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

Richard V. Reeves

• Publisher: Brookings Institution Press
• Year: 2018
• ISBN:
  9780815735496
• Topic: Politica e relazioni internazionali
• Subtopic: Politica comparata

Dream Hoarders sparked a national conversation on the dangerous separation between the upper middle class and everyone else. Now in paperback and newly updated for the age of Trump, Brookings Institution senior fellow Richard Reeves is continuing to challenge the class system in America.

In America, everyone knows that the top 1 percent are the villains. The rest of us, the 99 percent—we are the good guys. Not so, argues Reeves. The real class divide is not between the upper class and the upper middle class: it is between the upper middle class and everyone else.

The separation of the upper middle class from everyone else is both economic and social, and the practice of "opportunity hoarding"—gaining exclusive access to scarce resources—is especially prevalent among parents who want to perpetuate privilege to the benefit of their children. While many families believe this is just good parenting, it is actually hurting others by reducing their chances of securing these opportunities. There is a glass floor created for each affluent child helped by his or her wealthy, stable family. That glass floor is a glass ceiling for another child.

Throughout Dream Hoarders, Reeves explores the creation and perpetuation of opportunity hoarding, and what should be done to stop it, including controversial solutions such as ending legacy admissions to school. He offers specific steps toward reducing inequality and asks the upper middle class to pay for it.

Convinced of their merit, members of the upper middle class believes they are entitled to those tax breaks and hoarded opportunities. After all, they aren't the 1 percent. The national obsession with the super rich allows the upper middle class to convince themselves that they are just like the rest of America. In Dream Hoarders, Reeves argues that in many ways, they are worse, and that changes in policy and social conscience are the only way to fix the broken system.

1	HOARDING THE DREAM, STILL

IN 2016 I VOTED IN TWO IMPORTANT ELECTIONS. As a proud new American, I cast my ballot in the presidential election. Still a British citizen, I also mailed in my Brexit vote. Hardly a banner year for me, electorally speaking. (Parisian friends begged me not to seek French citizenship.)

A populist wave has destabilized the politics of both the United States and the United Kingdom. Middle-class and working-class voters gave the middle finger to the political elites of both countries. And now the price is being paid, largely, and tragically, by many of those voters themselves.

Donald Trump brilliantly exploited the angst of the American white middle class to secure the White House. But he has offered them precious little since. Instead, he has used his position to help corporations and the wealthiest. Trump is a plutocrat in populist clothes. The tax bill, passed in a breathless rush at the end of 2017, can be called many things: sloppy, reckless, incoherent. But perhaps the most shocking aspect of the Tax Cuts and Jobs Act is that it offers so little to the people who sent Trump to Washington in the first place. Families in the middle fifth of the distribution (with incomes between about $49,000 and $86,000) will get a $900 tax cut, somewhat less than the cost of a three-day ticket to Disneyland for a family of four. Households in the top fifth, with incomes above $120,000, will see an average cut of $7,640—more than enough for a week-long family ski vacation. And the very wealthiest Americans will save $7 billion a year from the virtual abolition of the estate tax.¹

Trump has talked about a $1 trillion infrastructure plan, a big expansion of apprenticeships, and cheaper health care plans. So far though, that is all it has been: talk. Many progressives hope that middle-class Americans will realize they have been duped and will eject Republicans from Congress, and Trump from the Presidency.

Perhaps. But I wouldn’t count on it. The anger of many of the Trump (and Brexit) voters was about more than money. It was about class. Many middle-class and working-class voters, especially whites, feel left out or left behind, and are looking for people to blame. Immigrants or fellow citizens of color provided some Trump-assisted targets, with whites reacting (almost entirely incorrectly) to a sense that Americans of color were overtaking them.

