More gruel
Mapping Wealth in America

Mapping Wealth in America

This week the Economic Innovation Group released a study, with accompanying multimedia tools, that finally tackles a frustrating data question. Where is America’s wealth concentrated?

When talking about economic issues we tend to conflate income with wealth, giving rise to endless distortions. Every so often social media lights up over an essay about a “struggling” family barely getting by on, say, $350,000 a year in income. How could people who are so “rich” have the gall to complain? Income is not wealth. A high income provides sparse protection against poverty. Only with insight, discipline and luck can an income be converted into the true currency of freedom in America, wealth.

Forming policy around mistaken assumptions about the world breeds dysfunction. Income is not wealth. Taxing income does not place any burden on the wealthy, only on those who aspire to be wealthy. High income people are not consistently wealthy people. The wealthy seldom need a high income to support their lifestyle. There are reasons that Mitt Romney pays less in taxes than Joe Biden. Failure to understand wealth drives these policy outcomes.

Researchers at the EIG built their analysis of American wealth by reviewing IRS data on income types. They separated wages from income derived from assets to identify wealth.

This is an imperfect analysis. Wealth need not always generate tax-measurable returns. For example, a stock portfolio that sits gaining value without selling, would not appear in this formula. A business interest or a portfolio of options being held without dividends would go unnoticed. Likewise, a very large portfolio being lightly utilized for dividend income would appear smaller than a much smaller portfolio of a retiree aggressively depreciating their wealth to support themselves. As a consequence, this analysis shows higher wealth in retirement havens like Florida, places where a large percentage of the population lives by depreciating an asset like a 401k. However, this is still perhaps the best publicly available portrait of wealth concentration you’ll find.

What is wealth? We generally equate wealth with capital, the ownership of productive assets. That that leaves out the influence of time.

Chris Rock summarized the difference between income and wealth in the context of the pro sports: “Shaq is rich. The white man who signs his check… is wealthy.”

A pro football rookie with no other assets who earns the league minimum $610,000 in W-2 wages this year is far less wealthy than someone who has no income at all, but holds $610,000 in a stock account. Depending on where they live, after taxes, that football player might take home as much as $425,000. Living an extremely frugal life, they might be able to save $375,000 or so. Even with the good fortune to earn an outsized, 1%-er income, it takes time to accumulate wealth. Few players do.

More than 75% of NFL players are broke within three years of their retirement from the industry. Only a minuscule fraction of professional athletes will ever accumulate the wealth required to own a team. Turning a high income into wealth takes time.

It’s helpful to think of wealth as more than just capital. Wealth = Money x Time.

Places with deep wealth are not towns like Benton, Arkansas, touched by a few rich families. They are places where many families have been earning and developing outsized incomes for generations. We’re not just talking about wealthy inventors or entrepreneurs, these are places where more or less ordinary people have been able to build and retain modest wealth, which over generations grows to immodest wealth. That kind of deep intergenerational capital creates a large well of public wealth, feeding not only new capital creation in a traditional business sense, but also public capital in the form of parks, hospitals, artistic and educational institutions, and other public infrastructure. Beyond these forms of capital, deep wealth fosters less tangible capital in the form of information networks, embedded know-how relating to public affairs and governance hard to develop through any level of investment over short timespans. Wealth is more than money. Wealth is Money x Time.

This formula helps explain why the Austin Metro area in Texas, a lucrative supposed “tech hub,” struggles to surpass the wealth already embedded in Detroit. Yes, Detroit. Thanks to a 150-year headstart on Austin and the continuing wealth-creation force of a powerful educational infrastructure, Detroit area residents are taking in roughly $36bn a year in wealth dividends compared to $27bn in marginally smaller Austin area. Austin has only just caught up to the smaller Cleveland, at $25bn. Prim Minneapolis sits comfortably at $34bn.

Thanks to the oil business, median incomes in Texas have risen over the past half century from near the bottom to almost the national average. Politicians have touted the state as a new center of wealth, but this is a distortion. A few of the state’s suburban counties now produce median incomes in the national top 50. Wealth, however, remains generations away. In wealth terms, Texas has only just begun to pull away from the poverty of the South. That progress remains tenuous, hampered by government policy that punishes urban development and education.

