Where Did All The Money Go? Not Far

The rich are getting richer - fast.

An "increase in inequality," is the way John Weicher, an economist at the Hudson Institute in Washington, puts it, "a concentration of wealth."

Between 1992 and 1995, the wealthiest 500,000 American households added $1.6 trillion to their assets.

How much is $1.6 trillion? Look at it this way: This tiny fraction of the US population, these super-prosperous families - pocketed enough new wealth to write a check for the entire US budget deficit and still cover the annual economic output of Italy ... and then buy any company traded on the New York Stock Exchange - General Electric, for example.

They did it with a certain amount of skill and a certain amount of good timing. Their biggest gains came from booming stock prices and rising business values.

The rest of the nation's households chalked up some impressive numbers as well, $1.1 trillion, although spread much thinner, over 99 million households, and about half the dollars came from the value of their homes.

And soaring stock prices this year and last will likely bulked up the bottom line still more, mostly for the rich.

The new wealth statistics are included in a paper by Arthur Kennickell, an economist at the Federal Reserve's Board of Governors in Washington, and statistician R. Louise Woodburn, of consultant Ernst & Young.

They may be startling enough, observers say, to influence the debate in Washington over cutting taxes on capital gains and estates. Supporters of these cuts argue that many less-than-wealthy taxpayers will benefit.

But the new numbers, only now available, indicate that the well-to-do and the rich would reap most of the tax benefits from such measures.

That's because the wealthiest 10 percent of households owned virtually all the nation's corporate stock in 1995, $2.3 trillion of the total $2.74 trillion.

The question of whether wealth was becoming more concentrated has been controversial among economists, in part because the numbers are imprecise.

Mr. Weicher held that the disparity of wealth increased slightly during the Reagan years - between 1983 and 1989. But that extra concentration disappeared in the 1990-91 recession.

He sees the trends as somewhat cyclic, reflecting the business cycle.

Edward Wolff, a New York University economist, also an expert on wealth, takes a different approach, finding that inequality has been increasing since the late 1970s. And he calls increasing wealth disparity a secular trend - separate from the business cycle.

But the two economists do agree on this conclusion: From 1992 to 1995, more wealth went into fewer pockets.

"The only dispute is when the rise began," says Wolff.

The study's author, Mr. Kennickell, cautions that the wealth shift could reverse. "It could be transient."

In 1992, the really rich 0.5 percent of households owned 22.7 percent, or $4 trillion, of the country's personal net worth of $17.77 trillion. By 1995, their share had risen to 27.5 percent of $20.52 trillion.

By contrast, the share of the 90 to 99percent bracket declined 3.7 percentage points to 33.2 percent in that period.

"The rich were getting richer at the expense of the well-to-do," says Ms. Woodburn, an author of the paper.

The paper shows that for about 90 percent of Americans, wealth remained virtually flat. Those in the 0 to 89.9 percent group, saw their share of total wealth fall by 1.48 percentage points to 31.5 percent, a "statistically insignificant" change, Kennickell cautions.

But though the majority's share was declining, their wealth increased $639 billion between 1992 and 1995.

"This is not a zero-sum game," says Weicher, where what one household gains others lose. Also, many individuals move up and down the wealth ladder. And most households increase wealth with time as breadwinners reach peak income years and mortgages get repaid.

In the 1983-89 period, the assets of the rich grew primarily through increases in the value of businesses and investment real estate, notes Weicher.

In the 1992-95 period, the stock market blessed the top 0.5 percent of households. The $865 billion of stocks held by this group, 15 percent of their total assets, was up 78 percent from 1992.

In 1995, 40 percent of this group's wealth consisted of businesses, their value up 40 percent from 1992. Investment in real estate represented 15 percent of wealth, or $728 billion, down 25 percent from 1992.

The entry "fee" for the top 0.5 percent in 1995 was $4.7 million. Owning a medium-sized business would qualify you for that category.

The minimum needed for the 99 to 99.5 percent category was $2.5 million. For the 90-99 percent bracket it was $368,300.

Median wealth in 1995 was $55,100, up from $52,800 in 1992. The median is the amount at which half of households have more wealth, half have less.