The Myth of the American Dream

“Some people are born on third base and go through life thinking they hit a triple.” – Barry Switzer

American Dream 1

A number of years ago a friend of mine had a full athletic scholarship to play baseball at the University of Michigan.  While exceptional at baseball, he also was quite bright and would likely have been successful even if he didn’t make the Major League.  However, as he was playing baseball, just few weeks before he was set to head off to Ann Arbor, the ball came off his bat and hit him in an unprotected part of his head, leaving him with significant brain injuries.  Unable to play baseball or go to school, he has now spent his life as a dishwasher and doing other menial tasks to make ends meet.

Individuals in the United States are brought up with the national ethos of the American Dream: the belief that we are all free to prosper and succeed. However, the belief in the American Dream is predicated on so many faulty assumptions that it has undoubtedly caused harm to so many.  Like the situation of my friend, each and every one of us is equally the result of a vast array of seemingly random, or at least unpredictable, processes that shape our lives from the moment we are born.  Circumstances that we do not choose shape our lives in drastic ways and result in vast inequalities before we ever begin.

Walk into a few schools in your city of varying socioeconomic status.  By the time school starts, children from poor households are already behind those from more wealthy ones.  Of course, this difference isn’t the fault of the child and in many cases it’s hard fault the parents. Parents in these households surely couldn’t, as easily, afford additional learning tools, like books and may have to work long or odd hours to provide for their family limiting the amount of time they could spend. These differences simply compound overtime. How can we believe in the American Dream, when we know that children are so disadvantaged before they get started?

What would a country where the American Dream actually existed look like? To begin, each and every individual would have the same chance of moving upwards and downwards.  For example, if we split income into quintiles, 20% of those in the bottom fifth would make it to the top fifth and 20% of those in the top fifth would fall to the bottom.  Instead, only 6% of those in the bottom make it to the top, while only 7% who started at the top, end up in the bottom.  Similarly, 43% of children born into the bottom quintile remain in that bottom quintile as adults and 40% of children raised in the top quintile will remain there as adults – and this problem is only getting worse.

What’s more, is that America has one of the worst levels social and economic mobility.  For example, the best country in terms of social mobility, Denmark, only 25% remained in the bottom fifth and 15% climbed into the top.  Despite this, Americans have the strongest belief that they live in a meritocracy.  When asked whether people get rewarded for their efforts, Americans answered at near 70% while the median across 27 other nations hovered below 40%.

American Dream 2

Indeed, one’s family income and status play a huge role in determining where one will end as demonstrated above, but it is not the only factor.  At the moment of conception, our genes have set the stage to explain a considerable amount of the variance in success.  For example, we know that height plays an implicit part on our judgments of others.  We see taller people as having better leadership qualities, being smarter, whether or not it’s true.  On average, every inch is worth an extra $800/year. This may not seem like a lot, but on average, someone who is 5’5 will make about $6000 less per year than someone who is 6’1.  For all we hear about the differences in gender inequality, height actually makes a bigger difference.    And that only touches on one aspect of success:  income.  Other research has demonstrated that when it comes to attracting women, making friends, or being looked upon as a leader, for example, a man’s height plays an even greater role.  For example, 80% of women say they’d rather date a man who over 6 feet tall and eHarmony will only match women with taller men due to complaints about being set up with shorter ones.

Cultural circumstances play a similar role.  Note that in 1931, Adams defined the American Dream as one in which “life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement…regardless of the fortuitous circumstances of birth or position.”   And yet, this was said at a time when overt prejudice and discrimination was being applied to various races (e.g. African and Asian Americans) and women.   While certain leaps have been made with regards to explicit suppression of certain races, cultures, and genders, we still have a long way to go before we resemble anything like the American Dream.

An entire book could easily be dedicated to the way initial genetic and environmental circumstances influence one’s success.  Income, education, mental health, race, gender, diseases, location, and attractiveness are just a few of the obvious uncontrollable conditions that affect one’s life.  Couple that with a life of other relatively uncontrollable events such as injuries or new diseases and it becomes painfully clear that success is not doled out in some idealized meritocracy, but rather are the result of more fatalistic processes.

And yet, so many take the view that our successes are our own. Interestingly, when bad circumstances plague us, we’re likely to blame external factors; a bias in psychology known as the correspondence bias.   More importantly, however, we don’t grant the same belief to others. Rather, we typically take the view that one’s failures are their own.  Poor, homeless, and/or unemployed individuals are denigrated and told to fend for themselves without any sympathy or acknowledgment that anyone born into a similar situation would be in the exact same spot.  Increasing amounts of suffering are inflicted on people due to circumstances outside of their control.

