If Elizabeth Warren really wants to unrig the system, she should focus on the Dream Hoarders

Odds are that you have not been following the recent libertarian dust-up over the merits of an Elizabeth Warren presidency. To give a brief recap: The main contenders were Will Wilkinson and Jerry Taylor of the “liberaltarian” Niskanen Center, who have been Warren-friendly to varying degrees; their opponents were colleague Samuel Hammond, along with Tyler Cowen of the more traditionally libertarian Mercatus Center, who touched off the whole debate with a withering critique of Warren’s policies.

A point-by-point exploration of their arguments would exceed the space allotted for this column by several thousand inches. But I think one can sum up the libertarian approach to Warren with a single question: How big a problem do you think billionaires, and the mega-successful corporations they helm, pose to the average American? Actually, come to think of it, I think that’s about how you’d sum up the question of Warren from any angle.

Which is why this debate ultimately matters to a lot more people than just some cranky libertarians: It speaks directly to a whole lot of young people who see that the economy doesn’t work for them the way it did for their parents and grandparents, and therefore conclude that somewhere along the way, the people it is working for — the barons of finance, the giants of Silicon Valley — must have rigged the system in their favor.

To be fair, they’re not entirely wrong. As Adam Smith once wrote, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Bankers and tech executives very much included. So I find myself nodding in agreement with Wilkinson — and, by extension, with the progressive base of the Democratic Party — when he says: “Warren’s general diagnosis of the problem — it’s a rigged system of anticompetitive rent-seeking enabled by insufficiently democratic and representative political institutions — is broadly similar to my own.”

Yet they’re not entirely right, either. Are big corporations, or billionaires, or banks, or tech giants, or health insurers and pharmaceutical firms — to name some of Warren’s favorite targets — really the reason that young people are struggling

  • with enormous student loans? Are they the reason that millennial homeownership lags that of their parents? Are they the
  • reason that recent college graduates are more likely than their elders to be underemployed? Have they
  • driven the cost of health insurance to its current stratospheric levels?

Sure, Warren may be eager to sic her Consumer Financial Protection Bureau on your mortgage lender if you fall afoul of some obscure clause, but that’s not the problem for most Americans. They’re much more likely to struggle with finding affordable housing in prosperous cities. In fairness, Warren does have a plan to ease the zoning regulations that cause the shortage — but for some reason she rarely talks about it on the campaign trail, possibly because it’s constitutionally dubious, but more likely because it would alienate her affluent suburban base.

Similarly, Warren is eager to forgive student loans — a $1.6 trillion transfer to some of the most affluent members of society — but not to attack degree creep, which has walled off most of the best jobs for those who hold a bachelor of arts while enriching a lot of colleges. She targets insurers and drugmakers, but not the hospitals and medical workers who drive most of our health-care costs.

Too many of her proposals are like this; they focus on corporate villains or billionaires while ignoring the much broader class of people that Richard Reeves of the Brookings Institution dubbed the “Dream Hoardersthe well-educated upper-middle-class people who are desperate to pass their privilege onto their kids, and are unhappy about the steadily mounting cost of doing so. They’re Warren’s base.

Unfortunately, the Dream Hoarders — and I include myself in their number — are a much bigger problem for the rest of America than the billionaires whose wealth Warren promises to expropriate. Those billionaires got that way by building companies that disrupted cozy local monopolies, and they fund coding camps for high-school dropouts; Dream Hoarders

  • protect their professional licensing regimes and
  • insist on ever more extensive and expensive educations in the people they hire. Dream Hoarders also
  • pull every lever to keep their own housing prices high — and poorer kids out of their schools — while
  • using their wealth to carefully guide their children over the hurdles they’ve erected.

Which may be why the best predictor of a neighborhood with a low degree of income mobility is not the gap between the top 1 percent and everyone else — the gap that Warren focuses on with all her talk of taxing billionaires — but

If you really want to unrig the system, you need to focus less on a handful of billionaires than on the iron grip that the Dream Hoarders have on America’s most powerful institutions — including, to all appearances, Elizabeth Warren’s campaign.

How the Upper Middle Class Is Really Doing

Is it more similar to the top 1 percent or the working class?

Have upper-middle-class Americans been winners in the modern economy — or victims? That question has been the subject of a debate recently among economists, writers and others.

On one side are people who argue that the bourgeois professional class — essentially, households with incomes in the low-to-mid six figures but without major wealth — is not so different from the middle class and poor. All of these groups are grappling with slow-growing incomes, high medical costs, student debt and so on.

