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Factsheet #113 on Economy and Political Thought

September 14, 2012

Defending the Dream: Why Income Inequality Doesn't Threaten Opportunity

Conflicting Dreams

  • The ladder of opportunity vs. the escalator of results: The American Dream is about climbing the ladder of opportunity. The new liberal dream can best be likened to an escalator of results—everyone just hops right on and moves on up.
  • The American Dream: Stemming from our founding principles of "life, liberty and the pursuit of happiness," the American Dream is first and foremost about hard work and the opportunities created by a free economy. It is summed up by a simple equation:
    Economic Freedom + Culture of Work = Prosperity and Opportunity
  • The New Liberal Dream: The Left’s new dream is first and foremost about all that the federal government must do to create opportunity and ensure incomes are more equitably distributed. Individual effort takes a backseat to government spending, programs, and cradle-to-grave entitlements.

American Dream comparison

Income Inequality Isn’t the Threat

  • Economics is not a zero-sum game: The Left claims that growing income inequality is a result of the 1% getting richer at the expense of the 99%. In reality, there isn’t just one dwindling pie to go around, but rather a proven recipe to grow the pie to serve everyone.
  • Income inequality does not threaten the American Dream: The recent rise in income inequality has not caused a decline in upward mobility. Standards of living have increased for everyone—as have incomes for that matter—and mobility remains robust in America.
  • Income is a flawed and inadequate measure of well-being: Standard measures of income ignore household size and government transfer payments. Consumption is a much better measure of well-being and when levels of consumption rather than income are compared, inequalities are much less pronounced.

The Real Threats to the American Dream

  • Statism: The suffocating web of regulations and laws that restrict opportunity and benefit entrenched players (crony capitalism).
  • The Collapse of the Family: The decline of marriage, especially among the poor, has devastating, long-lasting consequences on children.
  • The Dependency Fostered by the Welfare State: Far from eradicating poverty, the welfare state traps people in poverty by discouraging work and undermining the family.
  • The Erosion of our Culture of Work: By legitimizing indolence and devaluing hard work, our culture decreases the likelihood that the poor, who are most in need of sound cultural indicators, will take advantage of the opportunities America continues to offer.
  • The Failures of Public Education: Our failing public schools deny countless children the rudimentary skills they need to move ahead in the life.
  • The Looming Fiscal Crisis: By saddling the next generation with an unconscionable level of debt, we threaten to deny it the opportunities of the American Dream.

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