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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
LOUIS STOKES, Ohio

JOHN J. DUNCAN, Tennessee
ELIZABETH HOLTZMAN, New York CLAIR W. BURGENER, California
BUTLER DERRICK, South Carolina RALPH S. REGULA, Ohio
OTIS G. PIKE, New York
DONALD M. FRASER, Minnesota
DAVID R. OBEY, Wisconsin
WILLIAM LEHMAN, Florida
PAUL SIMON, Illinois
JOSEPH L. FISHER, Virginia
NORMAN Y. MINETA, California
JIM MATTOX, Texas

GEORGE Gross, Executive Director
BRUCE MEREDITH, Assistant Director, Budget Priorities
NANCY TEETERS, Assistant Director, Economic Analysis

WENDELL BELEW, Chief Counsel
WILLIAM LILLEY III, Minority Staff Director

Task FORCE ON DISTRIBUTIVE IMPACTS OF BUDGET AND ECONOMIC POLICIES

DONALD M. FRASER, Minnesota, Chairman
THOMAS L. ASHLEY, Ohio

JOHN H. ROUSSELOT, California
BUTLER DERRICK, South Carolina
OTIS G. PIKE, New York
PARREN J. MITCHELL, Maryland

BRUCE MEREDITH, A88istant Director, Budget Priorities
NANCY TEETERS, Assistant Director, Economic Analysis

JEROME SEGAL, Administrator
NICHOLAS A. MASTERS, Director, Majority A88ociate Staf

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CONTENTS

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166

168

169

1 Hearings held on-

September 26, 1977

September 29, 1977-

Statement of -

Duncan, Dr. Joseph, Deputy Associate Director, Office of Management

and Budget..

McClung, Nelson, Assistant Director, Office of Tax Analysis, Depart-

ment of the Treasury-

Morgan, James N., professor, Institute for Social Research, University

of Michigan

Natrella, Vito, Director, Statistics Division, Internal Revenue

Service-

Projector, Dorothy S., Director, Division of Economics and Long-

Range Research, Social Security Administration -

Ruggles, Richard, department of economics, Yale University

Smith, James, professor of economics, Pennsylvania State University --
Additional information submitted for the record by-

Carlson, Dr. Jack, prepared statement submitted on behalf of the U.S.

Chamber of Commerce, with attachments.---
Attachments 1-4:

Table 1.- Estimated Characteristics of the Direct Beneficiary

of Program Expenditures ---
Table 2.-Fiscal Year 1969 Federal Budget Expenditures by

Federal Regions with Economic and Population Information.
Table 3.- Selected Locational Characteristics of Federal

Budgetary Expenditures.--

Table 5.-Tax Expenditures-

Duncan, Dr. Joseph:

Paper submitted, entitled: "Income, Wealth, and Consumption”.

Prepared statement...

Statement entitled: "Confidentiality Statistics and Research

Data".

Franklin, Stephen D., and James D. Smith, prepared statement..

Morgan, James N.:

Alternative Designs for Studies on the Distribution of Housing

Wealth (article) -

Prepared statement-

Projector, Dorothy S.:

Prepared statement..

“Social Security, Saving, and Capital Formation," article written

by Selig D. Lesnoy and John C. Hambor...

Ruggles, Richard:

Prepared statement.-

Tables submitted for the record:

Table 1A.-Assets and Liabilities of Households--

Table 1B.-Assets and Liabilities of the Top 1 Percent of

Wealth Holders.--

Table 24.-Assets and Liabilities of Households...

Table 2B.-Assets and Liabilities of the top 1 percent of

Wealth Holders

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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
of Program Expenditures.

168 Table 2.–Fiscal Year 1969 Federal Budget Expenditures

by Federal Regions With Economic and Population
Information.

169 Table 3.- Selected Locational Characteristics of Federal Budgetary Expenditures

170 Table 3.-Tax Expenditures

171

DATA ON DISTRIBUTION OF WEALTH IN THE

UNITED STATES

MONDAY, SEPTEMBER 26, 1977

HOUSE OF REPRESENTATIVES,
TASK FORCE ON DISTRIBUTIVE IMPACTS
OF BUDGET AND ECONOMIC POLICIES,
COMMITTEE ON THE BUDGET,

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:
First: How important is information on the distribution of wealth?
Another: What do we know about the distribution of wealth?
Last: What more do we need to know? And why?

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

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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.

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