Where the Millionaires Are

Look to the states won by Hillary Clinton in the 2016 presidential election.

Proportion of “millionaire households” by state (darker shades equals higher proportion of millionaires).

Over the past few years, we’ve heard a good deal about income inequality in the United States. One persistent narrative is that the wealthiest and highest-income households continue to do well – and indeed are improving their relative standing – while many other families struggle financially.

The most recent statistical reporting seems to bears this out.

According to the annual Wealth & Affluent Monitor released by research and insights firm Phoenix Marketing International, the total tally of U.S. millionaire households is up more than 800,000 over the past years.

And if we go back to 2006, before the financial crisis and subsequent Great Recession, the number of millionaire households has increased by ~1.3 million since that time.

[For purposes of the Phoenix report, “millionaire households” are defined as those that have $1 million or more in investable assets. Collectively, these households possess approximately $20 billion in liquid wealth, which is nearly 60% of the entire liquid wealth in America.]

Even with a growing tally, so-called “millionaire households” still represent around 5% of all U.S. households, or approximately 6.8 million in total. That percentage is nearly flat (up only slightly to 5.1% from 4.8% in 2006).

Tellingly, there is a direct correlation between the states with the largest proportion of millionaire households and how those states voted in the most recent presidential election. Every one of the top millionaire states is located on the east or west coasts – and all but one of them was won by Hillary Clinton:

  • #1  Maryland
  • #2  Connecticut
  • #3  New Jersey
  • #4  Hawaii
  • #5  Alaska
  • #6  Massachusetts
  • #7  New Hampshire
  • #8  Virginia
  • #9  DC
  • #10  Delaware

Looking at the geographic makeup of the states with the highest share of millionaires helps explain how “elitist” political arguments had a degree resonance in the 2016 campaign that may have surprised some observers.

Nearly half of the jurisdictions Hillary Clinton won are part of the “Top 10” millionaire grouping, whereas just one of Donald Trump’s states can be found there.

But it’s when we look at the tiers below the “millionaire households” category that things come into even greater focus. The Phoenix report shows that “near-affluent” households in the United States – the approximately 14 million households having investable assets ranging from $100,000 to $250,000 – actually saw their total investable assets decline in the past year.

“Affluent” households, which occupy the space in between the “near-affluents” and the “millionaires,” have been essentially treading water. So it’s quite clear that things are not only stratified, but also aren’t improving, either.

The reality is that the concentration of wealth continues to deepen, as the Top 1% wealthiest U.S. households possess nearly one quarter of the total liquid wealth.

In stark contrast, the ~70% of non-affluent households own less than 10% of the country’s liquid wealth.

Simply put, the past decade hasn’t been kind to the majority of Americans’ family finances. In my view, that dynamic alone explains more of 2016’s political repercussions than any other single factor.  It’s hardly monolithic, but often “elitism” and “status quo” go hand-in-hand. In 2016 they were lashed together; one candidate was perceived as both “elitist” and “status quo,” and the result was almost preordained.

The most recent Wealth & Affluent Monitor from Phoenix Marketing International can be downloaded here.

The Sanders/Trump phenomenon: A view from outside the United States.

photo1This past Tuesday evening as I watched Bernie Sanders and Donald Trump vanquish their rivals handily in the New Hampshire presidential primary election, I received an e-mail from my brother, Nelson Nones, with his observations on “what it all means.”

As someone who has lived and worked outside the United States for years, Nelson’s views are often quite perceptive — perhaps because he is able to look at things from afar and can see the “landscape” better than those of us who are much closer to the action.

Call it a “forest versus trees” perspective.

And when it comes to the 2016 presidential election, it is Nelson’s view that the Sanders/Trump phenomenon is absolutely real and not something based on personality or celebrity — for good or for ill.

Shown below is what Nelson wrote to me.

… On the Underlying Dynamics

For context into what’s happening in the United States, the Pew Research Center’s recent report on the wealth gap in the United States is instructive.

