The Elusive American Dream : Dwindling U.S. Optimism Confronts Next President

By any standard, Vic Verni has realized the American Dream.

The son of a factory worker who never completed high school, Verni, 41, serves as a full-time executive of a prestigious local charity organization here. He and his wife, Kathie, a social worker, live in a modest but decidedly comfortable three-bedroom home on the outskirts of this reviving industrial city. And they have all the trappings of middle-class life--a new recreational van, two older cars and, of course, a VCR.

But, underneath, the Vernis worry about whether their two children, ages 14 and 10, will be able to enjoy the same kind of life as they have. They are beginning to feel the middle-class squeeze.

“A couple of years ago we lived on one income,” Vic Verni says. “Now we can’t. I look at a nickel twice now before I spend it.”

Adding to his uneasiness is concern for the national economy. Verni finds himself worrying frequently that the mountain of debt that the government has amassed over the past few years is “going to come due when we’re in our aging years . . . . We’re writing bad checks, and we can’t go writing bad checks forever. I think the prospects look horrible for the longer-run.”

The Vernis are not alone in their anxiety. Public opinion polls over the past several months have shown that, although Americans believe that they are better off than they were eight years ago, they share an increasing apprehension about whether their children will fare as well as they.

The two major presidential candidates, Democrat Michael S. Dukakis and Republican George Bush, have offered a spate of proposals aimed at soothing these anxieties by trying to make it easier for families such as the Vernis to finance new homes, college tuition, day care and medical services.

Deep Anxiety Over Future

But economists dismiss these proposals as palliatives. The public’s anxiety over the future, they say, reaches far deeper than meeting the next mortgage payment. As the polls show, Americans are worried that the national economic fabric has been stretched thin by the massive trade and budget deficits. And in the view of most analysts, neither Bush nor Dukakis is offering a way of coming to grips with them.

The President who is elected Nov. 8 may be the captive of economic and demographic forces beyond his immediate control.

Brookings Institution economists Robert Z. Lawrence and Barry P. Bosworth say the next President’s biggest challenge in bolstering America’s prosperity will be to improve the nation’s long-term productivity growth. But that, they say, is a herculean and politically thankless job that involves hard choices and some no-nonsense proposals to cut the budget deficit, spur investment and improve education.

“There is no policy that will dramatically increase the growth of productivity in the next few years,” Bosworth contends. “So there’s nothing either candidate can do.”

No Help in Long Term Seen

Michael Barker, a Democratic economist, says programs to relieve the squeeze of health-care costs and college tuition do nothing to assure the economy’s long-term health.

“The big questions are whether we can avoid a destructive trade war, whether we can keep inflation in check, whether we can avoid an interest-rate spike, whether we can keep the budget deficit going down, whether productivity will revive,” Barker says. “Everything else is blue smoke and mirrors. We’ll be better off with the President who’s more serious about the deficit.”

But the two presidential candidates have been more eager to address narrower concerns--the cost of a college education, for example. And their solutions do not always wash with the voters. In this category is Dukakis’ proposal to provide federally guaranteed loans for all college students--and to ask them to repay their debt by contributing a share of their income for their entire working lives.

In a reaction that is common in Rockford, Pam Read, a white-collar worker who faces college tuition costs next year, bridles at the notion that her son, Mike, could be saddled with an extra payroll tax for the rest of his career. “I guess I would like my son to graduate debt-free,” Read says.

Dukakis’ loan repayment proposal reflects a reality of the 1980s: Life is not as freewheeling as it was in the 1960s or early 1970s. Increasingly, it takes two wage earners to support a middle-class life style. The income gap between high school and college graduates has widened substantially. Medical and college costs have skyrocketed.

Particularly on the East and West coasts, young home seekers are finding the cost of starter houses to be beyond their means. Some workers thrown out of high-paying manufacturing jobs are having to make do on far lower wages.

“There no longer is the unbridled optimism there was before,” says Mervyn Field, a San Francisco pollster.

David Meer, vice president of Daniel Yankelovich Group Inc., a New York opinion research firm, calls it “the erosion of that psychology of affluence.”

The psychology of affluence has certainly eroded in Rockford, particularly among those who were pushed out of their jobs during the mid-1980s upheaval in manufacturing industries.

Sorrow at Reduced Wages

Jennifer Thomas, a 37-year-old single parent who was laid off from her $11.55-an-hour job as a lab technician when her plant shut down earlier this year, says she was so upset when she got the first paycheck from her new $5-an-hour job as an airplane parts inspector that she “took it in the bathroom and cried.”

Thomas concedes that she “probably will never make what I was” before, particularly if she stays in low-wage, low-cost Rockford. But, undaunted, she is learning how to operate a word processor and is hoping to push her income back to the $7- to $9-an-hour range.