The only real winners in today’s economy are at the very top, according to this side of the debate. When Bernie Sanders talks about “the greed of billionaires” or Thomas Piketty writes about capital accumulation, they are making a version of this case.

.. “What do the upper middle class care most about in my district? They want a pluralistic America that is engaged with the world and embraces technology and future industries. What they don’t want is a backlash to diversity, a backlash to globalization, a backlash to technology.”

The upper middle class doesn’t deserve the blame for our economic problems. But it doesn’t deserve much government help, either.

Another Bad Idea for the Tax Conferees

A political drawback of the Republican tax bills is that they raise taxes on a significant number of voters by curbing the deduction for state and local taxes. A lot of these voters are in households that make between $100,000 and $500,000 in taxable income. About 40 million tax returns come from that group, and its members are disproportionately likely to face higher taxes as a result of Republican tax legislation.

Would Republicans make these households happier if they cut taxes more for households richer than they are?

The Top 20 Percent Are the Real ‘Hoarders’ of Wealth

Richard Reeves. In his new book, Dream Hoarders, Reeves argues that the upper middle class, or the top 20 percent, is “hoarding” the American Dream.

.. Reeves first points to unequal development of human capital.

By unequal development of human capital, Reeves is talking about parenting and education. Upper middle class parents are more likely to be married, and they’re more likely to plan their pregnancies. A study at the Columbia School of Social Work found that parenting behavior, namely maternal warmth and sensitivity, to be the most important factor of the gap between upper middle class children and bottom-income quintile children. In other words, parenting behavior is more important than maternal education, family size, and race.

Furthermore, upper middle class children generally live in neighborhoods with high-performing public schools, or they attend posh private schools. Upper middle class parents can hire college admissions consultants for upwards of $5,000 to guarantee that their children attend a selective college. Not to mention that most upper middle class parents have often gone through the college admissions process themselves and can help their children succeed.

.. In order to give all children the chance to succeed, Reeves suggest that we

  • curb exclusionary zoning, especially density requirements that prevent multi-family homes from being built in wealthy areas;
  • end legacy admissions at the top colleges in America that inevitably give preference to upper middle class children; and
  • open up internships by increasing regulatory oversight and extending student financial aid to cover summertime opportunities.

.. while Absolute mobility is concerned with whether incomes increase or decrease. Over time, everyone can be better off as the economy grows. Why do we need downward mobility from the top? If everyone’s standards of living are rising, why do we need to be concerned with class status?

..  “increasing the number of smart, poor kids making it to the top of the labor market is likely to mean an improvement in quality and therefore productivity.” Upper middle class people are top influencers in society; they are politicians, pundits, broadcast journalists, and financial analysts. These people should be the most talented people in society, not just the ones lucky enough to be born to rich parents because that is best for the economy. To give one of many examples, a working paper published by the National Bureau of Economic Research determined that fund managers from low-income backgrounds perform better than those from upper middle class backgrounds.

How We Are Ruining America

Over the past generation, members of the college-educated class have become amazingly good at making sure their children retain their privileged status. They have also become devastatingly good at making sure the children of other classes have limited chances to join their ranks.

.. Since 1996, education expenditures among the affluent have increased by almost 300 percent, while education spending among every other group is basically flat.

.. Richard Reeves of the Brookings Institution recently published a book called “Dream Hoarders” detailing some of the structural ways the well educated rig the system.

The most important is residential zoning restrictions. Well-educated people tend to live in places like Portland, New York and San Francisco that have housing and construction rules that keep the poor and less educated away from places with good schools and good job opportunities.

.. zoning restrictions in the nation’s 220 top metro areas lowered aggregate U.S. growth by more than 50 percent from 1964 to 2009.

.. Educated parents live in neighborhoods with the best teachers, they top off their local public school budgets and they benefit from legacy admissions rules, from admissions criteria that reward kids who grow up with lots of enriching travel and from unpaid internships that lead to jobs.

..  I led her into a gourmet sandwich shop.

.. Suddenly I saw her face freeze up as she was confronted with sandwiches named “Padrino” and “Pomodoro” and ingredients like soppressata, capicollo and a striata baguette.

.. the educated class establishes class barriers not through material consumption and wealth display but by establishing practices that can be accessed only by those who possess rarefied information.

.. To feel at home in opportunity-rich areas, you’ve got to understand the right barre techniques, sport the right baby carrier, have the right podcast, food truck, tea, wine and Pilates tastes, not to mention possess the right attitudes about David Foster Wallace, child-rearing, gender norms and intersectionality.

