Saving the American Dream

by James Pethokoukis
It’s not as bad as we think, but there’s work to be done.

Recall Barack Obama’s casus belli: Rising income inequality has left the American Dream of upward mobility in tatters. It’s impossible to climb the opportunity ladder when the 1 percent have pulled it up. So time to redistribute those ill-gotten gains to the needy 99 percent.

But the moral and economic justification for the president’s populist campaign has run afoul of the facts. The superstar economists of the Equality of Opportunity Project find American upward mobility getting no better or worse for decades. As the EOP study puts it: “Children entering the labor market today have the same chances of moving up in the income distribution (relative to their parents) as children born in the 1970s.” And companion research by the group finds that, when looking at mobility across U.S. geographic areas, the gap between the 1 percent and the 99 percent is “uncorrelated” with upward mobility.

The inconvenient results of the EOP’s research should prompt a deep rethink by the inequality alarmists at the White House. After all, imagine how climate-change worriers would react to data showing no change in global surface temperatures for the past 16 years despite more than 100 billion tons of carbon being added to Earth’s atmosphere. Such a pause would surely cause environmentalists to at least reconsider their thesis.

Well, not exactly. Such climate data are a reality, and greens have been working hard to explain them away. Meanwhile the War on Carbon continues unabated, as will the Left’s War on Wealth. Obama is all in, as tomorrow’s State of the Union will probably again show. Of course, one can always hope he follows the (likely apocryphal) example of John Maynard Keynes and permits this new data to change his mind. Or at least open it a crack.

With Republicans, on the other hand, the risk is not that they’ll reject the findings but that they’ll reverse course. Some high-profile GOPers, including Mike Lee, Marco Rubio, and Paul Ryan, have been urging the party to focus more on improving upward mobility and reducing persistent poverty. It might be tempting to interpret the study’s results as suggesting the American Dream is hale and hearty despite a toxic culture, family breakdown, and huge labor-market changes from globalization and automation.

Such thinking would be a mistake. First, social scientist Scott Winship points out that those negatives have been offset to some extent by positive factors such as higher living standards, less racial and gender discrimination, and decreased exposure to lead and other toxins. Second, the EOP study also finds U.S. upward mobility is “consistently lower in the U.S. than in most developed countries” such as Canada and Sweden. Third, the likely increase in high-end inequality means the top rung is higher and thus harder to reach for those who lose the birth lottery. Finally, greater automation in the manufacturing and service sectors threatens the upward mobility of those bereft of the intellectual and social capital transmitted by good schools and stable families.

Policymakers should look to the EOP research for next steps. The research finds that the share of kids living in single-parent households “is the strongest correlate of upward income mobility.” Even kids of married parents have less mobility if they live in communities with a high percentage of single parents. Dealing with family breakdown isn’t as simple as reducing income inequality by raising top marginal tax rates. But obvious pro-family policies — such as eliminating safety-net marriage penalties — would be a good start. Areas with shorter commutes also have sharply higher rates of upward mobility, suggesting we need policies to improve public transportation and increase the availability of housing near areas with strong job growth. Achieving greater mobility also means better schools, including vocational training and apprenticeship programs. And to make sure good jobs are plentiful, regulations at all levels need to assessed for negative impact on entrepreneurship and innovation.

Income inequality may not be the villain of the piece — much to the Left’s surprise — but that doesn’t mean the American Dream doesn’t need saving.

— James Pethokoukis, a columnist, blogs for the American Enterprise Institute.

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