This problem is further compounded by the fact that this belief actually hurts all of us.  Recent work by Richard Wilkinson and colleagues have noted that as inequality increases so do health and other social problems – across all levels of income.

For example, consider that it is more expensive to patch up the problems associated with homelessness, than to simply provide them with homes and other basic necessities.  Shelters and emergency health care are way more expensive than what it would cost to simply provide basic housing.   Estimates put the average cost currently between $66,000 and $134,000 compared to $10,000 and $25,000. Think of the good that could be done and the money that could be saved by simply recognizing that some people got dealt a rough deck and providing them with a real chance to make the best of it.

Another obvious inefficiency is what we spend on criminals and imprisonment.  On average, it costs over $31,000 per year to imprison a single individual which amounts to near 50 Billion dollars across the U.S., and this doesn’t take into account the billions of dollars spent on court fees and police[1].   More importantly, the U.S. dwarfs other countries in how many people we incarcerate; 2 million people, compared to the next country China with only 1.5 million people (which has about 3x the population).  What is responsible for such a high rate of crime? Surely, U.S. citizens do not carry some innate ‘criminal gene’ and so one can only conclude that a host of environmental and cultural factors are to blame.  Terrible drug policies and systemic racism surely play a part (and two more reasons for our non-meritocracy). But more vital is the fact that the U.S. fails to help those who are least fortunate – setting them up for a life of crime.  Ironically, when crime goes up, the gut-level reaction is to increase police and jail sentences, but that only costs more money, which in turn results in the need for cuts and important social programs are often the first to go.  Imagine what states could do with the billions of dollar we spend on police and prisons if instead, we only helped to provide for those who felt they needed to turn to crime to survive.  More teachers, better schools, free tutors, supervised after school programs – simple changes that would have amazing ripple effects to both lower crime, save money, and promote the wellbeing of so many.

I could go on and on.  One final example, the average student loan debt for going to college and university is $29,400 – but this also factors in the 30% of people who have their way paid for by a wealthy family or some scholarship; suggesting the total amount for people who pay their own way is much higher.    While most people have to pay for their education; those who have families that front the costs – save on both the amount to pay back the debt and the insane interest that comes with it.   More importantly, those individuals who have to pay for their entire education, likely need a job to pay to supplement their student loans, while those who don’t are free to spend their time on additional studying or taking part in worthwhile extracurricular activities; setting themselves up for additional advantages down the road.

“No man is an island entire of itself,” wrote John Donne.  Even those who are least fortunate still benefit from those around them, social services, as well as the many important people that came before.  But for others, their early advantages dwarf any benefits provided by any country’s social system.  The mantra “you can do anything you set your mind to” is only true for a select few.   Like individuals born with dwarfism who want to be NBA stars, some goals are simply out of reach from the moment some individuals are born.

I’ve worked hard and it feels like my successes are my own. But they aren’t.  I’ve been lucky to be born into a well-to-do, two parent household and the benefits that has provided me have been incalculable. For example, I recently won a prestigious scholarship for graduate school, partially as a function of some research I did in my undergrad.  The research position was unpaid and I was only able to do it because I didn’t have to worry too much about finances.

Whether I would have come to terms with this would be debatable had I not had the opportunity to see the other side first hand.  My girlfriend has had a tough life.  Born with not much, a father who passed away relatively early, and a mother with mental health problems, she’s had to work tirelessly to get where she is.  She is now a teacher and an amazing one at that. But if it weren’t for the benefits my parents had provided me and now transfer to her – she would be scraping by, likely unable to fulfill her passion.  Needing to use my car to get from school to school for her substitute jobs[2] as well as some additional resources to live (substitute jobs are hard to come by, at least at first), it is doubtful she would have ever been able to become a teacher, unless she could convince the bank to give her a loan; one that the bank would see as risky and thus extremely high in interest.

The American Dream is currently only that: a dream.   While the idea is beautiful, its execution has been disastrous.  That anyone can do anything is a wonderful belief, if true, but things shouldn’t be believed simply because we want them to be true.  Through this belief we have degraded and vilified those who do worse than us, believing that those who do worse are actually worse. This idea that people deserve what they get and that failures and successes are due to some inherent disposition[3] and not due to a wide variety of situational factors leaves us only to blame and disparage, rather than help and motivate.

The American Dream remains a myth, but it doesn’t have to be.  We can restructure our society so that we live up to the initial visions put forward by Adams and others.  We can live in a world where ‘life can be better and richer and fuller for everyone, with opportunity for each according to ability or achievement, regardless of social or circumstances of birth.’