The Quiet Rise of the American Upper-Middle Class

So different to the countries of old Europe, still weighed down by the legacies of feudalism. British politicians have often felt the need to urge the creation of a “classless” society, looking to America for inspiration as, what historian David Cannadine once described, “the pioneering and prototypical classless society.”

.. A key attraction in socialist systems — the main one, according to Orwell — is the eradication of class distinctions. There were few to eradicate in America. I am sure that one reason Downton Abbey and The Crown so delight American audiences is their depictions of an alien world of class-based status.

.. Class division becomes class stratification when these advantages — and, thus, status — endure across generations. In fact, as I’ll show, upper-middle-class status is passed down to the next generation more effectively than in the past and in the United States more than in other countries.

.. But I think some of the most popular efforts to date have diagnosed the class fracture incorrectly. Some analysts have let the upper-middle class off the hook (yes, that would be you) by pointing at the “super-rich” or “top 1 percent.” Take the new rock star of economic history, Thomas Piketty. For him, inequality is pretty much all about the top 1 percent.

.. This class, according to Murray, is defined as much by elitist culture — tastes and preferences — as by economic standing, and accounts for just 5 percent of the population.

.. Robert Putnam, in Our Kids, has a broader group in mind. “When I speak of kids from ‘upper class’ homes,” he writes, “I simply mean that at least one of their parents (usually both) graduated from college.” This represents, Putnam estimates, “about one third of the population.” Putnam’s concern is really with the bottom third, who he fears are being left behind.

.. my editors would have preferred me to use “upper class,” too. But I stuck with the longer, uglier, wonkier “upper-middle class.” This is not just semantics. If people are encouraged to think inequality is an upper-class problem, something important is lost. Most of us think of the upper class as the thin slice at the very top, but the tectonic plates are separating lower down. It is not just the top 1 percent pulling away, but the top 20 percent.

.. one in seven — adopts the “upper-middle class” description. This is quite similar to the estimates of class size generated by most sociologists, who tend to define the upper-middle class as one composed of professionals or managers, or around 15–20 percent of the working-age population.

.. America’s growing class division does not mean that categorical inequalities on the basis of race, ethnicity, and gender have disappeared. If anything, the relative position of black Americans has worsened in recent years

The Hoarding of the American Dream

the top quintile of earners—those making more than roughly $112,000 a year—have been big beneficiaries of the country’s growth. To make matters worse, this group of Americans engages in a variety of practices that don’t just help their families, but harm the other 80 percent of Americans.

.. if we are serious about narrowing the gap between ‘the rich’ and everybody else, we need a broader conception of what it means to be rich.

the upper-middle class has pulled away from the middle class and the poor on five dimensions:

  1. income and wealth,
  2. educational attainment,
  3. family structure,
  4. geography, and
  5. health and longevity

.. They dominate the country’s top colleges, sequester themselves in wealthy neighborhoods with excellent public schools and public services, and enjoy healthy bodies and long lives.

They then pass those advantages onto their children, with parents placing a “glass floor” under their kids.

  • They ensure they grow up in nice zip codes,
  • provide social connections that make a difference when entering the labor force,
  • help with internships,
  • aid with tuition and home-buying, and
  • schmooze with college admissions officers.

All the while, they support policies and practices that protect their economic position and prevent poorer kids from climbing the income ladder:

  • legacy admissions,
  • the preferential tax treatment of investment income,
  • 529 college savings plans,
  • exclusionary zoning,
  • occupational licensing, and
  • restrictions on the immigration of white-collar professionals.

.. As a result, America is becoming a class-based society, more like fin-de-siècle England than most would care to admit, Reeves argues. Higher income kids stay up at the sticky top of the income distribution. Lower income kids stay down at the bottom. The one percent have well and truly trounced the 99 percent, but the 20 percent have done their part to immiserate the 80 percent, as well

Reeves offers a host of policy changes that might make a considerable difference:

  1. better access to contraception,
  2. increasing building in cities and suburbs,
  3. barring legacy admissions to colleges,
  4. curbing tax expenditures that benefit families with big homes and capital gains.

.. Expanding opportunity and improving fairness would require the upper-middle class to vote for higher taxes, to let others move in, and to share in the wealth.

.. Prying Harvard admission letters and the mortgage interest deductions out of the hands of bureaucrats in Bethesda, sales executives in Minnetonka, and lawyers in Louisville is not going to be easy.