We Are the 99 Percent—Except for the Top 20 Percent of Us

We Are the 99 Percent—Except for the Top 20 Percent of Us

We Are the 99 Percent—Except for the Top 20 Percent of Us

In a new book, Richard V. Reeves argues that members of the upper middle class, not just the ultra-wealthy, are making our society profoundly unequal.

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How is it that Donald Trump, a man who boasts about having billions in wealth and covers his apartment in gold, could attract the support of two-thirds of white working-class voters in the 2016 presidential election?

There are lots of answers to that question, including racial resentment and sexist attitudes. But another is Americans’ poorly defined sense of class. Now and historically, the working-class and poor Americans think of themselves as the 1 percent in waiting—thus aligning with politicians who, in practice, favor the interests of the wealthy over everyone else’s.

The enemy, instead, is not the wealthy but the elite: the media, the political “establishment,” the academics who warn about climate change. Trump may be rich, but he’s not snobby or elitist. He’s a rich guy who’s just like us, what we’ll be when we’re rich too.

Lower-income Trump supporters are not the only ones who fail to identify their own class standing, however. There is a group whose inability to understand class structure, and their place within it, that is actively making American society more unequal. It’s the very class that Trump supporters so loathe. In a new book, Dream Hoarders, Brookings Institution Senior Fellow Richard V. Reeves indicts his own milieu: the upper middle class of America, among them academics, doctors, managers, and members of the media.

Reeves’s book is an important reminder: The United States has a class system, even though we never talk about it. Since 1939, Gallup has found that almost 90 percent of Americans describe themselves as “middle class.” Just 1 to 2 percent define themselves as “upper class.” These definitions have therefore come to do more to obscure class divisions than to illuminate them. Even though the United States has “a more rigid class structure than many European nations, including the United Kingdom,” Reeves points out, “Americans are more tolerant of income inequality…in part because of this faith that in each generation the poor run a fair race against the rich, and the brightest succeed.” He does a great service by talking out loud about his own class and its influence.

His book falls short, however, in its inability to consider how class intersects with and is even often trumped by other factors, like race and gender. His solutions are so mild as to represent barely a slap on the wrist for a class that hoards wealth and opportunity. And he never questions a meritocratic system that will inevitably produce losers, no matter how even the playing field becomes.

Movements like Occupy Wall Street illuminated our gilded age’s defining characteristic: income inequality that has seen the money and wealth of the richest 1 percent break away from everyone else. But Reeves argues that this framing—in which the tip-top of upper crust is pitted against everyone else—paints over another significant fault line, the one between the richest fifth and the rest.

This is the upper middle class, as he defines it: households in the top 20 percent of the income distribution, making about $117,000 or more a year. And they’ve done remarkably well over recent decades, even as the other four-fifths of American households have treaded water. Income for the top fifth grew by $4 trillion between 1979 and 2013, $1 trillion more than the increase for everyone else combined.

“[T]oo often the rhetoric of inequality points to a ‘top 1 percent’ problem, as if the ‘bottom’ 99 percent is in a similarly dire situation,” he writes. “This obsession with the upper class allows the upper middle class to convince ourselves we are in the same boat as the rest of America; but it is not true.”

Reeves’s aim is not to deflect blame from the 1 percent. Income inequality is fractal, such that every time you zoom in on a higher and higher income group, there is inequality to be found among it. Thus the 1 percent captured a third of all income gains within the top 20 percent between 1979 and 2013, despite its smaller size.

But lumping the very well-to-do in with the 99 percent papers over important distinctions. There has been very little increase in income inequality among the bottom 80 percent; all of it has been created by the richest fifth lifting off from the rest of us. For every dollar that went to the 1 percent over the last three decades, two went to the 19 percent just below them. The upper middle class may not be cashing in quite as much as the ultra-wealthy, but they are still vacuuming up a disproportionate share of income.

