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Sylvain Catherine
@sc_cath
When do we start including Social Security pension wealth in wealth inequality statistics? You can’t advocate for large progressive social programs that displace private savings and then ignore their actuarial value in measuring wealth inequality. Since the mid-1980s, real interest rates have fallen sharply, inflating the present value of stocks and private businesses—driving up inequality measures. But the present value of accrued pension benefits, essentially long-term annuities, has risen too. Why record paper gains for some assets but not others? Social Security represents half the wealth of the bottom 90%. Excluding it from wealth inequality statistics distorts the picture, even though we know it matters. If Bush had succeeded in partially privatizing Social Security, contributions would have accrued in individual accounts and been counted as assets—reducing measured wealth inequality. If Social Security were privatized tomorrow and people received the fair value of their accrued benefits in individual accounts, the top 1% wealth share would hit its lowest recorded level. Yet, people wouldn’t be much better off—it would just move an existing off-balance-sheet asset in their balance sheets. This thought experiment highlights why wealth measures that exclude the primary way most Americans save for retirement are misleading. If you think rising wealth inequality is a huge problem and Social Security claims are worth nothing to people, you should be the main advocate of its privatization. Because, according to your own metric, wealth inequality would immediately collapse, and it would not change the intertemporal budget constraint of the government.
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Gabriel Zucman
@gabriel_zucman
oh
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David Watson 🥑
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Moritz Kuhn
@kuhnmo
I think it is also just a measurement issue. We typically focus on marketable wealth as this can be directly translated into consumption. If we also add non-marketable wealth, a lot of questions like the only by
@gabriel_zucman
about other expected/promised transfers arises. 1/2
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Sylvain Catherine
@sc_cath
But these metrics are used in the political debate. There, if your measure of inequality goes up as a consequence of expansions of the welfare state, and you use the measure to advocate for more expansions of the welfare state, then there is a conceptual big issue.
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Gabriel Zucman
@gabriel_zucman
Ok to include the present discounted value of future Social Security benefits (+ future Medicare, etc) but then you need to include the PDV of future transfers to oligarchs: PDV of political contributions, PDV of controlling the Treasury payment system… interesting computations!
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Sylvain Catherine
@sc_cath
These things—which are real—are largely reflected in market caps: Tesla went up by 30% the week following Trump’s election. So they are for a great part already included in your statistics.
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Jacobo Pascual
@jacobotweetsnow
The problem with recognising the wealth that the current value of Social Security pensions represents is that you would also have to explicitly recognise the current value of the off-balance sheet liabilities of Social Security.
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Bernhard Hammer
@BernhardHam
Then taxes and social contributions need to be included as liability. The measurment of "wealth" depends on the purpose of the analyis. There is a difference between transfers (politicians decide) and wealth (I decide myself) that needs to be considered.
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Sylvain Catherine
@sc_cath
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Sylvain Catherine
@sc_cath
🧵🚨Accepted paper🧪 with @mjmill611 (Harvard) and @NatashaRSarin (Yale) Existing studies paint an incomplete picture of trends in wealth inequality in the US. When Social Security is properly accounted for, wealth inequality has not really increased over the past three decades.
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Dan Smith
@dsmith147
If half of the bottom 90%’s wealth comes from SS and Medicare’s future benefits, shift the graph down, and the trend holds.
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Sylvain Catherine
@sc_cath
Nope
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Sylvain Catherine
@sc_cath
🧵🚨Accepted paper🧪 with @mjmill611 (Harvard) and @NatashaRSarin (Yale) Existing studies paint an incomplete picture of trends in wealth inequality in the US. When Social Security is properly accounted for, wealth inequality has not really increased over the past three decades.
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Harrison Bergeron
@BigLawNoMaw
SSI and pensions do not have a present value because they're not liquid or guaranteed (unless there's survivorship benefits), unlike other assets like stocks or RE. Otherwise good thought experiment and agree should be considered a (small) counter to inequality stats.
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Sylvain Catherine
@sc_cath
It’s the choice of policy makers to make it illiquid. If it’s less valuable to people than its NPV, then privatization is optimal. If not, it means that its overall design is valuable. But you have to choose.
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Polydamas
@Polydamas
Tu ne peux pas t'en occuper ? Comme tu l'avais fait pour l'estimation des gains si on était passé en capitalisation ?
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Sylvain Catherine
@sc_cath
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Sylvain Catherine
@sc_cath
🧵🚨Accepted paper🧪 with @mjmill611 (Harvard) and @NatashaRSarin (Yale) Existing studies paint an incomplete picture of trends in wealth inequality in the US. When Social Security is properly accounted for, wealth inequality has not really increased over the past three decades.
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John L Davidson
@HHIDavidson
Privatizing Social Security has nothing to do with understanding wealth inequality in the United States but thanks for reminding us that schemes like privatization are intended to increase inequality
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Sylvain Catherine
@sc_cath
That’s what I say. If it has nothing to do with it and yet doing it would radically change the metric, then the metric is wrong.
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Daniel P Clark
@dpcrr
It makes perfectly good sense to me that we should be counting the Social Security income when considering these types of things. However, The minimum Social Security check is around $50 per month if you’ve worked 11 years or $1000 a month if you’ve worked the full 30 years.
