by Nina Easton

Losing the American dream

The Dow is soaring, and the economy is growing. So why are so many Americans bearish? Fortune's Nina Easton looks at an economy where money is plentiful, but security scarce.

By Nina Easton, Fortune Washington bureau chief

WASHINGTON (Fortune) -- The Dow pops into uncharted 14,000-point territory. An economy pummeled by the 9/11 terrorist attacks has grown for 22 quarters straight. Unemployment stands at 4.5 percent - lower than any average decade from the 1960s through the 1990s. And Treasury Secretary Hank Paulson declares: "This is far and away the strongest global economy I've seen in my business lifetime."

So why do six out of ten Americans think that the economy was better five years ago and fear that worse economic times are on the horizon, according to the latest USA Today/Gallup poll? "If it makes you happy," moans Sheryl Crow, "then why the hell are you so sad?"

From opposite sides of the aisle, two Congressmen are quietly trying to take on the most volatile policy issue in Washington. Fortune's Nina Easton looks inside an unlikely partnership. (Read the column.)

This isn't new, but it is befuddling. The public has been blue about the economy for years, giving rise to an industry of blame-layers. Liberals predictably blame George Bush - for the war, for tax policies that favor the rich, for letting U.S. jobs go to China and India. Conservatives point the finger at the "liberal media establishment," which, they insist, put a shinier spin on the Bill Clinton bubble economy than on George Bush's recovery. And when all those explanations are exhausted, pundits like to blame Americans themselves - for being spoiled and soft and wanting too much.

But as new directions for the nation are being debated on the '08 presidential candidate trail, the question deserves a more thoughtful answer.

Democratic pollster Celinda Lake took a stab at it with a series of surveys that found only 18 percent of Americans believed they have obtained the "American dream." In a presentation last week at the Brookings Institution, she blamed concern over "the basics - health care, retirement, personal debt, paying the bills." She added: "People believe that corporations and wealthy interests have too much power and that they are putting up working people achieving the American dream."

While there may be some truth in this, it's a brand of class consciousness that hasn't exactly connected with voters in the past (though John Edwards is taking it out for a spin once again). As Jim Kessler, vice president for policy at the two-year-old think-tank Third Way, put it: From Walter Mondale and Michael Dukakis to Al Gore and John Kerry, Democrats "not only lost, but they lost to the middle class." Last year, in the 2006 congressional elections, Democrats won among middle-income voters for the first time since 1990.

As Third Way documents in its reports, the American middle class isn't really shrinking, so much as it is anxious. The median household income for workers aged 25 to 60 is nearly $62,000. If both spouses work, it's close to $82,000. As Kessler notes: "That is not an extravagant living. But it is not drowning. And it is not one step away from losing your home." The same Third Way report noted: "The bottom line is that the middle class is shrinking not because the bottom is dropping out; it is because more people are better off."

So why the jitters?

Lake hit on it, I believe, with this comment: "There have been times in our history when the American dream was rooted in opportunity, and there have been times in our history where the dream was rooted in security. This is a time, and has been for a couple for years now, where the dream is rooted in security."

There's not a lot of security in a fast-paced global economy where workers get ahead by chasing opportunities (not obediently following office rules), by constantly reinventing their careers (not relying on seniority), by self-investing their savings (not counting on company pensions).

In other words, in the new economy, we all have to be entrepreneurs with our own lives - with all the rewards and risks and, yes, anxieties that entails. According to Third Way, middle-aged men are staying at the same job nearly half as long as they were just 20 years ago, and more than 60 percent of workers report they've actually had to switch the type of work they are doing.

Add to all that a war in Iraq that America can't seem to win, and the always looming threat of another terrorist attack here at home, and it goes a long way toward explaining public unease.

The presidential candidates are already talking about building a stronger safety net for workers. But before buying into more calls for government spending, we should be debating what a 21st century safety net should look like.

As Rep. Jim McCrery, ranking Republican on the House Ways and Means Committee, notes: "We need to do something different. The old safety net we have in place is built for a time when people went to work for a company and stayed 30, 35 years, and then retired on a pension with defined benefits. The world has changed and we ought to look at new approaches to give workers in this country some feeling of security." And that's a conversation that doesn't have to rely on the same old partisan blame game. Top of page