Barack Obama’s success, cruelly, likely added to this delusion, as he himself suggested in a postelection interview with the New Yorker’s David Remnick. “A President who looked like me was inevitable at some point in American history,” he said. “It might have been somebody named Gonzales instead of Obama, but it was coming. And I probably showed up twenty years sooner than the demographics would have anticipated. And, in that sense, it was a little bit more surprising. The country had to do more adjusting and processing of it. It undoubtedly created more anxiety than it will twenty years from now, provoked more reactions in some portion of the population than it will twenty years from now. And that’s understandable.”²

President Trump tapped into this white anxiety, putting issues of race and ethnicity at the core of his campaign. Just over half (58 percent) of whites voted for him. But class counted, too. Trump secured the support of two-thirds (67 percent) of whites without a college degree, helping him to narrow wins in swing states in the Midwest.

But race is not the whole story. Many working-class and middle-class Americans also feel that the upper middle class, the professionals with six-figure incomes, college degrees, and pension funds, are leaving everyone else behind. On this count, they are absolutely correct: we are. Joan Williams diagnoses this group (she labels us the “professional-managerial elite”) with a very bad case of “class cluelessness.”³ Insulated from many of the risks and costs of economic change, and convinced of our merit, we have a tendency to look down our noses at the unenlightened classes below us. That “deplorables” comment from Hillary Clinton echoed so loudly around the social media chambers because it felt like an authentic expression of elite condescension. Let’s be honest. It was.

At first glance, Trump’s success among middle-class whites might seem surprising, given his own wealth. But his movement was about class, not money. Trump exuded and validated blue-collar culture and was loved for it. His supporters have no problem with the rich. In fact, they admire them. The enemy is upper middle-class professionals: journalists, scholars, technocrats, managers, bureaucrats, the people with letters after their names. You and me.

And here is the difficult part.

However messily it is expressed, much of the criticism of our class is true. We proclaim the “net” benefits of free trade, technological advances, and immigration, safe in the knowledge that we will be among the beneficiaries. Equipped with high levels of human capital, we can flourish in a global economy. The cities we live in are zoned to protect our wealth, but deter the unskilled from sharing in it. Professional licensing and an immigration policy tilted toward the low-skilled shield us from the intense market competition faced by those in nonprofessional occupations. We proclaim the benefits of free markets but are largely insulated from the risks they can pose. Small wonder other folks can get angry.

Americans in the top fifth of the income distribution—broadly, households with incomes above the $121,000 mark in 2015—are separating from the rest.⁴ This separation is economic, visible in bank balances and salaries. But it can also be seen in education, family structure, health, and longevity, even in civic and community life. The economic gap is just the most vivid sign of a deepening class divide.

Inequality has become a lively political issue—indeed, the “defining challenge of our time,” according to Obama. But too often the rhetoric of inequality points to a “top 1 percent” problem, as if the “bottom” 99 percent is in a similarly dire situation. This obsession with the upper class allows the upper middle class to convince ourselves we are in the same boat as the rest of America; but it is not true.⁵

The upper middle class has been having it pretty good. It is about time those of us in the favored fifth recognized our privileged position. Some humility and generosity are required. But there is clearly some work to do in terms of raising awareness. Right now, there is something of a culture of entitlement among America’s upper middle class. Partly this is because of a natural tendency to compare ourselves to those even better off than us. This is the “we are the 99 percent” problem. But it is also because we feel entitled to our position since it results from our own merit: our education, brains, and hard work.

We use our power to secure and advance our own position. That seems natural enough. But democracies require elites to show “forbearance,” according to Steven Levitsky and Daniel Ziblatt, authors of the 2018 book How Democracies Die.⁶

Long before the rise of Trump, there was a moment when, for me at least, the power and self-interest of the upper middle class were brightly illuminated. It came at the end of January 2015, when Barack Obama suffered an acute political embarrassment. A proposal from the budget he’d sent to Congress was dead on arrival—but it was the president himself who killed it.

The idea was sensible, simple, and progressive. Remove the tax benefits from 529 college saving plans, which disproportionately help affluent families, and use the money to help fund a broader, fairer system of tax credits. It was, in policy terms, a no-brainer. You can easily see how the professorial president would have proposed it. But he had underestimated the wrath of the American upper middle class.

