Are The Rich Hoarding The American Dream? An Examination Of Penny And Rich’s Path To Income Inequality.


On Father’s Day weekend I spent a lot of time thinking about income inequality. We’ve touched on this topic in the past, and I’d like to spell out some thoughts a little more extensively. You and I are income inequal, as it happens, so this could be an interesting forum to have this conversation, even if you may be delayed in responding due to your technology hiatus.

What got me started on this were a couple articles in the NYT and in The Atlantic. They were highlighting a new book coming out by Richard Reeves called 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. I’ll try to state his case as well as I can from the articles, although I have not yet read the full book. Any mistakes are my own.

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The upper middle class in the US, defined as the top 20% by income, is pulling away from the middle class and increasingly preventing upward social mobility for others. We all know about the top 1% — the ultra-rich — but the rest of the top 20% wields just as much influence, to the detriment of everyone else. You could even say they are rigging the system. They live in exclusive communities that middle class people can’t afford, and they are helped by deducting the interest on their huge mortgages; they send their kids to the best schools and colleges, the latter being paid for by tax exempt 529 plans; the kids then get the best internships (and jobs) due to the family’s affluent social network.

From start to finish, people in the upper middle class have the advantage, and they delude themselves in thinking they’ve earned it by merit. They don’t see their own luck and privilege, nor do they admit they’re rich. What’s worse, they support policies that will keep them elevated and oppose policies that might create a more even playing field for the lower classes. It’s time to raise awareness and rethink policies that only favor the rich. Most of all, it’s time for the rich to admit that they are the problem.

This thesis seems to be pointed directly at me. Am I really a problem within society? Am I a Dream Hoarder?

Before disputing this, there are certain facts that I’m happy to grant.


Fact 1: I’m in the upper middle class, and the US upper middle class is rich.

Here’s where my household ranks in the US.

  • Income: $260,000. Within top 2%.
  • Net Worth: $630,000 (and growing). Within top 15%.

By the measure of income, the top 20% starts at $112,000. One could argue that six figures goes further in Fargo than in Chicago, but by and large I won’t dispute that a person should be comfortable with this salary. I’ll also grant the more controversial claim that this makes a person RICH. One won’t “feel” rich on $112K in Chicago (or NYC, etc), but feeling rich is subject to lifestyle choices. Objectively speaking, to make more than $112K is to have one of the highest incomes in the richest country with the highest standard of living in the history of the world. It’s silly to deny that, so I won’t.

Fact 2: It takes some luck to get into the upper middle class.

I recently got into a virtual tussle with ThinkSaveRetire about luck. He was arguing that if a person doesn’t meet his/her goals (like early retirement), it’s all their fault. I disagree. Practically speaking, I don’t live my life as if it depends on luck. But, I acknowledge that everyone is lucky (or unlucky) to some degree by being born with a genetic inheritance in a particular time and place with a family / culture / society that supports (or doesn’t support) their ability to make choices. The reality is that anyone who is reading this blog has had an incredible amount of luck — living in the West in 2017 with internet access puts them almost automatically in the top 1% of human history in terms of wealth (hat tip to Make Wealth Simple’s article: “You are richer than you think.”)

My own luck can be seen in my origin story. I wasn’t born as rich as Ivanka Trump or as genetically gifted as Einstein or Michael Jordan, but there wasn’t anything holding me back, per se.

Fact 3: Mortgage interest deductions and 529 plans disproportionately favor the rich.

Agree. This is simple math. The rich take on bigger mortgages and have extra money to save for college, so these policies lean toward the wealthy. Also, it goes without saying that if one pays more taxes in a higher tax bracket, then any tax break will result in a bigger benefit. The progressive tax system by definition incentivizes the rich to be cognizant of tax breaks. This is easy to see when comparing our tax bills, Penny.

I should note there’s strange sort of circular reasoning for one to quibble with the upper middle class about taxes. According to Forbes, those who make over $100k pay 80% of all income taxes. So complaining about tax breaks for the people who pay most of the taxes is like complaining about frequent flyer miles for those who frequently fly. You can’t have one without the other.

Fact 4: Upper middle class advantages can be self-reinforcing across generations.

If a family’s income is high, it’s quite likely that the next generation in that family will have a financial advantage and be able to maintain higher levels of wealth. They are starting from a more secure place, more inoculated to tragedy or bad luck. Many rich families have financial security as a goal. I admit this. I want to build a family legacy through financial security, education, and smart estate planning. 

I’ve ceded a lot of ground here. There are some basic facts that the Dream Hoarding thesis points to, even if I disagree with the implications. So where, exactly, do I disagree with this idea of Dream Hoarding?


