Americans have always been optimists. Historical opposition to confiscatory taxes, for instance, has been fueled, in part, by the popular notion that many people think they will be rich some day.
The worrisome new development is that polls suggest Americans may be losing faith in the historical notion that through hard work, determination - and luck - they may make some day be wealthy. That the decline in this belief tracks the financialization of the US economy - going back to the year 2000 - suggests that the data on unequal income distribution and opportunity are sinking in. They are upending traditional notions of the path to success. The implications for changes in voting patterns in a Presidential election year are not yet clear but could be decisive. JL
Bruce Bartlett comments in the New York Times:
Historically, less than 6 percent of people identify with the lower class – well below the poverty rate, which was 15.1 percent in 2010 – and about 3 percent with the upper class. Not surprisingly, the economic crisis has increased the ranks of the lower class and working class and reduced the ranks of the middle class and upper class.
The first thing to know is that there is no formal definition of who is rich, middle class or poor. Of course, there is an official definition for the poverty rate, but that figure is just a back of the envelope calculation that has simply been increased by the inflation rate since the 1960s. There are many other ways of calculating the poverty rate that could either raise the poverty threshold or reduce it.
Another problem is that one’s social class is a function of both income and wealth. There are many among the elderly who have little income but may have fairly substantial wealth by, for example, owning a home free and clear. At the other end, there are those with high incomes who are, nevertheless, deeply in debt, perhaps even having a negative net worth.
Social class also involves self-identification. According to the General Social Survey at the University of Chicago, which has been asking people what social class they belong to since 1972, more than 90 percent of Americans put themselves squarely in the middle – belonging either to the working class or the middle class.
Of course, social class is also a question of perception. A family that has temporarily fallen on hard times might still view itself as belonging to a higher social class than its income justifies. Therefore, it is also useful to look at how people identify their income class. The results are not dissimilar to those above – the vast bulk of people see themselves as being broadly in the middle.
Another factor that might shape people’s perceptions of their social class and what, if anything, the government ought to do to improve the distribution of wealth and income is the prevalence of mobility.
Republicans often oppose policies that would equalize incomes on the grounds that today’s poor could be rich tomorrow and vice versa. Data from the General Social Survey show, by and large, that people believe they have a pretty good chance of improving their economic condition, but probably less so than Republicans believe.
These data are confirmed by various New York Times polls, the latest of which, in October, found that 67 percent of people believe it is still possible to start out poor in America and become rich. Only 32 percent said that it was not possible. The peak of optimism came in February 2000, when 84 percent of people said it was possible for average people to become rich. The stock market peaked a month later. The trough came in January 1983, when only 57 percent of people thought they could become rich. That was right on the brink of an economic boom.
Times polls also cast light on the issue of mobility. In a 2005 poll, people were asked about their social class when they were children compared with today. People generally saw themselves as better off today.
Since 1989, The Times has asked people whether they think future generations will be as well off as people today. In October, 26 percent said that future generations would be better off, 22 percent said they would be the same and 46 percent said they would be worse off.
The peak of optimism was also in February 2000, when 44 percent said future generations would be better off and 27 percent said they would be worse off. The trough came in March 1995, when 16 percent of people thought future generations would be better off and 58 percent said they would be worse off. This was also right on the brink of an economic boom.
When people are asked whether it is the responsibility of government to reduce income inequality, they mostly disagree, but not strongly. The data for 2010 show an increase in the percentage of people opposed to income redistribution that may reflect the influence of the Tea Party movement.
The Times poll in October, however, found that only 26 percent of people thought the distribution of money and wealth was fair, with 66 percent saying it should be more evenly distributed.
Obviously, the question of who is rich in America is extremely fluid. The commonly used threshold of $250,000 is certainly reasonable, but it is nevertheless questioned by those who have such an income but also have equally high expenses, such as children in expensive Ivy League schools.
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