4/13/2005

Making it to the Top

According to an article on CNN Money, an increasing number of economists’ claim that the US no longer lives up to its promise and that getting ahead is getting so tough that the very idea of the American dream is threatened. Some economists and policy makers worry about the dramatic widening of the gap between rich and poor. The top 1 percent of American families, for example, now own as much as the bottom 95 percent combined, the highest such gap among developed nations. Does this suggest that the American dream may be moving out? Although growing inequality offends many Americans’ sense of fairness, there’s no conclusive evidence – at least not yet – that it has lessened the odds of getting ahead. Getting rich will never be easy, whether you start poor or somewhere north of the middle. But the claim that the rich have pulled the drawbridge up behind them is simply false. In an economy as dynamic as this one, they can’t.

2 comments:

Anonymous said...

" But the claim that the rich have pulled the drawbridge up behind them is simply false. In an economy as dynamic as this one, they can't". The moron in Chief has burnt the bridge with his idiotic policies. Who among you can deny that?

Dr. Tufte said...

Hey anonymous: the rich guy who married money TWICE lost the last election.

I am bothered by the statistic cited in the source article. That goes against everything I know as an economist. It's telling that there is no attribution for it. It wouldn't be the first time an urban myth got into a discussion like this.

The U.S. may have a more unequal distribution of wealth than other developed nations. But the key word their is "may". I think you only get that result if you exclude ownership of real estate, which is far broader and deeper in the U.S. than in other countries.

In an event, using wealth is problematic. Wealth is the result of two things: 1) earning income, and 2) saving and investing it. The latter means that its distribution doesn't change much.

It is a fact that with income, the U.S. has a more mobile income distribution than other countries. There is a lot of inequality, but there is also mobility: our poor are poorer, but they don't get stuck in that state for as long.