If I had to describe the American Dream to an alien life form, basically I would say that it’s about opportunity. Not exactly equal opportunity (ref. Michael Jordan — I don’t have the opportunity to dunk a basketball, I’m too short), but the opportunity for basic improvement. A person in America should have the opportunity to work toward a better situation in life. But opportunity doesn’t guarantee a particular outcome in a particular timeframe. It will always take a bit of luck to attain a favorable outcome. That’s life.

The system can’t control luck or genetics, but it should strive to be fair to most people most of the time. Over time, perhaps over generations, a person’s family should be able to increase their standard of living to a “middle class” existence, which, as I’ve mentioned, is pretty darn good in the richest country in the history of the world. A place to live, a job, food, and the freedom to pursue happiness. That’s the desired outcome. It’s not guaranteed, but as you’ve shown, Penny, you don’t need to make a lot of money to achieve this in the US. (And good news — your family income has been on an upward trajectory.)

But what shall we make of our inequality? Using rough data from our origin stories, check out our respective household incomes.

Penny and Rich’s Income Inequality. Click on image to enlarge.

I know this is only a specific case of 2 cousins, but it’s worth asking: Was there some dream hoarding going on here? Is our inequality due to luck or choices or both?

The way I see it, a person is born with a certain amount of luck. You can’t change the circumstances of your birth or your genetic makeup. After that, your life outcome will be determined by 2 factors:

  1. More luck (health, key life events, etc).
  2. Choices (education, career choice, who you marry, etc).


When I was born, I probably had a built-in income range. On the low end, I could’ve become a farmer (the family business) or a theology professor (which was the plan, for a while) making $50,000. It’s entirely possible I could’ve married a woman who wanted to be a stay-at-home mom, and so our family income would’ve been based entirely on my salary. There are different ways of parsing it out, but I’d be middle class in terms of income, barring some sort of tragedy.

On the high end, I could’ve been a bit more ambitious in college, pursuing a high income profession based on my aptitude in school. I’m thinking lawyer or investment banker (not doctor — too much blood), making $300,000 or more by now. With a working spouse, maybe we’d be pushing $450,000 or so in family income. That’s the top 1%.

So let’s take $50k and $450k as my potential household income range. I admit this is very wide, but I have reason to believe it plausible based on examples from my extended family.

It’s helpful to visual this on a graph, with rough estimates for my potential income by age. I factor in the likelihood of not earning much before college, and then a big jump during prime working years, and then a slowdown in older age. For now, I’ll disregard improbable events like winning the lottery or getting assassinated by ninjas.

Rich’s range of potential incomes. Click on image to enlarge.

As it happens, our household income is now $260,000, well within my range of potential. I haven’t always been here — I started out at $39,000. I’ve had some luck and there’s also no doubt that my career choice was significant. I’ve stayed with my company and earned consistent promotions. After 6 years of work I was making 6 figures, and then I married a woman with similar earning potential. None of this was a master plan, it’s just life. It wasn’t guaranteed, and it could’ve gone another way.


Now let’s consider your story. You were born into the same small town as I was. Same amount of luck there. Genetically, we are related but we both admit I’ve always had more ambition. Fair enough. As a result, I’d suspect you have a lower and more narrow income range just based on those factors that you don’t necessarily control. Back of napkin, I’d say $40k on the low end to $200k on the high end.

What about career and family choices? You wanted to be a stay-at-home mom, so your household income is naturally lower. Nothing wrong with that. Mr. Penny was a teacher, which also put him on the low income end, but becoming a Chiropractor has given him more earning power. A quick Google search says the average Chiro in Minneapolis makes $152,034. This would catapult the Penny family to the top of their range (or perhaps my estimates are too low).

But, you and Mr. Penny feel strongly that chiropractic should be available to all, and you’ve come up with a pricing model that accords with your values. It’s a choice, and a commendable one. For this reason, I’ve estimated that your earnings will be closer to $75,000 at the peak. Just a guess. Here’s the graph.

Penny’s range of potential incomes. Click on image to enlarge.

To say you are at the low end of your own income potential is not a knock in any way. It’s also not bad luck. It’s the result of certain choices you’ve made for reasons that go beyond finances.


So when I read this thesis of dream hoarding, I have a problem with the insistence on “privilege,” which denotes a special right, advantage, or immunity granted or available only to a particular person or group of people.” To my ear, “privilege” connotes not just an opportunity to succeed if good choices are made; it connotes a prepaid ticket to success regardless of good and bad choices.

I didn’t go to an Ivy League school based on parental legacy. I didn’t get an internship from a family friend. My grandfather (on one side) was an illiterate wheat farmer, not a Kennedy. I’ll admit to luck, but not to privilege.

Another problem I have is that my current status is judged by a snapshot in time with no regard to context, no acknowledgment of the path. I’ve been upper middle class for around 10 years, but the label of “rich” is still new to me. Moreover, the “unfair” advantages of Dream Hoarding don’t apply. I don’t have a big mortgage and I don’t have a 529 plan. If I did have those things, it wouldn’t make much of a difference to me or to you or to anyone else. Paying for college and owning a home would be an effect of my income, not a cause.

