Bonus Quotation of the Day…

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… is from page 103 of economists Phil Gramm’s, Robert Ekelund’s, and John Early’s important and data-rich 2022 book, The Myth of American Inequality: How Government Biases Policy Debate (footnote deleted):

Income from saving and investing in 2017 remained a small fraction of total earned income up to the 99th percentile of households. Even up through the 99.99th percentile, saving and investing generated less than half of household income…. But even for the top four hundred highest-earning households, wages, salaries, and benefits still created more than 20 percent of their earned income.

The fact that income from work is the dominant determinant of earned income for 99.99 percent of all households in America has significant implications. Prosperity for all but a tiny outlier group of very-high-income households comes from normal, everyday work.

DBx: In his flaw-filled 2014 tome, Capital in the Twenty-First Century, Thomas Piketty repeatedly used as an example of an idle rich person Liliane Bettencourt, heiress to the L’Oréal cosmetics fortune. But Ms. Bettencourt (who died at the age of 94 in 2017), while she was perhaps typical of rich people in France, was certainly not typical of rich people in America.

Contrary to Piketty’s tale – and to the belief of Elizabeth Warren and other advocates of imposing a wealth tax in America – vanishingly few Americans live idly off of investment income. Promoting the image of such living does, of course, help to gin up support for soaking the rich, but this image is false.

And note also that the figures reported above by Gramm, Ekelund, and Early are powerful evidence against Piketty’s assertion that capital grows automatically. If capital did grow automatically, far more Americans than is the case would be living idly off of their investment incomes.

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