The Reagan Information Page:Income and Wealth

As can be seen in the section on incomes, incomes increased for all wage earners. Here we show that wealth increased for all wage earners (though not at the same rate) during the Reagan Years as well. We also include aggregate income figures to demonstrate that shares of income are not the same as wealth (as some would have you believe). For example, a retired couple in the second lowest quintile for income in all likelyhood own their home and car(s) outright.

Note: we are proud that this particular section of The Reagan Information Page has caused Reagan deniers the most trouble. Some have simply read the first section below and then had a brain melt-down, refusing to read anything else on the page and proclaiming that the income table "proves" their point, entirely missing the point that the income table is shown to prove that income is not the same thing as wealth.

First the income figures:

Share of Aggregate Income Received by Each Fifth and Top 5 Percent of Households, by Race and Hispanic Origin of Householder: 1977 to 1994.

Percent distribution of aggregate income and Gini ratio

Year Lowest Second Third Fourth Highest Top 5% Gini Ratio

1994 3.6 8.9 15.0 23.4 49.1 21.2 0.456

1993 3.6 9.0 15.1 23.5 48.9 21.0 0.454

1992 3.8 9.4 15.8 24.2 46.9 18.6 0.434

1991 3.8 9.6 15.9 24.2 46.5 18.1 0.428

1990 3.9 9.6 15.9 24.0 46.6 18.6 0.428

Year Lowest Second Third Fourth Highest Top 5% Gini Ratio

1989 3.8 9.5 15.8 24.0 46.8 18.9 0.431

1988 3.8 9.6 16.0 24.3 46.3 18.3 0.427

1987 3.8 9.6 16.1 24.3 46.2 18.2 0.426

1986 3.9 9.7 16.2 24.5 45.7 17.5 0.425

1985 4.0 9.7 16.3 24.6 45.3 17.0 0.419

1984 4.1 9.9 16.4 24.7 44.9 16.5 0.415

1983 4.1 10.0 16.5 24.7 44.7 16.4 0.414

1982 4.1 10.1 16.6 24.7 44.5 16.2 0.412

Year Lowest Second Third Fourth Highest Top 5% Gini Ratio

1981 4.2 10.2 16.8 25.0 43.8 15.6 0.406

1980 4.3 10.3 16.9 24.9 43.7 15.8 0.403

1979 4.2 10.3 16.9 24.7 44.0 16.4 0.404

1978 4.3 10.3 16.9 24.8 43.7 16.2 0.402

Households as of March of the following year. Income in current dollars. Data for the years 1978 through 1986 were revised in March 1996.
Source: Census Bureau tables on income inequality.

For those who would claim that an increasing Gini Ratio is unique to the Reagan Years, note the trend predates and postdates President R eagan's terms. In addition, the rate accelerates over time. Clearly, the issue goes beyond any that of any one president's economic policies. Also note that the 0.02 increase in 1993^[1], the year of Clinton's retroactive tax increase is larger than any increase in the Reagan Era, though the reason for the jump isn't just changes in behavior due to tax law changes.

Notes

[1] 1993 Figures

A further comment about 1993 is necessary. Starting with the 1994 survey (which measured 1993 income) the Census Bureau increased the top level of some income categories (and decreased one). From their footnote about 1993:

Data collection method changed from paper and pencil to computer-assisted interviewing. In addition, the March 1994 income supplement was revised to allow for the coding of different income amounts on selected questionnaire items. Child support and alimony limits decreased to $49,999. Limits increased in the following categories: earnings to $999,999; social security to $49,999; supplemental security income and public assistance income to $24,999; and veterans' benefits to $99,999.

The "limit" referred to above means that any amounts above that were recorded as that level. There are a number of reasons for doing so, including the privacy of survey respondents. These changes make a direct comparison with pre-1993 numbers problematic. As with all numbers from the Census Bureau, visiting their web site can provide further information. In particular, see The Changing Shape of the NationÕs Income Distribution 1947-1998 by Arthur F. Jones Jr. and Daniel H. Weinberg.

And the figures for net wealth:

Family Net Worth-Mean and Median of Net Worth, by Selected Characteristics: 1983 and 1989

Mean Median % Families

Income (constant 1989 dollars) 1983 1989 1983 1989 1983 1989

$10k and less 30.0 30.1 3.8 2.3 19 20

$10k-$19.9k 53.0 63.1 19.3 27.1 23 20

$20k-$29.9k 69.5 89.6 36.9 37.0 19 17

$30k-$49.9k 117.6 150.2 67.7 69.2 23 23

$50k and more 550.5 586.7 176.1 185.6 17 20

Mean and Median are in thousands of dollars.
Note: 1983 and 1989 are the only two years the study was done.
Source: American Almanac, Table 732, page 462 (1993 ed).

Note how the the second and third lowest divisions get smaller...while the top division grows the most! Clearly the middle class was getting smaller, but it was moving up, not down.

And let's look at how they got richer:

Family Net Worth-Composition of Assets and Debts of All families: 1983 and 1989

Assets 1983 1989 Debts 1983 1989

Total 100.0 100.0 Total 100.0 100.0

Financial 25.6 27.7 Home equity credit 0.5 2.6

Nonfinancial 74.4 72.3 Credit cards 1.8 2.2

Vehicles 3.6 3.9 Car loans 6.1 8.0

Principle Residence 33.4 32.2 Home mortgages 58.1 53.1

Real estate 16.0 15.1 Investment real estate 20.5 25.0

Business investments 20.4 17.8 Other lines credit 2.8 1.0

Other (stocks, bonds, etc.) 1.0 3.3 Other 10.2 8.1

Source: American Almanac, Table 734, page 463, (1993 ed).

Well look at that. Gains in financial assets. Stocks, bonds... IRAs. And the much ballyhooed increase in consumer debt? Didn't happen. The main rise in debt (as a percentage of all debt) was from investment real estate.

So there you have it...everyone got richer, and with tangible assets.

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Income shares 1977-94 and wealth 1983-1989