January 14, 2020
January 14, 2020
The White House’s Council of Economic Advisers (CEA) is not, these days, known as a source for impartial economic analysis. So when the CEA tweeted last week that the poorest 50 percent of Americans’ wealth is growing three times faster than the wealth of the top 1 percent, we were skeptical.
The CEA’s exclamatory tweet boasts that “under Donald Trump, real net wealth held by the bottom half of households has grown by nearly 50 percent—that’s over 3 times the rate of increase for the top 1 percent of households!” This finding is, as it turns out, neither a lie nor a damned lie, but tells us virtually nothing about whether (as the CEA implies) the Trump administration’s policies have reversed the long national trend toward increased wealth inequality. And as is almost always the case with this administration’s pronouncements, this claim requires just a bit of scrutiny to reveal the facts.
As it turns out, the CEA’s tweet is a reminder that the poorest 50 percent’s wealth grew twice as fast during President Obama’s second term as it has under President Trump, but to this day remains far below its pre-recession share.
The data cited by the CEA tweet come from the Federal Reserve Board, which last year introduced “Distributional Financial Accounts (DFA),” a quarterly time series of wealth distribution information. The most recent data, covering the third quarter of 2019, show that the top 1 percent of households in America hold 32.2 percent of nationwide wealth. The DFA data also show that the next-richest 4 percent hold 37.4 percent of the wealth, meaning that just 5 percent of Americans now hold almost 70 percent of wealth nationwide. Meanwhile, the poorest 50 percent of Americans hold just 1.6 percent of nationwide wealth.
That half the nation’s population owns so little of the nation’s riches is nothing to crow about, particularly since they have substantially less today than they did 30 years ago. The Federal Reserve data tell a story about wealth concentrating at the top and a hollowed-out middle class—not a story about economic conditions improving for the vast majority of working people.
This staggering level of inequality is partly a recent development. As recently as 1991, the bottom 50 percent’s share of wealth was more than twice as large, at a still-tiny 4.3 percent of the nationwide total. And the top 1 percent held “only” 24.5 percent of wealth. By each of these measures, inequality gradually grew throughout the next decade. Immediately before the Great Recession, the poorest 50 percent of America’s share of wealth had fallen by half, to just 2.0 percent.
The Great Recession pushed this trend into overdrive, reducing the poorest 50 percent’s share of wealth to just 0.3 percent by 2011, even as the top 1 percent’s share broke the 30 percent barrier.
During Obama’s second term, the bottom 50 percent’s share of wealth began to rebound slightly at a fairly constant rate and now stands at 1.6 percent. Since the total wealth owned by this half of the American population was near zero after the recession, any growth would look substantial in percentage terms. So yes, in the first 33 months of the Trump presidency, the bottom 50 percent’s wealth grew by 55 percent, which is an average quarterly growth rate of 5 percent.
More to the point, the incremental growth in the bottom 50 percent’s wealth over this period still leaves its share well below pre-recession levels, and less than half of its share during the Clinton administration. The distribution of wealth in the United States, as measured by the DFA data, is radically unequal and far worse than it was in the 20th century.
And these data are utterly silent on the wealth of the near-poor or below-poverty population. The most recent data on the wealth of the poorest 20 percent of Americans, from 2016, shows that the bottom 20 percent’s share of wealth in that year was negative, at minus 0.8 percent. The newer DFA data tell us nothing about whether this worrisome statistic has reversed itself or gotten worse.
It’s hardly surprising that the Council of Economic Advisers would be the latest entity of government to be roped into cheerleading for the President’s economic policies. But the CEA’s tweet simply doesn’t support the claim that President Trump’s policies have been a net positive for low- and middle-income Americans.