Chicago’s metro area comes in at about $116bn in annual wealth dividends compared to $68bn in the similarly sized Houston, or $72bn in Dallas. New York City by itself comes in at $105bn, before even beginning to calculate the staggering wealth in Long Island or the neighboring counties in New Jersey and Connecticut. Wealth is Money x Time. New York was wealthy before Houston was carved out of the swamp.

The comparison is even more stark when looking at California, the wealth-creation leader of the world in our generation. Keep in mind a couple of factors that make California’s numbers even more impressive. The state isn’t very attractive to retirees due to its cost of living and tax structure. With a relatively young population, this report of dividend income is likely an extreme under-reporting of its overall wealth.

California shows the benefits of generations of ordinary wealth creation coupled with the new wealth engine of the tech industry. Bay Area residents are taking in roughly $190bn a year in wealth dividends. Los Angeles County alone takes in $145bn.

Why does any of this matter? That dual income family of an accountant and a lawyer each working 50 hours a week while trying to raise two kids is not wealthy by any measure. They have a shot at wealth, a much better shot than most people, but they’re just as likely to fall short. Converting that income to wealth could take a lifetime of health and luck.

A kid from a working class family who wrangles a full scholarship to a great school will likely struggle all the way through, and perhaps fail to finish at all, because surviving in that environment calls on the benefits of wealth, benefits that go far beyond what we measure in income. They won’t be taken into an elite fraternity on their father’s influence. They won’t speak the language and cadence of the elite. They won’t have aunts, uncles and cousins to tell them which courses to take, which advisors to meet, which mentors to connect them with jobs, or family support to keep them fed while they serve in unpaid internships. Wealth is something greater than either income or money. Time turns money into not just a line item on a financial ledger, but an intangible network of advantages.

And of course, wealth in America is white. Only a small minority of Black or Hispanic families possess any retirement savings at all. The LA Lakers spend $133m each year on the team’s overwhelmingly Black roster of players, which includes the superstar LeBron James. Their owner, Jeanie Buss, inherited the team from her real estate developer father. She holds roughly four times the team’s annual payroll in her own personal wealth. LeBron will spend a career sweating and aching, performing at the absolute peak of a brutally competitive business to accumulate the kind of wealth that the Lakers’ owner simply inherited. LeBron is rich. Jeanie is wealthy.

In our country, wealth is the only true freedom. No one in America gets to choose their own path in life until they can buy their way free. That’s why we scorn income taxes, or any public burden of any kind. Any obstacle slowing the path to wealth meets fierce resistance, while citizens of other countries enjoy as a matter of course lifestyles that most very successful Americans will never experience at any income level. Shared wealth, in the form of public investment, creates lifestyles and security that personal wealth could never attain. Americans don’t understand this, because this realization would have consequences for our most privileged classes.

It’s often said that to understand politics we need to “follow the money,” but that formula is incomplete. Understanding American politics means following the wealth.


  1. Hiya Chris,

    Apologies for being off topic, but if you’re taking suggestions for upcoming posts, I’d love your thoughts on the legacy of the 2020 BLM protests. I’m particularly fascinated by how quickly white people went from net supporting back to net opposing it. At first it seemed like something truly remarkable was happening in our politics. That’s an observation you yourself made while observing the legit protest that occurred in Vidor, TX.

    I don’t know if it was on purpose or not, but I do remember that the reversal of support by white Americans occurred when mainstream media stopped covering the footage of police using excessive force on protesters in favor of images of commercial property damage in the aftermath of the protests. Printed articles used wording emphasizing how the American consumer is being inconvenienced by the protests. “Protesters blocking traffic,” was and still is a frequent one.

  2. Also, Chris, since this is an economics post, I hope it’s relevant to consider your old posts about Modern Monetary Theory and how it’s playing out in today’s world.

