Is the American dream dead?

If not, it's certainly ailing with the onset of huge student debt and the stagnation of investments that once seemed to grow magically.

By MSNMoney partner Sep 25, 2012 11:32AM
US News logoBy David Francis

The concept of the American dream—that this country is the land of opportunity, and that anyone can achieve success through hard work—has given hope to people born without privilege, and it's one of the main reasons people come to the United States from throughout the world.

 

But in recent years, the basic premise of the American dream has been questioned. The Great Recession had a much larger impact on the working class than it did on the upper and middle classes. Most of the people who lost jobs had a high school education or less. A recent report by Georgetown University's Center on Education and the Workforce found that employment among people who didn't attend college has been flat since the recovery began, meaning people who lost their jobs can't find new ones.

 

The uneven nature of job losses spurred by the recession has exacerbated income inequality, further spreading the gap between the wealthy and the rest of the nation. According to Nobel Prize-winning economist Joseph Stiglitz, the percentage of income that goes to the top 1 percent of American earners has doubled since 1980, while the percentage that goes to the top 0.1 percent has tripled.

 

In addition, the Organization for Economic Cooperation and Development (OCED) recently warned that structural income inequality in the United States threatens the long-term strength of the country.

 

"The U.S. education system is less effective than those of other countries in helping children realize their potential," OCED said in its June 2012 report. "The United States is one of only three OCED countries that on average spend less on students from disadvantaged backgrounds than on other students."

 

The stark inequalities between the upper and middle classes have become fodder for the presidential campaigns. More important to average American consumers, however, is what these changes mean as the nation's economy attempts to rebound. Are there still real opportunities to better your lot in life through hard work? Or is the American dream dead?

 

According to Scott Winship, a fellow in economic studies at the Brookings Institute, most of the research on economic mobility focuses on people who were born in the early 1970s. These studies have not reached a consensus on whether mobility is increasing or decreasing.

 

However, Winship says that when studies are done on people born in subsequent generations, they are likely to show a decline in economic mobility. "Kids born more recently, when they are in (their) middle age, will have experienced less mobility than we have in the past," he says.

 

But Winship adds that it's not clear whether this lack of mobility is structural or cyclical. Opinion polls show that many American parents believe their children will not be better off. "If you look at trends in public opinion on the question of whether children will end up better off, you do see very clear cyclical patterns," says Winship. "During downturns, people are more pessimistic."

 

Brian Domitrovic, a professor of economic history at Sam Houston State University in Texas, says the main factor that could limit economic mobility is debt, particularly debt in the form of student loans.

 

"When you're talking about college kids with $120,000 in debt, nothing like that has been in the landscape before, especially in terms of women," he says. "You're going to spike the impossibility of realizing the dream if you're saddled with that kind of debt coming out the gate."

 

Domitrovic adds that any lack of economic mobility is intensified by the anemic recovery of the U.S. economy. "I don't think there's going to be any problem with jobs and wealth in this county if we figure out a way solve the problems of the Great Recession," he says.

 

Lisa Kirchenbauer, president of Omega Wealth Management in Arlington, Va., says she believes the American dream of improving one's lot in life still exists, but it's becoming more difficult to accomplish.

 

"I'm not saying it's as easy to start a business as it was in past years, or that people feel they can afford to take some of the risks that they would have in the past, but it is still possible to increase one's wealth," she says. "It may take sacrifice in the short term, disciplined savings, a conscious approach to spending, (and) smart investment management, but it's still possible."

 

However, Kirchenbauer believes the era of growing wealth quickly through an investment is over. The tech and real-estate bubbles allowed people to climb the economic ladder swiftly, but that wealth was lost just as quickly when those bubbles burst.

 

"What we have also learned is that you cannot count on your investment portfolio to do all the heavy lifting for you. You have to add to it if you want to see it grow," she says. "I think that many investors had gotten used to the wealth being created almost by magic."


