The favored fifth: A long-read Q&A with Richard Reeves, author of ‘Dream Hoarders’

Over the past several years, we have grown accustomed to hearing about the 1%. Yet Richard Reeves, a senior fellow at the Brookings Institution, asserts that it’s the “favored fifth” — the top 20% of the income distribution — that is the greater problem. Richard and I discussed his recent book, “Dream Hoarders: How the American Upper Middle Class Is Leaving Everyone Else in the Dust, Why That Is a Problem, and What to Do about It.” To listen to our conversation, head on over to Ricochet. A short-read version of the transcript can be found here.

PETHOKOUKIS: The dream hoarders. Who are we talking about? Who is doing the hoarding and what is being hoarded here? 

REEVES: Broadly, the top fifth. The top quintile — those with healthy six-figure incomes. Largely college graduates; the average income for that group is $200,000 or so. The dream that is being hoarded is the dream that, I think, most Americans would have, which is a chance to get a good college education, a chance to get your kids into a good school, a chance to own your own home and build some wealth.

So this is a story of the top 20% pulling away from the bottom — even though oftentimes we hear about the 1%, 99%, or the 0.1% — but you think that the relevant story then is the top 20%. Not only are they pulling away income-wise, but it’s also a story of upward mobility. And it’s also a story that there are things they’re actively doing to not only help their own position but then ensure their position and that their kids will do even better than they are. What are the mechanisms involved here?

You’re right. The story I tell is one of both separation and perpetuation. There’s this pulling away. You see that economically. The top fifth has seen the pulling away; there’s been no increase in income and equality in the bottom 80%. All the action’s above that line. It is true that the closer you get to the top, the more action you see. So it’s certainly true that the higher you get, there’s been this stronger pulling away. But you start to see this break at about the bottom of the top fifth.

I think one of the problems of the inequality debate has been the “We are the 99% rhetoric.”

But I think one of the problems of the inequality debate has been the “We are the 99%” rhetoric. I think that’s been profoundly unhelpful because it’s allowed somebody in the 98th percentile or the 95th percentile — someone who’s really doing pretty well, on the winning side of recent inequality — to point upward and say “No, it’s them. It’s just the super rich.” And then they blame the super-super rich and they blame the super-super-super rich. But in terms of the class fracture, in terms of not just money, but the way the housing market works, the way education works, the way college education works, that’s not just a top 1% story. So, four year selective colleges, you know, the best four year colleges: 70% of their students are from the top 20% now. And sure, disproportionately more from the top 1%. And so, then the question becomes: Are those inequalities happening as a result of fair processes or unfair processes? I think it’s a combination of the two. So you want to focus on the unfair ones. I think it’s the way the housing market is rigged, and the way you subsidize a rigged housing market, and the way you organize K-12 education, it’s almost like a perfect storm in a way to separate and then perpetuate inequality.

When did this become a problem? When did this start showing up in the data? What was it like before the dream was hoarded? When did the hoarding begin? 

The income inequality trends — I think it’s pretty well known — began in late-70s and early-80s. That’s certainly true for this group. Since 1980, by my calculations, the top 20% has seen about a four trillion increase on their pre-tax income. And the bottom 80% a three trillion. There’s been an increase across the board, but much more towards the top. And I think what’s happened is you get a series of unintended second and third round effects. There’s more economic inequality, that allows the top to buy into opportunity goods like education, like the housing market, and so on. And then they’re able to use local policies like zoning and so on. So it ends up being, without some evil genius sitting there saying “Aha, how can we hoard the American dream,” the net result of each of these policies — local, federal, and educational — laid on top of each other is in a sense to kind of end up with an accelerating process, almost a self-reinforcing cycle by which they are able to do much better. You saw it in the recession, you see it in K-12, and you see it in college.

So what are the driving factors? Is it the actions taken by people in the top 20%? Or are they somehow benefiting from other macro factors as the wind in their sails?

There are systems that are at work here that result in the perpetuation of class fractions, particularly at that top 20% level.

