Millionaires in America: They just ain’t what they used to be

Dr. Mark W. Hendrickson's picture

Recently, CNN’s Money.com posted an article bearing the title, “U.S. Millionaires Population Expanded by 8 Percent in 2010.” According to the article, there are now approximately 8.4 million millionaires in the United States, and last year’s increase was due primarily to rising stock prices, following a 27-percent decline in the number of millionaires in 2008 due to the stock market’s plunge that year.

What is one to make of this information?

There were only a few thousand millionaires in the United States in 1900. One would expect there to be many more today with the enormous economic growth of the last 110 years. On the one hand, there would be even more millionaires today had progressive taxation not prevented millions of Americans from accumulating more wealth. On the other hand, there would be considerably fewer millionaires were it not for the effects of inflation.

Adjusting for the increase in the Consumer Price Index, it would take a net worth of about $25 million today to be the economic equivalent of a millionaire in 1900. Clearly, being a millionaire today does not support the lifestyle that it did a century ago.

Leaving out the market value of one’s primary residence, the number of American millionaires today would fall by more than half. Many millionaires are land-rich or house-rich, but middle class in terms of liquid assets.

As the article reported, many Americans rise into and fall out of millionaire status as the stock market fluctuates. Their millionaire status is rather tenuous — “here today, gone tomorrow” — subject to the capricious gyrations of financial markets. Easy come, easy go, that paper wealth.

The fact, though, that last year’s increase of millionaires is attributable to stock-market gains is troublesome. Federal Reserve Chairman Ben Bernanke stated that today’s higher stock prices show that his QE2 policy of inflating the monetary base has been successful. This raises questions of legitimacy, for it was never the Fed’s legislative mandate to pump up stock prices, as well as questions of fairness—if Bernanke is using his power to enrich stock-market investors.

I am concerned that these facts will stir up resentment at millionaires in general. There are already too many Americans who have a negative, even hostile, attitude toward the rich.

As a free-market economist who believes in America as the Land of Opportunity, I hope our country continues to prosper and produce even more millionaires. Indeed, these two phenomena go hand in hand, rising together interdependently. However, an absolutely crucial distinction must be drawn here.

From a true free-market, capitalist perspective, there is a legitimate way to become a millionaire (the economic) and an illegitimate way (the political). The economic way is the old-fashioned way: One earns his or her fortune as a reward for sharing one’s talents and products with others, by excelling in service to one’s fellow man in an open, free, competitive marketplace.

The “soak-the-rich” ideologues think these achievers deserve to be subjected to punitive taxation for having dared to earn so much. Is it really a valid theory of justice to punish success in benefiting others? Is rendering service to one’s fellow man somehow objectionable or morally suspect? I think not.

The political approach is an entirely different matter. This is the far-too-common practice that economists call “rent-seeking” behavior: individuals and corporations using their political connections to rig the market to enrich themselves—things like bailouts for Wall Street firms, giant subsidies, federal regulations that require use of a particular product that a politically-connected firm just happens to make, etc.

Rent-seekers don’t profit by serving their fellow man through voluntary exchange, but by milking the taxpayer through manipulating the political process. Rent-seekers prosper from political connections and privileges that the rest of us don’t have. This is patently unfair, and most definitely is not free-market capitalism, contrary to the false assertions of the anti-capitalist left.

Indeed, free-market economists going back to Adam Smith have warned us about businessmen exploiting the political system to enrich themselves at everyman’s expense.

Let us respect those who earn their millions in free, honest commerce; let us end the socialistic practice of government determining economic winners by channeling favors and funds to favored clients. The former is the fulfillment of the American Dream; the latter is its repudiation.

[Dr. Mark W. Hendrickson is an adjunct faculty member, economist, and fellow for economic and social policy with The Center for Vision & Values (www.VisionAndValues.org) at Grove City (Penn.) College.]

MikePatton
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Dr mark Frederick Henderson,

Dr mark Frederick Henderson, I want to thank you for standing up for an oppressed minority: america's millionaires. These middle class Americans need our help. I too hope to see a day where almost everyone is a millionaire, so our unlimited land and resources can go to good use. Surely, it's what Jesus would advocate.

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This article leaves little to add on this subject.

Thank you for writing it.

Having wealth does not make you a crook. Overtaxing and spending or pocketing it does.

Many people are poor because of their animosity toward those who are not poor. They even feel guilty if they make more money than they have an immediate need for. Probably because they associate so closely with others who are poor and can't feel good about having more than their friends or family.

This is the reason for class separation among associates and even within families. In our free economy there is no way to avoid it. What a shame.
It is however softened by charitable acts.

To accomplish Obama's plan anyone making over $30,000 a year is considered "the rich" and would be taxed more.

roundabout
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Gambling TB millionaires

All the stock market is is pure gambling. The odds are a little better than you get at Vegas and one doesn't usually lose all as you normally do in Vegas.

