Paul Buchheit: America’s Children Face Income Inequality Unseen in Generations
Greater equality of wealth and opportunity can only be achieved through progressive policies, now and in 2020.
The Inequality to be Suffered by Our Children
The fortunate ones will not be suffering. In the past eight years, the richest 5% of Americans have increased their wealth by $30 trillion — almost a third of total U.S. wealth — while the poorest 50% have seen their average wealth drop from $11,500 to $9,500. There is ample evidence for a nation soon to be made even more unequal by the transfer of wealth from rich baby boomers to their children and grandchildren, who will have done little if anything to earn it. The middle class will be further crippled by the ongoing growth in inequality. Unless progressive policies are demanded by American voters, most of our children and grandchildren will suffer from the continuing expansion of a Great-Depression-like wealth gap that already “dwarfs” the rest of the developed world.
Nearly a Third of U.S. Wealth will be Handed Down, Mostly to Rich Kids
Total U.S. wealth is about $98 trillion. According to an Accenture study, $30 trillion in financial and non-financial assets will be inherited by the children of Baby Boomers in the next thirty to forty years. A Boston College study predicts an overall transfer twice that size, at $59 trillion, with $36 trillion going to heirs. Deloitte predicts a $24 trillion transfer of wealth (to and from all generations) in the next fifteen years. America’s richest 20% own nearly nine-tenths of this impending windfall (Table 6-5).
Some sources question the claims for massive impending wealth transfers, saying that Boomers may spend most of their money, or that the newly rich young beneficiaries will mismanage their portfolios. Apparently it’s difficult for some of us to accept the reality of a worsening disparity in U.S. wealth.
The Rich Kids will have Learned How to Avoid the Public Good
Skipping out on tax obligations will start right away, as over 99.8 percent of estates are not currently required to pay any estate tax.
Here’s another way for the young heirs to skip out on taxes: Offshore hoarding of private American wealth is estimated to be $3.3 trillion (4% of U.S. $82 trillion financial wealth).
And yet another way: Make a fortune, then move out of the country and renounce U.S. citizenship to avoid taxes. Most infamous for this strategy was Facebook co-founder Eduardo Saverin, who turned decades of American technology research into a billion-dollar fortune before bolting to Singapore and giving up his U.S. citizenship. There are more of these tax avoiders every year. Tech billionaires are building their doomsday bunkers in relatively safe faraway places like New Zealand, the home of the world’s most unaffordable house prices.
Still another way to shirk responsibility, while looking altruistic: Set up a donor-advised fund with a charitable-sounding name. Rich donors can get immediate tax deductions, while the recipients of their largesse don’t actually have to use the money for charitable causes, and the fund directors can pay themselves handsome undisclosed salaries.
The Rich Kids will have Private Doctors, Police, and Firefighters
The kids will never have to worry about health care. They’ll continue their parents’ trend of paying ‘concierge’ doctors to visit their mansions or yachts, where emergency rooms are equipped with heart monitors, ultrasounds, x-ray machines, and blood analyzers. If a hospital stay is required, they might look into a $2,400 per day penthouse hospital suite complete with butler and grand piano.
In case of fire, they can follow the example of Kanye and Kim and hire a private firefighting service.
For security, the already proliferating private police forces are certain to fill the protection needs of the kids with newly-acquired estates. But private officers tend to be undertrained compared to public police; their acts of aggression are rarely reported; and in some states private forces are not even subject to investigation through the Freedom of Information Act.
The Growing Number of Poor Kids
The expected growth in inequality is shown dramatically in a 2017 report by the Institute for Policy Studies, which predicts ZERO median Black household wealth by the year 2053, if current trends continue. Median Latino household wealth would hit zero twenty years later. Right now the poverty rates for Black and Hispanic kids are 30 and 26 percent, respectively. Overall, for all demographic groups, income instability and debt are diminishing the quality of life for middle- and lower-class families with children. It’s frightening to anticipate a worsening poverty rate for children already largely ignored by the privileged members of society.
Greater equality of wealth and opportunity can only be achieved through progressive policies, now and in 2020. That is the hope of people who care about the needs of society rather than one’s position on a billionaire list.