How’s the American Dream doing? Not bad at all!

By James Pethokoukis of AEI.

"Writing in The Nation, Maria Bustillos advises caution when hearing some politician or billionaire musing about the “American Dream.” This from her piece, “How the ‘American Dream’ Became Un-American: When plutocrats defend it, and democrats bewail its passing, it’s time to recall the original meaning of the phrase”:

Powerful political language is invariably corrupted and exploited by many actors, and that’s why it’s crucial to trace out this history of meanings. Whenever the phrase “the American Dream” is invoked, we should take care to consider whether it means the dream of a better life for a lucky few, or a better life for everyone.

There are different ways to define the American Dream. In a 2019 survey commissioned by AEI, 94 percent of respondents reported that having a successful career was essential or important to their own view of the Dream, while 88 percent reported the same about having a better quality of life than their parents. And it is the economic aspect of the Dream that is the focus of the short and sharp (and excellent) 2020 book “The American Dream Is Not Dead: (But Populism Could Kill It)” by my AEI colleague and economist Michael Strain. And I think three of the many informative charts from that book give a great indication of the health of the Dream heading into the pandemic.

This first chart shows that over the past three decades, wages for typical workers have grown by 20 percent using the CPI and by a third using the PCE, the inflation measure preferred by the Federal Reserve.

This second chart is of absolute mobility: Are you doing better during, say, your 40s than your parents were doing during their 40s? Overall, Strain finds that around 73 percent of Americans in their 40s have higher incomes than did their parents.

Third, Strain notes that although the Congressional Budget Office found that income inequality between 1979 and 2006 increased by between 24 and 27 percent (depending on the definition of income), inequality only grew by 2 percent between 2007 and 2016. (Using income after taxes and transfers, inequality has actually decreased by 7 percent.)

Growth. Mobility. Equality. Nothing un-American about any of this. The American Dream, while it could be stronger with faster economic and productivity growth, abides."