March 11, 2005

What Freedom Buys

Larry Kudlow "reviews" a new publication from the Federal Reserve: The Wealth of America.

In their "flow of funds" report, the Fed tells us that the U.S. just hit a record of $48.5 trillion in net wealth of American households. That represents an 8.8 percent gain over 2003. That, by the way, is our true savings rate.

Inside the wealth report, real estate was the big winner, rising by $2.1 trillion. Financial investments of stocks, mutual funds, and pensions rose $1.5 trillion. In total, netting out assets and liabilities, the wealth of America increased by $3.9 trillion.

Now, I say that's pretty good. Free markets, free trade, and add a dose of lower tax-rates, deregulation, and technology-driven productivity. Oh, and by the way, a $48.5 trillion net wealth is 121 times the 2004 federal budget deficit of $413 billion.

Publus Pundit notes that collectivist Venezuela is not doing nearly so well -- even with $55 oil.

Economics and Markets Posted by John Kranz at March 11, 2005 5:38 PM

Good stats, all. One picky point though, wouldn't it make more logical sense to compare the $48.5 trillion net wealth to the $7.7 trillion national debt not an annual deficit?

Posted by: Silence Dogood at March 11, 2005 6:01 PM

Your criticism is fair, but I think that Mr. Kudlow's point is illustrative against the tide of hand-wringing over the deficit.

As a supply-sider, he consistently claims that it is growth that will lead us out of d e b t, so he focuses more on pro-growth policies, even if they present short-term increases to the deficit.

History has been good to the supply-siders!

Posted by: jk at March 11, 2005 7:27 PM

Indeed it has. Capitalism is the only economic system that functions properly without an element of force.

To realize just how important an attribut this is, see my comment below on the 'Urban Politics' post.

Posted by: johngalt at March 12, 2005 10:42 AM | What do you think? [3]