The notion that the American dream has slipped beyond the reach of a significant portion of the populace is a familiar refrain. Many who echo this sentiment advocate for increased government regulation and spending, hoping to rekindle that dream.
But what if the American dream isn’t as elusive as it’s made out to be? What if, in fact, the very government interventions designed to bolster it are, paradoxically, hindering its realization? In his new book, Crushing Capitalism: How Populist Policies Are Threatening the American Dream, economist Norbert J. Michel from the Cato Institute challenges these prevailing assumptions. He presents an extensive array of data showcasing that conditions are improving for most Americans, contending that many government actions are slowing this progress and that additional interventions would only exacerbate the situation. His analysis delves into wage trends, household incomes, and poverty rates, all while scrutinizing the implications of welfare benefits, minimum wage laws, and tariffs.
This discussion draws from my recent Hoover article, “The Resilient American Dream,” published in Defining Ideas on June 19, 2025.
Another excerpt:
Are real wages truly stagnant?
The commonly held belief is that real wages have seen negligible growth over the past few decades. Notably, in a 2018 book, Oren Cass, chief economist at American Compass, asserted that from 1975 to 2015, “the median worker’s wages have barely budged.”
Michel identifies several flaws in Cass’s assertion, two of which stand out. Firstly, Cass relies on the Consumer Price Index (CPI) to adjust wages for inflation—a measure infamous for overstating inflation rates. A more accurate, albeit still imperfect, alternative is the Personal Consumption Expenditure (PCE) index. Michel’s analysis reveals that real wages actually increased by 22 percent from 1975 to 2015, a stark contrast to Cass’s figure of just 1 percent using the CPI. Secondly, we must consider employer-provided benefits, which constitute a significant portion of total compensation. From 1973 to 2019, these non-wage benefits surged from 13 percent to 30 percent of overall compensation. Thus, a more nuanced evaluation shows that real wages, when accurately measured, have indeed seen substantial growth since 1973.
Additionally:
What about household incomes?
Another widespread claim is that household incomes have stagnated. For instance, economists Isabel Sawhill and Eleanor Krause from the Brookings Institution asserted in 2018 that “American households in the middle of the distribution have experienced very little income growth in recent decades.” Yet, Michel counters this perspective by highlighting that between 1967 and 2015, median real household income increased from $44,895 to $57,230—a 27 percent rise that, while modest, cannot be dismissed as “very little.” Moreover, Michel points out critical issues with the Sawhill/Krause data. Notably, they failed to account for a significant decline in household size. On a per capita basis, household income grew by an impressive 64 percent over that period. Furthermore, similar to the wage analysis, their inflation adjustments utilized the CPI. When using the PCE, Michel concludes that real household income per person surged by 140 percent between 1967 and 2015. That’s a considerable increase.
For an in-depth exploration, read the full article.