When it comes to financial security being self-reinforcing across generations, I’m not sure how that could be prevented. It seems to me that if we really want people to have the opportunity to become upper middle class, then we shouldn’t demonize people for being upper middle class. It’s like wanting everyone to go to school but not wanting anyone to graduate. Would we want to live in a society where every generation starts from scratch, where families can’t promote higher education for their kids, or aspire to high levels of financial stability and success? Would it be better to incentivize financial mediocrity? 

Finally, when we control for luck and genetics, I don’t see how my path has created a disadvantage for you (or anyone else) along your path. We’ve both made choices and we’ve had our reasons, and we continue to make choices about our careers, our kids’ education, and our family legacies. Aren’t we both examples of the American Dream at work, in our own distinct ways, by virtue of being able to make choices about our values and lifestyles and incomes?

In my view, the Dream Hoarding concept confuses equality of outcome with equality of opportunity within a lifetime. I concede that my range of possible incomes is higher than many, but that’s not really the point. We can’t guarantee high income outcomes for everyone. We could maybe guarantee middle income outcomes for everyone with a radically different political system, but that wouldn’t be in the spirit of the American Dream either, to have a lower common denominator forced on the populace. The point of the American Dream is mostly about being free to have the opportunity to meet one’s potential.


Now one might be thinking: “Well, this is all just the story of Penny and Rich — most of the rich and poor are not like this.” 

Can we be so sure? Most of the upper middle class people I know are exactly like this. Most of them started out middle class. Some, like Gen Y Finance Guy, started out with a bunch of obstacles, and he makes a boat load of money. I don’t think one would argue that he or I should’ve been stopped along the road to the upper middle class, so why, after the fact, would we be accused of hoarding?

I also know plenty of people who started out middle class and ended up middle class (like Penny). The big problem with the generalizations in the Dream Hoarding thesis is that everyone has a story about how they got to where they are. The thesis also insinuates that rich people either pretend they aren’t rich or lucky, or they unfairly hold others down. Even though I don’t know many people who have been extremely lucky or unlucky, I fully admit the role that luck plays. And I’m in favor of helping my fellow squirrels who need help via charity or tax benefits. Beyond luck, the primary factors that enable opportunity, to my eye, are education, career choice, and choice of spouse. Measurable, predictable choices. 

Maybe you and I have had more opportunities and choices than the typical middle class person? I’d love to hear from readers — rich or poor or in the middle — about other real world examples to see how the Dream Hoarding thesis holds up.

Am I living the American Dream as I suspect, or am I stealing it somehow? What would be some examples of people who started out middle class and have no opportunity for advancement? I know it happens, but is it happening unfairly? Are the rich to blame?



11 Replies to “Are The Rich Hoarding The American Dream? An Examination Of Penny And Rich’s Path To Income Inequality.”

  1. Well done! I like how you put out the income scenario analysis of the both of you and made some logical assessments. It’s kinda like our weight. Is it all genetics? No. There’s probably a weight band we will hover in for 90% of our lives.

    Folks really need to look at the 0.1%. That is where the really rich are. The people making $400,000 as the top 1% cut off are usually paying hefty income taxes, property taxes, and housing expenses. They are well to do, but the environment they are necessitates a higher income.

    I’m a big believer that most of our income or career or business success is luck, like 70% of it.


    Financial Samurai recently posted…How To Create Next Level Wealth: When A Million Just Won’t Cut ItMy Profile

    1. Sam — I will never discount the luck factor. That said, I think we should be able to acknowledge luck and then have a clear-eyed look at the other factors, the factors we can try to control. There’s a lot of frustration (some legitimate, some not so legitimate), at least in my perception, being vented toward high income earners as being tone deaf to those less fortunate. Maybe that’s true, it depends on the individual. There should be an understanding of who high income earners are as humans. It’s easy to say that rich people are selfish a-holes. But let’s say I had decided to be a farmer instead, and I wasn’t very good at it, making $35k per year in a small town. Does that automatically mean I’m not an a-hole? In other words, does my a-hole-ness depend on my salary or level of financial success? You know what I’m getting at.
      Rich @ recently posted…Monthly Happiness Report: Rich Is Part Of The Global Elite And His Quality Of Life Is An Oppressive Symbol Of Class Warfare. Pass The Quinoa Crackers. –June 2017My Profile

  2. I think what’s lacking in the understanding of what privilege means is the fact that the systems set up by society favor you, and therefore, they help you with your luck and opportunity, making it easier for you to make better choices.