But, the stock market is so controlled now by computerization by large stock holders that they can set it up for a fall, usually, and take theirs out before you or I can.

They can also do the same with a rapid increase of the market, then sell before the fall.

All this happening lately make the gamble not much better than Vegas!

If most of our millionaires of recent time have made the millions on the stock market, it could just as well be from gambling as from all the bragged upon intelligence and job creation, supposedly, of those millionaires.

I don't know the quantity of millionaires made by Wall Street manipulators
of recent years by shuffling paper (crooked paper) but certainly that kind of money ought to have to be returned in full--not just a small tax increase!

There must still be a few who make a million honestly, but being the unselfish people that they are, would welcome paying some more in taxes as an appreciation for the USA instead of bitching about the poor ignorant and even lazy ones who won't work at the non-existant terrible few jobs we have!
Yes, they should pay more taxes than they do! Just be glad you aren't like those bitchers, or those non-taxpayers who make under $30,000 per year.

lion
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Millionaires and Hendrickson

Yes, millionaires are the true victims in our economy. (Sarcasm)

The middle class who want their government to work for them (Social Security, Medicare, Medicaid, progressive income tax)are bad.

I missed the part of the Sermon on the Mount in which Jesus said thou should always bow to the "free market" even when it hurts the less fortunate.

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lion

You are correct in that the middle class expects their government to work for them, but you neglect to state where the middle class is satisfied with the moochers of society continuing their drain on our economy. You do realize that some 47% of our citizens pay little or no taxes and expect to live the same lifestyle as any working stiff don't you?

Jesus said many wondrous things, but I can not recall Him saying to the masses "Sit on your asses and multiply for there are those that society has chosen to support you."

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Oh DANG Mike King I hear that thunder rolling.

I saw the flash and looked toward Lion's singed mane and thought now that was a slap-down well deserved.

PTC Observer
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Millionaires in America

Another good article by Dr. Hendrickson......I wonder how many out there are actually,

"...exploiting the political system to enrich themselves at everyman’s expense."

More than we would like to admit.

AtHomeGym
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Millionaires

Who gives a rip about millionaires? Isn't it sufficient to be debt free and have sufficient net income to do all of what you need to do and some things you want to do?

PTC Observer
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AHG - I care

when they become millionaires at our expense. Why do you think all those politicians want to become professional?

Observerofu
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Uh guys Millionaires are generally the ones

that provide, you know, jobs and such.

They also provide working Capital so others can create jobs and such.

That Capital investment creates additional wealth that spawns new businesses that then creates new jobs and the cycle goes on.

They pay the most in taxes.

They purchase/spend the most, transferring their wealth to others. (Progreesives should love that one)

And most of all generally they represent the most productive in Society, most "Rich" earned their money they should be used as an shinning example of the American Dream, but mostly they are vilified.

Can't really blame them for going Galt.

roundabout
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Fallacy of "Atlas Shrugged"

Millionaires have to get their money somewhere! Since they can't just print it, they must get it from someone else!

Millionaires deserve no credit for creating jobs. If they happen to start up something that provides jobs it is because they took the money from someone else in many ways.
The "someone else" would have started the jobs if they didn't!

Money simply flows around and around!

Rand was a deviant person who liked shock value, hung around with weirdos,
and came up with a joke. "Millionaires striking."

Observerofu
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...and the Guru speaks
roundabout wrote:

Millionaires deserve no credit for creating jobs. If they happen to start up something that provides jobs it is because they took the money from someone else in many ways.
The "someone else" would have started the jobs if they didn't!

Money simply flows around and around!

Rand was a deviant person who liked shock value, hung around with weirdos,
and came up with a joke. "Millionaires striking."

This is the most illogical, farcical and nonsensical post I think you have issued to date and that is saying a lot.

Tell me oh roundone how many poor people have you ever worked for?

PTC Observer
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Observerofu - I am

I am not speaking of millionaires that make their money through their ability, skills, and brains in honest work.

I am talking about millionaires that make their money through political connections, and political elites in general (professional politicians).

Neo-capitalists are the worst of the worst, leeches on our society. The banksters that used the government to pass laws and regulations to benefit themselves should all be in prison, along with the politicians that helped them.

Hope I have made my point clear on this.

Gort
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PTC_0, to my knowledge, I

PTC_0, to my knowledge, I don't think I know any millionaires personally. How can we tell the good one's from the bad? Do the good ones have an extra whole in their head to pour the money in? 8 - )

PTC Observer
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Hi Gort - Well

I think you know some millionaires; you're just pulling my leg.

But if you want to find some of the really bad ones, you can start by just looking at the US Congress. In fact, Presidents are good at making millions too including Mr. Obama.

