Streetcar Line

American Dreaming

We've never had it so good.

By 4.26.06

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Memo to Mr. and Mrs. Media: No matter how many times you report that the American middle class is getting "squeezed," you're just flat-out wrong.

This past Sunday's Parade magazine featured the latest attempt by the mainstream media to deny the self-evident truth that the American economy right now is booming. Before dissecting Parade's story, it's worth reviewing the real statistics. All the traditional measurements are not just solid, but spectacular: Unemployment is at a low, low 4.7 percent; the average inflation rate has been under 4 percent for years now; interest rates that seem high today (prime rate on a 10-year T-bond right around 5 percent) are, by historical standards, incredibly low. The economy is producing jobs lickety-split and, just yesterday, the latest consumer confidence report showed that measure of public financial optimism to be at its highest rate in four years.

In the face of this abundance of good news, Parade produces a tendentious poll that it selectively (mis)interprets to ask, in big headlines, "Is the American Dream Still Possible?" -- and then to answer that the "comfortable and contented lifestyle" that once characterized the American middle class "is harder to achieve and maintain." After a series of illustrative semi-hard-luck stories, the article closes by quoting a New Mexico woman to the effect that "The American Dream is a bygone thing." She and her husband, you see, net just $50,000 per year, and they have a seven-year old daughter who is deaf in one ear and goes to a private school that costs $3,600 each school year.

What's the supposed evidence from the poll that things are so hard? Well, you see, 47 percent of those polled who have household incomes between $30,000 and $99,000 per year "say that no matter how hard they work, they cannot get ahead." And "almost two-thirds say they live from paycheck to paycheck." Meanwhile, real median household income is down, reports Parade. And "the percentage of households earning $25,000 to $99,999 (roughly middle-income range) shrank 1.5 percent." And credit card debt is at an all-time high, and college tuition is too high, and "the savings rate for Americans is the lowest it has been in 73 years." And so on.

But here's the rub: The first two figures are for years 2000-2004, so they include the post-tech-crash, 9/11-influenced recession, but they exclude the huge boom of 2005. Also, the figure on the supposedly shrinking middle class (wow, a whole whopping 1.5 percent -- oh my!!) leaves out the most crucial information: In which direction did the shrinking occur? Did the 1.5 percent of Americans who no longer fall in that arbitrary income range sink below the range -- or, more likely, did they rise above it? If the formerly middle-income earners are now upper-earners...well, uh, what, exactly, is the problem?

ALSO MISSING IS ANY comparative data. Is it actually unusual for 47 percent of middle-class earners to feel they are running in place financially rather than "get[ting] ahead"? (How many of those feel they are falling behind?) Is it unusual for 66 percent to think they live paycheck to paycheck? If those same questions were asked, say, 25 years ago and again 15 years ago and the numbers in those years were much smaller, then that would be a sign of an increasing feeling of being "squeezed." But with no old apples to compare to these new apples, it's impossible to tell if the new ones are wormy or just par for the middle-class course.

Then there's the nearly useless information about the low "savings rate" in American households. A very quick Google search yielded a plethora of news articles and columns, from a variety of sources (i.e., not just conservative ones), explaining why the official measure of household savings is not terribly useful -- specifically, why it makes matters look far, far worse than they are. First and most importantly, the measurement excludes increases in the value of assets such as stocks and private homes. It also excludes employer contributions to 401(k) plans. In other words, what most Americans consider to be their nest eggs -- especially in this age of record-high home ownership levels and record-high stock ownership, especially in retirement plans -- doesn't even count, by official statistics, as thousands of dollars (or even pennies) saved for a rainy day.

Last year the Federal Reserve reported that the average U.S. household has a net worth of more than $400,000. In most people's minds, that's a lot of money saved. And last August, raging-moderate economics columnist Robert J. Samuelson, known for his doom-and-gloom outlook, noted that the low savings rate is belied by these statistics: "From 1985 to March of this year, Americans' mutual funds and stocks rose from $1.3 trillion to $10 trillion; over the same period, real-estate values jumped from $4.6 trillion to $17.7 trillion. Once you consider these value changes, most Americans don't look so irresponsible."

Finally, Business Week columnist Michael Mandel complains that the official measurement counts money spent on education and research-and-development as, well, spending, rather than as investments. He argues that they amount to a "hidden savings rate" that should be credited to our economy -- and notes that "the U.S. far outperforms its major industrialized rivals" in such useful investments.

NOW, BACK TO THE PARADE STORY. The Sunday magazine does dutifully report, but seems not to understand the import, of several encouraging statistics. It highlights, for instance, the supposedly disturbing news (which is actually a measure of the impressions of those surveyed, not of actual economic data) that 57 percent of what the magazine defines as middle-class respondents "say they believe that the middle class in America is decreasing." But the magazine doesn't see the contradiction between that finding and its passing note that, of the 2,200 Americans surveyed (this was before the pollster then self-selected for the $30,000-$99,000 range), "fully 84 percent described themselves as belonging to the middle class."

If so many Americans self-describe themselves as middle-class, while a majority of the what the magazine defines as middle-class respondents think the middle-class is actually shrinking, this shows nothing more than that the polled Americans have been bombarded with so much media-driven scaremongering about a shrinking middle-class that they have begun to believe it's true. True, that is, for other people out there, because an astonishing 84 percent of them, remember, believe that they themselves are indeed middle-class.

Finally, Parade also reports, but as if the numbers are a mere anomaly in their tale of woe rather than as if they are the real story of the poll, the following encouraging results:

- The average households polled "own a home and at least two cars, and they are able to take vacations."

- "Almost three-quarters of the middle-class respondents surveyed say they take responsibility for their own financial destiny and believe they will succeed or fail based on their own efforts." ("Still," Parade hastens to add in the very next sentence, "many are downsizing their dreams.")

- "More than 52% of middle-class Americans think that they're better off than their parents were."

- "80% say they believe it is still possible to achieve the American dream." (!!!)

And no wonder. Americans' sense of what is "normal" has changed a great deal over the years. So many things once thought of as luxuries are now considered necessities. Americans have bigger homes, more gadgets and trinkets, and more access to more types of entertainment than ever before. And Americans buy more food at restaurants (or pre-cooked take-out meals from grocery stores) than they did 20 years ago (and thus pay more for food, rather than pay less to cook at home), and probably (I can't find the statistics) far more than was the case 30 or 40 years ago.

INDEED, A NEWLY RELEASED SURVEY by ACNielsen shows that Americans recognize that dining out is an expendable luxury, which means the "squeeze" for supposed necessities is somewhat self-selected: "In the United States... consumers cited cutting down on take-out meals as their most popular cost-cutting method." (Worldwide, the survey showed that the supposedly imperiled middle-class wouldn't suffer if their finances seemed tight; instead, they would just "cut down on out-of-home entertainment and spend less on new clothes.")

In other words, the apparent problem isn't one of economic hardship, but of lifestyle choices and changed cultural expectations. What once would have seemed luxurious now feels, to many middle-class Americans, to be almost an entitlement.

All of which helps explain why, with the national economy booming to an incredible degree, President George W. Bush seems to receive no credit for the good news: Americans don't realize just how good things are.

It's especially hard for them to realize it when the mainstream media keeps using pretzel-twisted logic and misleading headlines to convince them that their livelihoods are frighteningly imperiled. But the truth is that the American Dream isn't merely alive and well, it's actually not even a dream. Instead, the beautiful dream is reality right here and now -- no matter what the headline writers say.

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About the Author
Quin Hillyer is a senior editor of The American Spectator and a senior fellow at the Center for Individual Freedom. Follow him on Twitter @QuinHillyer.