The American Dream? “It got lost along the way,” Thomas says. “But you can’t just sit still and worry about it.”

Chad Lenz, a 21-year-old unemployed auto detailer laid off early this year, is also having difficulty getting a comparable job--because he lacks the necessary skills.

“If you want to work at one of these places, that’s one thing,” he says, gesturing toward a nearby fast-food restaurant. “But the work is part time, and they only call you when they need you.” Lenz is still searching and taking temporary jobs whenever he can.

Lenz, who is looking ahead to at least 40 years as a wage earner, will be buffeted by a host of conflicting economic and demographic forces, some of which can already be foreseen. Economists expect these developments:

--On the whole, living standards will rise more slowly in coming years. The need to reduce the nation’s massive trade deficit is likely to force Americans to stop consuming more than they produce, as they have for most of the past eight years. That means living standards will increase less rapidly than they did during the 1960s and early 1970s.

The need to pay interest on the nation’s rapidly mounting foreign debt will make a further dent. “It’s an anchor around this country,” says Ellwyn Englof, a Rockford white-collar worker.

--Jobs will be more plentiful because labor will be in short supply. With the baby-boom generation approaching middle age, the labor force is likely to grow far less rapidly than it has in the past decade. That should improve job prospects for all workers and might even produce labor shortages in some fields, resulting in higher wage levels generally.

--The rebound in the manufacturing sector will help less-educated workers. Manufacturing employment is already coming back now that the dollar has fallen in value to levels where it no longer hampers the ability of U.S. manufacturers to compete with foreign firms.

But the good jobs will require more skills than the old, says Judy Wilhelmi, director of employment training at Rock Valley College. “It used to be you could get $10 to $11 an hour with only minimal skills,” she says. But in coming years, “you’ll need more than a high school diploma” to support a truly middle-class life style.

--With most women already working, families will no longer be able to mobilize second wage-earners to maintain or increase their standards of living. “Over the past 15 years, we’ve cheated by borrowing and by sending women to work,” says Lawrence Mead, a New York University economist. “But we don’t have those options anymore.”

--Housing costs should begin to level off as the baby-boom generation ages and no longer drives up demand for starter homes. Simultaneously, deficit reductions could help bring mortgage interest rates down.

Medical Prices, Tuition

At the same time, medical prices will continue to soar unless the federal government and private insurance companies engineer a major overhaul of how medical services are provided. And tuition will probably continue to rise sharply for “premium” private colleges but climb more moderately for state universities and lesser-known institutions.

But all these factors pale beside the impact of productivity, which grew by an average of 3% a year during most of the prosperous 1960s but has increased by only an average of 1.1% a year in the 1980s.

It is productivity--output per worker--that drives up standards of living. Frank Levy, a University of Maryland economist, argues that, unless productivity growth increases sharply, the prospect that the next generation will earn more than the present one will be “precarious”--particularly for those without college educations.

Higher Education Seen as Plus

Levy’s calculations, in a soon-to-be-published book called “American Living Standards: Threats and Challenges,” show that despite the recent slowdown in wage increases, “it is reasonable to forecast that today’s young college-educated worker will earn more than his college-educated father by a modest amount.” But he says the future of today’s young high school-educated worker “is less certain--unless the country returns to very rapid economic growth.”

If productivity rises 1.9% or more, Levy says, college graduates will be reasonably ahead of where their fathers were and high school graduates will just about keep pace. But if productivity growth slips even to 1.2%, as Lawrence forecasts, college-educated workers will end up only slightly better off than their fathers, and high school graduates will fall behind.

“The kind of upward mobility implied by these projections is significantly less than . . . was taken for granted in the 1950s and 1960s,” Levy says.

Americans may already be getting used to the new reality. The Yankelovich Group’s Meer contends that they are merely readjusting their sights, not giving up hope.

Recasting American Dream

“I think what we’re undergoing is a redefinition of what the American Dream really is, to recast it for a changing world,” Meer says. “Does it still mean a home for everyone? Two cars? A chicken in every pot? Is it possible to have a less-exorbitant style and still be a winner? These are questions that we have to sort out.”

In Rockford, these questions mean nothing to Bounsay Pipathsouk. He still believes in the original American Dream.

A Laotian refugee, Pipathsouk arrived here 10 years ago with a single suitcase, $15 in his pocket and not a word of English. Today, after years of hard work and learning a new trade, he owns a two-story clapboard house in one of Rockford’s plain-but-tidy downtown residential neighborhoods, a small storefront building half a mile away and a fledgling upholstery business that employs two other people.

Has No Doubts

What’s more, Pipathsouk has no doubts that he and his family will prosper and that his 2-month-old son will go to college.

“This is a country where, if you work for it, you get it,” Pipathsouk says. “When my son, Andrew, grows up in this country, it means he can grow up and be whatever he wants to be.”