First, we’re not talking about a leisure class here. We’re talking about a pretty hard working upper middle class. What’s been driving the kind of economic separation has been a combination of two main factors: One, well-established earnings inequality and higher returns to higher education at the top. And then actually you see this stunningly unromantic term, assortative mating — i.e. college graduates marrying other college graduates, which means they double down on that income. And then they’re able to put that into housing which gets them access to a good school and so on. Then you take all the tax subsidies that are available. So, I’ve got a new paper on 529 but there’s also mortgage interest deduction which ends up in a way subsidizing this kind of separation. This interaction between good economic forces, if you like, which is growth and education, but then also the way that it is set up to kind of — through no one’s malicious fault, most of this is not people setting out to cheat — it’s the result of the system. So most people listening to this may well take all of their deductions. I do — I take my 529 college savings deductions. I’ve just written a paper saying it’s one of the most egregious elements of the tax system — and then give it away. But nonetheless, there are systems that are at work here that result in the perpetuation of class fractions, particularly at that top 20% level.

So if it’s a story of meritocracy — that because of the system we live in, because of globalization and technology you have the top 20% doing really well — is that a different story? Is that mainly a story of meritocracy? And that, even if that’s the case, we still don’t like it because we have this separation? Or is it not so much the story of a meritocracy?

It’s both, and I work pretty hard to make the distinction between those two. I think the market is pretty meritocratic in the United States. The labor market does quite a good job at rewarding the skills, abilities, talents, and capacities that the market likes.

The wages — that’s reflecting something really. There’s a return to certain skills that as the economy changes are being more rewarded and other skills are not being rewarded. Is that the story?

There’s no reason why we should have legacy preferences in college admissions; there’s no reason why I should be able to use zoning to keep lower income kids out of my school or neighborhood; there’s no reason we should hand out internships based on who we know.

Right, and that’s driving a lot of these economic gaps. There, the implications are not that the kind of person that worked hard to get a good education and is now working hard to earn what they can is doing something wrong. The result though is that they’re able to use those economic resources to significantly affect the distribution and accumulation of merit in the next generation. Merit is not just something we’re born with, it’s a combination of what we’re born with and what we accumulate. So, my kids get a chance to go to good schools, live in a stable, safe neighborhood, and have engaged parents. So they’ll hit the labor market with quite a lot of “merit,” which doesn’t necessarily speak a lot to their innate ability; it speaks to the fact that basically the upper middle class are merit production machines. Their kids do well because their kids are pretty awesome because they have had all this investment. There, the public policy implications are to retry to redistribute a little and to say, how can we help other kids who were not lucky enough to be born to people like that to do better? That’s more choice in K-12, that’s more investment in community colleges, etc.

Then there’s this whole other section that’s not meritocratic, where we are rigging the system — that’s where the hoarding kicks in. There’s no reason why we should have legacy preferences in college admissions; there’s no reason why I should be able to use zoning to keep lower income kids out of my school or neighborhood; there’s no reason we should hand out internships based on who we know. So there’s another side which is unmeritocratic, which is anti-competitive behavior. So one reason you see the upper middle class is pulling away is because of competitive behavior in a market economy. The other is: anti-competitive rigging of the market in our favor.

So the first part, the more meritocratic part of it: Is that the more important part? If that’s the more important part, is that a problem? I have kids in college and going to college, I’ve been thinking a lot, we’ve been going to a lot of awards dinners. And my kids go to public high school, so we have a wide variety of kids. And I always think, where are the kids who are getting good grades — maybe from any part of the income scale — where are they going to school? Do you think our system is doing a bad job of taking the kid who income-wise is in the bottom 40% or bottom third, who gets a 35 or 36 on their ACT — is our system not doing a good job of making sure that kid ends up at, certainly a top-100 university, but even what we might call a top-25? If we’re not doing that very well, then this isn’t a very meritocratic system. Are we doing that well? I think we are. I think that kid can still go to a very good school and that school would probably do a lot to make sure that kid has the financial aid to go to that school.

So, if the kid you just described will get financial aid, and there’s an undermatching problem, that kid is less likely to go to one of the. . .

