by Scott Rasmussen | September 2, 2016 12:02 am
America has long been known as the land of opportunity. “When one starts poor,” Abraham Lincoln observed, a “free society is such that he knows he can better his condition.”
It’s a theme constantly celebrated in popular culture. In the 19th century, countless Horatio Alger tales told of poor boys working hard and reaching middle class respectability. Today, the biggest hit on Broadway tells how an orphaned immigrant with no money and no name rose to become a key leader in the American Revolution and our nation’s first Treasury Secretary.
In 21st century politics, however, the main storyline is that economic progress has stalled since the 1970s. Many question whether opportunities still exist and some even consider the phrase “land of opportunity” to be politically incorrect.
As usual, the politicians are out of touch.
For most of us today, America is still a land of tremendous opportunity. It’s not paradise, but we enjoy a level of affluence far above any civilization in the history of the world. Despite all the failures of our political system over the past four decades, the average American income has doubled from $25,994 in 1976 to $51,173 today. Those gains are calculated after adjusting for inflation.
And, in reality, our standard of living has grown much faster than even those phenomenal numbers suggest. Yale Professor William D. Nordhaus has noted that “official statistical agencies” lack the “practical capability” to capture “the impact of new technologies on living standards.” How, for example, do you compare the value of today’s smart phone to the family land line phone that was standard in the ’70s? You can’t!
Because the official agencies can’t capture the value of new technology, Nordhaus has shown that real income growth is likely “understated by a very large margin.” His research implies that today’s living standard might be four to eight times higher than it was in the 1970s. As one who can remember the ’70s, that seems about right to me.
If our standard of living has improved so much in recent decades, why do so many people believe the opposite is true? Many factors are probably at work. Studies show that people are more responsive to bad news rather than good news. Recognizing this, media outlets share more bad news because there’s a bigger audience for it. That creates a vicious cycle of negativity.
On top of that, there are real problems. Many middle class families today worry about what their children are being taught in public schools but can’t afford a better alternative. And, many living in chronic poverty face countless roadblocks that prevent them from grabbing opportunities.
But the driving force behind the overly negative impression of economic growth is the partisan political debate. Research by Mark Pickup and Geoffrey Allen shows that partisan affiliations shape our perceptions of the economy. Sadly, both political parties have a strong incentive to badmouth the economy when the other team is in charge. And, in a time of divided government, both parties have an incentive to say that things are so bad only their policies can save the nation.
I’ll explore this again next week and also take a look at why it matters.
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