Middlegarchs are the new Oligarchs
Planet Money
The episode explores the rise of a massive, often overlooked class of wealthy Americans known as 'middlegarchs' or the 'stealthy wealthy.' U
Key takeaways
- The 'stealthy wealthy' collectively hold more than 13 times the wealth of the Forbes 400 richest billionaires.
- Pass-through businesses are a primary driver of income growth within the top 1% of Americans.
- The 1986 tax reform lowered individual income tax rates below corporate rates, incentivizing the use of pass-through structures.
- A significant portion of the House Ways and Means Committee consists of private business owners, creating potential conflicts of interest.
- This class uses political influence to protect market monopolies, such as car dealerships resisting Tesla's direct sales model.
Main topics
- Wealth inequality in America
- Pass-through business structures
- 1986 Tax Reform impact
Notable quotes
The oligarchs, we're giving them too much credit for... We're not giving enough credit to the middlegarks.
Conclusion
The episode reveals that true economic and political power in America
Transcript preview
Speaker 2 (0:00) As the political landscape shifts beneath our feet, we're all vulnerable to a well-funded distraction economy determined to take our eye off the ball. Our weekly politics series, If You Can Keep It, is here to help, where our focus is not the horse race, but the state. We tackle the big political stories of the day and why they matter for our democracy. Join me, Todd Zwilich. And me, Jen White, on the 1A Podcast from WAMU and NPR. This is Planet Money from NPR. Speaker 7 (0:29) Billionaires, man. Am I right? They're Speaker 1 (0:31) having a moment. Speaker 7 (0:32) They're launching rockets into space. They're controlling algorithms that influence what we see and how we shop. Funding Speaker 1 (0:39) elections. And there is this feeling among some, many, that the billionaires have too much power over the U.S. right now. Speaker 7 (0:45) Some people are calling them the oligarchs. Speaker 1 (0:48) Yeah, but there's another influential group in America. A bigger group that sometimes has more power than the flashy billionaires. The Speaker 6 (0:56) stealthy Speaker 1 (0:57) wealthy. The Speaker 7 (0:57) stealthy wealthy. We call them the stealthy wealthy because they fly under the radar. Eric Zwick is an economist at the University of Chicago Booth School of Business. He says many of us have a distorted picture of wealth and power in America. It's not just the so-called oligarchs. So Speaker 6 (1:13) the oligarchs, we're giving them too much credit for, you know, controlling things. We're not giving enough credit to the middlegarks. Speaker 1 (1:22) The Speaker 7 (1:22) middlegarks. I Speaker 6 (1:23) mean, middlegarky. Middlegarky is fun. It's fun. Speaker 1 (1:26) Eric has spent more than a decade researching who is rich in America and how they got rich. And he has a new book out about what he calls the middlegarky or the stealthy wealthy. It is about this specific group of three million multimillionaires in the U.S. who together make the billionaires look like small potatoes. Speaker 7 (1:45) Because this group collectively holds more than 13 times the wealth of the Forbes 400 richest billionaires. They're Speaker 1 (1:52) way wealthier. But unlike the billionaires, who mainly live in the big superstar cities with the tech industries and the finance industries, the stealthy wealthy are not just in Silicon Valley and on Wall Street. We Speaker 6 (2:06) call them Main Street millionaires because they're on every Main Street. Erica's Speaker 7 (2:10) another name for them. The Everywhere Millionaire. It's actually the title of his new book. Speaker 1 (2:16) You're into nicknames, it seems like. You can go through Speaker 6 (2:19) the appliances in my kitchen and I can tell you what they're all called. Speaker 1 (2:22) What's your toaster called? Speaker 6 (2:23) Angus MacGyver. Speaker 7 (2:26) No Speaker 6 (2:26) hesitation Speaker 7 (2:27) there. Okay, but to be fair to Eric, there is a meaning behind each of these nicknames. Speaker 1 (2:33) Yeah, Main Street Millionaire, Everywhere Millionaire. This has to do with where these people are. And also... The kind of like mundane industries that made them millionaires. Yeah, Speaker 7 (2:43) like one made their fortune on hamburger buns. Another, steel garage doors. Speaker 1 (2:48) And then the nicknames middle-garky or stealthy wealthy, those have to do with this group's political power and how people aren't paying enough attention. Speaker 7 (2:57) At the center of this group's story is a quiet revolution in the American economy. The rise of a particular kind of private business. Speaker 1 (3:05) Yeah, these millionaires. They are all the owners of what is called a pass-through business. And these pass Speaker 