The growing wealth gap between Congress and the rest of America was a leading story on the December 27th nightly news. The evening television news reports were based on the New York Times article “Economic Downturn Took a Detour at Capitol Hill.” As the Lester Holt (NBC Nightly News) and my much-loved Diane Sawyer (ABC World News) reports went on, I became enraged! Not at Congress but at the so-called “journalism” – a word I use because of an inability to come up with a better one that is also printable.

Don’t get me wrong. Since I am not a paid congressional staffer or blood relative of a congressman, I do not approve of the 112th Congress’s performance, and my rage is not in defense of their ineffectiveness and ineptitude. As a former competitive speaker and trained attorney, I recognized the “art” (and/or tricks) of persuasion, but as a researcher, I am appalled by the intellectual dishonesty using data in a “news” story like this.

Summary of the Story as Reported by the Evening News

A powerful study confirmed what many suspect; as ordinary Americans saw their net worth go down by 8% since 2004, members of Congress’s median net wealth went up 15%. There is no party bias when it comes to green. Of the 67 millionaires in the Senate, 37 are Democrats and 30 are Republicans. The leaders of both parties are millionaires, including Nancy Pelosi, Mitch McConnell, Harry Reid and John Boehner (in order of wealth).

While it is impossible to report exact net worth, congress members are only required to report ranges of assets and debts. Open Secrets.org estimates median net worth of Senators at $2.63 million and that of Representatives at above $750,000. This compares to the average American family net worth of $96,000, according to Moody’s Analytics.

The data leads Viveca Novak of the Center of Responsive Politics to ask, “Can Congress relate to the “plight” of the ordinary Americans?” Larry Sabato, director of the University of Virginia Center of Politics explains how “it is easy to see how the gap in understanding and credibility can grow between congress and the people they are trying to represent.”

Failure to Answer the Question

Both news anchors, Lester Holt and Diane Sawyer, asked their respective investigative reporters (Lisa Meyers & Dan Harris) to explain “why” members of Congress have fared so well. It is Meyers and Harris who do the full reporting for this story, and while both sensationalized the spending habits (and good fortune – i.e., lottery wins) of high-profile members of Congress, neither reported the primary wealth sources or the number of multi-millionaires or super wealthy members of Congress.

Instead, they suggested that due to out of control campaign costs, the wealthy are favored and average Americans are unable to get elected or, more sinisterly, that members of Congress have “inside” information they use to their advantages when investing in the stock market. An allegation, which if true is not actually illegal. Several blogs assert what the network news programs only insinuate; congressmen are lining their own pockets with earmarks, using taxpayer dollars for their personal benefit and exempting themselves from financial regulations.

If you look at the wealth sources of some of Congress’s wealthiest members, it’s a real “sudser.” For example, Senator John Kerry (D - MA) came by his fortune the old fashioned way – by being born into it and then marrying it. Kerry is a member of the Forbes family and is a trust fund beneficiary. His second wife Teresa is the widow of Henry John Heinz, III, an heir to the H. J. Heinz Company. She married Kerry after her first husband (also a Senator) died in a plane crash in 1991. While Kerry is a wealthy man with an estimated net worth of $230 million, Teresa inherited wealth and is worth between $750 million and $1.2 billion.

From the other side of the aisle, Darrell Issa (R - CA), the richest member of Congress, got there by being a ruthless business man. In the early 1980s, like a California 49er, Issa sold his possessions and borrowed money to invest in Quantum Enterprises, an Ohio electronics manufacturer. He loaned money to Steal Stopper, one of Quantum Enterprises’ clients and took control of that company after its founder missed a payment, foreclosing on the loan. In 1982, there was a suspicious fire the insurance company disputed and, in 1985, Issa sold the company. He moved to California to start a new company whose signature product was the late-night commercial favorite, after-market car security system “Viper.”

While 250 members of Congress have an estimated net worth in excess of $1 million, only fifty-seven (57) are part of the now notorious “1%,” which is defined as a net worth in excess of $9 million. As the richest member of Congress, Darrell Issa’s estimated worth is close to half a billion dollars ($448,125,000), but only 7 other congressmen have a net worth over $100,000,000. Finally, 72 members of congress have a net worth less than the average American family including three (3) members with a negative net worth in excess of $1 million.

Sample Selection Error

Who thinks the U.S. congress is a good representational sample of the U.S. population? This is a case of classic sampling error. It is legitimate to compare Congress, or any organizational subset, for that matter, such as Executives, People Managers, etc., to the overall population. Where the danger comes in is in drawing comparisons as if the control group is a random and representational sample of the overall population.

Why might congress have weathered the recession better than “the rest of us?” As a caveat, I have not run the numbers, but my hypothesis is Age, Gender and Education are the factors driving the wealth difference more than membership in the Congress.

Why is age so important in calculating net worth?

Net worth is calculated by taking your current assets and subtracting your current debt. Assets include 401K balance, pension value, investments, real property, savings, cash on hand, etc. Interestingly, for the purposes of this congressional study, primary residence value, the largest asset of most Americans, was not taken into account when calculating congressional net worth.

When we are young, we collect debt, regardless of whether we pursue higher education. Unless one is born with a trust or provided a large cash gift at age 18, debt is unavoidable and should not be considered a four-letter word. Transportation, professional attire, and tools of a trade are all initial investments the young make to become productive members of society. After joining the workforce, the debt should naturally decrease as assets are obtained; therefore, net worth is often first a reflection of age and not prosperity.

The last twenty-five years have been either particularly good to older Americans or bad for younger Americans, depending on where you sit on the age continuum. According to the Pew Research Center, in 1984 the age-based wealth gap was 10:1. The gap means for every dollar of wealth a household headed by a family under age 35 had, households headed by 65-year-olds had $10. By 2009, this ratio ballooned to 47:1! While the recent recession has exacerbated the issue, this trend has been decades in the making.

Why would gender matter when calculating net worth?

Countless studies show that, on average, women earn less than men. While this statement is hotly contested, explained, justified, and/or rationalized, I believe women earn less than men and, thus, will be a topic for a future 'Half-time Post.' For purposes of the congressional study, it is striking that fewer than 20% of congress members are female, further evidence that congress is not a representative sample of Americans.

Does higher education impact net worth?

Americans are betting the answer is “yes,” while another passionately debated issue continues. Although the advantage a Bachelor’s degree holds over a high school diploma has eroded over time, there is still an economic benefit for degree holders. The issue really is not that the Bachelor’s degree has become less valuable, it is that the rising cost of obtaining a degree has eaten up much of the economic value. Going back to the net worth calculation, it takes longer today to turn a degree from a debt into an asset.

The Trouble with Averages

In all the stories (and blogs), it is Congress’s median net worth being reported. You are probably familiar with an introduction to statistics joke. When Bill Gates walks into a bar, suddenly the drunks in the bar, on average are millionaires. It is a brilliant example of how averages can lead us astray and create a false impression.

If you remove the 9 “super rich” members of congress (those with a net worth above $100,000,000), the average congressional net worth drops 45% - it drops 11% if you just remove Darrell Issa. It is still higher than that of the average American, but given the demographic make up and education level of Congress, wouldn’t you expect it to be higher?

Are members of Congress wealthier than average Americans? Of course, but given what we know about the average Congressman, no logical consumer of data should expect anything else. In other news, on average, young, thin, good-looking co-eds have more sex than you, too. In 2012, I ask you to be a demanding consumer of data and not accept the junk food statistics that, although tasty, lack nutritional value.