Who Stole the American Dream?

When he began researching his new book about money and the American Dream, Pulitzer Prize winning journalist Hedrick Smith quickly discovered that the income disparity between the rich and the poor in the U.S. was beyond astonishing. It was greater than the gap in 16th century Spain. It was bigger than the divide in 17th century Holland. In fact, some social scientists were claiming that the world "has never seen such concentration of wealth since the Pharaohs of Egypt."

And Smith uncovered much compelling evidence that this enormously lopsided distribution of wealth was no random economic happenstance. "I found it hadn't happened to the middle class; it had been done to the middle class," Smith says.

The author appeared recently at Politics and Prose to speak to a large crowd about the details revealed in his latest work The Death of the American Dream.  

Smith said the new book he produced was not the book he originally planned to write. That book was tentatively called The Dream at Risk. As a reporter, he said, he, like his colleagues, tell "history by the salami slice on the fly. We don't have the time to fill in the gaps. I wanted to go back and take a look at these (economic) events, fit them together and show the big picture."

And the completed picture Smith portrays is discouraging, dispiriting and downright disturbing.

"When I came to find out that middle class families had suffered a 6 trillion (collective) loss in their homes before the bubble burst, the Dream at Risk was no longer an adequate title," Smith said. "This wasn't a trickle. This was a geyser."

Smith said that while Ronald Reagan often gets blame for beginning the rise of the rich, the most significant event actually occured in 1978, 2 years before Reagan took residency in the White House.

In that year, Supreme Court Justice Lewis Powell wrote a memo that American business was under attack and in extreme danger from the AFL-CIO union, Ralph Nader's consumer advocates, and environmental and safety regulations. "He took his task seriously. He was in fact, a Paul Revere,"  Smith said. Alerted and energized by Powell's call, business and industrial powers banded  together to have a Consumer Protection bill then being considered in the Democratically-controlled Congress killed. 

"That was a pivotal moment, a watershed of American history" Smith said. "Business found they could get what they wanted. They tasted power and they knew the things they could get." Capital gains tax was reduced from 48% to 28%, meaning that the wealthy paid substantially less tax on their investment income. The bankruptcy laws were changed. A "disgrace to the human race" tax system was created and subsequently and regularly strengthened. The race for unlimited wealth was on.  And that race is still raging today. At the time of Justice Powell's memo, there were 175 registered lobbyists in Washington. Today, there are 17,000 lobbyists and public relations specialists in DC. "This is Powell's army," Smith said. And one result - the aggregate wealth of the 1 percent is greater than that of  Canada, of France, or of  Italy.

But what about the middle class and the poor during this time period? "With wedge economics to divide people, that dynamic has been taken apart," Smith says. "They're not getting their share. Everybody does not share equally. For them, it's been 3 decades of getting nowhere."

Tales, Tidbits, Tips
So for those who believe that the economic picture Smith draws in his book is as real as the environmental dangers and violence that threaten the very existence of our country, the question becomes - what do we do?  "Folks, we've got to get up off our seats," Smith answers. "We have to create pressure from the bottom. Lobbying is one of the great growth industries. It's very unrealistic to think that it is going to happen on Capitol Hill. There are fundamental things wrong. What's happening is not just not fair, it's not smart economics. It's altered and decimated the American Dream.  We need people working together rather than working at cross-purposes."