The American Dream Is Alive and Well—but We Could Kill It
Despite the views of some commentators, the American dream is indeed alive and booming.
Despite the views of some commentators, the American dream is indeed alive and booming. Many of you may have read pieces suggesting that incomes are stagnating, but this assumption is mistaken. In contrast, the evidence indicates that America remains a socially mobile society. A landmark study published by the Pew Charitable Trust tracking income mobility since 1968 shows that fifty percent of Americans have greater wealth than their parents did at the same age. Furthermore, seventy-two percent of Americans whose parents were in the bottom fifth of the wealth ladder and fifty-five percent of those whose parents were in the middle quintile exceed their parents’ family wealth as adults.
Research demonstrates that approximately half of taxpayers who began in the bottom quintile in 1996 moved up to a higher income by 2005.
Moreover, buried inside negative reports are the astounding gains made by poorer people relative to the wealthy. Research demonstrates that approximately half of taxpayers who began in the bottom quintile in 1996 moved up to a higher income by 2005. Even more interesting is the fact that median incomes of people originally in the lower income groups accelerated more than the incomes of those initially in the higher income groups. Contrary to popular assertions it is poorer people, who are acquiring great gains. Citing the Federal Reserve Board’s Survey of Consumer Finances, the Wall Street Journal in a recent editorial argues that poor people seem to be thriving in America: “families at the top of the income and wealth distributions experienced very little growth in net worth between 2016 and 2019 “after experiencing large gains between 2013 and 2016,” while “families near the bottom of the income and wealth distributions generally continue to experience substantial gains.”
Notwithstanding the lamenting of systemic racism, the report finds that the median income fell for white families and rose slightly for black families.
Further, notwithstanding the lamenting of systemic racism the report finds that though black and white families experienced similar growth in median income, the median income fell for white families and rose slightly for black families. Interestingly, the homeownership rate grew during 2016 –2019 to 64.9 percent, a reversal of the negative trend between 2004 and 2016. Families also saw the median net housing value (the value of a home minus home-secured debt) rose to about $120,000 from about $106,000 in 2016. Low-income families also increased their ownership of corporate equities. Apparently, the doomsday rhetoric of leftists clearly does not match reality.
On the other hand, we ought not to decry the decline of the middle class. The middle class is getting smaller because Americans are growing richer. According to data from the U.S. Census Bureau, in 2018, 30.4 percent of American households earned over $100,000, up from 9.7 percent in 1967. Likewise, the share of households earning $35,000 or less was 27.9 percent in 2018, down from 36.4 percent in 1967. Another intriguing detail is that middle class people are now better positioned to buy goods, since the time-price of commodities has declined—meaning that people work less to purchase goods.
For example, economist Marian Tupy in a recent piece posits that the time-price of basic commodities fell by 72.3 percent between 1980 –2018. Hence, the time taken in 1980 to earn money to purchase one unit in a basket of commodities could purchase 3.62 units in 2018. With greater disposable income, the average American is better off today than he was thirty years ago. Similarly, Emily Dohrman and Bruce Fallick in a 2020 publication conclude that middle class Americans are doing quite well: “In comparing household incomes of the middle-class in the United States in 1980 to today, we conclude that real incomes for today’s middle class are somewhat higher than they used to be, particularly for households headed by two adults. … However, we also find that price increases are offset by relative price decreases in transportation, food, and recreation, among others, making real middle-class incomes slightly higher than in the past.”
Luckily for American citizens their living standards will continue to improve, because of the dynamism of the economy. In “A Calculation of the Social Returns to Innovation”, Benjamin F Jones and Lawrence H Summers note that the social benefits of innovations are not only astronomical but also greater than the costs of investments: “We find that the average social returns to innovation investments appear very large. … Even under very conservative assumptions, it is difficult to find an average return below $4 per $1 spent.”
The American dream is alive. However, onerous regulations can kill it. The Urban Reform Institute in its paper on mobility opines that ethnic minorities and people, in general, do best in regions where the climate is conducive to investment. One policy specifically highlighted as a barrier to the American dream is zoning: “The assault on suburban construction and single-family housing has been a major factor in driving median house prices in the coastal California metropolitan areas of Los Angeles, San Francisco, San Diego, and San Jose. … Restrictive land use regulations have also been associated with much of the unaffordable housing in Portland, Seattle, Denver and Miami, while rural zoning on the urban fringe has made new suburban tracts too expensive to develop around New York and Boston, … It is hard to imagine public policies more disadvantageous to the aspirations of Black and Hispanic families.”
Entrepreneurs and ordinary Americans are leaving regulatory states such as California and New York to settle in the South.
The study continues: “Despite this, planning regimes have instituted policies, often implemented as environmental necessities, that have helped raise housing prices in many large cities, particularly on the coasts. Barely one-third of African Americans own homes in Los Angeles, Boston, or New York.” As such we should not be shocked that entrepreneurs and ordinary Americans are leaving regulatory states such as California and New York to settle in the South.
Conversely, another hurdle to attaining the “American Dream” is the hysteria of the pro-lockdown narrative. Although several studies illustrate that lockdowns are ineffective at containing the spread of the coronavirus they are constantly touted by elites. Not only are lockdowns useless, they pose a serious threat to the health of small businesses. Though America’s future is bright—hysteria fueled by Covid-19, along with costly regulations can destroy its potential. Therefore, to prevent the undoing of the American Dream, we must remain steadfast in defending prosperity from those who wish to accelerate the demise of our civilization.
About the Author: Lipton Matthews
« Real Capitalism Lessens Racism An American Stasi? The Democrats May Launch One »