I’m kind of derailing you on this side, because it’s been my own life. I’ve noticed in that situation that oftentimes those kids, who I don’t know their SAT scores but I see what their grades are and they seem to be taking hard subjects, they’re probably pretty smart. And then I see that they’re not going to those schools, and I’m wondering if it’s a problem that we have a system that doesn’t let those kids go to those schools, that all those slots are filled up by legacy students. Or is the problem the parents? That the parents don’t think they can afford that school, and they don’t pursue it? And they’re so worried about debt, that they don’t want the kids to take out any debt. And so they end up going to maybe what they think is a more affordable, non-elite institution, and that’s the thing keeping that kid from going to that school, where he could not only go to a great school, but be around other students, have all of those networking opportunities, and have all the signalling value of going to an elite university. 

A meritocracy is for grownups; it is not for kids.

I think it’s a good vein. Don’t beat yourself up about derailing. I think this is absolutely critical because the deep problem is the inequalities in the opportunities to accumulate the kind of human capital that the labor market will do a pretty good job of rewarding. So I say in the book that meritocracy is for grownups; it is not for kids. Actually, in those years, the K-12 years, you actually want an almost anti-meritocratic principle in the sense of what you want to be doing is taking the kids who may have not been born lucky, they may not have been born brilliant or to parents who can do all this great stuff for them. They’re the ones we should be investing the most in if we are to pretend that the race that happens later is anything like fair. I would say: Are we doing a good job at that? I would say, not a good enough job. Now, it’s all going to be relative. But the kid’s ACT scores, what are their chances of getting good SAT or ACT scores if they come from a poor background and go to a terrible school? Data point: The increase in the number of kids from the bottom 20% going to four year colleges in the last fifteen years — zero, no increase at all, except at for-profit, private colleges. That’s small and mostly bad news for the reasons you get into. The US higher education system is not bringing in any more poor kids than it was 15 years ago. Maybe, there just aren’t enough poor kids from that bottom quintile who are smart enough to go to college. And maybe the reason why 70% of the students from those selective colleges are from the top quintile is because they’re naturally and innately brilliant and they were born that way. I don’t believe that.

That’s certainly an argument. The argument — I don’t believe it’s in this book unless I’ve missed it — is what we’re seeing here is a natural sorting because of these macro factors that are rewarding high IQ people. And there’s only so many of those people, and if you have a high IQ you’re going to do really well. And that’s why they’re in the top 20%. Granted, not everybody, and there’s certainly kids in there because of these anti-competitive things we’re going to talk about who stay there. But most of all, we’re seeing a natural sorting of the US economy and maybe more so in the future where we’re going to have this smaller sliver of people who can operate in an economy that rewards these sorts of computer skills, abstract thinking. It’s the Tyler Cowen argument. There’s going to be this sliver, and it’s not going to be because of zip codes or legacies at colleges. It’s just that our economy rewards really smart people, and if you’re a smart person, you’ll do well.

This is the cognitive meritocracy that Michael Young warned against in his book “Rise of the Meritocracy.” It was a dystopian satire, and everyone missed the point. Poor Michael Young spent the rest of his life writing letters to the Guardian, saying “That’s not what I meant.” But I think — you just used the word IQ; if you substituted it using the word “skill” — that you have a market that’s rewarding highly skilled people, which is going to contain IQ, but is not reducible to that, I would agree with you. But if we really think that IQ and ability is innate, it’s baked in, not much you can do about through education and the labor market rewards it, why then are so many upper middle class parents spending so much time, and money, and effort trying to get their kids to. . .

Because they’re not totally sure. . .

It’s because it’s not completely true! Otherwise we’d just step back, put our kids into a terrible school, and not worry about it because their innately high IQ will be rewarded in the labor market. It’s the opposite of that.

One advantage supposedly would be that wealthier parents can get test prep. If you have some money, you can get online test prep. If you have more money, you can send the kid to the class. If you have a lot of money, you can get the personal tutor. But I’m not sure the studies actually show test prep — there’s supposedly a big advantage. Now, are my kids getting test prep? Yes, they are getting test prep. Do I think there’s a reasonable chance it’s a complete waste of money? Yes, I believe there is a reasonable chance.

What a great advert for free-market economists you are.

I’m sort of worried.