    As Creigh and I mentioned, the basis of MMT states that a monetarily sovereign economy is not constrained by interest rates and debt markets, the usual constraints that classical economic posits. I don’t think you believed that despite the evidence of the 2007/9 GFC which saw massive worldwide economic disruption along with negative interest rates. Or the example of Japan which has by far the highest debt-to-GDP ratio of any large country but still chugs away with zero-percent interest rates.

    So how about corona? A massive hit to the global economy. In the US, a plunge in GDP and a massive spike in unemployment like we’ve never seen, entire industries shut down and at bankruptcy, with entire countries staring at a literal near-death experience. So how did interest rates do? They went down. We printed at least $10 trillion for direct fiscal spending (gave away cash through PPP, increased unemployment benefits, etc.) plus another untold trillions in monetary support for those wealthy asset holders. We did it in about 1-2 months at the start of the covid crisis. And yet interest rates held steady or declined. It’s never been a better time to refinance a mortgage. The Fed chief literally pegs the interest rate with his monthly meetings, and the entire debt market meekly follows along. Does the private market really believe that the United States economy was at less risk of utter ruin in May/June 2020 than it was the previous year? Or perhaps the private market has absolutely no role in setting interest rates after all…

    With that said, covid has been a great way of demonstrating the *real* constraints to an economy, which is never money (i.e. money supply, debt, etc. that classical economics uses). It’s the productive capacity of the economy. In our case, we artificially massively lowered our productive capacity, both by quarantines, massive business failures, plus things like supply chain havoc that meant lots of businesses couldn’t produce stuff even if there were buyers for it. We did the equivalent of Zimbabwe destroying their farms.

    So now we have massive fiscal stimulus from the government, throwing cash into an economy that doesn’t have the production capacity to produce the goods that the new cash wants to buy. And on cue, we’re getting exploding inflation. So yes, even MMT posits real limits on what the government can spend. You can’t just print and spend. But as covid demonstrates, it’s never the private market providing “discipline” by setting a sovereign’s interest rate. The limit is always set by how much the economy itself can produce. If you invest in an economy and grow its productive capacity (e.g. Biden’s infrastructure bill), then the govt can deficit spend without creating inflation or raising interest rates. Conversely (as in covid times), if a govt constricts its economy then even with the same spending and interest rates, you’ll see inflation rise.

    Personally, I think this a great example that shows that MMT isn’t just a pie-in-the-sky unrealistic theory. I’m not sure how many more times classical economics has to fail before people realize we should no longer run our economy as if it’s still based on digging up yellow lumps from the ground.

    1. Hi WZ Wall

      The thing that people don’t understand is that there is NO shortage of capital

      For 99% of history “Capital” was the limiting factor in getting any new business started

      You basically had to persuade an Aristocrat to fund your new operation


      Back in the 1700’s the London Coffee Houses invented/developed/grew into the first Stock Market – now 10,000 workers with a couple of Guineas each could fund a factory or a railroad or a canal

      (I have been told the Dutch got there 100 years earlier)

      Since then “Capital” has simply NOT been a limiting factor – today the markets are awash with “capital” looking for businesses to invest in – we can see that in the “irrational exuberance” of the stock market

    2. I think we have to seperate short-term economic returns from long-term. So your claim that we were worse off in May2020 than May2019 in the LONG-TERM is what I think is potentially flawed.

      Our ability to be economically resilient and the new tools that quickly emerged in March-May 2020 reflect powerfully on the strength of the American worker and economy.

      And we also have to remember that with a world generally dominated by fiat currencies, its the RELATIVE strength of different economies that matters. So compared to developing nations that don’t have the healthcare, research, and other strengths we have in the USA… COVID could easily have shifted US upwards relatively.

      So I think you hit it on the head here: “as covid demonstrates, it’s never the private market providing “discipline” by setting a sovereign’s interest rate. The limit is always set by how much the economy itself can produce.” As Duncan said – there is more than enough capital out there… the only question is about how we choose to spend it.

  3. I’m in a well-paid profession so sometimes people scratch their heads about why I’m such an economic liberal. I respond that it’s because I’m a serf. I may be a well-paid serf, but I’m still a serf, living off the earnings of my labor. I’m not a landowner, collecting rents from property that’s been in my family for generations. And that’s why my allegiance will always be to the serfs, even if I out-earn some of the lower-level landowners in gross annual income.

