Economic Foundations of the American Dream

It is often said, and apparently much believed, that living standards of typical Americans have stagnated or declined over the past decade or two, that the rich have gotten richer and the poor poorer, while the middle class has been up against a wall, going nowhere. These beliefs buttress another--namely, that today's young adults will be the first Americans not to do as well
as their parents.

Surveys confirm that most people share these opinions. Yet truth is not a
matter of opinion. A majority of Americans also believe that U.S. industry has
been slipping behind that of other nations, for example. As the Economist
points out, however, "America's industrial output expanded by 39 percent
between 1980 and mid-1994, a bigger increase than in any other G-7 country
[including Japan]." In a similar way, the facts do not support many widely
held beliefs and assertions about what has been happening to the growth and
distribution of income since 1980. There may be a problem ahead for younger
generations, but that risk lies in the soaring cost of government, not in any
deep flaws in the private economy.