With all the focus on how the top 1% (or 0.1% or 0.01%) are enriching themselves mightily at the expense of everyone else, Richard Reeves says that we must not ignore the problem of a much larger class of people, those who are in the top 20% of income whom he calls the ‘upper middle class’, for whom trickle down economics does work. He says that they are the hoarders of the American dream who are denying access to it for everyone else.
“The upper middle class, the top fifth, broadly, and above, not only maintain their position very nicely, but perpetuate it over generations more effectively than in the United Kingdom,” said Richard Reeves, a Brookings Institution scholar and author of Dream Hoarders: How The American Upper Middle Class is Leaving Everyone in the Dust, Why That is a Problem, and What to Do About It.
Why does this matter? It doesn’t just confirm what most Americans feel—that they are relatively stuck economically, perhaps doing better than their parents, but sometimes not even that. It shows that bashing the super-rich, the 1 percent, is politically expedient rhetoric that diverts the focus from those in America, members of both major parties, whose interests are maintained by the political system, instead of sharing the wealth. Reeves’ book, Dream Hoarders, explains how the top 20 percent protects its status, essentially by segregating educational opportunity, their housing—which is federally subsidized through the tax deduction for home mortgage interest rates—career networking and other government-supported perks.
Why is this happening? It comes down to hoarding the best opportunities in education, housing, careers and government tax policies that reinforce that status. This is not about inheritance taxes, which is a rarified subject. It’s how 40 percent of the upper middle class live near the public schools that have the best test scores. It’s how zoning in those communities only allows housing at price points well above those affordable by people earning median incomes—the real middle class. It’s about how the mortgage deduction allows people to buy even pricier homes. It’s about going to top schools, colleges and universities, and sending your kids there, and creating networks that turn into select entry-level jobs, internships and careers. In short, Reeves says all the political verbiage about equal opportunity, meritocracy and fighting inequality is sullied.
But don’t think that the upper middle class are just like the rest of the middle class but with a little more money. They have lifestyles that in other times would be considered that of the rich, though they may not think of themselves that way and indeed se themselves as struggling to make ends meet just like everyone else. It is just that the ‘ends’ they are trying ‘meet’ are much further apart than for most people.
Reeves describes their reaction when president Obama and some Democrats suggested doing away with the college savings plan known as the 529 program.
“Don’t you dare touch my 529!” was the response upper-middle-class constituents told top Democrats, Reeves said, then laying out how these folks think: “Do you know how hard it is to make ends meet by the time I’ve saved for my kids’ college, paid their private school fees, paid my massive mortgage—thanks for the [mortgage deduction] tax break; still it’s lots of money—I’ve got a skiing holiday, school trip gets more expensive, I’m barely making even here…I’m working really hard. I’m part of the 99 percent.”
“No, you’re not,” Reeves said, underscoring how the upper middle class is different. The 529 tax break was a college savings plan where you don’t pay any capital gains on money set aside and invested here, he explained. Who has these college savings plans? he asked. Forty-seven percent of people earning $150,000 or more annually, he answered.
Reeves says that politicians in both parties have learned this lesson: “Don’t mess with the American upper middle-class” and so scrupulously avoid any measures that adversely affect them. This ties in with a study by Martin Gilens and Benjamin Page that showed that politicians only respond to the concerns of the top 10% of income earners. Gilens and Page later responded to critics of their pessimism about the state of American democracy.