Two conflicting views of the American dream

The traditional definition of the American dream: America is a land of opportunity to those who are self-reliant and who work hard. Everyone can follow his/her dream to pursue whatever legal avenue brings happiness. It is a land where your station in life is not fixed at birth; rather, each individual can rise based on talent and effort. A free market allows all of us to expand the economic pie, raising the overall prosperity of society.

A progressive view of the American dream: The American dream can’t be fulfilled unless it can be assured. To protect it, government must be involved to ensure that everyone gets a “fair share.” Individual effort must be superseded by government oversight to distribute the fruits of labor equitably.

The Heritage Foundation, in a special report issued in September, contrasts the two conflicting dreams succinctly. The traditional view uses the ladder of opportunity as a symbol of progress; the progressive view uses an escalator of results. The traditional view aims to ensure all have the opportunity to rise; the progressive view ensures that all actually rise. The traditional view sees the primary focus on the individual, not on government assistance, with government playing a supporting role; progressives see government in the primary role. The traditional view sees opportunity springing from free markets; the progressive view relies on government spending. As to the greatest threat, the traditional view cites government dependence while progressives blame income inequality.

For progressives, the last point is the real focus. Inequality is the result of a new gilded age, in which those who succeed financially do so at the expense of others. But is the assertion true and does inequality threaten opportunity? The answer to both is no.

The unit used to measure wealth is household income, which shows a growing disparity between the highest and lowest income brackets. The yardstick is misleading. First, it doesn’t account for the explosive growth of pass-through entities created in the last 40 years. These corporate creations add company profit to personal income, which boosts the “income” for tax purposes but, in fact, creates no new wealth. Second, the income is determined before taxes are applied, thus not accounting for the lower net income of the recipient. Third, non-cash transfers to low-income households are not included in any calculations as income. Fourth, the number of households has grown with the breakup of the traditional family, thus lowering household income but not reflecting overall personal income.

I have long argued that household income is a poor unit of measure. A better yardstick is consumption. How are Americans faring compared with the rest of the developed world? Quite well, it appears. Those Americans classified as poor occupy more living space than the international middle class, and 42 percent own their own homes. America’s poor are not undernourished; in fact, we have a national epidemic of obesity. Health-care consumption for the poor is covered through Medicaid, which spends twice per-capita of any other country; 80 percent have air conditioning; all have TV sets and cellphones; and 75 percent own at least one auto with a third of the poor owning two.

Does inequality threaten opportunity? Everyone recognizes the inequality around us. Some are born handsome, smart, and athletic. Some cultures stress education and striving to achieve and their offspring often excel. Our genes can determine our state of health and longevity. Society accepts that superstars in sports, business, and entertainment are compensated for their prowess at levels far above most competitors. Inequality surrounds us, but it is not an obstacle to opportunity for all unless you believe that the economic pie is fixed and one sector must take a share from another.

The focus on inequality masks what really impedes the growth of the traditional American dream. Let me start with mindless government regulation, which strangles growth in the name of protecting society (Does every would-be barber need 1,500 hours of training?). Next is crony capitalism, where big government and big business collude to benefit the politically connected (think Solyndra). 

The collapse of the family over the last five decades has trapped millions, especially children, in poverty. Dependence on government welfare has become endemic, sapping individual initiative. With 70 federal programs, six federal departments, and scores of state agencies doling out nearly $1 trillion annually, millions of beneficiaries find it easier and more remunerative to stay on welfare than to find work. We see a similar pattern in federal disability benefits which have increased eight-fold in the last half century while the population has only doubled. Our concept of a safety net has been replaced by that of a hammock.

But individuals classified as poor aren’t the only ones addicted to public largess. American farmers (2009 figures) have an average net worth of $915,019 (159 percent above the national average), and in 2010, the U.S. Department of Agriculture tells us the average farmer enjoyed $84,440 in income. Keep in mind that farmers typically live in areas with a significantly lower cost of living, and the failure rate of farms is one-sixth the rate of other businesses. 

In 2010, the average farm income increased by more than $7,000, while the average U.S. household income dropped by $500. And how do we distribute welfare payments to farmers? The bottom 80 percent receive just 20 percent of the payments while those with incomes of $200,000 and net worth in excess of $2 million garner the rest.

The failure of our public education system stymies the growth of our economy. Despite doubling education expenditures (in real dollars) since 1970, only 40 percent of fourth-graders countrywide achieve their grade level in math; under one-third read at grade level. By eighth grade, the number performing math at grade level drops to 34 percent. In math, the U.S. places 25th among the 30 developed nations compared internationally. Also impeding our economic vitality is the escalating cost of higher education, which has now saddled taxpayers with a $1 trillion obligation of indebtedness.

Finally, the uncertainty created by an unresolved economic-policy direction and the indebtedness accumulating at an astronomical rate make planning and investing especially risky. Business people are reluctant to invest in this climate, uncertain of customer demand and of a predictable return on their investments.

Dream still alive

For me, the traditional concept of the American dream is still very much alive. For the past quarter century, I have spent every week interviewing entrepreneurs and executives, listening to stories of how they pursued their personal dreams. Many had no higher-education, some are immigrants, others their first-generation sons and daughters. There is, however, a common thread of hard work, perseverance, and self-reliance that binds all of these stories together. None believed in the Huck Finn notion that work was for suckers, and all knew they were liable for their own bad decisions or could be victims of bad luck. Each took whatever talents he or she had and applied them, overcoming myriad obstacles to reach their dream. Many have been very generous in sharing their expertise with others and in giving back to their communities.

For these Americans, the dream is also alive. These entrepreneurs see justice in the process, not in the outcome. They don’t look for guarantees in life. Their success is earned; it’s not built on envy of others but on emulating those who were successful before them.

It’s time to defend the traditional American dream by explaining it so all can see the promise of its premise. This is what’s at the center of the debate between Republicans and Democrats as we head for the crucial presidential election in November. It’s all about economic freedom.       

Norman Poltenson is publisher of The Central New York Business Journal. Contact him at npoltenson@cnybj.com