“The 9.5%: The New Aristocracy that is Entrenching Inequality and Warping our Culture” by Matthew Stewart, Simone & Schuster, NY, 2021. This 341-page hardback examines wealth inequality in the US. Stewart argues that wealth inequality is a negative on the US economy. The top 9.9% of the population controls more than half of the wealth in the US. Mostly they are professionals in medicine or law or finance or business owners. Inheritance is a major factor–25 to 53% of wealth is inherited. They are mostly white. Those born in the 1950s did better in accumulating wealth than those born in the 1980s. Home owners are way ahead. Higher social status, higher education, better health, and political power contribute to the success of the wealthy. The idea that wealth is earned by merit is false. The wealthy 9.9% think they earned their status, but others disagree.
Having a nanny is an indicator of wealth. But 54% are people of color, 35% are non-citizens, and 46% receive public assistance. In Boston, the average base salary of a nanny is $37K. In San Francisco, some are paid $220K/yr. Background in early education is often requested. In the US 40% of toys are purchased by 4% of the population. Spending on children has increased from $3K to $10K, 1970 to 2015. Today that might include baseball, soccer, or volleyball camp not to mention bonus for the nanny, test preppers and tuition to private school. Surveys show those parents are less happy. Admission to a prestigious university is important and a source of stress.
A common denominator in countries with achievement oriented parenting is the large gap between rich and poor. This began about the time women entered the workforce in large numbers. Hoarding resources for the wealthy slams the door on other children.
In 2013 Susan Patton, a 1977 Princeton graduate, told freshmen women your future is linked to the man you marry. Put on your hot pants and find a man now or die.
Ultrapartners apply to the finest preschools in New York when the eldest child turns four. They think admission is a guaranteed path to the Ivy Leagues, Goldman Sachs, and a classic six on the Upper East Side, but most fail. Women who graduate from selective colleges are more likely to hang up their office shoes and stay home.
Single parents are more likely to be poor and score less well on happiness surveys. Their children do less well in school, are less likely to graduate, more likely to be involved in crime, teen pregnancy and other behaviors that make success more difficult. The most significant indicator of low social mobility is the rate of single parent households. Single moms stay single because few find suitable marriage partners. Gender equality is associated with improvements in health, wealth, happiness, and political stability.
A chapter describes the importance of education. That includes the Morrill Act that provided federal land grants to colleges that taught practical arts like agriculture and engineering. The GI Bill after World War II is another important program. Pell Grants arrived in 1972 to fund college for low income students. Education provides social mobility, economic prosperity, and advanced knowledge. Methods used by the 9.9 to gain best admissions are described. That includes advisors for admission to the best summer camps. College counselors. Those who can increase ACT scores. The list price for a four year Ivy League degree is $350K. Children born to higher income families are 15 times more likely to get a bachelor’s degree from a selective college. More than 70% of their students come from top quartile income families. Recruiting low income students excludes the middle class creating an income gap on campus.
In 1879, Henry George published Progress and Poverty. He identified the three economic factors as labor, capital, and land. Land is the bogey because limited supply means owners can raise rent without improvements. A sort of monopoly. His solution is to tax all unearned land income at 100%. Friedman agrees. Taxation should return wealth to those who create it.
In the post war era, government mortgage benefits and the GI bill resulted in a 40 to 45% increase in home ownership. The middle class was strengthened. That reversed in about 1980. Now we transfer wealth from poor to rich, from black to white, from young to old. The system has become a dream killer.
In 2015 government spent $190B/yr on housing assistance, but 60% was the mortgage interest deduction which benefitted 7MM households with incomes over $100K. Another $32B went to stepped up basis (no capital gains tax) on inherited homes. Most of these benefits go to the 9.9%. Capping the SALT deduction at $10K was a step in the right direction.
Long commutes result in increased stress, health problems, increased divorce rates, and other negatives. Schools financed by property tax inevitably discriminate against the poor. Less money is available to educate those with the greater need. The 9.9% opts out of the system by choosing private schools. Civilization is co-operation. The wealth divide impedes progress.
Stewart argues that home should be a place to live, not an investment or a weapon of class warfare. Neighborhoods should build communities not segregate or isolate them. We should tax imputed rent, i.e. the wealth tax.
Over the past two decades one of seven Ivy League graduates joined a consulting firm as did 25% of elite MBA graduates. Most burn out after two years. Ditto those who enter investment banking. Our brightest and best are experts at pie charts, PowerPoints, and telling others how to do their job. People learn to groom their responses to various qualification tests. They adopt a facade to succeed. Hard work is required. A McKinsey alumnus summarizes: you find anxious over-achievers, bring them in for what they consider big money, give them some prestige, squeeze them like lemons and toss out the rinds. No wonder most last only a few years. Wealth distribution is not by merit. Rather success comes from unique talent coupled with co-operation. Teamwork is the key.
Stewart blames elite universities for exaggerating the value of merit. They should accept all who qualify. Graduates should be directed to jobs that use their expertise for the public good–not consulting firms and investment banks.
The author is critical of the US health care system. It is expensive compared to the rest of the world and delivers mediocre outcomes. Employment connected health insurance locks many into unrewarding jobs. Drug companies profit from drugs developed from publicly funded research. Powerful special interests control the health care industry. Public good is a low priority.
Black households represent less than 2% of the 9.9%, but are 13% of the US population. For every dollar earned by whites, blacks earn $0.60, Latinos earn $0.72. We have a significant income divide. The legacy of slavery and Jim Crow laws is described. It extends to differences in real estate values and funding for education. Stewart offers no solutions.
Stewart maintains that the Democrats have incorporated 9.9 percenters and abandoned traditional values in favor of wealthy homeowners. Meanwhile Republicans betray the interests of their base. Survey results are bazaar. In 2016, 46% of Trump voters believed Hillary Clinton was involved in a child sex ring, 43% did not believe humans evolved from animals, and 27% believed vaccines cause autism. Fox TV created true believers. Only 20% of Republicans trust journalists. Trump favors tax cuts, elimination of entitlement programs and estate tax, stopping environmental law, and opposes unions, gun laws, education, history, and media.
The disinformation problem must be addressed. The public square has been taken over by private interests. The system must be held accountable to the public good. Media giants must be broken up to increase competition in reporting.
The wealthy are powerful in their control of the tax code. They have the lawyers and accountants who can game the system. The government spends three times more on tax free employer health insurance than on subsidies for those who can’t afford health insurance. Many similar inequities are described. Political campaigns should be publicly financed–ideally by allowing free use of the public airwaves. Reforms should address the electoral voting system, gerrymandered districts, Supreme Court appointments, the filibuster, and Senate rules. Revision of the national health care system should be a priority. Universal rights should include a decent home and a good education.
Stewart describes the wealth divide and especially the excesses claimed by the wealthy. He asks for quite a list of reforms. He favors the Democrats approach and criticizes Republicans. References. Index.