The American Dream Is Not Dead (But Populism Could Kill It).

• Author: Morrison, Richard
• Position: Book review

The American Dream Is Not Dead (But Populism Could Kill It)

Michael R. Strain

West Conshohocken, Penn.: Templeton Press, 2020, 168 pp.

Capitalism's populist critics, on both left and right, have got their critique backward--not only are earnings and economic opportunity not evaporating, as they claim, but their own recommended "industrial policy" fixes would bring the working class to the ruin they claim to be combating. That is a central theme in The American Dream Is Not Dead (But Populism Could Kill It) by Michael Strain, director of economic policy studies at the American Enterprise Institute. Strain assembles a strong collection of statistics to disprove the catastrophist narrative about wage stagnation and teases apart some complex issues with the statistics cited by leading populist critics. The very success of his numerical counterargument, however, suggests that hard data will likely have a disappointingly small impact on a movement that is ultimately more about values and emotions than numbers.

The top populist economic critique of market economics--one that has recently gained ascendance on the political right--is that wages for the average American worker have stagnated or declined over the last several decades. Strain's analysis finds that "typical workers" have seen an inflation-adjusted increase of 34 percent in purchasing power over the last 30 years, which he writes "is not reasonably described as stagnant growth." He provides similar rebuttals to other populist claims about earnings for the lowest-paid Americans and supposed recent skyrocketing of income inequality. Real incomes of the bottom quintile increased 66 percent from 1990 to 2016. Meanwhile, inequality rose in earlier decades but actually decreased by 7 percent from 2007 to 2016.

The persuasiveness of these figures, of course, depends on Strain's analysis of the underlying data. He is in something of a bind when it comes to explaining the details, as his book is meant to be a short and accessible summary and not a detailed academic treatise. He does a good job of threading this needle, though, walking readers through important aspects of his method, including correcting several decades of income data for changes in household size, accounting for tax and transfer payment changes in addition to wage and salary income, and using personal consumption expenditures (CPE) rather than the consumer price index (CPI) to adjust for inflation.

All of those detailed...