As soon as the administration unveiled the plan, Democrats started to quietly mobilize against it. Representative Chris Van Hollen from Maryland (now a senator) called his colleague, House Minority Leader Nancy Pelosi. Pelosi happened to be traveling with Obama from India to Saudi Arabia on Air Force One. As they flew across the Arabian Sea, she persuaded the president to drop the reform. The next day, White House spokesman Eric Schultz declared that the 529 plan had become “a distraction” from the president’s ambitious plans to reform college financing.

The episode was a brutal reminder that sensible policy is not always easy politics, particularly when almost every person writing about, analyzing, or commenting on a proposal is a beneficiary of the current system. Pelosi and Van Hollen both represent liberal, affluent, well-educated districts. Almost half of their constituents are in households with six-figure incomes. I should know: Van Hollen was my congressman at the time. My neighbors and I are the very people saving into our 529 plans. More than 90 percent of the tax advantage goes to families with incomes in the top quarter of the distribution.⁷

As Paul Waldman noted in the Washington Post, the proposal “was targeted at what may be the single most dangerous constituency to anger: the upper middle class—wealthy enough to have influence, and numerous enough to be a significant voting bloc.”⁸ Like the flash of an X-ray, the controversy revealed the most important fracture in American society: the one between the upper middle class, broadly defined as the top fifth of society, and the rest.

Veteran tax scholar Howard Gleckman noted sadly that the demise of Obama’s plan “reflected the lack of serious interest in reform by most lawmakers today.”⁹ I think it reflected something much worse. The lawmakers were fairly honestly reflecting the views of their constituents and reacting to commentary in the media. But there certainly was a lack of interest in self-reflection by the upper middle class. Those of you who don’t follow tax history closely may not recall that it was George W. Bush who, in 2001, gave us the chance to grow capital tax free in 529 plans. (When Republicans proposed it during Bill Clinton’s second term, he promptly vetoed it.) Look how a regressive, Bush-era tax cut can become so precious to the upper middle class, including its most liberal members.

Small wonder that the Republicans decided in 2017 not to curb 529 plans, but to expand them. The Tax Cuts and Jobs Act allows funds from 529 accounts to be spent at private K–12 schools. The change, sponsored by Sen. Ted Cruz, was highly contested: in fact, Vice President Mike Pence had to break a 50:50 tie on the provision in the Senate after every Democrat and two Republicans (Susan Collins of Maine and Lisa Murkowski of Arkansas) voted against. But let me make a prediction. Affluent, liberal families will come to treasure this tax break on private education. If a Democratic president tries to take it away in 2021 or 2026, history will repeat itself.

You may have noticed that I am often using the term “we” to describe the upper middle class rather than “they.” As a Brookings senior fellow and a resident of an affluent neighborhood in Montgomery County, Maryland, just outside the District of Columbia, I am, after all, writing about my own class. This is not one of those books about inequality that is about other people—either the super-rich or the struggling poor. This is a book about me and, likely, you, too.

I am British by birth, but I have lived in the United States since 2012 and became a citizen in late 2016. (Also, I was born on the Fourth of July.) 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.

My argument proceeds as follows: The upper middle class is separating from the majority (chapter 2). Inequality begins in childhood (chapter 3) and endures across generations (chapter 4). This separation results from, first, the greater development of the “merit” valued in the labor market (chapter 5) but, second, from some unfair opportunity hoarding (chapter 6). I then offer seven steps toward reducing inequality and suggest the upper middle class pays for them (chapter 7). Gaining support for the kinds of changes I propose will, however, require those in the upper middle class to acknowledge their advantages (chapter 8).

In case you don’t manage to read the whole book (for which I forgive you so long as you actually bought it), here’s an overview of the key points:

THE UPPER MIDDLE CLASS IS LEAVING EVERYONE ELSE IN THE DUST

The top fifth of U.S. households saw a $4 trillion increase in pretax income in the years between 1979 and 2013.^10...