US Net Worth
Jude Wanniski
June 6, 2005


From: Ben.S.Bernanke@***.gov
Re: US net worth
To: Jude Wanniski <>


From Ben S. Bernanke, 10:47 am, 6/6/2005

I'm sure there is a number like this in the Flow of Funds.   I'll ask.

From: Jude Wanniski   <
To:  Ben.Bernanke@* * * *.gov 
Subject : US net worth
06/06/2005 10:05 AM          


Do you have at the Fed a number that represents to total dollar value of the US? And a chart that shows how it has grown over the last several years? This goes to the various arguments coming at the administration of economic problems, especially the deficit issues, but also the kind of stuff David Cay Johnston of the NYT is throwing out about the rich getting
richer, etc.  Are Americans not saving enough? Are poor countries propping us up by exporting their capital to us? We could whip one up, but I wonder if there is one at the Fed available to the public?

I've also made the argument over the last several years that during the deflation, which took down the nominal value of equities, unemployment increased because people who had retired thinking they could live on their savings had to re-enter the work force. The opposite argument holds that as national wealth increases, people can afford to drop out of the work force if they had re-entered because of the deflation, and others who were planning on retiring can do so.  This helps explain why job creation numbers seem disappointing of late -- even as the unemployment rate falls. One thing Mundell taught me 30 years ago is that the richer you are, the greater your debts. Creditors prefer to lend to the rich, not the poor, and the rich feel more comfortable borrowing great amounts to finance big homes, yachts, etc. because they have the collateral.

Another point about taxation that I learned over the years derived out of Laffer's "wedge model," where the government taxes a trade between a low-income worker and a high-income worker. The effect is the same if the government takes most from the low-income worker than from the high-income worker. The market simply adjusts the terms of trade. Did you know Japan
for many years exempted medical doctors from income-taxation? The objective
was to lower health-care costs for ordinary folks.  We do the opposite, not only taxing doctors and surgeons at the highest rates, plus AMTs, but also increasing the costs of malpractice insurance that of course has to be paid for by patients paying on their own, or the government paying for Medicare and Medicaid.

PS  Here is the response I got this morning from David Cay Johnston..... He's very touchy because I made the point to him about his 2003 book on the rich getting richer at the expense of the poor that in doing so he committed himself to an ideological perspective that made it impossible for him to be an objective reporter. He has a stake in Robin Hood economics. He doesn't manipulate "facts" as much as he presents his case by looking at numbers selectively.....

* * * * *


     Reading your imperious note a thought occurred to me: Who appointed you the God of facts?

     Just because you believe something does not make it so. It makes it your opinion.

      If you can show that I "manipulated" any of the statistics in my article please I will see to it that we run a corrective article. I posted at our website the links to the original source documents so you can see them for yourself.

      I will save you the time and trouble by telling you that after doing dozens and dozens of spreadsheets I threw out the outliers and used moderate and conservative examples.

     For example, if you go calculate the relative income gains of the bottom 90% and the top hundredth of one percent 1980-2002 (I used 1990-2002) the figure you will get is more than four times the one in my article. More than four times! So you won't find a single example of my cherry picking because there is none. I understated, if anything.

      I happen to agree with you on many points -- i.e., capital must be successfully put to work to increase wealth. But that has NOTHING to do with this story.

     This was not a book, but an article. And this article was a rounded and balanced look at the distribution of income GAINS, income, wealth and taxes drawn from official government sources whenever possible.

      But please show me where we "manipulated" the data. If you can find any example we will correct our report promptly.