While, Reeves notes, individual members of the 1 percent can swing their money around to great impact, the upper middle class as a bloc has outsized influence. “[T]he size and strength of the upper middle class means that it can reshape cities, dominate the education system, and transform the labor market,” he writes. When their interests are threatened, the members of this class have the social capital to fight back.

A perfect example is what happened when President Obama tried to undo a tax break largely enjoyed by this group in order to help those who are less well-off. Obama proposed undoing some of the tax benefits for 529 college savings accounts, which were instituted by President George W. Bush, given that more than 70 percent of the money in these accounts is owned by families making more than $200,000 a year. The new revenue could have been redirected into subsidies to help low- and middle-income Americans go to college.

The backlash was swift and severe. The plan endangered a benefit that’s popular with the vocal upper middle class, which includes members of Congress themselves. Both Democrats and Republicans balked. Obama scrambled to revoke the idea days after he floated it. He “had underestimated the wrath of the American upper middle class,” Reeves writes.

The failure to understand that the upper middle class’s economic fortunes have diverged from those of the rest of the middle class has other ramifications. Most Democratic lawmakers, Obama and both Bill and Hillary Clinton among them, promise they will never raise taxes on the middle class. But then they define this group as anyone who makes $250,000 a year or less, even though the statistical middle class—those who fall into the middle fifth of the income distribution—is made up of families who earn just $43,500 to $72,000 a year.

Pretending that people making six figures are middle class, and then promising to protect them from any tax increases, means politicians are unable to ask these families to pay a tiny tax into new universal benefits like paid family leave. But that’s just the tip of the iceberg. Real solutions to exponentially increasing income inequality will require extensive public investment. And the tax revenue required can’t all come from the top 1 percent. As Reeves shows, even if the top tax rate on household income over $470,700 went back up to 50 percent, where it was for the highest earners in the mid-’80s, it would only raise an additional $95 billion a year. That’s not insignificant, it’s but not nearly enough to fund things like a universal basic income, a government jobs program, universal childcare and preschool, free college, and single payer healthcare. And it’s not as if the upper middle class can’t afford to pay more. “[M]ore money can be raised from the upper middle class without plunging them into near poverty…,” he notes. “[I]f we need additional resources for public investment, it is reasonable to raise some of them from the upper middle class.”

But while the upper middle class may not see itself as a distinct group, it has an intense grip on power. Nearly 80 percent of this class can be expected to turn out for elections, as compared to less than half of the poorest Americans. Reeves also sees other kinds of influence: the cultural sway of having so many of its members working in the media, advertising, and the arts, as well as dominance in business, science, and even politics itself. “As a class, we are a powerful bunch,” he says.

He also sees this class as not just defined by income, but by better health, education, occupational opportunities, and even different family structure. The upper middle class then uses these assets to hoard opportunities for itself, perpetuating an unfair system: Its members fight to preserve zoning laws that keep the good schools free of poorer children, find ways to pay their children’s way into elite colleges (he takes particular umbrage with legacy admissions), and trade favors to get their kids into unpaid internships. The rich skew the game so that American class structure stays entrenched.

In this way, Reeves accurately names a problem that too often goes unacknowledged. But his solutions for the problem are weak at best.

While he admits that his suggestions for how to solve perpetual class stratification are just a starting point, the lack of teeth is telling. He suggests providing low-income Americans with better access to family planning and home visits from nurses for new parents, ignoring the fact that single mothers fare a whole lot better in countries that actually spend enough on their social safety nets. He wants better teachers in K-12 schools, a less complex college loan process, more support for vocational training, and the end to legacy admissions at elite universities, but stops short of calling for a full-scale overhaul of the educational system, one that would put an end to racial segregation and ensure adequate funding for all.

