Analytic Memo: The Rise of the Super-Rich 1. What is the authors thesis (main arguments)?

Nathan Kellys thesis in, The Rise of the Super-Rich: Power Resources, Taxes, Financial Markets, and the Dynamics of the Top 1 Percent, 1949-2008, is the factors that have supported rapid growth of the super-rich in the United States since the early 1980s. Kelly focuses on rightward-shifts in Congress, the decline of labor unions, lower tax rates on high incomes, increased trade openness, and asset bubbles in stock and real estate markets.

2. What evidence does the author present to support his/her argument? The author focus is on the rise in income of the super-rich over the last 25 years. The argument is introduced by referencing income accrued by the top one percent from 1913 to 2007. The author notes that from the Great Depression until 1980 there was a decrease in wealth held by the top one percent but since 1980, there has been a reversal. To support this finding, Kelly includes a chart, Figure 1: The Top 1 Percents Share of Income, 1913 to 2008. The chart depicts a sharp increase in income for the top 1 percent starting around 1980. The article introduces Power Resource Theory (PRT) when discussing how public policy has shaped the income of the super-rich. PRT emphasizes two major spheres within which the working and middle-class can organize to achieve progressive redistribution: politics and the market (4). Left parties typically support unions and redistribution policies, decreasing income of the super-rich. By using dummy variables and controls, the author notes that the party of the

president has no statistically significant effect on top income shares but the top marginal tax rate does influence income of the super-rich (18). On page 22, figure 2 graphically shows the articles findings from each model. These charts allow the reader to understand Kellys assertions. Another important argument of the article is that ownership of stocks and other securities are highly concentrated among top wealth holders (10). Therefore, it can be concluded that market performance will affect income of the super-rich. To support the rise in wealth, the author points to financial indexes. The stock market success or failure was measured off of the Standard and Poors 500 composite stock market index (14). By factoring in unemployment and real GDP, the article has concluded that real estate and stock gains (dividends) have been beneficial to the top 1 percent ultimately increasing their income.

3. Was the authors argument persuasive to you? The authors argument, though persuasive, was not surprising. The use of different theories, like the Power Resource Theory, allowed me to connect the authors findings to ideas at large. The inclusion of tables and charts, backing up the article arguments allowed me to understand the authors thought process. The most persuasive part of the article was the references to other research papers to support the articles hypothesis. This allowed readers to understand that the ideas of the article were accepted by other sociological findings. The article didnt present any groundbreaking findings about the rise of the super-rich. An introductory economics class would teach that the top 1 percent

may choose leisure over labor if their tax rate increased and the concentration of income among the top 1 percent would decrease (26). Though it was surprising that the president has limited ability to effect top tax rates, it is obvious that tax rates would greatly affecting the income among the top 1 percent. Though persuasive with its support, the article lacked interesting findings.

4. What counter arguments can you come up with to weaken the authors argument? The authors thesis focuses on the rise of income among the 1 percent. One argument that I could make is that the author doesnt distinguish what he counts as income. Legislation will soon require corporations to disclose the income of their CEOs to show the disparity between the top and bottom earners. The issue with this legislation is that companies dont know what to constitute as income. The author did not detail what he considered income among top earners. CEOs receive their base salary but on top of that they are offered stock options. Stocks, which are usually considered wealth, could be considered income in the year they are acquired. The effect of how stock options are included in the research could have an impact on the authors findings.

5. How does the article relate to your personal experiences, or peoples experiences who you know. As a taxpayer and investor, this article supported many ideologies that society and I hold. One may choose leisure over labor if their tax rate increases is

an interpretation made in the article that I can personally relate to (26). Current tax rates tempt me to take jobs that are under the table where I dont have to pay taxes. Over the summer, I would take work as a babysitter instead of a lifeguard.This tick allows me to record a lower income, and pay less in taxes. Kelly also notes, a more mechanical interpretation is that lower tax rates reduce incentives for high income units to shift income (26). As an investor, Im less likely to put money into the stock market if capital gain taxes or dividend taxes increase. It is common financial knowledge that society invests less when dividend and capital gain taxes are high.

6. Did you enjoy reading this article? Why or why not? As a finance major I found this article extremely enjoyable. The impact of unequal wealth distribution is scary. There are people unable to make a living compared to other individuals that earn so much that they can influence elections and policy for their own benefit. Though I consider wealth disparities to be natural and normal, the levels that our society is currently at are unhealthy. This article focused on public policys ability to support the rise of the superrich. Kelly, considering policy liberalism and left party power left out the ability of right party power to increase income in the super-rich (2). There are a disproportionate number of lawmakers in the one percent. Lawmakers support legislation that is in their best interest and could impact their wallets. It is legal and not uncommon for lawmakers to trade on sensitive information before the public knows about it.

7. Come up with two questions to pose to the class related to this reading. How does the definition of income influence this articles findings? What affect do a disproportionate number of lawmakers being in the one percent have on the increase in income of the one percent?