Monday, the White House proposed a new tax bracket for millionaires and billionaires, part of a $4.4 trillion proposal to rein in the country’s debt. Republicans such as Rep. Paul Ryan have called the proposal “class warfare,” but Obama defends it as only fair. Since the recession hit, the country’s rich have kept on getting richer. In fact, the flourishing of the ultra-rich raises an interesting thought experiment: In a world in which a lucky hedge fund manager can make billions in a single year, when will we get our first trillionaire?
The answer depends on variables including inflation, tax rates, and overall economic growth. In a first case, let’s assume that our hypothetical trillionaire is actually only as rich as today’s richest American, Bill Gates, whose estimated net worth is $56 billion. Since inflation slowly erodes the value of the dollar, it will be easier and easier to hit the trillion-dollar mark as time goes on. (We were all once Zimbabwean trillionaires, after all.) If the United States averages 3 percent annual inflation, and the richest American’s fortunes keep up with Gates’, America would have a trillionaire in 98 years. But now let’s assume that the richest American’s fortune not only matches the rate of inflation, but outpaces it by, say, an additional 3 percent a year. At that rate, we should have a trillionaire in 50 years.
Even that may be a conservative estimate, considering how fast the super-rich have been getting super-richer. Gauging how quickly the richest American’s net worth is increasing is a tricky exercise, given that for the past 15 years it has mostly meant tracking the worth of just one individual—Bill Gates. (His friend Warren Buffett, the billionaire namesake of Obama’s millionaire’s tax, briefly topped him in 2008.) His worth has plunged and climbed along with the price of Microsoft’s stock, peaking at the height of the tech bubble in 1999 at an eye-watering $90 billion. But at an average pace of growth, between 4 and 9 percent per year, the richest American could possess a trillion sometime between 2050 and 2085, presuming no major changes to the tax code and a healthy economy otherwise.
Of course it is myopic to presume the first trillionaire will be an American. Say that 27-year-old Mark Zuckerberg took his $8 billion fortune, went back on his promise to donate much of it to charity, and invested it successfully and aggressively for the next 25 years. Even if he made a magical, Madoff-like 20 percent return every year, he would still not be a trillionaire. *
Indeed, it seems far more likely that the first person to make the 13-digit dollar mark will come from a country more conducive to wealth concentration—a country with higher growth rates, rapidly expanding industries, fewer business regulations, and lower taxes. For the past two years, after all, Mexican business magnate Carlos Slim Helu has beaten Gates and Buffett for the title of world’s richest man.
Right now, commodities seem like the best bet for how the world’s first trillionaire might make his fortune: Demand from emerging economies is insatiable, and demand from developed economies seems unlikely to fall in the foreseeable future. The world’s richest family, the Al Nahyans of Abu Dhabi, are reportedly worth a collective $150 billion, thanks to high gas prices. A few decades of pain at the pump, smart investing, and dollar inflation, and the family’s net worth might hit $1 trillion. (America’s richest family, the Waltons of Wal-Mart fame, are worth $90 billion.)
Has any other individual or family—adjusted for inflation—amassed a trillion-dollar fortune before? Probably not. The richest-ever American, John D. Rockefeller, had a personal fortune of about $320 billion in today’s dollars, earned during the robber-baron days. And even the Rothschilds, the European bankers whose fortune ran into the hundreds of billions and whose name is a synonym for wealth, likely did not make it to a trillion.
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Correction, Sept. 21, 2011: This article originally stated that Zuckerberg would not become a trillionaire even after 50 years of such investing. In this scenario, he would reach $1 trillion within 50 years (but not within 25 years). (Return to the corrected sentence.)