On the margins, it might make a difference. And here’s the thing: I do think the margins are where a lot of the work is. I actually think we’ve come to believe that even a marginal improvement in skills or schools will make a marginal difference to the institutions they go to. And that might make a non-marginal difference on how they do in the world. Now, either we’re completely wrong about that and we’re being fooled by all the prep tutors, Ivy Leagues, and whatever into parting with colossal amounts of money, or there’s some truth to the fact that actually investing in various ways in our kids’ human capital — that’s mostly looked at the K-12 school they go to, the early years, and, candidly, the parenting we do, and the family stability of the upper middle class. Divorce rates are dropping among college graduates in the US. Actually, you’re seeing quite solid, stable family structures towards the top of US society. Both Putnam and your own colleague Charles Murray have written very strongly about this. And actually, families are incredibly important human capital generators too. And so, I don’t want this to try to come across as being all about state institutions and government. A lot of it is about family too.

Just a data point. If I’m reading a book called “Dream Hoarders” about how the middle class is pulling away and then pulling up the ladder behind them, the data point I’d really want to know is: are upward mobility rates getting worse? But are they getting worse? I thought there’s been a lot of research showing that — you can say they’re too low — but that’s not really changed much over the past quarter century, generation, forty years. If those haven’t really changed much, then how much of a problem is this really?

You’re right that relative mobility rates haven’t changed much. I think there’s pretty good evidence for that — it’s contested, you can find other scholars who will argue about that. There is some evidence in recent years it may have been worsening a little bit. But I think the responsible position is to say: “We don’t have evidence there’s been a big change in relative mobility rates, overall.” However, I think there is accumulating evidence that there is more stickiness at the top. So there is less downward mobility from the top than there was before. And so to the extent there has been a shift in mobility, there does seem to be. . .

A wealth trap.

Yeah, a wealth trap or a poverty trap.

That probably could’ve been an alternate name for this book, though that is not a very good name compared to “Dream Hoarders.”

Actually, Gary Solon says exactly that. I quote him saying: “Less a poverty trap, more a wealth trap.” Now, of course, people who are trapped in wealth don’t seem to complain about it very much. They quite like being trapped in wealth, and that’s part of the problem politically.

Of course people who are trapped in wealth don’t seem to complain about it very much. They quite like being trapped in wealth, and that’s part of the problem politically.

So, we talk a lot about upward mobility. What we don’t talk about is what is sort of implied in this book, that there needs to be downward mobility.

It’s not implied; it’s stated, very bluntly.

Right. Let me read something, this is from Janan Ganesh of the Financial Times who wrote a good piece on downward mobility:

No chess grandmaster cannot think an upper middle class couple trying to rig life for its spawn. . . .

The state would have to curb personal freedom, even human nature, to make downward mobility a serious risk for people born to rich parents. Would voter support confiscatory taxes on inheritance and lifetime gifts, the crimilisation of nepotism, the regulation of work experience, tutors and other kinds of ‘soft’ cheating. Would the well-off pay taxes for universal public services if schools in poor districts had much smaller class sizes? The rich compound their privileges by marrying each other: what chance government diktat in matters of the heart?

To spell out reforms is to see their political unthinkability.

To the extent that you have identified a problem, and given all the advantages that accrued to people for doing the right thing — stable families, working hard — is this just like complaining about earthquakes or hurricanes? There’s nothing that can be done about it significantly to increase downward mobility.

At the very least, we have an honest conversation about it. And Janan Ganesh’s piece is very clear about that. If it’s the case that we’re not going to see any more downward mobility, and if anything, we’re going to see less, and the US top quintile perpetuates itself more effectively than in other countries, well, let’s stop banging on about the need to get more poor people into those quintiles. Let’s at least be honest about it. Let’s at least recognize the nature of the tradeoff. And then look very hard at the ways in which that perpetuation is taking place, which include many behaviors and activities like family stability, striving, getting a good education, which we want others to emulate. You know, they’re doing something right, we want more people to do that, which we’re now seeing in parenting. You’re seeing the parenting gap beginning to close.