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Dog Playing Piano
@DogPlayingPiano
It is avoided because Social Security has a very large gender inequality. Between women living longer, and get the great majority of the Spousal and Survivor benefits.
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Yung El Paso 🔰✳️🍀💹💚🧩
@sanktsalvar
Also human capital! The bottom 90% invest significant part of lifetime earnings in family's education. Mostly a great investment - higher lifetime income. Compare to early 20th century where <10% finished high school & <2% graduated college, almost for free.
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Raj Jha
@rajjha
Ad
Systems are the unsung heroes in business They reduce dependence on individuals, increase predictability, and aid scaling Best part is: You don't have to be a multi-billion dollar corporation to start systemizing. The earlier you start, the better
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jck✨
@Alea_
C'est Zucman... households net worth n understated by 22.8 trillions...
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leowe
@leowe
Very wonky because social security pension wealth is much more sensitive to legislative changes and fiscal pressures than any other assets
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UXtigers
@uxtigersdotcom
Improved AI healthcare may add 5 years to the lifespan of current old people and 10 years for people who are currently middle-aged. Much increasing the NPV of a life-long annuity payment stream like Social Security. (But AI health will bankrupt it.)
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Jean
@betterltthannvr
Part of the whole wealth inequality is that it is yours to spend and do whatever including pass it in to your children. You can’t pass SS on to anyone but a spouse you were married for more than 10 years under certain circumstances. My ex died, he didn’t pass on all that wealth?
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The Education of O
@Ed_of_O
That's fair, but it should be a new, separate measure of inequality due to the issues others have brought up, and it should be used for every nation that has such pension systems, else cross-national comparisons become impossible.
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Axel Flasbarth
@AxelFlasbarth
Agree, including social security would be sensibel, though they're illiquid. And while it would reduce wealth inequality to levels which would still be alarming imho, it wouldn't change this trend very much, either. Conclusion is pretty robust, concerning both level and trend.
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Raj Jha
@rajjha
Ad
Systems are the unsung heroes in business They reduce dependence on individuals, increase predictability, and aid scaling Best part is: You don't have to be a multi-billion dollar corporation to start systemizing. The earlier you start, the better
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wald 🪿
@Wald52Wald
One simple answer : ideology. Moreover, Gabriel Zucman and his friends never say why the wealth of the top 0.00001% (or equivalent) doesn't stop rising. If they did, their ideology would collapse in the public eye.
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Ferghane Azihari 🌐
@FerghaneA
Retraite : Depuis Marx, il existe toute une gauche terrifiée à l'idée que les travailleurs s'embourgeoisent et renoncent au Grand soir. Voilà pourquoi elle fustige l'actionnaire en empêchant l'ouvrier de le devenir à travers les fonds de pension et la capitalisation.
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Mark in SF
@Mark_in_SF
Not to mention, a huge chunk of wealth is equities, which is a present-value measure of a company's future profits until the end of time. It's counting profits that may not even occur as "wealth"!!
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Praf
@askPraf
Is SS still an asset if it has to be printed? Considering there’s not enough to pay for the promised entitlement?
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bryan willman
@bryan_m_willman
Likewise, computing "wealth" on market real estate values is often nonsens - my house has "higher value", I get hit with much higher property taxes - but it's the same house! It has the same consumption value!
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Neuschwabenlander
@galtons_sextant
The valuation of it depends on how long you live though which is unknown. I'm guessing like everything else, there will be demographic stratification within the "average lifespan".
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Tim Worstall
@worstall
Why? Because if we include the things already done to reduce wealth inequality then the reported numbers for wealth inequality will be lower and so less support for the Revolution! Yes, I have read the P, S, Z papers and that is my considered resulting opinion.
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Understandable Economics
@UnderstandEcono
There is a big difference between wealth and income. Clearly a guaranty of future income is good, but current assets are better. We can do a separate analysis of income inequality that would capture that, but it would also show growing inequality.
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Goat Woods
@Lamoille85
Trust fund runs out in what 2035? Can’t PV unfunded flows. Although it will likely become more progressive in its next form.
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Matt Harbison
@mattyharby
There is a more basic legit criticism of graphs such as this: they assume that the “top 0.001%” of Americans are the same flesh and blood people every year, when in reality it’s the *most* transient cohort. It’s measuring statistical categories, not actual people.
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bryan willman
@bryan_m_willman
Many measures of "wealth" unrealistic. Zuck owns some 231$B or so of Meta - he's a billionare! But that "wealth" cannot realistically be converted into consumption - it's just a multiplier. Checking accounts, cars, SS payments are, or can be converted to, real consumption.
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SAV
@VelezStevenA
It's false equivalence. You can't compare guaranteed private assets to theoretical future government payments that can't be sold, borrowed against, or inherited, and depend entirely on political whims and future taxpayers' ability to fund them.
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Iusedtocare
@ciafo33716
as a couple that will wait till 70 for SS and pension those two represent, using the 4% rule sort of (clearly not a mathematician), about $2m in off the book wealth
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gadfly
@gadfly1962
Social security is a pay as you go system. What accrued benefits? If there was a social security savings funds then it would have invested the funds in financial assets already and received the benefits of overinflated stocks and bonds, that is why it is going broke.
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Charlie Jamieson
@CharlieJamies14
If you count the future value of SocSec payments, wouldn't that increase the net worth of the wealthy more than the poor? And so have no impact on inequality
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