    The fight between labor and capital has always been around, as has inherited wealth vs. earned gains. My question is, what in the US will stop this relentless new Guilded Age? You’ve always maintained that the government listens not to the extreme poor or the extreme wealthy, but to the upper/upper-middle class, which unlike the poor have money, but unlike the super-rich, constitute a fairly large voting bloc.

    I think the popularity of Bernie Sanders and Warren amongst these “privileged” people i.e. white, young, college-educated, above median income, is not a coincidence. Despite their privileged backgrounds, they do not feel rich, or even very secure. Even the ones who stand to inherit a little something from their parents feel they won’t accumulate enough assets to be truly wealthy, or even as wealthy as their parents were.

    You can shut the American Dream to any number of black inner city folk, Mexican day laborers, and even high-skilled immigrants who started with zero wealth. But when you slam the door on white upper middle class kids from achieving their dreams of becoming even richer, then you might just have a revolution on your hands…

    The ultra high net worth people like sports team owners have significant wealth in stocks. But the by far the biggest vehicle for building wealth for the past 80 years (Since the New Deal) has been owning your house. In the Bay Area, people can be considered stock-rich and house-poor: they may own a bunch of restricted stock grants, but they’re spending their $300k trying to pay the mortgage on their $2-4mil house. Why do they need a 2-4mil house? A) in the Bay Area, that doesn’t get you much more than a 1950’s era ranch house or maybe a 1980’s 2-story cookie-cutter subdivision house. But more importantly B) if you don’t buy that house, you can’t live in that neighborhood which means you can’t access their school district. And with private schools costing $50k/yr, if you have 2 kids, it still makes sense to buy that house than to pay $100k/yr for tuition especially since you think you’re at least “building equity” by buying that house.

    Reduce housing costs, and you allow those 300-500k earners to actually put some of their money towards building wealth, rather than paying back the previous house owners.

    What do you think about Warren’s call for a wealth tax? I’m all for it. Quite frankly, the Republicans screwed themselves by eliminating the inheritance tax. At least with that, you got to keep all your money until you died. But if we can’t have that, then let’s instead make them drip, drip that wealth away while they live.

    Since Creigh is back (glad to see you again!) I have to add that the immense growth in inequality in the past few decades is also driven by Fed policy: since 2007, they’ve massively inflated asset prices while suppressing interest rates. This benefits asset owners i.e. the ultra-wealthy who own real estate and stocks, while hurting humble income earners who generally use money markets, CDs, and other interest-based assets for socking away savings. It is not a coincidence that while unemployment spiked due to corona, guys like Bezos and Musk added literally tens of billions to their net worth. Every financial crisis since at least Greenspan has been Fed chief has been used in the same fashion.

    Anyway, this is an important topic. I just wonder how much further people are willing to be ground down before any sort of revolution occurs. While white upper middle class youngsters are now feeling the pinch, is it enough of a pinch to get them to rise up and eat their parents? Are they too invested in the system, warts and all, to work to burn it down?

    1. The call to “Reduce Housing Costs” though is a solution that is easier said than done.

      Obviously there are things like tax-deductions for second homes, etc. that could probably be eliminated relatively easily that would shift the margin towards more housing availabilty. Encouraging more multi-unit housing, etc. to increase affordable supply should certainly be considered. There is definitely room for improvement on the margins

      But in a geographically constrained place like the Bay Area (SF on a pennisula, relatively limited transport links/bridges to economic centers)… the primary reason that real-estate is expensive is because its limited. Its a nice place to live, and more people want to live there than there is real-estate to do so (at least without eliminating many things like zoning, bldg codes, etc. that make it desireable in the first place.

      So I think you’re right… changing those fundamentals would require “burning down” the existing system… which is a full of huge negative tradeoffs, with no guarantee the future is substantively better than the present. It doesn’t surprise me at all that such changes are politically untenable, and it shouldn’t surprise us when such ideas are rejected politically…. the electorate is not irrational at all IMO on that front.

