more taxes, but it seems odd to use such an arbitrary cutoff for reporting and (especially) policy decisions.<p>And please tell me if I'm wrong or off here–I'm geniunely interested in this.<p>EDIT: downvoted? Seriously?

Has anyone ever stopped to try to get an estimate of how much of these gains this 5% have <i>created</i>?<p>I honestly have no idea what this number would look like but it must be non-zero. Everybody wants to fit a picture of a fat, stupid, cartoonish banker gambling away grandma's pension and getting a mammoth bonus into this slot but how much is that the case? If the number's not zero, then its something. How much?<p>Its not completely outside the realm of possibility that the 5% created nearly <i>all</i> of the gains and then only grabbed most. Net win.

I usually defend capitalism, and I read and mostly agreed with PGs wealth essay. But having seen pictures of how the poor live in the US (I am not from the US), this just feels wrong. How much wealth do you really need? It is one thing if everybody lives a happy live, and some people live in slightly bigger houses by the seaside. It is another if lots of people live in squalor at the same time.<p>I think some things should be rewarded. If you find a cure for cancer, you deserve to be rich. But even then, maybe a couple of million $ would be enough, even if what you gave to society is worth trillions. Perhaps related: Joel Spolsky's article on how to compensate an intern who created a lot of value for the company. Can't find the article atm, but I think he ended up giving hardly anything. Cancer researchers are just interns of society, when seen from space.

Most of the US wealth is ephemeral and is tied up to the real estate market. The poorer one is, the greater proportion of personal wealth is tied up to the value of their real estate.<p>If you started off wealthy before the real estate crisis, and just stayed in cash, your wealth in absolute terms would decline slightly as your house lost value and your super-conservative cash holdings earned you 0%.<p>In relative terms the guy who bought with no money down, easy mortgage guaranteed is now seeing his total wealth delta in severe red, so yeah, the wealthy ones are seeing their proportion rise by staying stable.

Before jumping all over the rich, consider whether you are one. For example, if you earn $100k or more per year, you are IN the top 5% of income earners. And if you have a total net worth of ~$200k or more, you are IN the wealthiest top 5%. Easy to imagine that many HN readers are in these boats.

Not picking on this article in particular but whenever I read these types of stories I get the feeling that people don't make a clear separation of these two very different issues:<p>1. The bottom is worse off relative to the top in terms of wealth than they were before.<p>2. The bottom is worse off in terms of wealth (quality of life) than they were before.<p>People seem to imply 2 when they talk about 1. but they are very different things.

Some PG thoughts on distribution of wealth:<p><a href="http://www.paulgraham.com/gap.html" rel="nofollow">http://www.paulgraham.com/gap.html</a>

Wealth != income as pg says in <a href="http://www.paulgraham.com/wealth.html" rel="nofollow">http://www.paulgraham.com/wealth.html</a>.<p>I think wealth is more equal to total free time left on the planet. So total time minus time spent working to provide things for survival minus time spent surviving (like cooking, sleeping, running from lions). The washing machine is invented, lots of peoples' wealth skyrockets. Food gets cheaper, people's wealth goes up.<p>Looking at income is a short-sighted definition of wealth.

This is pretty damning when you consider it's being run by the Wall Street Journal.

I supported (absolutely past tense) capitalism on the basis that the right people would end up with the money. Maybe they will. Waiting another 30 years isn't on.<p>Things shouldn't go to people "according to his need".<p>But now things are going to people "according INVERSELY to his need".<p>Endless claim checks on future productivity are being stockpiled by precisely those who have no need of 99% of that productivity. In many cases they also have very little future, because they are old.<p>Politics is bought and paid for. People will not pay taxes. Inflation must now be used as a regressive wealth tax of last resort. At least it transfers purchasing power from the old to the young.<p>Poor people should, if they were intelligent, stop spending their disposable income and use it to buy the thing that gives the best return on investment - which is bribing politicians. And no, corporations aren't people, and money isn't speech.

It drives me crazy when I see encoding issues in popular articles. Come on, it�s embarrassing.

I am quite tired reading the top x%.<p>Many people living in the SF bay area for example technically belong to the richest 3-5%... But cannot even afford a nice house here.<p>And with "nice" I do not mean a pool, 10 rooms. movie room, etc, but just enough rooms for the kids and in a neighborhood with good schools.<p>Now I have a very liberal viewpoint, and above categorization mostly fits me. Still I personally do not mind to be taxed a bit higher.<p>But all that talk about the richest 5% living the life of riches is just not accurate.

