American Exceptionalism

Joseph Stiglitz was spot on about the costs of the Iraq War. But, like many Nobel Prize economists, he’s gained a tendency to believe he has a pulpit from which to preach. Sort of like being an economist and a New York Times columnist, except that Stiglitz still is an economist.

I enjoy Stiglitz less and less, I admit, but being cooped up in an airplane for 20 hours does something to you. You read what you brought or you watch the Transformers. (On that score, god, please let the Screenwriters strike stretch on –at least this year we will have fewer lousy movies.)

In one of the articles, Stiglitz, taking a page out of the John Edwards-Mike Huckabee-Barack Obama playbook, fashionably questioned upward mobility in the U.S., calling it a “lingering myth” that continues to attract immigrants.

I’ve spent my share of time in Asia and Europe, and this is one of the many chic things to say about the U.S., but it reflects other societies, especially Western European societies where old money is new money, and the nouveaux riches are still viewed askance.

Dr. Stiglitz might be interested in a hard-nosed empirical look at the question of mobility in America as did the Treasury Department. The Wall Street Journal (11/13/07) carried a great piece (Movin’ On Up) which called the view that “the U.S. is becoming a nation of rising inequality and shrinking opportunity” “so much populist hokum.” The money quotes follow:

The Treasury study examined a huge sample of 96,700 income tax returns from 1996 and 2005 for Americans over the age of 25. The study tracks what happened to these tax filers over this 10-year period. One of the notable, and reassuring, findings is that nearly 58% of filers who were in the poorest income group in 1996 had moved into a higher income category by 2005. Nearly 25% jumped into the middle or upper-middle income groups, and 5.3% made it all the way to the highest quintile.

Of those in the second lowest income quintile, nearly 50% moved into the middle quintile or higher, and only 17% moved down. This is a stunning show of upward mobility, meaning that more than half of all lower-income Americans in 1996 had moved up the income scale in only 10 years…

Those who start at the bottom but hold full-time jobs nonetheless enjoyed steady income gains…

Only one income group experienced an absolute decline in real income — the richest 1% in 1996. Those households lost 25.8% of their income. Moreover, more than half (57.4%) of the richest 1% in 1996 had dropped to a lower income group by 2005. Some of these people might have been “rich” merely for one year, or perhaps for several, as they hit their peak earning years or had some capital gains windfall…

The key point is that the study shows that income mobility in the U.S. works down as well as up — another sign that opportunity and merit continue to drive American success, not accidents of birth. The “rich” are not the same people over time…

Being successful is not always a matter of hard work and good choices, but hard work and good choices most often lead to success. The fluctuations in fortunes outlined in the Treasury Department study are unlike those in the rest of the developed world. Truly exceptional. And truly very healthy for our society.