Mr. MCCLUNG. Right.

Mr. FRASER. And tend to live by the short term.

Mr. MCCLUNG. Yes.

Mr. FRASER. That's for sure.

Well, I want to thank all of you. If you have any last comments now, or if there is something more you think should be part of the record, we would be glad to have it. We would like to find ways to encourage some progress along the lines we have discussed this morning. I do appreciate your presence, your testimony, and your response to the questions. It has been a very instructive morning for us. Thank you very much.

[Additional information supplied by Dr. Jack Carlson, on behalf of the U.S. Chamber of Commerce follows:]

STATEMENT ON WEALTH DISTRIBUTION, ON BEHALF OF THE CHAMBER OF COMMERCE OF THE UNITED STATES BY DR. JACK CARLSON*

The Chamber of Commerce of the United States welcomes the opportunity to comment on the distribution of wealth and the making of related public policy choices. Inadequate information about the nature of wealth, its distribution and its role in the economy can lead to unwise public policy decisions.

Public policy discussions and decisions frequently have either centered around or at least involved questions of the distribution of income among the U.S. population. The distribution of wealth generally has been acknowledged to be important too, but discussion has focused on the impact of policy choices on income distribution. Moreover, the problems of measuring the wealth of individuals and organizations are widely recognized.

Wealth affects income flows, consumption, savings, investment, and capital formation, and thus future economic growth and personal well-being. Public policy choices about taxation, spending programs, and monetary practices all impact on the distribution of wealth and affect our future well-being for good or ill. For example, current discussions of tax reform reflects much confusion, as is evident in the tendency to treat inflated capital gains as income.

Greater interest at this time in the distribution of wealth may signify a growing recognition of the interconnectedness of markets and the multidimensional impacts of Government policies and programs. The proportion of national income derived from compensation to employees has increased from 70.6 percent in 1966 to 76.2 percent in 1976. Welfare reform proposals are coming to the fore in national discussions, and the inadequacy of wealth distribution data is widely acknowledged.

Persistent inflation has created an uncomfortable situation for large numbers of Americans. The heady optimism accompanying milder inflation in the last half of the sixties has been supplanted by worrisome longer term concerns.

Inflation has had substantial redistributional effects not only on income but also on wealth, according to a study by G. L. Bach and James B. Stephenson reported in "The Review of Economics and Statistics" (February 1974). This study found that since World War II, among other effects, inflation appears to have caused a massive transfer of wealth to the Federal Government from households, while among households inflation has transferred purchasing power from older to younger people.

The redistributional impact of inflation is affected by the degree to which it has been anticipated, and it seems to have fallen with nonuniform results on different wealth and income classes. Moreover, there may be different effects within groups. The redistributional effects of inflation are complex, and evaluating its impact is made more difficult by inadequate data.

The meaning of property rights is in a state of evolution, or at least of change. We think it vital to recognize the role of private property in our society, which is the backbone for individual decisionmaking and individual choice in sharp contrast to collective choice.

We do need better, more accurate estimates of the wealth of representative households. Data on the distribution of wealth can play a significant role alongside income distribution data when evaluating issues bearing on public economic

*Vice President and Chief Economist, Chamber of Commerce of the United States.

well-being. Both debate and public policy choices are affected by public understanding and perception of the economic well-being of different groups. Recently, public perceptions of income distribution are being changed by the growing recognition of the inadequacy of typical income distribution data, which omit a significant part of the income stream in the form of consumption transfers by in-kind programs such as food stamps, medicare, medicaid, and public housing. As a result of various omissions, income data have been skewed toward understating the economic well-being of people in lower income groups, and have contributed to public policy choices that might have been different if more complete real income distribution data had been provided. The likely stream of these benefit payments can be aggregated on a present value basis to provide a new category of wealth. However, such an estimate should not infer guaranteed welfare payments.

In addition to the readily identifiable programs that redistribute income, all government programs inherently change the distribution of income. An effort was made in 1970-72 to measure the redistribution of income by Federal programs and revealed a significant allocation of benefits to the poor, the aged, the suburbs and black and other nonwhite minorities. Consequently, middle income households, young people, whites and central cities and rural areas received disproportionately less, and households with these characteristics are often the prime income taxpayers (see Attachment 1). The distribution by region was also estimated (see Attachment 2) and related characteristics (see Attachment 3). Also, an attempt was made to estimate the effect of "tax expenditures" (see Attachment 4).1

More accurate data on the distribution of wealth and wealth-like benefit streams would contribute to better-informed public discussion and to policy choices more representative of the broad public interest.

We need better data on the distribution of wealth, but we also need to beware of measures that will appear to the American public to confirm the growth of a Big Brother syndrome, or a 1984 atmosphere. We must eschew measures that contribute further to the low esteem in which both governmental and nongovernmental institutions are held. It is imperative that we strengthen rather than weaken safeguards to protect the privacy of citizens, and to assure the confidentiality of responses to legitimate inquiries regarding wealth. There are of course inherent problems of major importance in efforts to catalog all wealth holdings. Collections of paintings, tapestries, rare coins, and other so-called collectibles are especially difficult from the standpoint of data collection and evaluation. Their very nature emphasizes the delicate and potentially dangerous issues of invasion of privacy that may arise.

We support efforts to develop estimates of the capitalized value of pension rights, both public and private. These pension rights constitute a significant and apparently growing part of the wealth of large numbers of Americans. Their inclusion should assure more realistic estimates of the distribution of wealth. Also, estimates should be made for promised public benefits which have not been properly funded. For example, the Treasury Department estimates for the Social Security Program "as of June 30, 1975, the projected excess of benefits over contributions, on a present value basis, for present participants over the next 75 years is $2.7 trillion." These obligations will impose a continuing redistribution of income and wealth as they are met. Full recognition of these facts should help society in making sound policy choices.

2

Better data may be revealing. In Britain, the Standing Royal Commission on the Distribution of Income and Wealth found that, contrary to popular notions, the poor are getting richer and vice versa. The enormous transfer of resources from the private to the government sector appears to have been a major causative factor in Britain's inflation. We should take note of Britain's experience since World War II, and recognize that excessive redistribution of wealth may prove as disruptive to the economy and as injurious to the public welfare in the long term as is the excessive redistribution of income.

Finally, the National Chamber believes that the collection of statistics by Federal, state, and local governments should be coordinated, and carefully weighed against the reporting burden placed upon respondents, with maximum reliance on data compiled by nongovernmental agencies. Attachments.

1 More detailed description can be found in testimony to Subcommittee on Intergovernmental Relations. Senate Committee on Governmental Affairs. March 29. 1977.

2 United States Government Consolidated Financial Statements, Department of the Treasury.

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Research

VI. Arkansas, Louisiana, New Mexico,
Oklahoma, and Texas

232

IX. Arizona, California, and Nevada

37

D0000

Other urban counties (non-SMSA)..