Recently, USA Today published a study estimating the annual cost of achieving the American Dream. The price tag? $130,000 per year for a family of four. The implication of this report is that without a $275,000 home, an $11,000 per year four-wheel-drive SUV and a $4,000 family summer vacation, for starters, you are not living the American Dream. By these numbers, seven out of eight Americans fail at achieving the American Dream. However, this report has some fundamental flaws.
First, the report represents a snapshot in time rather than a family's lifetime career and growth path. Few recent college graduates can afford (or want) a $275,000 home, and few new parents immediately start saving for their child's college education.
Second, it fails to recognize the welfare and productivity gains American's have experienced over the years. In the past few decades, the average American's consumption has increased dramatically due to falling prices. Also, employee pay today includes various benefits -- such as health care and pension payments -- that significantly add to the welfare of workers. These benefits are often left out of salary calculations. The combination of these changes has contributed significantly to the average American's well-being.
Third, the report presupposes that preferences across individuals can be aggregated to create some sort of universal American Dream checklist. The analysis therefore lacks the nuance of different definitions of the American Dream and success.
USA Today's own definition of the American Dream -- not to get rich but to have security and the hope that your children ultimately have a better life -- is subjective and does not warrant the hard mathematical breakdown that is used as a checklist in the report. It fails to consider that some families may choose to strive for the very things on USA Today's checklist while others may consciously choose alternative paths. The implication is that those families who pursue lifestyles other than what is exemplified here are not really pursuing the American Dream, but somehow settling for less.
Fourth, the report briefly mentions that regional variations will alter the price tag of the American Dream, yet ignores this important distinction in making generalizations and policy conclusions. Clearly, USA Today's checklist will cost more in a large metropolitan area than in a smaller town. Certainly choice in location must be as much a part of the American Dream as a 401(k).
Importantly, these kinds of studies suggest that if all of these needs are not met for all Americans, somehow it is the job of politicians and policy-makers to fix it. But this kind of thinking is at best misguided and at worst dangerous. By aggregating the uniqueness and individual aspects of our life-long career paths and culture, analyses like this one suggest that all Americans can be nudged into a formulaic definition of a successful life based on the whims of whoever holds office.
Tragically, when policy-makers decide to legislate the populace into attaining more features of this stereotypical American Dream, the consequences can be devastating. For example, the recent push for increased levels of home ownership in the last two decades had disastrous effects, as the recent housing bubble illuminates. By relaxing the standards for mortgage applications, more people bought houses they couldn't afford and have faced foreclosure, upside down mortgages, and bankruptcy as a result. For them, homeownership did not lead to the American Dream.
Ultimately, policies based on this sort of analysis will always disappoint because they fail to grasp the uniqueness of the American populace. That not 100 percent of Americans strive to obtain the $275,000 home with two kids etc. is a fundamental characteristic of the American melting pot, and policies that ignore this fact can never succeed.
Ultimately, the analysis insinuates that seven out of eight Americans should not be happy with their achievements because they have not attained arbitrary material objects. Somehow, USA Today misses what the American Dream is all about -- the pursuit of whatever each individual finds personally fulfilling -- material or otherwise -- whether or not the price tag is $130,000 a year.