FACT CHECK: Are The 3 Richest Americans Wealthier Than The Bottom 50%?
Forbes, The Guardian and other news outlets reported recently that the three richest people in the U.S. own more wealth than the bottom 50 percent of Americans combined.
The Daily Caller News Foundation spoke with a number of economists who found the claim to be credible, but questioned its meaningfulness as a statistic on wealth inequality in the U.S.
The claim comes from a report by the Institute for Policy Studies (IPS), a progressive think tank that compared the Forbes 400 list of the wealthy Americans to financial data from the Federal Reserve.
The analysis found that when the assets and debts held by ordinary Americans are added together, the bottom 50 percent have less net wealth than the nearly $250 billion accrued by America’s three richest people – Bill Gates, Jeff Bezos and Warren Buffett.
The economists TheDCNF contacted believe the claim is roughly accurate, but several felt it wasn’t useful to compare the Forbes 400 to the bottom half of the population.
“This type of statement is not meaningful in my view because the bottom 50 percent collectively own almost no wealth,” Emmanuel Saez, an economics professor at Berkeley, told TheDCNF.
The key word here is collectively.
An estimated 19 percent of Americans have negative or zero wealth. This skews the combined net worth of the bottom 50 percent. IPS calculates that combined wealth only turns positive at the 48th percentile.
An American with $1 of wealth, let alone $250 billion of wealth, is richer than the bottom 48 percent of Americans collectively.
“I think the stat is literally true, but it tells us a lot more about people without assets than it does about people with assets,” Salim Furth, an economist at the conservative think tank The Heritage Foundation, told TheDCNF.
IPS includes an arguably better comparison in its report – how the rich compare to a “typical” American household. The think tank found that the entire Forbes 400 owns more wealth than 33 million families with a median net worth of $80,000.
In drawing these comparisons, one bit of methodology stood out: IPS excludes the value of cars from calculations of net worth because they are a “weak store of value.”
Eighty-five percent of Americans own vehicles with a median value of $17,300, the Federal Reserve reports. TheDCNF questioned whether this exclusion might distort the net worth of ordinary Americans, especially those in the bottom 50 percent.
“I don’t have a huge problem with them doing that, but if you do that you should exclude car loans too,” said Furth when asked about IPS’s methodology.
TheDCNF contacted the authors of the study, who noted that car loans were not excluded. This decision follows the methodology of economists like Thomas Piketty and Edward Wolff, but not all economists take the same approach. The Federal Reserve, for example, considers the value of cars when calculating wealth.
This methodological difference aside, experts we spoke to had no qualms with the claim as a close approximation. “Sounds like that would be in the ballpark, though you can always quibble with specific methodological choices,” Stan Veuger, a scholar at the right-leaning American Enterprise Institute, told TheDCNF.
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