Robert Reich’s increasingly well-traveled observation is that “The 400 richest Americans now have more wealth than the bottom 150 million of us.” But think about what that means. What is “wealth?” I routinely sense that most people incorrectly think this means how much money you have, or much stuff you own including money (i.e., assets.) No.
Wealth is the sum of your assets minus the sum of your liabilities. Consequently, the person with a $300,000 home, $25,000 car, and in other assets of $50,000 (total assets of $375,000), and with a $275,000 mortgage, $25,000 car loan, and $80,000 in student loans and other debt (total liabilities of $380,000) has a net worth (i.e., wealth) of -$5,000. The homeless person living under a bridge with no assets and no liabilities is wealthier than this person. Approximately 1 in 5 households have negative net worth, which means your new born baby is wealthier than 60 million Americans.
The fact is that most of us start out as young adults with very little wealth (i.e., assets minus liabilities). In fact, I suspect many high school grads are wealthier than many recent college grads because college loans create a negative net worth for many. Wealth builds over the years through saving and investment. Someone with a modest income who is 55 years old and has been regularly saving and investing well likely have hundreds of thousands of dollars in wealth, while many 25 year olds with professional degrees and good incomes will be at break-even or even have negative wealth. Wealth inequality is part of the natural process and it will always be considerably greater than income inequality.
Reich’s statement may be true but it strikes me as sensationalist without more context. A great many of the 150 million people at the bottom have considerable assets but also have much debt. Some in the top 150 million have modest assets but little debt. I suspect Reich’s statement gives the impression to many that half of America lives on just a few dollars a day. I’m just saying we need to be more clear in our thinking.