Even when he takes on systemic issues, like zoning, which keeps housing segregated by making it difficult to build affordable units, and a tax structure that demands little from the rich, Reeves pulls his punches. He doesn’t want the Department of Housing and Urban Development to ensure that communities comply with fair housing rules or even to make upper-middle-class areas accept more high-rises; he just wants more three-story buildings. On taxes, he believes, “As a general principle, it is better for people to be able to spend their own money rather than have it taken away from them,” which leads him to endorse merely limiting some tax deductions used by the well-off.

If Reeves is, as he says, not afraid to take on the wrath of his own class for the betterment of those with less, why doesn’t he offer bolder and more dramatic proposals? Why not propose dramatically increasing taxes on the top fifth of the country and using the money to, say, offer a universal basic income to everyone else? Just giving the poor money has been found to increase their incomes and even improve health and education. This and other policies, like universal preschool and health care, could help us create a fat middle, with many people enjoying a decent standard of living and few at the very bottom or top.

The answer may lie in the fact that for all his talk of a rigged system, Reeves doesn’t actually want to transform it. Rather than focus on improving the standard of living for all children—what economists call absolute mobility—he focuses on how children can move to a higher rung on the income ladder than the one their parents stood on. That means, mathematically speaking, there have to be children in the upper middle class who move downward to make room at the top for the children of other classes. For Reeves, American society is a zero-sum game.

Why would he see it this way? Because he wants to preserve the meritocracy rat race. For Reeves, the problem is not that America’s system creates a competition that will always produce winners and losers; it’s that the competition doesn’t start out fair enough. “The goal should not be to reduce market competition; it should be to create more competitors…,” he writes. “[M]aterial inequalities generated by market competition are fair to the extent that the opportunities to prepare for the competition are equal.”

“Simply put, I am arguing for a meritocracy for grown-ups, but not for children,” he says.

Yet he never talks about what happens to the losers in that system. What if someone doesn’t have the “skills, knowledge, [and] intelligence” that a market system supposedly rewards? Are they to starve? Incompetent rich kids should not get ahead just because they’re rich. But the bigger problem is a society that is willing to leave you to the wolves if you don’t have “merit.” We should care about the well-being of all our fellow citizens, regardless of their supposed skills or smarts. Losing a fair game doesn’t mean you deserve nothing.

Then there’s the question of whether a market can ever in fact be objective. Reeves’s biggest blind spot is any “ism” other than classism that might stymie someone’s chances of getting ahead. Perhaps the best tell on race is that he frequently quotes Charles Murray, author of a book that argues that black people are less intelligent than white people, and features a blurb from Murray on Dream Hoarders’s back cover. But he also gets the state of race and gender wrong himself. “Women and people of color are able to succeed more freely today, in part because of the slow triumph of meritocratic values,” he writes. “The meritocratic ideal is helping to dig the grave of discrimination.”

He’s right in part. Blacks are no longer enslaved, women and people of color have more enumerated rights, and their access to better jobs has expanded. But the idea that discrimination is on its deathbed, and the arrival of race- and gender-blind meritocracy is imminent, is ludicrous. Women make up two-thirds of minimum-wage workers and just 5.6 percent of big company CEOs, all the while still earning a percentage of what men make even while working full-time. There has never been a generation in which black children stood the same chance at economic advancement as white children, including ours, even if they become more educated and skilled; the gap between black and white wages is larger now than in 1979.

Meanwhile, meritocracy is more often to blame for perpetuating discrimination than heralding its end. One study found that when an organization explicitly calls itself a meritocracy, managers favor male employees over female ones. If a workplace, or a society, believes that all one needs to get ahead is talent, it quickly ignores anything else that might keep someone from rising.

Reeves says he wants upper-middle-class Americans like himself to pay more so that the playing field is leveled for all. But his solutions suggest he’s not willing to take that instinct very far. His class wouldn’t have to pony up very much for the milquetoast solutions he puts forward. Even after his ideal revisions, the basic structure of America’s ruthless market-based society would remain intact. In his world, being a member of the lower classes, even with more mobility, would still destine you to destitution.

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