Once again, this is a statistical aggregate. As difficult as it might be, please do not picture a filthy rich old white Scrooge character stealing cookies from poor orphans on the street when you read numbers like this. As the author clearly indicates, these numbers are in relation to <i>averages</i>, not real people. Movement between income groups is an area of current study, but I've seen numbers as high as 40% moving from one statistical group to another inside of a year. The rich may indeed be getting richer, but it may only be a small percentage of them who stay in that group over a period of decades. There might be many new arrivals and many people leaving each decade.<p>Of course, it's perfectly fair to say that the disparity is important whether or not the same people are involved year-to-year or not. I'm not trying to get into that part of the discussion. I'm simply trying to point out the difference between stereotypes and averages and real, live people. There are lies, damned lies, and statistics. (old joke)

Of course they did. As more gains are realized in capital rather than wages, the rich will literally get richer. At the same time, it's becoming ever less clear that many of them serve a useful purpose. Justifying executive pay is losing ground in economic literature and, frankly, has always required recourse to casuistry.

I would say that the problem is systemic - you have two political parties which are basically at eachothers throats the whole time, and a historical belief in a very pure form of capitalism - money is the bottom line, and the markets should govern themselves - the result? - all of the manufacturing has moved abroad, effectively killing the working classes ...<p>Any attempts to change this system gets vigourously branded 'socialism' both by the media (fox news) and by republican opposition which also has historical connotations harking back to McCarthyism and the Cold War ...<p>I don't think this is going to change anytime soon unless we see some sort of systemic collapse ... I would argue that this is possible ...

divide (rather arbitrarily) the population into a few groups.<p><pre><code> very wealthy: anyone with net worth exceeding $10M. wealthy: anyone with net worth between $1M - $10M upper middle class: anyone with net worth between $100k - $1M middle class: anyone with net worth between $10 and $100k poor: anyone with net worth &#60; $10k </code></pre> now let's make some overt generalizations!<p>the very wealthy seem to fall into one of two groups: successful business owners and venture capitalists on the one side, and bankers, traders, and some classes of lawyers on the other.<p>the wealthy and middle classes all seem to consist of professionals and small business owners, who have met with varying degrees of success.<p>the poor consist largely of immigrants, people living in impoverished urban and rural areas, as well as people without a trained skill.<p>here's what i think is happening: a group of the very wealthy, mainly those on the banker-trader-lawyer side of the divide, have this country by the balls. they have accomplished this by having their politician friends (how many politicians are former lawyers? and how many came from wall street? ok, now how many are former business owners or venture capitalists?) convince the poor that the "rich" are responsible for their plight. to fix this problem, they propose raising taxes on the "rich."<p>this proposal invariably means raising income taxes, which the very wealthy rarely pay because their income is mostly in the form of capital gains. the democrats propose a tax raise, the poor vote them into power, and income taxes go up. the wealthy and the middle class both feel like they're getting fucked, probably because they are. so they fight back, saying they want to lower taxes, reduce government spending, and cut social programs. the republican party says they support these ideals, so they get this type of vote. once in power, the republicans pass a tax cut on both income and capital gains taxes. they also increase government spending, because, hey, why not, fuck you buddy. the poor see this response and it confirms to them what the very wealthy have been saying through their proxy politicians, so the fight goes on.<p>if this process is going to stop, we need a new word to describe the members of the very wealthy who are contributing nothing but misery to the economy, whether by gambling with other people's wealth and getting bailouts when they lose, or simply by using the broken legal system as a weapon to extract wealth from the venture capitalist / successful business owner side of the divide. if we had a single word to embody this concept, i think more people would become aware of the distinction between the 'productive rich' and the 'destructive rich' and we could fix the problem. since 'destructive rich' isn't exactly catchy, i propose we call those people 'dicks.'

There are a lot of stats everywhere. Here is one I like. The top 1% pays for 38% of all taxes. The top 10% pays 70%. If I showed you this stat, you would lean on taxing the poor more, but that isn't right either. Everyone should look at the problem in aggregate and decide for themselves what is fair for our system as opposed to analyzing individual stats and extrapolated analysis from that alone.<p><a href="http://ntu.org/tax-basics/who-pays-income-taxes.html" rel="nofollow">http://ntu.org/tax-basics/who-pays-income-taxes.html</a>