Solving the Mystery of the Richest Americans' Missing Wealth

The United States has been regularly counting people, via the Census, since 1790. But the federal government didn’t start counting the dollars in people’s pockets, with any regularity, until 1983 when the Federal Reserve began conducting a “Survey of Consumer Finances.”

This Fed survey, now conducted every three years, tallies just how much family wealth sits in the United States and who holds it. The Fed delivers all this info in a neat little summary report that makes comparing the wealth of America’s poor, average, and affluent families a relatively easy undertaking.

But this Fed report doesn’t tell us much about America’s truly rich. These rich remain fairly invisible, lost in a broad “top 10 percent” category that includes plenty of families few Americans would consider exceptionally wealthy. In the Fed’s most recent Survey of Consumer Finances wrap-up, released in February, this top 10 percent extends down to families that make $140,000 a year.

To the rescue comes Arthur Kennickell, the chief of the Fed’s survey unit. Over recent years, Kennickell has been producing an analysis of the Survey of Consumer Finances data that isolates out the wealth of the top 1 percent, a group most all Americans would define as rich. His latest analysis has just become available online.

In 2007, the year the new Survey of Consumer Finances data cover, a family needed to sport a net worth of at least $8.3 million to enter the nation’s richest 1 percent. Together, these top 1 percent families held a collective net worth of $21.9 trillion, $3.5 trillion more than the net worth of all the families in the nation’s bottom 90 percent combined.

These numbers actually understate the wealth of America’s top 1 percenters. Each Fed Survey of Consumer Finances, as Kennickell notes, “specifically excludes” from the survey sample any of the people wealthy enough to make the most recent Forbes 400 list of America’s richest. In 2007, the Forbes 400 held a collective net worth of $1.5 trillion.

But in 2007, even without the fortunes of the Forbes 400, the top 1 percent still held a whopping 33.8 percent of America's total family wealth. Families in the bottom 90, all together, only held 28.5 percent.

Robert Frank, the Wall Street Journal reporter who covers the paper’s wealth beat, finds these numbers deeply troubling — and not just for the obvious reason that they reveal a staggeringly unequal America. For Frank, the Fed numbers on the top 1 percent’s wealth just don’t make sense statistically.

Here’s why. According to the Fed, the nation’s top 1 percent in 2007 held roughly the same share of the nation’s family wealth as the top 1 percent held in 1995. Indeed, the 2007 share for top 1 percent — 33.8 percent — runs a bit under the 34.6 percent top 1 percent share in 1995.

The Fed’s numbers on income, curiously, show a quite different dynamic. Since the mid 1990s, the share of the nation’s family income going to America’s top 1 percent of wealth-holders has risen substantially, from 11.5 percent of total family income in 1994 to 16.4 percent in 2006.

How can this be? How can the nation’s wealthiest be grabbing an ever greater share of America’s income and not show an ever greater share of America’s wealth?

The answer could be a statistical quirk. Maybe the Federal Reserve Survey of Consumer Finances just isn’t uncovering all the wealth the wealthy hold.

That's possible. The IRS, after all, can send people to jail if they don’t honestly report all the income they’re making. Fed researchers, to collect wealth data, have no such power. These Fed researchers have to rely on the families they survey to respond to questionnaires, and, as Kennickell points out, “nonresponse in surveys often appears to be higher among wealthy families.”