But I would resist the idea that there aren’t institutional changes that we actually could get political support for, which could, on net, somewhat increase the chance in downward mobility in the service of a fairer society. To take what might seem like a trivial example: internships. 60% of college seniors now have internships, a lot of those are handed out in ways that are very opaque. Bill de Blasio just gave two internships to his kids; he had to get a waiver from his own ethics commissioner for doing that — unthinkable in other countries, including the UK, where I come from. Unthinkable politically. The same way it’s unthinkable for a British prime minister to send their children to a private high school; you can’t do it — it’s not politically correct. Not that it’s illegal, it’s just that the social norm around these things can shift. And so you can imagine the social norm shift around some of these things. Or indeed towards more integrated schooling. We haven’t talked much about the housing market, but the way that the upper middle class ruthlessly and unfairly used local zoning ordinances to rig the housing market.

Let’s talk about it now. I think it is an important issue that is actually one where you’re seeing economists on the left, right, center talk a lot about housing. Could you get into that?

The more I’ve looked at housing and the combination of local zoning ordinances, federal tax subsidies in the form of the $70 billion a year mortgage interest and local property deduction, housing wealth, neighborhood schools, and so on, the more I have come to believe that regulation of land is becoming a bigger and bigger problem in the US. The US used to be a big country; it’s getting to be a smaller country in the sense that the areas of economic prosperity and growth are smaller. We’re also getting really expensive. Why? Because of land use regulation. You look at places like LA, used to be zoned for 10 million people, now 4.6. It didn’t get any smaller. What happened was all these zoning ordinances came around in single family dwellings. And then, it’s totally in my self interest as an upper middle class person to resist any encroachment on that.

I don’t in any way underestimate the political problems here. It does seem to me if we’re willing to say “Look, these people are always going to be self-interested in everything they do and everything they vote for, there’s no chance of making any kind of progress, so let’s just walk away,” well, either let’s live with the consequences of a fractured and unfair society or become really egalitarian and move towards very strong redistribution. Because if we’re going to give up on the idea of mobility, well in that case, we probably better start compensating the losers much more handsomely. I don’t really want to go either of those ways. Because neither of those ways seem to be particularly American. To give up on the idea of mobility and fluidity and meritocracy in the proper sense, or to just say, “Look, let’s just accept the fact we’re going to have to take lots of money from these people and give it to the poor people who can’t possibly keep up with them.” Both of those are un-American solutions, so let’s at least try American solutions.

It seems to be we are sort of drifting toward that solution toward redistribution, “let’s just cut them checks.” But would we care as much about this if the economy had been growing for the past 10 years at 3.3%? So at least, maybe the relative mobility rates wouldn’t change, but you’d be doing a lot better. And maybe you wouldn’t really care. Do you really care about that if you can feel your standard of living going up and you can see “well, wow this is an economy that is working, it’s going to work for my kids, they will do better”? Who even cares about mobility rates? Is this also an economic growth issue? Of course, if you don’t think the economy can grow much faster, then of course we have to turn to those other two solutions.

I also should say that I care a lot about relative mobility. I’m not sure that ordinary people do. They care more about absolute mobility — “Am I getting better off?” I use an analogy that was given to me by the writer Steve Pearlstein, where he takes the analogy of a highway where everyone’s driving along at 60 miles per hour or whatever the speed limit is here. But everyone’s moving along nicely. If someone overtakes you, eh, you’re pretty relaxed about it. If you’re in gridlock, and someone cuts up the inside lane and tries to cut in front of you, you’re furious. That’s a great analogy of a world of lower growth where relative mobility, where the sense of someone cutting in line or the system not working fairly becomes actually more acute. When things are slower and more cramped and more difficult, actually I think the sense of fairness around relative mobility might get greater. My position is more growth — everyone getting better off — is good in and of itself. It might also lower the stakes a little bit about relative mobility.

One of the reasons the upper middle class is so terrified about kids being downwardly mobile, and putting a glass floor underneath them, it doesn’t look so good down there. It looks pretty yucky down there. And so then you’re heavily incentivized to do everything you can to stop your kids from falling. If it didn’t look so bad down there, maybe the idea of a kid dropping a quintile or two in a high growth economy, that doesn’t feel so threatening. In a low growth economy, the stakes get much higher. Therefore, we work much harder to make sure that doesn’t happen. So I think low growth changes the equilibrium, the social equilibrium, around this stuff.

We were talking earlier about colleges and getting into good colleges. You had at least one big idea about that.

