The American Dream lives!

Despite what you heard, it isn't dead. Or dying. Or even wretchedly sick.

(Image credit: Nirot Sriprasit / Alamy Stock Photo)

Any chance America's terrible, horrible, no good, very bad 2016 will somehow end well? No way. This is the annus horribilis when nothing mattered. So when a group of top economists and sociologists from Stanford, Harvard, and the University of California released their findings last week on the vitality of the "American Dream," you just knew they weren't going to find it "healthy" or "robust." Instead they declared it to be "fading."

Of course, they did.

Now the Equality of Opportunity Project team defines the "American Dream" as the financial aspiration that kids will have higher living standards than their parents — what academics call "absolute income mobility." And their results — sorry, millennials — suggest barely half of American 30-year-olds, just 51 percent, earn more than their parents did at a similar age. That's a staggering decline from the early 1970s when 92 percent of 30-year-olds earned more than their parents did at a similar age. Income gains were particularly woeful for men in the upper Midwest where factory employment was hit by automation and Asian trade.

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Clearly years of slower economic growth and rising income inequality have taken a toll. But that they would isn't really surprising. It's just math. Had the researchers found mobility moving in the other direction, getting better, now that would have been the real shocker given those other economic realities.

What was gobsmacking was the severity of the decline. And given such an extreme result, the researchers tried to anticipate every possible objection. They ran the numbers using alternative inflation measures, including taxes and government transfers, calculating income gain at later ages, and adjusting for changing household size. But their bottom-line conclusion was "unaffected" by all those various tweaks.

So time to crank up taxes on the rich and start cutting checks, as the progressive left argues? Well, slow your roll, basic income enthusiasts, and consider the following:

First, the report may be a sort of worst-case scenario. Without disputing the core finding showing a decline in absolute mobility, some critics note that combining the effects of all those alternative measures presents a less dire picture. Add them to some other reasonable tweaks, notes Scott Winship of the Foundation for Research on Equal Opportunity, and modern mobility rates rise to 70–74 percent, with maybe two-thirds "a safe conservative estimate." So a bit better. And as Winship adds, "For adults who were poor children, absolute mobility rates almost certainly remain above 90 percent."

Second, you can also measure mobility by looking at a child's chance of moving up or down the income ladder relative to their parents. Is America still the "Land of Opportunity"? What are the odds someone born into the bottom fifth of household income, for instance, makes it to the top fifth? And here — big relief — the probability of moving upward hasn't changed in a generation, according to a 2014 report by the EOP team. That, despite less growth and more inequality. Many news reports about the new study failed to mention the older one on upward mobility. On the downside, though, differences in relative mobility between blacks and whites remain distressingly large.

Third, superstar economist Raj Chetty, involved in both reports, sees faster and more inclusive economic growth as key to improving mobility overall. But instead of perhaps a massive redistribution scheme for some dreamy "post-work" agenda, Chetty favors policies that promote work and opportunity, according to the Wall Street Journal, such as "increasing payments to the working poor under the earned-income tax credit, improving education, starting with elementary schools, and helping poor families move to higher-mobility areas."

So the American Dream still exists, although it's a bit dinged up. And the United States remains the Land of Opportunity, although it could definitely be better. All of which should pass for good news in a year with precious little of it.

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James Pethokoukis

James Pethokoukis is the DeWitt Wallace Fellow at the American Enterprise Institute where he runs the AEIdeas blog. He has also written for The New York Times, National Review, Commentary, The Weekly Standard, and other places.