[1] It is approximately 40 billion for 40 states, so I extrapolated to 50 billion for 50 states.

[2] In Canada, one has to put in over a year on the substitution list before they can become even a long-term occasional teacher.

[3] Even it is an inherent disposition, it is still arguably not ‘fair.’  Like the person with dwarfism and his dream to be an NBA basketball star.  This problem is a much harder one to solve and as long as their is genetic variance – it likely won’t be.

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Please Raise my Taxes

Please Raise my Taxes: Money Doesn’t grow on Trees

It’s election season here in Ontario with voting only 3 weeks away.  As such, mailboxes and TV commercials are packed with promises and attacks.  Of course, the U.S. is beginning their republican primaries, adding to rhetoric of trying to say what the majority wants to hear.

There is, however, one campaign promise that is offered by virtually every politician, regardless of political affiliation. The promise of not raising Taxes.  They sometimes attack others for increasing it in the past,  and some go so far as to promise to lower it, but noone promises to raise it.

I don’t understand this.  If you are under the mean tax line, which more than 50% of people are, then the benefits you get from taxes outweigh the costs*. The median is virtually always lower than the mean, because of the large dollar amounts paid by the very rich.  While it makes a lot of sense for the upper class to complain about  taxes, higher taxes are actually advantageous for those in lower class.  As such, the ‘threat’ of lowering taxes should scare away more voters than it brings in.  If you are under the mean tax line, which most people are, lowering taxes is in your disinterest.

Not convinced?

Imagine 5 friends decide that they want to go the bar once a week.     They could split the bill evenly, but the friends all have different income levels and so they agree to put money in a pot (A.K.A. taxes) to make it fair.  Let’s say they decide to put in $10, $15, $15, $20 and $40 from poorest to wealthiest respectively.   Now they have $100 to spend and here’s how it works out.

The  poorest friend chips in  10% or $10  (savings of $10)

The next 2 wealthiest friend chips in $15.00 each or 15% each ($15 or 30% total) (savings of $5 each)

The next friend chips in 20% or $20.

The last, and richest friend, chips in $40% or 40%.

Hopefully this reminds you of  our current tax system.  Those who make more money, have to not only pay more in absolute terms but also have to pay more in terms of a percentage of their income (see here).   You could imagine now that this is a country of 5 people, with a government budget of $100; or that each person makes up 20% of the population and the budget is $100 billion.

Now using the above example, let’s see what happens, if the 5 buddies (i.e. the government) decide to ‘cut taxes’; for ease let’s say by half.   If the ‘people’ want the same amount of beer/food, then their bill will still come to $100 but now they’ve only put in $50, leaving $50 left to be paid.

The  poorest friend chips in $5

The next 2 wealthiest friend chips in $7.50  (total of $15)

The next friend chips in $10

The last, and richest friend, chips in $20

Remember, they still owe $10 each (5 * 10 = 50) to pay for the bill, so now the poorest friend pays $15 ($10+5), with the following four paying $17.50,  $17.50, $20, and $30 respectively.

What happened?  The poorest three people are now paying more than when taxes were high, while the richest person pays less! (the 4th person broke even).  If you are not in the top 20%, why would you want that? When a politician says, I want to put some money back in your pockets, you’ll just have to take that money back out and more to pay for the things you’ve lost.

Of course, there is another option, that is more rational, but still not always so pragmatic; and that is to ‘cut taxes’ and then just ‘order’ less.  If we only have $50 in the pot, then we can say: only order $50 worth of beer/food.   So now, the poorest person still saves $5 overall, but they are only getting  a bonus of $5 worth of food/beer.  Before they had to pay $10 but they were getting a $10 bonus.

The problem is that more often than not, we don’t like lowering our bill from $100 to $50.  We don’t want  worse healthcare, poorer education, dilapidated roads, fewer policeman, dirty parks, etc.  Of course, there are times when there is fat to be cut from the bill, perhaps half a pitcher is always left on the table; but for the most part, the government has trouble cutting things, because, simply stated, those are the things that are wanted.  People want cuts, but when when they realise, that those cuts are going towards the things they like, and would pay for if they weren’t there, then obviously they are against it.   60% of Torontonians voted for Rob Ford (the current mayor), because he adamantly promised to make some cuts (“stop the gravy train”).   Now 75% of Torontonians are against those proposed cuts.

People want cuts, they want lower taxes, but they want to keep all the things they already have. You can’t have your cake and eat it too.

 

*Note: this assumes that tax rates are either increased evenly (i.e. a consumption tax like GST) or are increased more for the rich (i.e. income tax).  This doesn’t apply to increases in taxes for only the lower and middle class, which is quite rare