Reason Interviews

Michael Strain Wants You To Believe in the American Dream  

The economy is broadly healthy and that it's benefiting nearly everyone—including the lower-income households who need it most.

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In The American Dream Is Not Dead (But Populism Could Kill It), Michael Strain takes a deep dive into the state of the American economy. Strain, an economist at the American Enterprise Institute, doesn't gloss over the country's problems, particularly low workforce participation for young men without high school diplomas. But he marshals a trove of data to argue both that the economy is broadly healthy and that it's benefiting nearly everyone—including the lower-income households who need it most.

In February, before the market was disrupted by COVID-19, Features Editor Peter Suderman spoke with Strain about his book, economic pessimism, and why left and right alike have been getting this issue wrong.

Q: How do you define the American dream?

A: It means different things for different people in different times. But no matter what your specific definition, there's a strong economic component to it. The idea that you can better your economic outcomes, that if you work hard and play by the rules, wages and incomes will grow, and perhaps most importantly, that you can expect your children will be better off than you.

Q: So what's the good news?

A: If you listen to the populists on the political right, including the president, or the political left, you hear this message that the game is rigged, that the rewards to the economy flow only to the top. There's a bipartisan consensus that is striking.

That narrative is wrong. If you look at wages and incomes, they have been growing over the past three decades. America is still characterized by upward mobility. Workers do still enjoy the fruits of their labor in the sense that wage gains are still primarily driven by productivity gains.

Of course, different groups of Americans have fared better than others. The top 1 percent has seen much faster income growth than workers in the middle. But that doesn't mean that workers in the middle and toward the bottom have seen stagnant gains.

Q: Your book warns that while the American dream is alive, populism could kill it. How is populism threatening the American dream?

A: One way is populist policies. The policies [President Donald Trump] has pursued are designed to help the working class, but the trade war has, if anything, reduced manufacturing employment at the same time that it's raised consumer prices.

The second way is the message. If all people hear is that they're victims of the elites, that they don't have agency, that hard work doesn't pay off, that the economy only works for people at the top, that capitalism is broken—that will dim their aspirations. That message is deeply corrosive and can hurt the very people to whom it is targeted.

Q: What are the biggest wrong ideas that people have about the economy right now?

A: One is that wages and incomes have been stagnant for decades. Another is that since the great recession, we've seen a significant rise in income inequality. Another is that the American middle class has been permanently weakened. Another is that quality of life hasn't improved over the past few decades. Another is that America is no longer broadly characterized by upward economic mobility.

Q: One chapter concerns the "hollowing out" of middle-class jobs. You admit that's happening. But you also argue it's not permanent. 

A: If you look at traditional middle-class jobs—production workers in manufacturing, clerical workers—those jobs as a share of total employment certainly have been declining. That's caused significant social, political, and economic consequences. It shouldn't be dismissed.

But there has been a growth in other middle-wage jobs. These jobs are not as readily automated. They are middle-paying jobs that require a middle level of skill, [and they've] been growing as a share of employment.

It's a broader lesson in economic dynamism. You're going to see occupations change and occupations shrink in terms of their size. But you're also going to see them grow. We're seeing both.

Q: You're fighting a perception of economic decline. What would you say to people who perceive decline but aren't likely to pore through the data and look at the charts? 

A: What I would say is that the economy right now is very strong; that the rewards to this strong economy are accruing to all sorts of people, including workers with relatively fewer skills and lower wages, workers who are more vulnerable; and that if you work hard, you can better your economic outcomes. You can expect to see your wages and incomes grow, and you can expect your kids to do better than you. That's what the data show.

This interview has been condensed and edited for style and clarity.

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  1. “The economy is broadly healthy”

    What?????

    Even a few months ago, before the #TrumpVirus hit, the economy was bad. Reason.com’s benefactor Charles Koch was stagnating at a roughly $60 billion net worth — an unacceptably low figure. And Reason writers correctly pointed out the economic damage caused by Drumpf’s high-tariff / low-immigration policies.

    Now — despite the heroic efforts of Democrats like Andrew Cuomo — Drumpf’s disastrous handling of the virus has taken us from recession to depression. And Mr. Koch is now worth barely $50 billion.

    #HowLongMustCharlesKochSuffer?

  2. If all people hear is that they’re victims of the elites, that they don’t have agency, that hard work doesn’t pay off, that the economy only works for people at the top, that capitalism is broken—that will dim their aspirations. That message is deeply corrosive and can hurt the very people to whom it is targeted.

    That assumes that the people putting out the message actually have the best interests of their target audience in mind. If you assume that the people putting out the message have their own best interests in mind, it makes sense to convince the sheep they need a shepherd to protect them from the wolves.

    1. If you meet the messenger, kill the messenger.

    2. What is worse, a cynical politician who manipulates what the people believe in order to gain power, or a true-believing charismatic leader who promotes the same delusions?

