Tuesday, July 18, 2017

Book review: "Dream Hoarders"

Richard V. Reeves, Dream Hoarders: How the American Upper Middle Class is Leaving Everyone Else in the Dust, Why That is a Problem, and What to Do About It (Brookings Institution Press, 2017)

The power of Richard V. Reeves's argument is probably best exemplified by the troubled reaction of a New York Times reader. David Anderson of Weston, Florida responded on June 26, 2017, to an op-ed column by Reeves:
My wife and I fall within Richard V. Reeves's target. We met at an Ivy League school in the 1990s and fall within his "healthy six-figure" income range. Our children attend an expensive private school. If you are waiting for us to apologize, don't hold your breath.
Mr. Reeves should leave the Beltway and meet some upper-middle-class Americans. It might be enlightening. We attended good schools because we studied hard. We're not legacies: Nobody else in our families attended an Ivy League school. If you met us 20 years ago, you would have seen two 25-year-olds with no money, swimming in student loans in a roach-infested studio apartment in Manhattan.
We worked around the clock to pay our loans off. Then we started a business with $7,000 of our own money. We've made a nice living grinding away over the last two decades, which you are certainly free to characterize as "luck or a rigged system." 
 We send our children to the best school we can find, and we do so "without so much as a murmur of moral disquiet." Why? Here is one reason: Over the last 20 years, we have paid millions in taxes. What have we gotten in return? Bad public schools not worthy of our children and $20 trillion in federal debt. And we are the problem because we want the best for our children?
Reeves, a British-born economist with the Brookings Institution who is also Co-Director of the Center for Children and Families, takes a nuanced, data-rich look at economic inequality in America. While some of his premises are empirical--a society that constricts opportunity is both less internationally competitive and internally unified, and "a mixed team is a better team" (p. 121)--his principal premise is moral: America prides itself on equality of opportunity but it needs to live up to that ideal better than is currently happening:
I am British by birth, but I have lived in the United States since 2012 and became a citizen in late 2016.... There are lots of reasons I have made America my home. But one of them is the American ideal of opportunity. I always hated the walls created by social class distinctions in the United Kingdom. The American ideal of a classless society is, to me, a deeply attractive one. It has been disheartening to learn that the class structure of my new homeland is, if anything, more rigid than the one I left behind and especially so at the top. (p. 5)
Reeves reasonably allows admits takes the reasonable position that economic inequality is often functional, in that it allows rewards to go to those who do socially useful things. Unequal outcomes that result from fair competition are fine, but they become highly problematic when that inequality becomes ossified across generations. This is, I think, a weakness in Adam Smith's iconic argument for market economies. (I write "I think" because, while my devotion to The Wealth of Nations is passionate, it's a huge work. Not only have I not read all of it, I can't claim I've grasped all the nuances of the parts I have read.) Smith says that in a free market, economic rewards flow to those who are industrious and create things that society values. Those "winners" then have extra money they can spend on luxury goods which the rest of us can envy, which in turn ought to inspire us to be industrious and useful too. OK.

But Smith doesn't as far as I know address round two of the competition. It stands to reason that the winners could spend some of their winnings on political power, in order to insure themselves against competition) as well as buying their children advantages over all other children. Writing in an era where there was real hereditary aristocracy, Smith could be forgiven for not addressing the likelihood that capitalism could quickly create its own ruling class.

Reeves documents two ways in which the children of the winners--defined here as those in the upper 20 percent of incomes, which in 2014 meant families over $112,000--separate themselves from the children of everyone else that tend to limit competition and preserve advantages. He distinguishes the two ways with the help of a metaphor he brings out two or three times: We would look kindly on a father who helps his son get picked as starting pitcher for his school baseball team by practicing with him every evening after work. But we would likely feel differently about a father who secures the coveted lot for his son by bribing the coach (p. 98).

The style in which they're raised gives competitive advantages to the fortunate fifth. Far from doing something wrong, in many of these areas the upper middle class is setting a good example, which others would do well to follow (p. 93). Upper-middle class babies are more likely to be planned pregnancies in a marriage, to be exposed in early childhood to more parental contact, language, trips, and books, and to have better teachers and an easier route to college (ch. 3). This means when they enter the job market, the balance of merit is all on the side of those children (ch. 5).

