Robert Samuelson Poor Mouths the Super Rich

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Robert Samuelson writes today about the “backlash against the rich.” It’s actually a fairly evenhanded column, but at the end he just can’t help himself. The super rich just have to be defended:

The trouble is that the wealthy don’t fit the stereotypes: They aren’t all pampered CEOs, hotshot investment bankers, pop stars and athletes. Many own small and medium-sized companies. Half the wealth of the richest 1 percent consists of stakes in these firms. That’s double their holdings of stocks, bonds and mutual funds, according to figures compiled by economist Edward Wolff of New York University. Reid would pay for Obama’s jobs plan by taxing the people who are supposed to create jobs. Does that make sense?

“Many own small and medium-sized companies.” Well, sure, if you’re talking about really successful doctors and lawyers, who make up about a quarter of the top one percent. Most of the rest are corporate executives and financial professionals.

“Half the wealth of the richest 1 percent consists of stakes in these firms.” Hmmm. I clicked the link to the Edward Wolff paper that Samuelson cites, and Table 6 shows that top earners hold 25% of their wealth in stocks and other securities, and 52% in “unincorporated business equity and other real estate.” This is indeed double, but what does that category mean? According to a footnote in Table 5, it’s “Net equity in unincorporated farm and nonfarm businesses and closely-held corporations.”

Does this mean that 52% of the wealth of top earners consists of stakes in “small and medium sized companies”? I suppose it might, but that’s not what Wolff’s paper says. It just says that 52% of their wealth consists of stakes in non-public businesses. Those could be Koch-sized megacorporations, private equity funds, legal and medical partnerships, real estate trusts, or a hundred other things. Nothing about them has to be small, and they probably aren’t. We’re talking about people who earn upwards of a million dollars a year, after all. You don’t get that from taking a minority stake in your brother-in-law’s auto shop.

More than two-thirds of both the top 1% and the top 0.1% consists of corporate executives, financial professionals, doctors, and lawyers. Small businesses of the traditional variety just aren’t a big part of this, and it’s time to stop pretending otherwise.

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