Examining: "redistribution of wealth".

Author:Kolnick, Jeff

Redistribution of wealth was all the rage following a five-minute encounter between then presidential candidate Barak Obama and Ohio plumber Joe Wurzelbacher on October 12, 2008. Candidate Obama told Wurzelbacher that "my attitude is that if the economy's good for folks from the bottom up, it's gonna be good for everybody ... I think when you spread the wealth around, it's good for everybody." (1) From that point on redistributionism was back in vogue. (2)


In September, even before the encounter with "Joe the Plumber," candidate Obama was confronted with the charge of redistribution of wealth when interviewed by commentator Bill O'Reilly. When discussing Obama's plan to raise the top marginal rate for federal income taxes from the current 35 percent to 39 percent, the rate paid under the Clinton administration, O'Reilly stated: "you're taking the wealthy in America and the big earners, OK, you're taking money away from them and you're giving it to people who don't. That's called income redistribution. It's a socialist tenant [sic]. Come on, you know that. You went to Harvard." (3) Obama's clear pronouncement that he favored a modest increase in tax rates for the wealthy was perhaps the best publicized part of his agenda.

Wealth Distribution in the United States

Because wealth, or net worth, reflects life cycle savings and can be passed from one generation to the next, it tends to be more concentrated than income. Although a rentier class comparable to that of the Gilded Age has yet to reconstitute itself, the concentration of wealth at the top is still striking. The top 10 percent of Americans held 71.2 percent of total wealth in 2004, while the top 1 percent alone held a larger proportion of wealth (34.3 percent) than the bottom 90 percent (28.7 percent). (4) Putting this disparity in dollar terms, researchers at the Washington-based Institute for Policy Studies observe that "the richest 1 percent of Americans currently hold wealth worth $16.8 trillion, nearly $2 trillion more than the bottom 90 percent." (5)

Wealth inequality is also growing. "Over the 1962--2004 period," report the authors of the Economic Policy Institute's (EPI) State of Working America 2006--07, "the wealth share held by the bottom 80 percent shrunk by 3.8 percentage points, and that 3.8 percent share of wealth shifted to the top 5 percent of households." The wealth held by the wealthiest 1 percent was 125 times median wealth in 1962, but 190 times the median in 2004. (6) For the super-rich who make Forbes Magazine's annual list of the 400 wealthiest Americans, the expansion of wealth has been particularly dramatic. In the 11 years between 1995 and 2006, this group saw its total wealth more than double from $470 billion to $1.25 trillion. (7) At the same time, the personal saving rate of Americans overall--one indicator of wealth among the 80 percent who work for wages--has declined precipitously since 1982, dropping into negative territory (-1.1 percent) in 2006. (8) "Approximately one in six households," according to the EPI, "had zero or negative net wealth" in 2004.

Clearly, the evidence shows that the redistribution of wealth can move from the bottom to the top or, as "Joe the Plumber" and Bill O'Reilly feared, from the top toward the bottom. There are several ways that nations address the distribution of wealth. The most important of them are labor laws, tax policy and social programs. It is difficult to imagine a completely neutral policy of wealth distribution.

Labor Law

Almost certainly the most effective government program for the redistribution of wealth has been the reform of labor law. Two significant reforms, the 1935 National Labor Relations Act and the 1938 Fair Labor Standards Act, did more to create the American middle class than any other efforts...

To continue reading