Creating the American Dream in Its Modern Form

Although both presidents John F. Kennedy and Ronald Reagan quoted Puritan leader John Winthrop’s 1630 “City upon a Hill” speech (Reagan added the word “shining”) when referencing our land of opportunity, the expression “American Dream” originates with historian James Truslow Adams and his 1931 book The Epic of America. He describes “that dream of a land in which life should be better and richer and fuller for every man, with opportunity for each according to his ability or achievement.”1

He was expressing a sentiment held by most of the Founders of this country and the Framers of the Constitution, as well as foreign observers and leading American philosophers throughout history. Alexis de Tocqueville in 1840 called it “the charm of anticipated success.”2 Henry David Thoreau, in Walden, wrote in 1854: “If one advances confidently in the direction of his dreams, and endeavors to live the life which he has imagined, he will meet with a success unexpected in common hours.”3

The phrase “American Dream” was first used widely during the Progressive Era (1888–1920) and originally meant something quite different from today: it meant justice, equality, and democracy during a time when the nation was run by oligarchs, politicians were bought off (so much so that states added ballot initiatives to their constitutions to get around the problem), and workers were routinely murdered for wanting to unionize.

In this context, “the American Dream” began to appear in newspaper articles and books. Arguably, President Grover Cleveland was referring to it when he gave this part of his second State of the Union speech in 1888:

We discover that the fortunes realized by our manufacturers are no longer solely the reward of sturdy industry and enlightened foresight, but that they result from the discriminating favor of the Government and are largely built upon undue exactions from the masses of our people. The gulf between employers and the employed is constantly widening, and classes are rapidly forming, one comprising the very rich and powerful, while in another are found the toiling poor.

As we view the achievements of aggregated capital, we discover the existence of trusts, combinations, and monopolies, while the citizen is struggling far in the rear or is trampled to death beneath an iron heel. Corporations, which should be the carefully restrained creatures of the law and the servants of the people, are fast becoming the people’s masters.4

But the expression became cemented in the American vernacular in 1931 with Adams’s book, although at the time, many were doubtful; it was the depth of the so-called Republican Great Depression. As FDR put America back together and created the nation’s first comprehensive social safety net, the idea began to acquire its modern context of the American government providing fertile soil for people to achieve their personal dream.

Prior to the full enactment of Progressive Era and New Deal reforms, the American middle class was relatively small and mostly limited to professionals, such as physicians, attorneys, and those in business management.

We practiced largely unregulated capitalism until the 1930s, and the tiny class of morbidly rich people (that unregulated capitalism always produces) largely controlled our political system through most of our nation’s history, particularly from the early Industrial Revolution 1870s through the 1930s, when President Franklin Roosevelt directly challenged those whom he called the “economic royalists.”5

As recently as 1900, for example, poverty stalked America and farmers were at the mercy of the weather. There was no minimum wage. When workers tried to organize unions, police would help employers beat or even murder their ring-leaders, and social safety net programs such as unemployment insurance, Social Security, Medicare, food and housing supports, and Medicaid, didn’t exist.

There was no income tax to pay for such programs, and federal receipts were a mere 3 percent of GDP (today they’re around 20 percent6). As the Council of Economic Advisers noted in their 2000 Economic Report of the President,

To appreciate how far we have come, it is instructive to look back on what American life was like in 1900. At the turn of the century, fewer than 10 percent of homes had electricity, and fewer than 2 percent of people had telephones. An automobile was a luxury that only the very wealthy could afford. Many women still sewed their own clothes and gave birth at home. Because chlorination had not yet been introduced and water filtration was rare, typhoid fever, spread by contaminated water, was a common affliction. One in 10 children died in infancy. Average life expectancy was a mere 47 years. Fewer than 14 percent of Americans graduated from high school. . . .

Widowhood was far more common than divorce [because of the dire economic consequences to women of divorce]. The average household had close to five members, and a fifth of all households had seven or more. . . .

Average income per capita, in 1999 dollars, was about $4,200. . . . The typical workweek in manufacturing was about 50 hours, 20 percent longer than the average today.7

The Progressive Era laid the groundwork for President Franklin D. Roosevelt’s New Deal, which he rolled out after his inauguration in March 1933. The major pre-FDR Progressive Era accomplishments included the following:

• The 16th Amendment (1913) established the ability of Congress to create and levy a tax on personal income and corporate profits. Prior to that, most government functions were funded by tariffs on foreign goods, which paid for almost all federal operations from the George Washington to the Abraham Lincoln administrations, about two-thirds of government from Lincoln to Woodrow Wilson, and about a third of government until the mid-20th century as “free trade” collapsed tariffs while leading to an explosion of foreign-made goods in American stores.8 Lacking the revenue from an income tax served as a limit on the size and functions of the federal government; the passage of the 16th Amendment set the stage for the New Deal and subsequent expansion of federal programs to this day.
• The 17th Amendment (1913) ended the practice of state governments appointing US senators and turned that choice over to each state’s voters. Prior to that, wealthy people and big businesses would make sure their choice of senators were put into office by essentially bribing state legislators and governors. The event that most conspicuously led to the 17th Amendment was when William Clark, a Montana copper baron and one of America’s richest men, reportedly stood outside the doors of the Montana legislature in 1898 as they voted on that state’s next US senator. Clark, the story goes, had a pocketful of white envelopes in his jacket pocket, each containing a crisp new $1,000 bill, which he passed out to each legislator who’d voted for him as they left the chamber. The national outrage was so severe that the Senate first refused to seat Clark, then forced his resignation in 1899 with a motion to void his position. Montana’s legislators, not forgetting his great wealth and many favors, returned him to the US Senate in 1900, where he served from 1901 until 1907.9
• The 19th Amendment (1920) nationally enfranchised women. This amendment to give women the right to vote across the country was written by Susan B. Anthony in 1878, and finally passed both the House and Senate in 1919, with Wisconsin and Illinois being the first states to ratify it, and was put into law on August 26, 1920. The first state to enfranchise women was Wyoming, which, in 1869, passed a law allowing women to vote, own and inherit property, have legal custody of their own children, and hold public office.10 That was, not coincidentally, the year that Anthony and Elizabeth Cady Stanton established the National Woman Suffrage Association.11
• The Sherman Antitrust Act (1890)12 and the Clayton Antitrust Act (1914)13 both were designed to stop and unwind the excesses of the morbidly rich and the giant corporations they controlled.
• Both federal and state-by-state legislation regulated working hours and conditions, improved sanitary living conditions and open spaces in big cities, and protected consumers from fraud and hustlers.

The Progressive Era came to an end with the election of conservative Republican Warren Harding in 1920. Harding campaigned on two major slogans: “A return to normalcy”14 and “Less government in business and more business in government.”15 The “normalcy” slogan was a promise to drop President Woodrow Wilson’s 76 percent top income tax bracket down to 25 percent,16 and the second slogan essentially meant “privatize and deregulate.”

Harding did all three, causing (through his, Coolidge’s, and Hoover’s Republican administrations between 1921 and 1932) an explosion in the stock market that created Roaring ’20s piles of cash for the very, very rich while crushing unions and driving down working-class wages.

Harding’s conservative era ended abruptly when his deregulation of the banking and securities industries led straight to the stock market crash of 1929 and what was then called the Republican Great Depression.