The American Dream….Still a Reality
I’ve been writing this column for about four years now. Eleven months of the year, I truly enjoy it. December is the exception. There is just something about writing a political column at Christmas that makes me feel uncomfortable. Christmas is a time for forgiving and celebrating, not really a good time for partisan sniping or mind-numbing columns about Albanian fiscal policy. In that spirit, I tried to find some good news to report on that is appropriate for a political column but also conducive to time when Democrats and Republicans are sitting at the same table fighting over drumsticks rather than who should be president next year.
I found that good news. According to the U.S. Department of the Treasury and the Wall Street Journal (Nov 13th, 2007), the American Dream is still alive. In a report titled “Income Mobility in the U.S. from 1996 to 2005” the primary finding of the study, according to the Journal, is “that the U.S. remains a dynamic society marked by rapid and mostly upward income mobility.” Despite the “conventional wisdom” (which I find is not always that wise) that the rich are getting richer and the poor are getting poorer, the data does not support such a conclusion. In fact, 58% of people who were in the lowest income group in 1996, had climbed into a higher income group by 2005. Of those earners in the second lowest income group, half had moved into a higher income bracket and only 17% had moved into a lower bracket.
The Treasury study looked at about 100,000 tax returns over the 10 year period. The researchers controlled for inflation and used median income rather than average income to mediate the effects of a few large income earners skewing the data. The results were encouraging. Over that 10 year period, the inflation adjusted income of all Americans rose by approximately 25%. Remember, that is inflation adjusted, not raw data. In all, about 66% of Americans saw an increase in their real income compared to about 33% who saw a drop. Obviously, we would like to live in world where everyone saw an increase in income, but that’s pretty difficult in a high-tech, globalized economy like ours.
Another interesting finding is that the poor are getting richer faster than the rich are getting richer. Those Americans in the bottom 20% saw a 90% increase in their incomes. Those Americans in the top 20% saw only a 10% increase in their incomes. There were two groups of Americans who did see their incomes fall. The top 5% of earners lost 7% and the top 1% lost 26% of their income. Karl Marx, I’m sure, would be happy to hear that. In fact, half of the earners in the top 1% had fallen to a lower income bracket over the 10 year period.
What I like about the study is that it covers a time period that includes both the Clinton and Bush presidencies. No one can really claim partisan manipulation here. If there is any credit to be passed out to government for these findings, it will have to go to both administrations equally.
I think the more important lesson to draw from these numbers is that we still live in a country full of opportunity. I know it can be fashionable in some corners of our society to embrace self-loathing at every opportunity. Let’s face it, some people just love bad news. Most of them work for CNN. But as you sit around your Christmas table this year, it would be good to remember you live in a country where no one will shoot you because of your religion, your children are not judged by what tribe their parents belong to, and if you have a little ingenuity, some willingness to take a risk, and are not too afraid of some hard work, you can enjoy the social mobility that few nations on earth have ever been able to offer.