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Brother, Can You Spare a Billion?
The 400 richest Americans are worth nearly one-eighth of the total GDP of the United States
Being a billionaire used to be a really big deal. When Forbes magazine started its roll call of the 400 richest Americans in 1982, there were just 13 billionaires and 5 of them were oilman H. L. Hunts children.
Now more than half the Forbes 400 are billionaires. The United States has 268 billionaires and 35 million people living below the official poverty lineabout $13,000 for a three-person family.
Boom Times for Billionaires
Together the 400 richest Americans are worth more than $1 trillion. Just 400 peoplethey could all stay at New Yorks Plaza Hotel at the same timeare worth nearly one-eighth of the total gross domestic product (GDP) of the United States, the worlds richest economy.
For years, researchers have compared the annual sales of the worlds largest corporations with the economies of countries. Now were comparing billionaires and countries.
The Forbes 400s $1 trillion is worth more than the GDP of China, a country of over one billion people, which is ranked number seven among the worlds richest economies. With $85 billion when Forbes compiled this years 400, Bill Gates alone matches the GDP of Singapore, the worlds 38th largest economy. Gates is a microcosm of the wealth gap. He has more wealth than the bottom 45 percent of American households combined.
Together, Microsoft billionaires Bill Gates, Paul Allen, and Steve Ballmer plus the five Wal-Mart heirs have a net worth of about $233 billion. Thats more than the GDP of wealthy Sweden, the worlds 20th largest economy. Warren Buffet, number three on the Forbes list, has more than the GDP of oil-rich Kuwait.
It took a net worth (assets minus debts) of at least $625 million to get on the 1999 Forbes 400up from $500 million in 1998. If an entry-level Forbes 400 member gives away a million dollars, thats equivalent to the median American household which makes about $39,000 a yeargiving about $62.
A billion dollars may only get you tied with 25 others for 243rd place among the Forbes 400, but its still a lot of money. Youve heard the expression, "money makes money." Park $1 billion risk-free in a bank CD earning 5 percent interest, and it will gain $50 million in one year.
A billion dollars equals the combined net worth of 1,000 households worth $1 million each or 20,000 typical households.
For $1 billion you could fund a large share of the current Head Start budget or cover tuition for more than 250,000 low-income students at a state university. With $1 billion you could give million-dollar endowments to 1,000 nonprofit organizations providing job training, low-cost housing or shelters for battered women.
The top 1 percent of American households now have more than the bottom 95 percent combined. Novell CEO Eric Schmidt told Forbes that the scale of inequality "makes me uncomfortable." He says, "Lots of people who are smart and work hard and play by the rules dont have a fraction of what I have." He adds, "I realize I dont have my wealth because Im so brilliant. Luck has a lot to do with it." And Schmidts not even on the Forbes 400.
When Bob Thompson sold his Michigan road building company for $422 million he made news because he did something unusual: he shared the proceeds with his employees. He divided $128 million among the 550 workers, creating more than 80 millionaires. He plans to give away much of his remaining fortune.
Thompson said he wanted to reward the employees who had worked so hard for the company. He knew he couldnt be successful without them. "Thats what America should be all about," he told People magazine. "Everybody should get a piece of the action."
Playing Catch Up
While the Forbes 400 was becoming ever more fabulously wealthy, the typical American was stagnating. At about $50,000, the net worth of the American household in the middle is lower than it was in 1983, adjusting for inflation. Nearly one out of five households have zero or negative net worth (greater debts than assets). Only one out of ten households had zero or negative net worth in 1962.
Median household income reached a new high of $38,885 in 1998. Unfortunately, its not much higher than it was in 1989, adjusting for inflation, despite longer work hours and increased productivity. Latino households had lower real 1998 median incomes, at $28,330, than they did in 1989.
"The average American worker now produces about 12 percent more in an hours work than he or she did back in 1989, but after adjusting for inflation, the typical workers wages have increased only 1.9 percent," says John Schmitt of the Economic Policy Institute.
Average workers are still trying to catch up with the wages their counterparts made during the Nixon administration. Men have a lower median income now than they did in 1969, adjusting for inflation. If not for mens and womens increased work, families would be far worse off. Unfortunately, women who work full time earn only 73 cents for every dollar earned by men.
Mothers in married couple families increased their average annual paid work by 223 hoursnearly 6 weeksbetween 1983 and 1997, reports the Boston Globe. Fathers increased their work by 158 hours4 weeksin the same period. Americans work longer hours than anyone else in industrialized nations.
While wages stagnated for decades, costs did not. An average worker had to work 15.3 hours to pay for a days stay at a community hospital in 1960, according to Newsday. By 1997, they had to work 80.8 hours. A years tuition at a private college took 9.1 weeks of work in 1960 and 37.4 weeks in 1997.
You know somethings wrong when the economys been good for so long and its still so bad for so many people. The official poverty rate has fallen in recent years to 12.7 percent, but its still higher than it was in the 1970s. Even married couple families have higher poverty rates today than they did in the 1970s, despite womens greatly increased hours on the job.
One out of eight Americans live below the official poverty linejust $8,316 for one person and $16,660 for a family of fourincluding one out of four Blacks and Latinos, and one out of five children.
One out of two poor full-time workers does not have health insurance, the Census Bureau reports. The total number of people without health insurance went up by about a million last year, reaching 44.3 million peopleone out of six Americans. We are the only industrialized nation that does not insure everyone.
Inequality remains at record highs. In 1977, the 2.7 million Americans in the top 1 percent of households had as much income, after federal taxes, as the bottom 49 million, according to the Center on Budget and Policy Priorities. In 1999, the top 2.7 million is projected to have as much as the bottom 100 million.
Between 1977 and 1999, the top fifth of households increased their annual income after federal taxes by 43 percent while the middle fifth gained 8 percent, and the bottom fifth lost 9 percent. The top 1 percent of households gained 115 percent.
If the middle fifth of households were to receive the same percentage of after-tax income in 1999 that it received in 1977, it would come to $3,500 more per household. Households in the poorest fifth would have $3,300 morea huge difference for households with a projected 1999 after-federal tax income of only $8,800.
Boom times dont last forever. If we dont narrow inequality now, when will we? Congress can take a first step by raising the minimum wage. Congress recently gave itself a raise of $4,600 to $141,300, an income that is twice the average lawyers.
The new congressional salary is 13 times the minimum wage; in 1950, it was 8 times the minimum. Lets cap congressional salaries until they are once again eight times the minimum wage. That would give Congress an incentive to care as much about constituents at the bottom of the income pyramid as at the top. Z
Holly Sklar is co-author of Shifting Fortunes: The Perils of the Growing American Wealth Gap, (United for a Fair Economy www.stw.org).