Leveling America's Playing Field

According to this story, "Meritocracy in America," recently published by the conservative British publication The Economist:

A growing body of evidence suggests that the meritocratic ideal is in trouble in America. Income inequality is growing to levels not seen since the Gilded Age, around the 1880s. But social mobility is not increasing at anything like the same pace: would-be Horatio Algers are finding it no easier to climb from rags to riches, while the children of the privileged have a greater chance of staying at the top of the social heap. The United States risks calcifying into a European-style class-based society.

The article went on to quantify how dramatically income inequality in America has risen:

The past couple of decades have seen a huge increase in inequality in America. The Economic Policy Institute, a Washington think-tank, argues that between 1979 and 2000 the real income of households in the lowest fifth (the bottom 20% of earners) grew by 6.4%, while that of households in the top fifth grew by 70%. The family income of the top 1% grew by 184%—and that of the top 0.1% or 0.01% grew even faster. Back in 1979 the average income of the top 1% was 133 times that of the bottom 20%; by 2000 the income of the top 1% had risen to 189 times that of the bottom fifth.

Along these same lines:

[M]ore and more evidence from social scientists suggests that American society is much “stickier” than most Americans assume. Some researchers claim that social mobility is actually declining. A classic social survey in 1978 found that 23% of adult men who had been born in the bottom fifth of the population (as ranked by social and economic status) had made it into the top fifth. Earl Wysong of Indiana University and two colleagues recently decided to update the study. They compared the incomes of 2,749 father-and-son pairs from 1979 to 1998 and found that few sons had moved up the class ladder. Nearly 70% of the sons in 1998 had remained either at the same level or were doing worse than their fathers in 1979. The biggest increase in mobility had been at the top of society, with affluent sons moving upwards more often than their fathers had. They found that only 10% of the adult men born in the bottom quarter had made it to the top quarter.

President Bush has often (justly) been criticized as exacerbating the rise in inequality in America with his tax cuts that disproportionately benefit the richest among us. But the underlying problem precedes the Bush Administration, as The Economist's article shows.

Cynthia Tucker, a liberal columnist for the Atlanta Journal-Constitution, agrees in this column, which quotes The Economist's article, that it's not all Bush's fault: "President Bush is not responsible for the hardening of class status; social mobility has been limited by a range of trends, including the demise of manufacturing jobs that guaranteed middle-class wages and lifelong benefits."

But she also faults Bush and his "so-called Ownership Society." She says it

... will make things worse for those stuck in the bottom half. His policies help those who already own stock, bonds and real estate; they do little for those who don't have much. As just one example, Bush has done little to help working-class and poor students pay college tuition (except to offer them the chance to serve in the military).

oldstyliberal, this blog's proprietor, doesn't think the Ownership Society itself a bad idea ... but he also agrees with Ms. Tucker that "if America is to live up to its ideals as an egalitarian nation where any child can grow up to be president of the United States or CEO of her own software company, we're going to have to level the playing field."

One way to level the playing field is to take Rep. Harold Ford, a Democratic congressman from Tennessee, up on his proposal to create American Stakeholder Accounts. In an op-ed column in the Washington Post of Jan. 25, 2005, the congressman wrote:

The time has come for a national strategy to give every child an ownership stake in America's future. In the tradition of the GI Bill and the Homestead Act, Congress should act on a bold initiative to introduce more middle- and lower-income Americans to the financial markets.

New Deal and Great Society programs have had great success reducing poverty. But these programs are not oriented toward wealth accumulation. To renew America's tradition of upward social mobility, we have to find new ways to help those living on modest incomes save and invest.

To do that, according to an online press release here, Ford proposes "the creation of American Stakeholder Accounts, savings accounts established at birth to give all children 'an ownership stake in America's future.'"

These investment accounts would be financed something like IRAs, with tax-free contributions. The accounts would be established for a newborn child by its parents; they would receive regular tax-free contributions from the parents thereafter; they would be restricted to relatively "safe" private investments, not wild speculation; and they could not be touched until the child is 18.

Then, after age 18, money could be taken out of the accounts, tax free, for a limited list of purposes such as paying college tuition.

These American Stakeholder Accounts would make even children born to families of limited means active participants in the Ownership Society. They would help America level its playing field, and that's all to the good.