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18Comments
Dec 1, 2012 11:58AM
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I can't see the dream at the moment, I really don't know how many people can see past the problems in their lives to really enjoy what they have worked for, if they don't achieve the dream then they won't realize until it's too late and their life or their best years of their youth will be wasted in hard work for nothing.
Oct 1, 2012 2:40PM
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The End of a Dream

            It didn’t happen all at once, but the dream that was the United States of America, the Great Republic, has died. It wasn’t caused by other countries hostile to the idea of true freedom; it wasn’t caused by a radical religious organization. The downfall of the United States was all from within its own borders, by its own people. The people, for whom others have died, have allowed the country to die a slow death. The me too, me first attitude that started many years ago, along with the idea that all are entitled to the fruits of others hard work, has allowed this country to bleed to death. When the British raised the tax on tea, our forefathers should have just shut up and paid the tax. Almost 239 years later, what has changed? Thousands have died for absolutely nothing.

 

June 28th, 2012

Oct 1, 2012 1:26PM
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Totally agree with some of the posts; the Dream is not dead but difficult to obtain.  We have so many obstacles to overcome.  my 19 year old had to move back in as he could not pay his basic bills while living in his own apartment.  He does work just not able to earn enough at this job.  He could go to college but he does not want to start his life out in debt.  I hope he can find his path and at the very least MOVE OUT.  I am ready for him to move out and be a young man.  Till he can make the ends meet he will be with us though.  I suspect it is that way for many of our youth.  I know in my middle age I am finding it very difficult to maintain the basics.  I am fortunate to have a house.  It needs lots of repairs but I still have a place to live.  I unfortunetly still owe a large sum on my education. Not sure when I will get that paid off. So I can say the dream is difficult to achieve in our current society.
Sep 27, 2012 12:22PM
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Two days ago, Tuesday morning, 09/25, Charles Plosser, president of the Philadelphia Federal Reserve Bank, said that he did not believe the Fed's latest stimulus campaign would do anything for economic growth; he had strongly opposed the Fed's decision to buy up to $40 billion in mortgage bonds. Likewise, many prominent and highly respected economist concur with Mr. Plosser's statement.  In my opinion, for what it's worth, I unquestionably believe that Mr. Plosser's assessment of the Fed's actions accurately reflects the state of our economy and the absolute futility of this irresponsible stimulus plan!  Moreover, I applaud Mr. Plosser for having the courage to stand-up to "the powers that be" and tell the American public the truth.  

Short-term, this so called "stimulus plan" may very well help our economy; unfortunately, in the not too distant future, it, along with all the other recent Fed economic stimuli, will undoubtedly devastate our economy -- gross devaluation of the US Dollar in conjunction with hyper-inflation.  I sincerely believe that our economy, and even worse, our country is on a "slippery slope."  I'm certainly not smart enough to know what the answers/solutions are.  I do know, however, that if Congress, our political leaders, and corporate leaders don't stop their childish bickering and start impartially working together to solve our country's problems, we very well may lose our prestigious position as the most powerful political and economic leader of the free world.
Don Moore
Sep 27, 2012 8:15AM
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Greenreaper...This just out.  This is one of the reasons we are stuck in neutral...

 

New research into the impact of federal regulations on manufacturers, commissioned by MAPI and prepared by NERA Economic Consulting, confirms that since 1998 the cost of manufacturing-related rules has grown far more rapidly than manufacturing itself: Manufacturing regulations grew an average of 7.6% a year in that time span compared with average growth of 0.4% for the sector’s output.

Sep 26, 2012 5:17PM
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Washington & Wall Street slowly poisoned the patient, and now the "patient is on life-support!"   You see, Wall Street wanted more profits so beginning in the 1950’s they started to systematically decimate the then-thriving middle-class by paying-off (campaign contributions) the politicians who drastically cut corporate taxes and passed one-sided import-export treaties and tax laws that only served to hasten the demise of our industrial and manufacturing infrastructure…one after another after another!  Then, those people that we sent to Washington compounded the problems by building a bigger and bigger bureaucracy adding layers and layers of rules, regulations, penalties with loopholes only for their Wall Street campaign contributor- friends (of course).  So now, in 2012, 47% of us are on food stamps (go to Wal-Mart and see those people with $100 tattoo’s and body piercings using food stamps – it’s a hoot!); we have millions and millions of illegal immigrants working the dwindling number of jobs that many of those 47% people don’t want to do. Add Obama's socialism, and, this is America 2012.  No Hope, but plenty of “Change” --- for the worst!  The Death Watch has begun! 

