Giving Compass' Take:

• Isabel V. Sawhill and Christopher Pulliam share six important facts about wealth in the United States that can help inform policy and philanthropy. 

• How can funders best use this information to guide effective giving? 

• Learn about defeating income inequality through prosperity. 

On Wednesday night, the first of the 2020 Democratic debates will take place with ten candidates vying for the national spotlight. Senator Elizabeth Warren, one of the leading contenders for the nomination, will take the stage. She has proposed a wealth tax on the richest Americans, sparking intense debate about wealth inequality in the United States.

1. There's a lot of wealth out there: American households held over $98 trillion of wealth in 2018.

2. There's also a lot of debt - and much of it is in our homes: American households also hold a lot of debt—over $15 trillion in 2018. Not surprisingly, over two-thirds of that debt is in our homes.

3. Wealth inequality is high and rising: The share of wealth in the economy is increasingly owned by families in the top of the income distribution. The top 20 percent held 77 percent of total household wealth in 2016, more than triple what the middle class held, defined as the middle 60 percent of the usual income distribution.

 4. Only the top 20 percent has recovered since the great recession: While the middle class has seen modest growth of 7 percent in their net worth since 1995, it has not yet recovered to its previous peak in 2007. This tepid recovery is driven by declines in home-ownership and stock market participation since 2007—if you do not hold assets, you cannot benefit from recovery in asset prices.

In contrast, the wealthy have seen robust growth since 1995 and have fully recovered from the Great Recession.

5. Americans’ liquidity could improve: A recent survey from the Federal Reserve Board found that 61 percent of Americans said that they would cover a hypothetical $400 expense with cash or its equivalent, a record high since the question was first asked in 2013.[v] This statistic has led some news outlets to say, erroneously, that nearly 40 percent of Americans can’t cover a $400 expense. Some politicians are using a similar line.

As Michael Strain and others have pointed out, saying that almost 40 percent of Americans can’t cover a $400 emergency expense is not correct. While 61 percent of Americans said they would cover a $400 emergency expense with cash or its equivalent, only 12 percent said they would not be able to pay for the expense right now.

6. Generational wealth inequality matters too: Age-based wealth inequality has increased over time. From 1989 to 2016, the median net worth of families with a head of household age 65 or older increased by 68 percent. Over that same time period, the median net worth of families with a head of household age 35 or younger decreased by 25 percent.

Read the full article about wealth in the U.S. by Isabel V. Sawhill and Christopher Pulliam at Brookings.