Few Americans do not dream of becoming wealthy. Many people see the acquisition of wealth as the one true way to become free, fulfilled, and “happy.” Belief in the positive effects of wealth is nearly universal, and the pursuit of financial abundance is a common lifetime mission in America. Entire industries have been built to capitalize on Americans’ opulent ambitions. A myriad of companies exist solely to produce a never-ending and readily available supply of educational information about ways and means of “getting rich.” There are books, seminars, financial service companies, and folk wisdom dispensed by overcaffeinated financial gurus. Above all, there is the everlasting “American Dream” of upward social mobility. In the 19th Century, author Horatio Alger popularized the “American Dream.” The moral of Alger’s stories spoke of hard work, square dealing, and good character as keys to attaining the “American Dream.” In the 21st Century, author Suze Orman writes financial self-help books such asThe Courage to Be Rich, and in it, she claims that an individual’s negative emotions block the acquisition of wealth. The chances at present are greater that average Americans will become poorer rather than wealthier, regardless of how hard and long they work, or how they feel about money.
Indeed. Congressman Bernard Sanders of Vermont states, “Between 1983 and 1995, the inflation-adjusted net worth of the top 1% of the U.S. population grew by 17%, while the bottom 40% of American families lost 80% of their worth (12).” Despite working longer hours and boosting productivity levels, Americans continue to lose not only net worth, but also benefits and the world prominence enjoyed by previous generations. In 2003, the Center for Economic & Policy Research, a Washington think tank, determined that in the 1990s, average workers’ annual hours increased from 1,783 to 1,878, while annual wages increased only 0.5% after inflation. The United States, once the economic leader of the free world, now:
- Ranks below six other countries in annual income per person.
- [Has an] income gap between rich and poor … bigger than in any other developed country in the world.
- Ranks below 11 other countries in pay and benefits for manufacturing workers.
- [Has} low wage workers … [who] are the lowest paid workers in the industrialized world.
- [ has]...the highest rate of childhood poverty among any industrialized nation(list from Sanders).
The problem of lower wages among workers is exacerbated by a lack of financial knowledge, also known as “financial illiteracy.” The National Endowment for Financial Education examined this problem in October 2002 at a symposium titled: The State of Financial Literacy in America—Evolutions and Revolutions. The executive summary of the resulting 15,000+ word white paper states:
…Research shows that a large percentage of people of all ages, incomes and education levels lack the basic financial knowledge and skills to ensure long-term stability for themselves and their families. Numerous organizations offer research, insight, and partial solutions, but there is no unified approach, no universally acknowledged financial literacy agenda.The reality of widespread financial illiteracy is unquestionable. Individual debt loads and bankruptcy filings are at all-time high levels, while rates of savings are at all time low levels. At the same time, Americans are bombarded with media messages encouraging mass consumption and an economy that “…appears structured to minimize conscious thought or financial independence on the part of individual consumers, while also draining them in every conceivable way money-wise…[what’s more,] many Americans don't have a clue about what comprises real wealth in the USA (Mooneyham).” The “American Dream” is no longer just an idyllic vision of happiness. It is a promise of freedom from economic slavery that, unfortunately, few can define or recognize. How then, can “wealth” be defined, and what are an average American’s true chances of acquiring it?
True financial wealth can be defined as the minimal income required allowing for a living standard far higher than that afforded by an average income, without requiring that the recipient work for a living, and after any applicable taxes are paid. J.R. Mooneyham estimates that “a household or family with an annual income at least ten times that of the average…qualifies as rich in America today…'rich' will… be considered to be $400,000 in annual income that'll come in regardless of whether anyone in the family is holding a paying job or not.” The average purchasing power parity in 2004 in the U.S. was $40,100, with the lowest 10% accounting for 1.8% of income and the top 10% accounting for 30.5% of income (The World Factbook). Gross household income of $400,000 per year is then a highly reasonable base for defining where the “wealthy” level begins, as the amount remaining after taxes still places the household above the highest level earned by the middle class – all without having to work. What’s more, 99% of American households earn less than $374,000 (Cox), placing the $400,000-and-up crowd in the top 1% of American households. Within that 1% lay 38% of American household wealth (Hutton), and a world many would have difficulty conceiving of in the first place. A 2000 ABC poll which asked Americans how high of an income they believed would qualify them as “rich” concluded “Most Americans say a tidy $200,000 a year would do just fine — and a plurality would settle for $100,000(qtd. by Mooneyham)"
The difficulty in defining “wealth” for average Americans is partly due to political doubletalk and questionable government reporting of statistics. According to Michael Parenti, until 1994, the U.S. Census did not gather the same information on households with incomes above $300,000 as they did for households at lower income levels. In 1994, the bar was raised to households with incomes over $1 million, meaning that those households were excluded from many economic reports and analyses (3). This downward shifting of the scale gives an inaccurate picture of Americans’ relative financial status, which is verified by the U.S. Census’s Survey of Income and Program Participation (SIPP) methodology description:
The distribution of wealth in the United States has a large positive skew, with relatively few households holding a large proportion ofthe wealth…a household survey should heavily oversample wealthy households to obtain a better representation of the less commonly held assets…the Survey of Consumer Finances (SCF), conducted by the Federal Reserve Board, oversamples households likely to be wealthy. SIPP, however, does not oversample wealthy households (indeed, it oversamples lower-income households), and its estimates of average net worth and total aggregate net worth are significantly lower than the estimates from the SCF… average or mean net worth in 1998 from SIPP was $149,629 (in 1998 dollars), compared with $282,500 (in 1998 dollars) from the SCF. The two surveys’ estimates of median household net worth for the same year were substantially different from each other but much closer: $47,887, and $71,600, respectively.A direct comparison of median net worth between the skewed U.S. Census report and the more inclusive Federal Reserve report illustrates why many upper-middle class Americans consider themselves the actual “wealthy,” when their average income places them solidly in the middle class. For 1998, the U.S. Census claims a median net worth of $161,174 for the highest 20% of households (Net Worth and Asset Ownership), whereas the Federal Reserve reports a median net worth of $1,019,000 for the highest 20% of households (Evidence from the 1998 and 2001 Survey of Consumer Finances). Considering themselves “wealthy” despite a median income that averages 15% and less of that of the wealthy class, many lower-middle- and middle-class voters support pro-wealthy conservative politicians, believing they will reap the benefits of tax cuts and reduced social spending, when their income level actually excludes them from the lion’s share of the benefits. One of the strongest examples of this collective delusion was a 2000 Time magazine poll in which 19% of Americans said they are in the richest 1% and a further 20% expect to be someday.