The whole college admissions process, and I say this as a new American with a high school junior, is terrifyingly opaque and complex. And, of course, complexity is a friend of the upper middle class because then you can navigate it. There are many, many, many reforms around income contingent loans, more market pressure on these institutions, et cetera. . .

But you don’t want a kid to get an edge just because their parent went to that great school.

I actually find the symbolism of a hereditary principle in college admissions in the US of all places to be quite extraordinary. I mean that literally — there is no other country in the world where this happens.

I actually find the symbolism of a hereditary principle in college admissions in the US of all places to be quite extraordinary. I mean that literally — there is no other country in the world where this happens. It was wiped out in my old country in the middle of the 20th century. The fact that I went to Oxford did not help my son get into Oxford. But our royal family don’t go to Oxford or Cambridge. Why not? Because their grades aren’t good enough. We may have a hereditary monarch but we don’t have hereditary principles. Now, you might then argue, “that’s trivial, what effect will that actually have?” But it seems to be symbolically quite important. The idea that you should actually be able to implement a hereditary principle, which is racist in its implications of course because more of the people who went there tend to be white, is just extraordinary to me. I’m hoping the 75 selective and elite universities that do this will quietly get together — as they did in the 1950s over athletic scholarships — and just agree en masse to get rid of it. There’s a collective action problem here. It’s a national embarrassment.

Can I buy my kid’s way into Oxford?

No. There’s no way to do that. I know it’s outrageous. Your kid has to get the grades. There’s no other way in.

No matter what computing center, library, or sailing center I buy, I can’t get in there.

There’s no price that you can pay that could get your kid in. It doesn’t work like that. Here, of course, faculty’s kids get an even bigger tip.

Not that I’ve contemplated it, of course.

But that’s a conversation that some people have. How much do I have to give? And then you get into the whole alumni giving thing, part of that is motivated by legacy preferences. Talk about waste upon waste. The idea that you should even give money to a college that you paid a fortune to go to 20 years earlier is quite extraordinary. Didn’t you pay for it the first time around?

More or less. This is tough. We’ve mentioned that if you’re going to marry someone who is also doing great and has a fantastic job, it’s tough to do anything about that. What we’re talking about are incremental, marginal things. Do you think they will significantly change these mobility rates?

I think to significantly change mobility rates would require significant reforms across a whole range of institutions — K-12, postsecondary, it would require significant investments. We can get the money for that from those at the top. But I actually think we’re a very long way from people feeling ready for that kind of politics.

Maybe they’re more ready for the redistribution argument.

It may be. They might be more ready for that. It may be that they like keeping it nice and distant, and paying for it, and not talking about it but just subcontracting it. I don’t know, but I do think the rise of Trump and the discomfort of the upper middle class creates a moment where there’s at least pause and reflect. I do think that it’s necessary to have a sort of moral awakening. We don’t lack for policy, what we lack for is a sense among the people with power in this society. It’s not just the top 1%; it’s all of us in the top 20%. Those with power should recognize. . .

Should I have not bought that test prep class?

I cannot tell you how often I get asked that. You know you shouldn’t because you looked at the research, you’re wasting your money.

Probably. I’m not entirely. . .

I’ve had that asked before. Someone just tweeted at me: Should I not have paid for that? I explicitly mentioned that, if you want to do that and you think it will help. I do not in any way want to come across as saying good parenting is somehow wrong. What I do want to say is just reflect on how did you vote when there was a zoning battle on bringing a bit more lower income people into. . .

Keep them out, Richard. I’m putting up the wall. No, I’m kidding.

Basically, they are gated communities. You might not see the gates, but they’re gated communities.

Right.

How do you react to PTA funding? One of the things, again a trivial thing, get your PTA to split the funds with a poorer school. I know a couple of PTAs that are doing that. Why not? Because there’s huge money going into PTAs now because parents can afford to do it. So it’s not anyone’s fault, but it is our responsibility. Even if it’s not individually our fault, it is collectively our responsibility to just look and reflect, and then we can have a conversation about policy.

Even if it’s not individually our fault, it is collectively our responsibility to just look and reflect, and then we can have a conversation about policy.