7 (3:12) -throughs, they are raking in more dough than all traditional corporations combined. Move over, corporate America. Hello and welcome to Pass-Through America. I'm Greg Rosalski. Speaker 1 (3:25) And I'm Sarah Gonzalez. The U.S. has had a giant blind spot when it comes to wealth in America. But Eric and his colleagues got their hands on a goldmine of data. And Speaker 7 (3:34) they uncovered an epic story of wealth and power in America. Today Speaker 1 (3:38) on the show, how 40 years of preferential tax policies have helped propel a stealthy, wealthy class of private business owners into the 1%. And Speaker 7 (3:48) how today, those middlegarks are wielding their power to shape... How we buy cars. Who gets to whiten our teeth. Where we get our beer. Whether a nurse can diagnose us or it has to be a doctor. And how the middle guards also shape Speaker 1 (4:02) who pays what in taxes. Speaker 7 (4:05) Are they the protagonists of this story? Are they antagonists? Who are these people? Speaker 6 (4:10) They are the protagonists, but some of them are protagonists in the same way Tony Soprano is a protagonist of a show. Speaker 2 (4:19) This is Ira Glass. On This American Life, we tell stories about when things change. Like for this guy, David, whose entire life took a sharp, unexpected, and very unpleasant turn. And it did take me a while to realize it's basically because the monkey pressed the button. That's right. Because the monkey pressed the button. Surprising stories every week, wherever you get your podcasts. Speaker 8 (4:43) This election season, let the NPR Politics podcast save your time and your sanity. We'll help you understand key races, which polls you can safely ignore, and what might happen if power shifts in Congress. Our short daily episodes come out every afternoon, so you can spend less time scrolling through each chaotic news cycle. Make NPR Politics your hub for midterm election coverage. Follow our podcast on the NPR app or wherever you get your podcasts. Speaker 1 (5:09) For a long time, we did not really know who was rich in America or how they got rich. I mean, we knew how much the CEOs of public companies make from SEC filings. We knew about the Forbes 400 list, their government surveys. But that left us with only a fuzzy picture of the richest Americans. Speaker 7 (5:27) Although we did know one big thing about the richest 1%. They were getting a bigger and bigger slice of the nation's income. Like take all of our income in the United States, all our paychecks, business profits, stuff like that. The top 1 % share of it, it more than doubled over the last half century. This was according to really influential research by these French economists. Speaker 1 (5:49) Ooh la la. Speaker 7 (5:50) Thomas Speaker 1 (5:51) Biggity and Speaker 7 (5:52) Emmanuel Saez. They were the ones who helped inspire the defining slogan of the Occupy Wall Street protests. Speaker 7 (6:02) These are the economists who got us talking about all this kind of stuff. The 99%, the 1%. But Speaker 1 (6:08) their research really just gave us one side of the story. We had this big blind spot when it came to private businesses. Nobody knew what industries were propelling people to the 1%. Surprisingly, there wasn't clear data on... which people owned which businesses or what they even sold or created at these businesses. We didn't know if a business owner had one business, a bunch of businesses. How Speaker 6 (6:33) big the businesses were, you didn't know that either. Speaker 1 (6:35) Did we know anything else, like how many employees they had? Nothing, Speaker 7 (6:38) no. But in 2014, Eric Zwick and these two other economists, Owen Zadar and Danny Yagan, they got the assignment of a lifetime, one that would ultimately give us an unprecedented look at the income and wealth of private business owners. At first, the Treasury Department tasked them with kind of a simple question. What are these private business owners paying in taxes? I mean, the IRS could audit individual people, you know, one by one and figure that out. But as far as like the big picture of what these business owners were paying on average, the answer to that was buried deep in a labyrinth of data. Speaker 1 (7:16) Eric, Owen and Danny were fresh out of getting their PhDs, working in the basement of the U.S. Treasury on this giant. tax data project and they create like a little little nickname for themselves. Please Speaker 7 (7:27) tell us what that name was. Speaker 6 (7:29) Yes. Yes. Because we were, you know, children in grown up bodies, we referred to ourselves as the tax ninjas. Speaker 1 (7:35) You and the nicknames. And Speaker 6 (7:37) I don't know which of us came up with the idea. Oh, Speaker 7 (7:40) I think we have an idea. I Speaker 6 (7:41) think we know who. So Speaker 7 (7:43) were you guys fans of that movie