More perniciously, though, the winners achieve public policies that keep their families on top and other families--with rare exceptions--down. Reeves begins his book with President Obama's 2015 attempt to replace 529 college savings programs, the benefits of which flow largely to the "favored fifth," with a broader program, but which was blocked by united bipartisan opposition in Congress (pp. 1-2). Urbanists will recognize the effects of zoning ordinances to keep exclusive neighborhoods exclusive which restricts access to the opportunities they afford, like "good" schools (ch. 6). Along with the mortgage interest tax deduction, "we are using the tax system to help richer people buy bigger houses near the best schools" (p. 105). Colleges continue these advantages: Who but upper-middle class students can afford to do unpaid internships? (He also has an extended discussion of legacy slots in college admissions, which is so far from my world that I can't comment.) By the time the upper-middle class gets to the job market (pp. 119-121), it's no wonder they appear to be the stronger candidates.

For the upper-middle class to respond to these findings with denial or anger, in the manner of letter-writer Anderson, is to be willfully blind to the tendency of the market system to create its own permanent hierarchy in which they reside. No one can deny that successful people work hard and make good choices; the problem is rather that most people who work hard don't get rewards commensurate with their efforts--which (to extend Smith's logic) has to be discouraging. So is the proper response feelings of guilt? Hardly--for the upper-middle class to respond to these findings with guilt is useless.

We should use our political power to work for a society that supports our common life in a truly inclusive way. Reeves's concluding chapter includes ten policy recommendations. Some deal with the "problem" of upper-middle class parents spending extra time practicing baseball with their kids. In other words, how can we help all parents be able to find that time? He suggests access to better contraception, home visiting programs, encouraging better teachers to work in low-SES neighborhood schools, and expanded housing voucher programs. All would require policy changes, and some would require government outlays. They would also require upper-middle class people to recognize where opportunities for others could be improved, not to mention overcoming silly squeamishness about contraception and government spending.

Things get even trickier politically when policy changes directly address the unearned privileges of upper-middle-class children (analogous to "bribing the coach"). These include an income-contingent college loan system, limiting exclusionary zoning, an end to legacy admissions, making internships more accessible by requiring they be paid, and reforming taxation to end subsidies for the well-off. These require government action, but even before that a "change of heart" among the upper-middle class: recognizing privilege, bringing behavior into line with beliefs about fairness, and a willingness to share the American dream (pp. 14-15).

An economically mobile society could be more unified, because unlike now people are likely to know others at all economic levels. It could also be more humane, if those at the top realize they and their offspring aren't guaranteed to stay there. Reeves quotes "JB," who commented on his 2013 column "The Glass Floor Problem":
Parents' desperation to keep their children in the top 20%... is at least partly driven by their fear of what happens in the 21st century to young people who are in the middle or lower: job insecurity, contingent and contract employment, no health insurance, outsourcing, and the rest. (p. 73)
It's a long way down from the favored fifth. I have argued elsewhere that generating broad career opportunity is one of the core challenges facing us. Maybe one of the reasons solutions are so elusive is that the most politically powerful class feels insulated against the dislocations everyone else has to deal with?

Reeves's analysis is based on social class. Racial and sex discrimination are mentioned and he doesn't argue against their reality (pp. 21-22, e.g.) but the employment market for working-age adults is treated largely as merit-based. Particularly "on the top rungs of society, where market meritocratic values dominate, class barriers are rising, even as those related to race are slowly lowered" (p. 120). This might be seen as a flaw; I'd prefer to see it as focus on one set of serious barriers to opportunity in a world where sex and race also matter.

Elizabeth Mann, "The 'Word Gap' and One City's Plan to Close It," Brown Center Chalkboard, 10 July 2017
Richard V. Reeves, "Don't Want to Be a Dream Hoarder? Here Are 5 Things You Can Do Right Now," Social Mobility Memos, 23 June 2017

"The Future is Exciting and Scary," 24 June 2013
"Is There a 'Natural' Minimum Wage," 15 March 2014
[or click on the Inequality link in the right hand column under "Labels"]

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