  3. Strain appeared with Yuval Levin at AEI a couple of months ago before cordoba fever started. Back then (February) was a simpler time.

    Anyway, Richard V. Reeves was also there to push back against some of Strain’s rosier portrayals.

    The statistic I was hoping that they would discuss is the following:

    “Almost 40% of American adults wouldn’t be able to cover an $400 emergency with cash, savings or a credit-card charge that they could quickly access”

    That one is pretty well documented, and depends only on current data, and not data from the past thirty years. This is important because Strain gets in a tizzy about the “starting point” of various data sets used. But Strain never really brings the “$400 statistic” up directly.

    Some person or other can only be doing so great if they are living hand-to-mouth and hardly ever have a spare 400 bucks (or equivalent real credit (non-pawnshop) in that amount).

    All of the above aside, although the story Strain tells is probably quite a bit rosier than the lived experience of the 40% that don’t have $400, it is still a decent book. Even Reeves concedes this much.

    The video with Strain, Levin, and Reeves is on the AEI site, and also in the c-span video library:

    https://www.c-span.org/video/?469767-2

    1. “Almost 40% of American adults wouldn’t be able to cover an $400 emergency with cash, savings or a credit-card charge that they could quickly access”

      But that’s reality. Most of those 40% still cling to the dream that hard work will some day make them millionaires. This is how ideology works. We insist on the truth of the dream or story even if reality is telling us something else.

    2. Or 40% of American “adults” do not have the cognitive skills, knowledge, maturity, and/or self control to be on their own.

      Of course, nanny statists will just use this to justify their designs.

      1. No, you’ve misunderstood. 40% of Americans can’t raise $400 in a time of need. The percentage of Americans who are ignorant and lacking in self control is much higher.

        1. Count yourself in that group, Beavis.

          1. You’re in the other one.

    3. Not having $400 to hand is as much a result of life choices as it is relative poverty. Some of those 40% are in the lower income brackets and simply couldn’t have $400, not going to deny that. But a surprising proportion of them could have had $400 but made expensive life choices which reduced their ability to respond to emergencies – and that’s on them.

      A surprisingly large number of people choose to live at the edge of or beyond their means, even when their means are reasonably ample. A statistic that solely focuses on available savings but doesn’t factor in total income or spending decisions is a virtually worthless statistic. Liberty means people can and will make poor choices – that they do so is not an indictment of capitalism or the state of the economy.

      1. This.

        The Venn diagram of those who can’t scratch $400 from their proverbial couch cushions, and those who have an iPhone and an expensive phone plan very likely overlap a whole lot. It seems that the definition of “need” has been heavily skewed in the last 20 years.

        In my experience, people in America can generally afford what they want, IF THEY PRIORITIZE IT. I can’t tell you how often I hear “I can’t afford that X” and then watch the same person spend the cost of X (or a substantial portion of it) at the bar in just 1 or 2 nights.

        People just don’t get that if you drink beer at home instead of at the bar, or use a cheap phone (if they have a cell phone at all – you know, like 1985) there’s a good chance that you could get that $400 pretty damn quickly.

        None of this should be taken to mean that shit doesn’t happen, but in modern America, if you can’t scratch together $400, it’s probably your fault.

  4. Reading a list of sunny conclusions, given without any justification, is less than enlightening. Usually you do better, Pete.

  5. Q: How do you define the American dream?
    A: It means different things for different people in different times.

    Exactly correct.

    But far too many people and groups seek to define THE American Dream and impose it on others. And a common strategy requires a highly scripted and managed dream.

    1. But far too many people and groups seek to define THE American Dream and impose it on others. And a common strategy requires a highly scripted and managed dream.

      And the dream has to be something that’s just out of reach for most people but not so far out of reach that people just give up. And of course, it has to be a dream that can only be achieved by giving political power to the right TOP MEN. That’s the really important part.

  6. This didn’t age well.

  7. This guy is nuts. Big ticket cost of living items such as housing and healthcare have gone up considerably faster than incomes. Same is true of upper education which gives you less useful job skills than ever yet is increasingly necessary to qualify for most jobs. Not surprisingly, they are all items where the government is heavily involved. Technological productivity improvements have been outdone by government induced inefficiencies like endless regulation compliance, insurance on everything, liability and lawsuits and a need for an HR department and to hire lawyers, accountants, compliance and tax experts for the smallest and simplest of businesses. And the government’s covid-19 absurd overreaction will bring about the debt bubbling bursting much sooner leading to some combination of much higher taxation and/or high inflation that will drastically lower purchasing power.
    There is no way in hell the present and especially the future is looking better than say the 80s or 90s. We just have better and cheap electronics to distract us from reality. We also don’t know how poor we truly are until debt on every level from personal, business, local, state and federal finally comes due.

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