Number of Millionaires Down 40%

See The Wild Ride of the 1%: The once-stable incomes of America's biggest earners now fluctuate dramatically from year to year. And as go the rich, so goes much of the economy by Robert Frank, WSJ, 10-22/23-11. Excerpts:

"During the past three recessions, the top 1% of earners (those making $380,000 or more in 2008) experienced the largest income shocks in percentage terms of any income group in the U.S., according to research from economists Jonathan A. Parker and Annette Vissing-Jorgensen at Northwestern University. When the economy grows, their incomes grow up to three times faster than the rest of the country's. When the economy falls, their incomes fall two or three times as much.

The super-high earners have the biggest crashes. The number of Americans making $1 million or more fell 40% between 2007 and 2009, to 236,883, while their combined incomes fell by nearly 50%—far greater than the less than 2% drop in total incomes of those making $50,000 or less, according to Internal Revenue Service figures."

"During the 1990 and 2001 recessions, the richest 5% of Americans (measured by net worth) experienced the largest decline in their wealth, according to research from the Federal Reserve. As of 2009, the richest 20% of Americans showed the largest decline in mean wealth of any other group."

"Only 27% of America's 400 top earners have made the list more than one year since 1994, one study shows."

"It wasn't always this way. For decades after World War II, the top-one-percenters were the most steady line on the income and wealth charts. They gained less during good times and lost less during contractions than the rest of America.

Suddenly, in 1982, the wealthiest broke away from the rest of the economy and formed their own virtual country. Their incomes began soaring higher during good times. The top 1% of earners more than doubled their share of national income, to 20% as of 2008. Looking at another measure, the richest 1% increased their share of wealth from just over 20% to more than 33%."

"This marked a new personality type in the history of wealth: the High-Beta Rich.

"High beta" is a term used in financial markets to describe a stock or asset that has exaggerated up and down swings with the market."

"Between 1947 and 1982, the beta of the top 1% was a modest 0.72, meaning that their incomes moved relatively in line with the rest of America. Between 1982 and 2007, their beta soared more than three-fold."

"...new communication technologies that allow the best workers and products to be scaled over larger markets, thus making them more sensitive to economic changes. Others cite globalization and the rise of "winner-take-all" pay schemes."

"...a different cause: the "financialization" of wealth. Simply put, more wealth today is tied to the stock market than to broader economic growth."

"The household debt of the top 1% surged more than three-fold between 1989 and 2007, to $600 billion, and grew faster than their net worth."

"The top 5% of earners now account for 37% of consumer outlays, according to Moody's Analytics. The top 1% of earners pay 38% of federal income taxes. The richest 1% of Americans own more than half of the country's individually held stocks, according to the Federal Reserve."

"The spending of the rich is even wilder than their incomes. The spending volatility of the top 10% of earners is now more than 10 times the spending volatility of the bottom 80%, according to one study."

"Since a high percentage of spending by the rich is discretionary—jewelry and vacations rather than toothpaste and milk—it rises and falls with their confidence and the stock market. Luxury is now the most volatile segment of the consumer economy."