    Have you ever had to worry about being stopped by the police on a regular basis because of what you look like or the neighborhood where you live? Did your schools have adequate staff, textbooks, and were the buildings falling apart? Did you ever have to worry about losing one of your parents to deportation, a drug overdose, or their being killed?

    Not having to deal with issues like these is privilege, and many take it for granted because they don’t see it. Even if you or anyone you know has never had to confront these issues, they are real, and they affect someone’s opportunity and “luck.” They affect the choices that someone makes in their lives.

    I don’t know that I agree with the idea of “Dream Hoarding” but there is a definite lack of awareness of the ways that we systemically limit opportunities for some people and not for others. You and Penny have made different choices. Not everybody has the opportunity to make those kinds of decisions in their life.

    1. Mollie — thanks for the comment. The concern in your note is exactly what the dream hoarding concept is tapping into and why I think it’s important to talk about.

      I don’t dispute that I had plenty of luck and good fortune being born in a stable and benign situation. By “luck” I mean anything that’s outside of one’s control. I tried to make that clear — luck plays a huge role and if you look at the comment I left on ThinkSaveRetire, you’ll see I was arguing exactly that. We are in agreement on the role of luck.

      But the accusation of taking things for granted … sorry, that’s not me. Why do people assume that high income earners always take things for granted, or that there’s some sort of pretending going on? Can’t a person make money and be thoughtful at the same time? There’s currently a perception that people who earn a high income are instantly clueless about anything in the “real world.” You may not know this, but I’ve been to quite a few housing projects and slums and orphanages in the US and around the world. I don’t think I deserve anything for it, I’m just saying let’s not dehumanize people who actually want to help. People who run businesses and work at big companies are people. Good people, even.

      What you are describing, in my mind, is not privilege, at least in the way I defined the term or the way the articles were using it. The articles were describing the inability to break into the American upper middle class without wealthy social networks in gated communities or legacy schooling or tax breaks. And what I was describing was that, indeed, it’s possible to move from working class to upper middle class without any of those factors.

      I’m not sure where you think I grew up. It wasn’t leafy suburbia. It was blue collar / manual labor / rural farming. The “system” was not in my way, but it also wasn’t pushing me toward high income work. And getting from the farm to an upper middle class life is a counter-example to the idea that working class people can’t make it. That was my point. That’s why I think the article’s thesis is incorrect.

      You are making a different point, I think, and what you are describing is valid. I couldn’t agree more that growing up in a situation where schools are falling down and parents are being deported or killed is much, much worse. It’s a tragedy. It shouldn’t be a privilege to go to a functioning school, it should be a basic right. I’m not trying to compare my opportunities with those of someone born in a slum.

      But to describe anything better than extreme poverty and injustice as “privilege” is to redefine the term to the point where people can’t talk about anything other than the worst situations in a politically charged way. And that, in my opinion, is not a good idea. Because as I’ve said, I think I agree with you on the key concerns that you have.

      Thanks for the thoughtful comment –R
      Rich @ recently posted…Rich Is Preparing To Move. He Enjoys Moving. Wait … He’s Paying HOW MUCH On Rent???My Profile

  3. I actually started out mid to low middle class by income and low middle class by networth. I’m definitely upper class by any definition today. As for the question at hand, I firmly believe luck favors the prepared. In some ways I had a leg up as my parents cared about encouraging me to learn. In others like little financial help for college and an utter lack of connections I had no luck. Still I utilized my opportunities.

    1. Thanks for the comment FTF. Your parents encouraging you to learn was key, and I’m increasingly convinced that education is the real hinge here. My grandfather had 8th grade education, my dad graduated from college, and now all my siblings and I have graduate degrees. We were expected to take school seriously from day one. It’s not a guarantee but it’s also not a coincidence that our family has become socially mobile over generations. Again, there’s luck involved, but a person could easily spoil their own good luck via bad choices.
      Rich @ recently posted…Rich Recites The Four Commandments Of Technology, Which Were Given To Him On A Tablet. No, Not A Stone Tablet.My Profile

  4. Nice post. Agree 100%. I am someone who started out with very little money (and an immigrant as well) and finally made it into the upper middle class and I feel quite offended by this class warfare drivel in the book. The economy is not a zero-sum game where my success takes food off the table of others. Quite the contrary, it’s the effort and the hard work and innovations from folks in the top 20% that grow the cake and make life better for everybody.

    1. Thanks ERN — have you read the whole book? I’m curious if there were more detailed arguments in the full treatment.

      Yes, I think the assumption of advantages and then motives is what grates here. You’ve made your way via a journey, you didn’t just magically appear in the upper middle class. To ascribe negative assumptions to everyone in a certain income range is to miss the point that many people still do achieve upward mobility.

      Appreciate the comment … R
      Rich @ recently posted…How Rich’s LLC Turned $30,000 into $200,000 — A Story About Brothers, Bubbles, and Prairie Dogs.My Profile

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