What Wessel and others can’t seem to explain is how we Americans supposedly save nothing, yet at the same time manage to get wealthier and wealthier every year. Indeed, data last month from the Federal Reserve show that U.S. household net worth hit a record of $49.8 trillion, up roughly $5 trillion in the last year alone. Notably, those gains were split almost equally between residential real estate and financial assets.
Tamny is using the same definition that Lawrence Kudlow and David Malpass have used in the past and risks running the same mistake that Robert Samuelson made:
Since I have blasted the folks over the National Review for touting the over-time increase in nominal aggregate wealth as opposed to the more modest increase in real per capita wealth …
Tamny is referring to the reporting of household net worth from table B.100 of the Flow of Fund Accounts. Nominal aggregate wealth rose by 14.6% from the end of 1999 to the end of 2004, but also note prices rose by 11.5% so aggregate real wealth had increased by only 2.8% over this five-year period as opposed to an increase in population of almost 5.2%. In real per capita terms (using 2000$), net worth was over $153.5 thousand at the end of 1999 but only $150 thousand at the end of 2004.
We should be delighted to note that even Donald Luskin is finally coming around to discussing issues in real per capita terms. Unless Malpass wishes to enter the race for Brad DeLong’s stupidest man alive, he might admit that he has also learned this simple concept. So might he and Luskin kindly teach their National Review colleagues what most college freshmen already know?
The next lesson at National Review University should be taught by Ricardian Equivalence advocate Victor Canto – that simply being that the Kudlow-Malpass-Tamny definition of savings omits the fact that Federal debt is rising in real per capita terms. But one step at a time for these fellows.