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COMMITTEE ON THE BUDGET
ROBERT N. GIAIMO, Connecticut, Chairman JIM WRIGHT, Texas
DELBERT L. LATTA, Ohio THOMAS L. ASHLEY, Ohio
JAMES T. BROYHILL, North Carolina ROBERT L. LEGGETT, California
BARBER B. CONABLE, JR., New York PARREN J. MITCHELL, Maryland
MARJORIE S. HOLT, Maryland OMAR BURLESON, Texas
JOHN H. ROUSSELOT, California
JOHN J. DUNCAN, Tennessee
GEORGE Gross, Executive Director
WENDELL BELEW, Chief Counsel
Task FORCE ON DISTRIBUTIVE IMPACTS OF BUDGET AND ECONOMIC POLICIES
DONALD M. FRASER, Minnesota, Chairman
JOHN H. ROUSSELOT, California
BRUCE MEREDITH, A88istant Director, Budget Priorities
JEROME SEGAL, Administrator
Projector, Dorothy S., Director, Division of Economics and Long-
Ruggles, Richard, department of economics, Yale University
Smith, James, professor of economics, Pennsylvania State University --
Carlson, Dr. Jack, prepared statement submitted on behalf of the U.S.
Chamber of Commerce, with attachments.---
Table 1.- Estimated Characteristics of the Direct Beneficiary
of Program Expenditures ---
Federal Regions with Economic and Population Information.
Table 5.-Tax Expenditures-
Additional information submitted for the record by-Continued
Table 3.–Balance Sheet for Households, Personal Trusts, Page and Nonprofit Organizations, 1959–69.
64 Smith, James D., and Stephen D. Franklin, prepared statement. 173 U.S. Chamber of Commerce, prepared statement submitted on its behalf by Dr. Jack Carlson
166 Attachments 1-4 in prepared statement:
Table 1.—Estimated Characteristics of the Direct Beneficiary
168 Table 2.–Fiscal Year 1969 Federal Budget Expenditures
by Federal Regions With Economic and Population
169 Table 3.- Selected Locational Characteristics of Federal Budgetary Expenditures
170 Table 3.-Tax Expenditures
DATA ON DISTRIBUTION OF WEALTH IN THE
MONDAY, SEPTEMBER 26, 1977
HOUSE OF REPRESENTATIVES,
Washington, D.C. The task force met, pursuant to notice, at 10:12 a.m., in room 210, Cannon House Office Building, Hon. Donald M. Fraser, chairman of the task force, presiding.
Present: Representatives Fraser and Simon.
Mr. FRASER. This morning, we begin 2 days of hearings on data on the distribution of wealth in the United States. As is well known, the Federal Government collects a vast amount of data covering most areas of economic and social life. What is not so well known is that the Federal Government collects relatively little data on the distribution of wealth. The last comprehensive survey was done in the early 1960's.
In this morning's hearing we will address three major questions:
In our hearing Thursday morning, we will continue this exploration, focusing on specific data collection efforts presently underway, possible alternatives, costs, and problems.
Our witnesses this morning are three distinguished individuals, each of whom has considerable personal experience in the area under discussion. They are: James Morgan, Institute for Social Research, University of Michigan; James Smith, professor of economics, Pennsylvania State University; and Dorothy Projector, Director, Division of Economic and Long-Range Research, Social Security Administration.
Ms. Projector is here not as an administration spokesman, but in virtue of her long expertise in this area.
Our first witness will be James Morgan. We will hold off questions until all of the witnesses have completed their prepared statements. When we do ask questions, I would encourage the witnesses to feel free to respond to statements by the other witnesses. STATEMENT OF PROF. JAMES N. MORGAN, INSTITUTE FOR SOCIAL
RESEARCH, UNIVERSITY OF MICHIGAN Mr. MORGAN. Thank you. I wanted to say something about the kinds of data needed as well as why they are needed. It is important to stress
that we need information on distribution of assets, information on what people have in mind to do with them and their sources of advice and their expectations.
There are several areas of important policy for which we need such information. The most obvious one is that people are concerned with the equity of an economic system, and this is indicated not just by the distribution of income, but also wealth. We have had substantial inflation and unemployment, progressive taxes and income maintenance programs, and they seemed to have maintained almost constant income distribution over many years, but that may or may not be true of wealth. We can't tell for sure. So we need a fresh assessment of household wealth and its sources. Gyrating asset values and inflation and high profits can lead to asset accumulations that never appear as taxable income of any household.
Second, individual retirement planning and the management of the social security system will be affected by people's saving for retirement. Our earlier studies, entitled, “Economic Behavior of the Affluent”, indicated a trend toward polarization into two groups, one with substantial accumulations, most of whom expected to retire early, and the other with little beyond social security, many of whom feared retirement and would only do so when compelled by poor health, compulsory retirement age, or obsolescence of jobs skills. We need to know whether this trend has continued. This requires knowing not only about financial assets but also about various accrued retirement rights.
Third, there is reason to believe that a substantial number of households are well fixed for their own retirement and that some of them have accumulated already more assets than they could possibly expect to consume during the rest of their lives. What they do with these surplus assets during their lifetimes and where they bequeath their estates are important for capital markets, for monetary policy, for international monetary flows and the balance of payments, and for the creation of new inherited fortunes:
If these assets are used to fund ventures of younger entrepreneurs, they can increase the dynamic growth and flexibility of the country.
If they are used to speculate, they can increase the instability of various markets including the stock market and foreign exchange rates, and make it more difficult to achieve proper fiscal and monetary stability.
If these funds flee abroad, our balance of payments will be affected.
If they go into philanthropic ventures in large volume, the country should benefit. But the need for new policies to define philanthropy and its tax status is increased, if we want to encourage support for things that are widely beneficial rather than reflecting only the interests and concerns of a small, already privileged group.
Fourth, on the other hand, if there is a large and growing group in their fifties and sixties who have accumulated little or nothing, this should affect our policies about mandatory retirement age, and suggest the need for ways of supplementing social security more flexible and automatic than the new independent retirement accounts will be. The proposals for a method for converting equity in a home into a cash annuity would also seem more attractive if the number of aging households who own little else than a home is large.