In a nutshell, over the past 30 years Pew’s data points reveal: 

  • Upper-income families currently represent ~20% of the total, and their wealth (measured by median net worth) has doubled. 
  • Middle-income families represent 46% of the total. Their wealth barely changed (up 2%). 
  • Lower-income families therefore represent ~34% of the total, but their wealth fell 18%.

Now, after the end of the Cold War in 1992 until the onset of the Great Recession in 2007, the wealth of all three groups did rise, albeit by varying degrees: 

  • Upper-income by 112%
  • Middle-income by 68%
  • Lower-income by 30%

Here’s how they fared during the Great Recession (2007-10): 

  • Upper-income wealth declined by 17%
  • Middle-income wealth fell by 39%
  • Lower-income wealth fell by 42%

And after the Great Recession:

  • Upper-income families recovered 36% of their wealth lost during the Great Recession
  • Middle-income families recovered none
  • Lower-income families lost an additional 7% relative to their wealth in 2007

So, if we assume wealth to be a proxy for the feeling of well-being, then one could surmise that ~80% of American families feel like victims today — of which nearly half feel they are still being victimized.  

… On “Anger”

Are people feeling angry about this? You bet.   

Who are they going to blame? The other ~20% and foreigners, of course. 

Never mind the exculpatory hard data proffered by defenders of the nation’s elites revealing that big banks paid back all the bailout money they received during the Great Recession, or that bankers cannot be jailed for their alleged misdeeds unless and until proven guilty by jurors in courts of law (like anyone else), or that pharmaceutical companies’ margins on $45 billion of profit, at 12%, aren’t “quite” as obscene as they appear at first glance.   

None of those facts can ever restore wealth that’s been lost and never recovered, or is still falling. When you feel like a victim, such hard data are utterly and completely irrelevant.  

Both Bernie Sanders and Donald Trump are tapping into this anger with great success. As I watched both Sanders’s and Trump’s victory speeches, to vastly oversimplify, here is what I heard.  Sanders essentially said:

“It’s not fair that most Americans can’t get ahead or are falling behind. I’ll expropriate money from the rich by taxing Wall Street bankers and give it to you in the form of free tuition, student debt restructuring, lower healthcare costs and single-payer healthcare!” 

Trump essentially said:

“Political hacks are negotiating bad deals, letting China, Japan and Mexico take our money away from us every day. As the world’s greatest businessman, I’ll negotiate great deals fast to give you universal healthcare, and beat these countries so you get your money back – without having to share it with all those illegal immigrants!”

Photo2In my view, what both Sanders and Trump recognize is that ~80% of American families may have lost 40% of their wealth since 2007 with little or no hope of recovering it … but they haven’t lost any of their voting power.  

It makes no difference that the prescriptions offered by Sanders and Trump – squeezing money from Wall Street, China, Japan and Mexico, for example – are nonsense. As a lawyer I once knew always said, “Winning isn’t everything; it’s the only thing.”  To have any chance of accomplishing something useful (or not) as President, you have to win first.   

… On Populism being the Winning Ticket

In this election, under present circumstances, populism is a sure winner. 

The wealthiest ~20% of families (Democrats as well as Republicans) who represent the “establishment” in the eyes of the angry Sanders and Trump crowds, don’t quite smell the coffee yet.  

The angry crowds are out for money this election cycle, and I believe they hold enough votes to elect one of the two populist candidates (Sanders or Trump) who is promising “money.”   

… Not “experience,” “pragmatism,” “conservativism,” “liberalism,” “socialism,” “limited government,” “feminism,” “pro-life,” “pro-choice,” “pro-LGBT,” “hope,” “change,” or whatever.  But money.

To protect as much of their wealth and status as they can, the elites have little choice but to scuttle their aspirational platitudes and learn to deal with it.

So there you have it — a view of the presidential election from the outside looking in. I think there’s food for thought here — and very possibly a look at where we’ll be in another nine months.

What do other readers think? Agree or disagree?  Please share your observations here.