Liberty for All : A Manifesto for Reclaiming Financial and Political Freedom (9781466879300) by Newman Rick

Author:Newman, Rick
Language: eng
Format: epub
Publisher: Macmillan
Published: 2014-12-04T16:00:00+00:00

Ten

American Dream Inflation

The first time I bought a home, in the 1990s, everybody offered this advice: stretch. Buy as much real estate as you can afford, and then some. You’ll grow into it. Money will come. In a few years, you’ll be sorry you didn’t buy more.

That was a reasonable way to think about buying a home from 1950 to 2000 or so, but it would come off as terrible advice today. Millions of people who “stretched” to buy a home during the last 10 or 15 years ended up deeply regretful: either underwater on homes that plunged in value and were suddenly worth less than the buyers paid, or so behind on mortgage payments that they may as well have just signed the foreclosure papers when they closed on the property. The story of the subprime crisis and the housing bust that began around 2006 is familiar by this point, yet we still haven’t fully adjusted to the ways it changed the quest for the American Dream and the financial freedom the Dream represents.

Historian James Truslow Adams coined the phrase “American Dream” in 1933 in a book called The Epic of America. He didn’t stipulate owning a home or any of the other materialistic pleasures we have come to associate with the American Dream. Here’s how Adams defined it: “That dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement. . . . It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.”1 The American Dream, in short, was the freedom to make the most you could out of yourself. Since Adams wrote in the early days of the Depression—when regular meals were a luxury to many—the society he described may have literally seemed like a dream out of most people’s reach.

Today, by contrast, we tend to regard the American Dream as something we’re entitled to as a birthright and something that should alarm us if it’s unavailable. In 1933, when Adams published his book, only about 45 percent of adult Americans owned the homes they lived in, according to Census Bureau data, and the homeownership rate was going down, not up, on account of the Depression.2 Owning a home was challenging even before then, because banks were disinclined to lend large sums to ordinary people, and when they did, they typically demanded a down payment of 30 to 40 percent, which many were unable to muster. But dream inflation has brought the idea of owning a home from the fringes of the American Dream to the center. A number of changes over time made owning a home cheaper and easier, including government programs that effectively subsidized homeownership for almost everybody who buys one.

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