Is the American Dream dead? Does hard work still pay off?
The American Dream is alive and well – and it is attainable for those willing to work for it, according to economist Dr. Michael Strain, the Director of Economic Policy Studies at the American Enterprise Institute (AEI), a leading think tank in Washington, D.C. He is the author of the book, The American Dream is Not Dead (But Populism could kill It). The book responds to claims that the American Dream is no longer within reach for most Americans and offers a data-driven and nuanced defense of capitalism and free enterprise.
Last week, Senior Policy Analyst at the Kentucky Chamber, Charles Aull, sat down with Dr. Strain to talk about his work at AEI and the state of the American economy.
Strain argued that any claim that the American Dream is dead is analytically wrong. “If you take a hard look at the data, you see that over the last 30 years, wages for the typical worker have increased substantially; you see that some middle class jobs have disappeared but others are being created; America is still broadly characterized by upward mobility; the game isn’t rigged against ordinary workers. In fact, ordinary workers saw substantial benefit from the hot economy that existed prior to the pandemic,” said Strain. “The narrative of declinism and the narrative of defeatism that the populist left and right both embrace is just at odds with the facts.”
Strain noted that criticisms of capitalism and free enterprise have intensified in recent years, coming from both the political left and the political right. He pointed to debates around free trade and globalization as examples.
“One of the strange realities of this populist moment: historically, the left has been very critical of free trade, globalization, very eager to embrace protectionism as a way to help workers. For the 1990s, early 2000s, pre-President Trump, the political right really pushed against that,” said Strain. “Now a lot of the populist right is right there with the progressive left on the dangers, as they see them, of globalization.”
Strain also gave his thoughts on the current state of the economy, inflation, the labor force shortage, and policy responses from Washington to the economic downturn brought on by the pandemic.
Commenting on the CARES Act, passed in March 2020, Strain said that this legislation helped the U.S. avoid several years of long-term unemployment. “Several years of unemployment in the teens was a very real possibility, and the CARES Act helped us to avoid that.” The $1.9 trillion American Rescue Plan, on the other hand, may be doing more harm than good, Strain argued. “By spending that much money, the President pushed the demand side of the economy way too hard. We’ve seen elevated inflation as a consequence … That is eroding real gains. When wages go up and prices go up, purchasing power doesn’t go up as much.” In addition, he argued that some of the bill’s policy provisions may have been misguided. “The $300 supplement to unemployment benefits really is holding the economy back. It’s creating price pressures and it’s keeping workers on the sidelines, which is not only bad for the economy but bad for them.”
Watch our full conversation with Dr. Strain below.