      If we really want to change some of these dynamics, I think the solution comes in other investments like Chris Ladd states that build SOCIAL WEALTH, not railing about the symptoms like housing prices. Your pieces on investment income taxes, wealth taxes, etc. all seem promising to me.

      I also think some basic reforms, like a UBI, could fundamentally change some of these dynamics. If folks suddenly don’t have to live/work in these highly productive economic centers to survive, they are free to recognize different types of values. One can live pretty nicely in rural Missouri on an $18k basic when you also have your 40+hours per week to do with as you will. And that is $18k more rural income to support local businesses, and one fewer competitor in the urban area. Suddenly the Ozarks, WY, and many economically depressed but aethestically pleasing areas become very WEALTHY in natural assets. Why rat-race in SF or Chicago or HOU when there are plausible alternatives (and similarly, if you prefer the more urban life/competition… you can pay for it. No judgment either way!).

      There is a cost to make these transitions, but this is where fiat currency and MMT could really help us. Pay the transition costs with fiat money! Skip the QE, and use that to pay the grandfathered years of the existing social safety net system while we transition to the basic. Pay off some of the federal debt for things like infrastructure investments in the process. Ultimately you don’t want new money paying the long-term costs (you’ll want enough taxes to make it self-sustaining), but short-term costs are a great way to use money supply changes.

      And HERE is where markets/inflation could actually play a role, because they will judge if those short-term investments are worth the expanded money supply used to pay for them. If the markets really like those investments… it could even DECREASE currency inflation, etc. Its too bad these issues are complicated, because the public dialogue on such issues is just so simplistic, uninformed, and biased that we can’t even have a discussion on the merits….

  4. My husband had a saying he shared on this topic: “ I’m rich now; maybe one day I’ll have money “

    He understood that happiness can’t be bought. Earning “Enough “ income to provide financial security for one’s family and retirement were his goals. After his discharge from the army in 1953, he was encouraged to take advantage of his military college benefits and obtain a master’s degree. As aluring as an MBA was at tjis point in history, he decided against this. Why? He knew what he wanted to do in life and that this degree wasn’t necessary to be successful. Time has challenged the MBA cost- benefit ratio but he knew he didn’t need it.

    He was a rare man who knew clearly what was important in life. As your post illustrates so well, the “getting there” part of wealth accumulation is not always worth the effort. Other societies and countries seem to focus less on careers and more on personal happiness. Sufficient income is critical regardless where one lives, but the arrogant criticism by “wealthy and many rich Americans” is reflected in the lack of adequate healthcare and other important social safety net services.

    I read an article today about a poll on public sentiment regarding covid mandates. It was gratifying to see the words “Common Good” used by many survey participants. This is missing in much of our public discourse and priorities- whether it is federal budgets or health safety. America is a rich country but it is not a happy country.

    1. Mary, money might buy happiness, but it sure as hell can alleviate a ton of unhappiness.
      Count me as one who believes the uber-rich are not all faking it when living in their multi-million homes, with their multi-million dollar toys, going to all those fabulous spots, all the time not worrying about job prospects, housing issues, or paying for any medical problems that crop up.

      Sure, there is no doubt that social capital is the main reason that countries like Denmark and Canada score higher on any happiness index. But that does not change the fact that being rich is vastly superior to not being rich.

    1. Also, accumulating wealth often involves imposing costs on others. I’m thinking of patent monopolies granted by the government, but there are many other examples. On the other hand, public expenditures often powerfully reduce costs for the public. I’ve seen estimates that the Interstate Highway system returns 25% annually in reduced costs for transportation and leisure. Of course, these benefits are highly progressive; the cost reduction is much more meaningful for average people than for the wealthy.

      1. In TX, private interests are investing in toll roads. Eisenhower’s magnificent national highway system has inspired capitalists to get into this lucrative arena. Throw in a little local politics and, voila! Our roads are now too expensive for average workers to use, but too convenient for the harried commuters to ignore.

      2. What pisses me off about those private toll roads is that as soon as they are in place the toll booth owners start pressing the state not to compete by upgrading the public roads, and to instead allow them to deteriorate.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.