I did go on Twitter and I asked “Do you have any questions?” and the first question is one I know you get, and you’re prepared for this question. From an economist, Ernie Tedeschi, who says: “Can you ask him to respond to the criticism that this is more of a story about the top 1% or 0.1% than the top 20%?” So, you’re taking your eye off the ball — we need to be worried about the super rich — and now you’re throwing in a couple, he’s a cop, she’s a nurse, and they’re making a good salary. And you’re throwing them into the same group as Silicon Valley billionaires who are working at these platforms which are virtual monopolies. Should we talk about busting up Big Tech rather than worrying about a couple making $225,000 a year?

It’s a criticism I take very seriously. As soon as you start drawing lines, they start feeling very arbitrary. My main concern is to point out that the economic inequality trends do not start at the top 1%. They might be the most glaring at the top 1%, but they don’t start there. They do start much lower down the distribution.

Secondly, the top 1% aren’t some kind of fixed permafrost on top of society. Actually what you find is quite a significant proportion of the top quintile move into the top 1% for a period of time. These aren’t other people; they’re quite often us having a good year. And so, we shouldn’t sort of separate them out.

Thirdly, even the top 1% with all their money can’t actually have the same impact on housing markets and education markets that a broader class can, the upper middle class.

Lastly, I’m not letting them off the hook. Look, I think the top 1% should be paying a lot more taxes, and can. There’s all kinds of egregious tax subsidies; to the extent they help the top 20%, they really, really, really help the top 1%. So many of the policies I’m proposing and in favor of would actually hit the top 1% really hard — it would hit them harder than it’d hit the rest of the 20%. I just don’t think the conversation which has tried to restrict inequality to the top 1% has worked or been effective. Not least because the top 1% says “No, no, no. It’s the top 0.1%.” And the top 0.1% says “no, no, no, it’s the top 0.01%.” So everyone’s looking up. Everyone knows somebody richer than them. It’s always possible to convince yourself you’re just an ordinary Joe compared to the person you live next to or work with. Actually, that’s a problem. It’s a problem for Americans that they are all able to convince themselves that even if the rich deserved to be taxed, they’re never talking about themselves. But at some point, you have to be.

Now, the way you’re calling for a moral awakening — and you’re a very good salesman for this — what has been the reaction to people in your circles? I’m sure you’ve been talking about this for a long time; do you sense an awakening by them to this problem? Do you sense that they’re thinking about it differently? And will that different thinking translate into action?

Of course, there are a whole bunch of people who profoundly disagree and are furious about it.

What about the 1%?!

Yes, “What about the 1%?!” is one, but also, “You came here, why don’t you just go back to the UK?” or “What do you know? If you’ve still got a UK passport, why don’t you expletive back to your own country?”

Of the people who are at least open to the argument, I think one is “Well, I agree with you but there’s nothing to be done about it.” So it’s a futility argument. There’s also sometimes a sense of “What do I do then?” Then I can give them examples of what to do. I’ve been surprised by that. There has been some cognitive dissonance around a lot of people. Actually, all of us can feel these tensions between wanting the best for ourselves and our kids, being self-interested. That’s good. It’s good to be self-interested in our kids, and then our broader commitments to a kind of society that feels fair and open. It’s when they start to come into conflict with each other is where a lot of the real work is. This gets real personal will quick. People always start talking about themselves, an argument they had with their spouse, or “what do I do about this?” That’s been true with my own kids and with my friends and so on.

Actually, I’ve been struck by the fact that it’s been a personalization of the inequality debate that has taken place around this. I think that’s a necessary precursor to a successful politicization of the inequality debate. Though uncomfortable as it may be, I think this kind of looking quite hard at what we’re doing ourselves is necessary before we can get serious about any of these policies that threaten our self interest. We have run out of road in terms of just saying “This won’t hurt you. This won’t hurt you. This is all in your self interest, it will only hurt the rich.” That’s not good enough anymore. We need something like what Richard Hofstadter talked about before the Progressive Era, a moral awakening, some inward criticism. That’s the necessary precursor to progress. What happens? That requires argument and there’s lots of arguments about this.

Right. My guest today has been Richard Reeves talking about his new book “Dream Hoarders.” Thanks for coming on the podcast.

Thank you, great conversation.