We reported in 2010 that the American Dream has moved abroad.
Today, a very powerful insider – the President of the most powerful Fed bank, the Federal Reserve Bank of New York, Bill Dudley – confirmed that the American Dream has left the country:
The United States has always prided itself on being “the land of opportunity.” Parents hope that their children can achieve more than they did. Over the course of our history, immigrants have journeyed to America in search of a better life, a chance to live the “American Dream.”
What defines the American Dream? President Reagan thought that one element of the American dream is “the opportunity to grow, create wealth, and build a better life for those who follow,” while President Obama has described it as follows: “A child’s course in life should be determined not by the zip code she’s born in, but by the strength of her work ethic and the scope of her dreams.” One’s destination in life should not depend on where the journey begins.
Equal opportunity does not imply equal outcomes—some people may work harder, be more fortunate in terms of their disposition and endowments, or just be luckier in how their lives evolve. But it does require that income mobility—in particular, upward mobility—be widely evident and remain part of the fabric of the nation.
I don’t think the issue of income mobility receives the attention it deserves. It is a foundational element for a well-functioning democratic society and provides evidence about the ability of an economy to provide opportunities for its citizens.
While income mobility in the United States has been relatively unchanged, it remains well below several other nations. According to Stanford economist Raj Chetty, the probability of moving from the bottom quintile to the top quintile is 7.5 percent in the United States, as compared to 11.7 percent in Denmark and 13.5 percent in Canada—two countries with relatively high levels of intergenerational mobility. So effectively the chance of achieving the American Dream is not the highest for children born in America.
Dudley recommends policy changes that will increase mobility in America:
Some kinds of public policies may exacerbate, rather than lessen, the tendency of the housing market to price some families out of good neighborhoods.
I believe that safe, reliable, affordable and efficient transportation to job locations should be a crucial element in an effective housing policy.
Access to affordable credit is yet another pillar of a policy program that promotes housing affordability. We at the Federal Reserve have long worked to ensure that credit flows equitably and that financial services are available to all U.S. citizens.
The Federal Reserve has the twin objectives of maximum sustainable employment and price stability.
Ironically, Federal Reserve and government policies of the last 8 years have exacerbated all of these problems and decreased income mobility.