Posted on July 18, 2007

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Lower Taxes, Twenty-Year Bull Market Usher in New Gilded Age

Twenty-five years of deregulation, declining tax rates, and booming stock markets have many people talking about a new Gilded Age, including many of the beneficiaries of the recent explosion of wealth, who see themselves as pillars of a new and expansive age in which their financial success and philanthropy have made government less important than it once was, the New York Times reports.

Some of today's mega-wealthy believe that their unique talents justify their ability to earn what the market will bear — and place a greater responsibility on them to use that wealth for the benefit of others. One of them is Sanford I. Weill, the retired Citigroup executive, whose net worth exceeds $1 billion, not including the $500 million he has contributed to various charitable causes. "People can look at the last twenty-five years and say this is an incredibly unique period of time," he told the Times. "We didn't rely on somebody else to build what we built, and we shouldn't rely on somebody else to provide all the services our society needs."

Weill is right in one respect: Only twice before over the last century, according to an analysis of tax documents by Emmnauel Saez at the University of California, Berkeley and Thomas Piketty at the Paris School of Economics, has 5 percent of the national income gone to families in the upper one-one-hundredth of the population — currently, the almost 15,000 families with household income of $9.5 million or more a year. "I once thought how lucky the Carnegies and the Rockefellers were because they made their money before there was an income tax," Weill added. "I felt that everything of any great consequence was really all made in the past. That turned out not to be true and it is not true today."

Yet a handful of critics among the elite are scornful of such self-appraisal. "I don't see a relationship between the extremes of income now and the performance of the economy," said Paul A. Volcker, former Federal Reserve Board chairman, challenging the contention that the very rich, more than others, are the driving force behind a robust economy. "The [stock] market did not go up because businessmen got so much smarter. [The 1950s and '60s] were very good economic times and no one was making what they are making now."

In fact, the new Gilded Age has created only one fortune as large as those of the Rockefellers, the Carnegies, and the Vanderbilts — that of Bill Gates, whose net worth, measured as a share of the economy's output, ranks him fifth among the thirty all-time wealthiest American families, just ahead of Carnegie. Warren Buffett, in sixteenth place, is the only other living billionaire on the list. Buffett sees himself as having had the good fortune to be born in America, white and male, and "wired for asset allocation" just when all four really began to pay off. Like Carnegie, he also prefers philanthropy to higher taxes as a way to redistribute income. "Society should place an initial emphasis on abundance," he told the Times. "I want to give away my money rather than have somebody take it away."

Looking back, none of the nation's legendary tycoons was more aware of his good luck than Carnegie, who made it clear that the centerpiece of his gospel of wealth was that individuals do not create wealth by themselves, said historian David Nasaw, author of the biography Andrew Carnegie. "The creator of wealth in his view was the community, and individuals like himself were trustees of that wealth."

Uchitelle, Louis. “The Richest of the Rich, Proud of a New Gilded Age.” New York Times 7/15/07.

Primary Subject: Philanthropy and Voluntarism
Location(s): National

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