The Republican political strategy of skewing statistics, perpetuating altered perceptions of class status and use of election rhetoric focused on red herring “values” issues such as gay marriage to divert attention from core economic issues has proven to be very cunning and difficult for centrist and socialist political parties to counter. The traditional left-wing voter base has been effectively split, as it has caused many working class voters to shift their support to the right. This has given the right a virtual lock on government control. In 2004, the Republican Party acquired control of the executive and legislative branches of American government for the first time since the 1920s, when their pro-wealthy government policies contributed to the Great Depression of the 1930s. Signs of a repeat performance are on the horizon, as numerous articles of legislation have been made into laws that greatly benefit wealthy corporations and individuals, such as tax cuts funded by future federal budget deficits, the pro-finance Bankruptcy Abuse Prevention and Consumer Protection Act, and the pro-energy company Energy Policy Act of 2005. The object of right-wing politics is not to create new wealthy Americans, but to enrich those who are already wealthy, and increase the difficulty level for all others to become wealthy as well.
Most Americans accept that building a fortune is difficult, and don’t expect it to come easy. Many appreciate; even admire the hard work of those who have done it. It is certainly possible to acquire great wealth, but what are an American’s statistical probabilities of actually becoming the next John D. Rockefeller? Of 2004’s new billionaires, 69 were from the U.S. (Kroll et al.), which has a population of 295,798,362 according to the U.S. Census. Calculated by Mooneyham, “the average person's chance of becoming a billionaire in the US in any particular year is about one in 4,286,933 (4.28 million) or 0.000000233”, or 233 billionths of one percent – difficult, but not impossible.
Who wants to be a millionaire? Who wants to marry a millionaire? These questions were asked of America’s television viewers, and millions faithfully tuned in to shows of the same name. The words “million” and “dollars” used in concert commonly evoke images of luxury, opulence, and wealth. Lottery jackpots and sweepstakes prizes in the millions of dollars promise the “good life” for their winners. Investment houses tout how their mutual funds will help investors retire as millionaires by regular investment. The probability is higher for becoming a millionaire than a billionaire, but to paraphrase J.P. Getty, a million dollars ain’t what it used to be. Having a few million dollars will make most folks relatively “well off,” but nowhere near the level of truly wealthy. Besides, there isn’t as much zip to a TV show title like “Who Wants to Be a 30-times-over Millionaire?”
The amount of investment capital needed to earn consistent interest returns of $400,000 per year (the minimum level to be considered “wealthy”), is between $30 and $35 million. The investment company Merrill-Lynch created the term “UHNWI”, or “Ultra High Net Worth Individuals”, for those with “investable” assets of more than $30 million (World Wealth Report-2001). J.R. Mooneyham, using the Merrill-Lynch estimates of 7% yearly UHNWI growth and proportionality of their numbers to the rest of the world, estimates that there are 1,365 Americans who attain this level annually, out of a U.S. population of 295,798,362. Combined with the number of new billionaires, this makes a total of 1,434 Americans who are truly “getting rich” each year. Therefore, a fair summary estimate of the odds for achieving the “American Dream” are one out of 206,275, or a 4.847 billionths of one percent chance.
The “American Dream” is perhaps more elusive than ever, and the commonly-held beliefs about how to attain wealth are being rendered obsolete. According to Michael Parenti, 50% of those in the “wealthy” category inherited their wealth, regardless of their feelings about money. Many state lottery winners have seen their lives collapse, and become worse than before millions of dollars magically came their way. Horatio Alger never mentioned the dark side of good, hard work, as J.R. Mooneyham points out that hard work and health problems that go with it has “thus far failed to make 99% of Americans rich, generation after generation after generation...” David Cay Johnston agrees:
In 1977, the richest 1 percent of Americans had as much to spend after taxes as the bottom 49 million. Just 22 years later, in 1999, the richest one percent — about 2.7 million people — had as much as the bottom 100 million Americans.
The “American Dream” will live as long as America itself does. The fact that it survives as strongly as it does today is a testament to that. The United States will only see its greatest days when hard-working Americans awaken from dreaming the American Dream, and begin building the prosperous American reality they have rightfully earned.
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