 

Sep 26, 2012 11:25AM
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This Country is in a downward spiral GOVCO taxing us from as many ways as possible Corporate greed is hurting American working class as they want more and more from less people .Wealth gap is rising ,no job growth is main reason so many people getting some kind of Aid from GOV. if you can't find a job its hard to improve your financial status, high price's for main things people have to have IE-gas,power,water,food,where does it all end ? 
Sep 26, 2012 8:42AM
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more protest in greece! go ahead idiots vote for obama!

US isn't dead but it has one foot in the grave and the other

on a banana peel! watch or listen to the howard stern interview

of obama voters on the street to see how STUPID AND

BRAINWASHED THEY ARE! they think mc cain is running

and ryan is a black man and Obama's running mate!!!

 

Sep 26, 2012 4:38AM
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In my opinion, the problem isn't with the government, the problem is with the people and our lack of involvement in government and politics.  For years now we've been trading over our civil liberties in exchange for a false sense of security.  It's amazing how more Americans can tell you about the latest episode of American idol, than about the changing political climate in our society.

We took part in creating a society where the majority is ruled by a few.  Now that things have really gotten out of hand, people are starting to wake up and are complaining.  There's no time to complain and dwell on the problem, it's time we collectively agreed upon a solution.  I can tell you one thing, the solution isn't continuing to allow the few to rule the many.  It's time for a redistribution of power in our democracy.

There's over 300 million people living in this country today.  What we need to do is stop buying into this system, and start making our voices heard.  What would happen if 230 million taxable Americans decided to stop paying taxes until policy reflected the needs of the people?  

We need to forget about the things that divide us like race, religion, sex, sexual orientation, etc... and show the world what' makes our democracy so great.  Our needs are the same people.  We all want to live in peace, we all want to see our children grow and blossom, we all want to have enough money to live comfortably...  Americans as a whole have to stand up and make our voices heard.  Not through the filter of a politician, but from the hearts of the people that makes our country so great.

We, the people, have to leave our comfort zones to confront this problem head on!  If we don't, than we'll continue to be stepped on by government and politics.  Do you think Romney and Obama are worrying about their future and the future of their children?  There's no glory without sacrifice.  What are you willing to sacrifice for a better America?
Sep 26, 2012 1:09AM
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The dream isn't dead, but we've put tremendous barriers in front of that dream, and raised those that had previously been beaten down, whereas other advanced nations are moving toward making the dream MORE accessible to all their citizens.   We've made it virtually impossible to work your way through college without incurring large debts.  Meanwhile, college is virtually free in other major nations.  We fail to push our young people into math-oriented fields.  So Japan, with 1/3 our population graduates twice as many scientists and engineers.  The dream is alive in Japan even with two decades of a stagnant economy.  And the dream should NOT be limited to college types alone, but in America our education system is dismantling vo-tech high schools, saying college is where we want to push everyone, even though many don't fit there, while shortages grow in skilled and certificated mechanics, masons, carpenters, etc.  Other nations have stronger work-study relationships with private businesses.
Sep 25, 2012 4:48PM
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I agree with the tone of the article that the American Dream of every rising income and wealth has gone away.  I feel sick that so many young people cannot find decent paying jobs and that even middle aged people like myself find themselves worse off than five or six years ago.

 

I really believe that the U.S. like most of the other developed world is going to face slow growth, high unemployment and hard times for quite a few more years.  The excesses and waste of the booming real estate market may take a decade to overcome.  Spain has 20% unemployment.

 

There are around 20 million unemployed Americans and only net job growth annually of 1 million; rising productivity and births add the equivalent of at least 1 million new workers annually.  Job growth would need to rise 5 million new jobs annually do do away with all unemployment over five years. 

Sep 25, 2012 12:59PM
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Get the government fools off of the peoples backs and success will follow.
Sep 25, 2012 12:48PM
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As a small business owner, I refuse to say the dream is dead.  I prefer to say it has been on hold for the last few years.   The reason is NOT the great recession, it's UNCERTAINTY.  The unknown in added regulation coming down the pike. The bashing of the business creators and saying we didn't do it, government did.  The unknown of what my new tax rate will be and how much I have left over to invest in my business.  The difficulty in getting a loan for my business.  What will an added employee cost in the coming years with health care costs and other regulatory requirements?  If there isn't a change in administrations, I will take the LOW RISK path for the next few years, investing in only sure things.  If there is a change and start feeling some of the uncertainty is falling away, I will take more risk in hiring and investing to grow.  Today I wait till November.
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