There are 261 millionaires in the 111th Congress, many of them were not millionaires when they started their lifetime of "service" to the country, I suppose some made their money without government help. However, my guess is that number is small. In other words, they for the most part are neo-capitalists.

http://www.cbsnews.com/8301-503544_162-20041350-503544.html

Now, if you look at the people around the elected representatives in our Congress and their close associations, you will find many more millionaires. If you ask me, I would say those are the bad millionaires, they leech off the revenues flowing into a corrupt government. They don't create wealth but they do enrich themselves. They get laws passed that will benefit them, they line the pockets of the politicians, and the politicians return the favor. The cycle continues over and over.

The good ones are out in the country employing people that will never be millionaires. These are the millionaires that have no intention of running for office, but they do run businesses. They have no intention to use the government to make money, they never benefited from a government contract, in fact they don't know a Congressman or a politician. They just like making money and seeing their employees improve their wealth right along with the company they work for, those are the good millionaires. ;-)

Gort
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PTC_0, I’m serious, I’ve seen

PTC_0, I’m serious, I’ve seen millionaires on the TV but I don’t think I know any personally.

Are you one? (For some reason, I thought you were an airline pilot that flew international routes.)

When I think of a millionaire what comes to my mind is the ‘bully-boy’ type, like Donald Trump. Makes a lot of noise but got nothing. (I can see why the Tea Party is so drawn to him.)

Or the ‘Machiavellian’ type likes the Koch brothers or Richard DeVos, pulling strings in the background with big wades of cash.

Of course we have the Bernie Madoff type. Pure greed.

And let’s not forget the “screw the stockholder, customers, and employees” types, like Ken Lay and Jeff Skilling.

The way you describe millionaires, they sound like “Mr. Fezziwig, the merchant.”

Observerofu
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Gort. Do you really believe no Millionaire is good?

And to you what is a "good" millionaire?

Many businesses are run by "Millionaires" are therefore according to you are all businesses are bad?

Gort
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OofU, I never said “…no

OofU, I never said “…no Millionaires are good.” That is what you said I said but didn’t. All I did was list the arch-typical types for PTC_0. Didn’t you see my reference to “Mr. Fezziwig, the merchant?”

Now I will answer your question:

Quote:

… what is a "good" millionaire?

I’ll answer this using you as an example: Here is what you have told me about yourself blogging on “The Citizen.” You own three businesses so I will presume you are a millionaire. You stood by your wife when she was ill and made sure she was provided for. Voted for Jimmie Carter. You volunteered to help clean the beach during the BP oil spill; (you whined but did it anyway.) You provide health insurance to your full time employees. And finally, you own an electric vehicle that would put a smile on Al Gore’s face each time you zoom on by!

These are all good things, are they not? So, I would have to say, you are an example of a “good” millionaire.

Unfortunately what distracts from your persona is you suffer from an acute case of Richard DeVos complex, compounded by a severe dose of Donald Trump ego.

The good news is there is a cure for these maladies. Why don’t you sign up for a two year subscription to “The Nation” and in no time at all you too can be a full fledged “Mr. Fezziwig.” : - )

PTC Observer
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Gort - I believe

that most are like Mr. Fezziwig, the merchant. I have no numbers to back that up at the moment but I think it is a fair judgement on what I know about business.

No, I am not an airline pilot, though I have used them and thier skills so many times I can't count them all.

Don Trump is not your typical person in any line of work.

Gort
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PTC_0, I wish it were so but

PTC_0, I wish it were so but all this money in the political process is coming from someplace. In my opinion these influences work against the interest of working people.

Did you see Yaron Brook opened a can of “whip-ass” on Alan Greenspan today?

PTC Observer
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Gort - Afraid

I am afraid I missed this one, I will look for it on YouTube.

BHH
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I can almost assure you that you know someone who is.

You would be utterly astonished at how many people you come in contact with who are millionaires by definition.

Observerofu
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Absolutely PTCO

just wanted to get ahead of the game a little. the "I Hate The Rich" crowd will surly flock or waddle as it is here to Demonize those that have earned their wealth.

Gort
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OofU, you spent most of the

OofU, you spent most of the week defending George W Bush, now your complaining about neo-capitalist? You was for him before you were against him?

Observerofu
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No Gort I have been defending the Military

at least their role here. While the new neoprogs are thumping their chest many that just a few months ago were calling our Men and Women in the military killers and terrorist are now taking credit for the work they performed. Like I have already said Obama deserves kudos. It was a gutsy call.

The Victory lap however as Bill O'Reilly says he was a pinhead for that move.

Gort
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OofU, actually I thought we

OofU, actually I thought we were talking about “neo-capitalist.” Did you get your posts mixed up or did you forget to take your pills today?

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