How Many Dollars at the Top?

April 24, 2006

A quarter-century ago, federal statisticians could tell you just about anything you might want to know about poverty in the United States — and next to nothing about America's wealth. That indifference toward America's distribution of wealth started to change in 1983 when the Federal Reserve Board began conducting, every three years, a “Survey of Consumer Finances,” an exhaustive exploration into who holds America's wealth.

This Survey of Consumer Finances, unfortunately, has always presented a somewhat incomplete picture. The reason? The Fed has never included in its official calculations the wealth of America's most wealthy, the deep pockets who populate the annual Forbes 400 list of America's richest.

Fed statisticians have had a rationale for excluding the Forbes 400 from their triennial surveys. Those Americans surveyed, the researchers point out, need to be assured confidentiality. Otherwise, they might not respond candidly to the Fed's questions about how they earn, save, and spend their money.

Interviews with someone wealthy — and visible — enough to appear in the Forbes 400, the Fed researchers believe, could not be conducted “without introducing too large a probability that the identity of the responder might be compromised” when the survey data go public.

Now if the families on the annual Forbes list held only slightly more wealth than the rest of America's wealthy families, then ignoring the Forbes 400 would be no big deal.

But the Forbes 400 don't hold only slightly more wealth than other wealthy families. Their fortunes tower over America's economic landscape. In 2004, the year Federal Reserve researchers collected data for their latest Survey of Consumer Finances, the wealth of the Forbes 400 totaled over $1 trillion.

Fortunately, no one understands the magnitude of Forbes 400 fortunes any more clearly than the economist who directs the Fed's entire Survey of Consumer Finances effort, Arthur Kennickell.

Over recent years, Kennickell has begun producing his own analysis of each new round of Fed Survey of Consumer Finance data, an analysis that takes the fortunes of the Forbes 400 into consideration. The Fed unveiled his latest analysis, Currents and Undercurrents: Changes in the Distribution of Wealth, 1989-2004, earlier this month, about six weeks after the release of the Fed's official summary of the 2004 Survey of Consumer Finances data.

Taken together, Kennickell notes in this new analysis, the Survey of Consumer Finances and the Forbes 400 data “offer what is probably the best hope for identifying shifts in the wealth distribution for the whole population.”

The Forbes data, Kennickell's paper shows, can help paint a particularly dramatic picture of how intensely wealth has accumulated at the highest rungs of America's economic ladder.

Between 1989 and 2004, after adjusting for inflation, the total net worth of the Forbes 400 more than doubled, from $396.4 billion to just over a trillion. The average net worth of the 10 wealthiest households in the Forbes 400 more than quintupled over this same period, jumping from $4.5 billion in 1989 to $22.7 billion in 2004.

Kennickell does not actually add the Forbes 400 data into the Survey of Consumer Finance data tables. But we can.

The Survey of Consumer Finance figures, without the Forbes data added in, show that America's richest 1 percent held just over one-third of the nation's wealth in 2004. Another 36.1 percent went to the next richest 9 percent of Americans.

The rest of the nation's wealth — less than one-third — sat with America's bottom 90 percent.

In 2004, in other words, America's wealthiest 1 percent held more wealth than the entire bottom 90 percent combined, even without figuring into the mix the wealth of America's 400 richest people.

With the Forbes 400 figured in, America's richest 1 percent held not just more net wealth in 2004 than the nation's bottom 90 percent, but over $2.5 trillion more.

In 1989, with that year's Forbes 400 wealth factored in, the average family in America's richest 1 percent held 106 times the average net worth of families in America's bottom 90 percent. In 2004, with the Forbes numbers again taken into account, the average top 1 percent family held 176 times more wealth than the average bottom 90 percent family.

What do these multiples and percentages mean in actual dollars and cents?

If the bottom 90 percent of America's families and the wealthiest 1 percent held the same share of the nation's income in 2004 as they did in 1989, the average family in the bottom 90 percent would have had $12,208 more to its name and the average top 1 percent family $1.7 million less.

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