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The American Dream: Origins and Evolution

Jun 21, 2025

The American Dream

The American Dream is one of the most enduring ideas in the United States. It’s more than a slogan—it’s a belief that through hard work, determination, and opportunity, anyone can succeed. For generations, America was viewed as the land where you could start with nothing and, through grit and initiative, rise to success. Nowhere else in the world, it was believed, offered the same level of upward mobility or access to possibility.

Unlike most nations, the United States was not founded on shared ethnicity, religion, or royal lineage, but on ideals. Margaret Thatcher once famously said, “Europe was created by history. America was created by philosophy.” [1] America’s founding was deeply philosophical—anchored in Enlightenment principles of liberty, individual rights, and merit. It was built by people willing to take extraordinary risks to start something entirely new, united not by bloodlines but by belief in a better system. These founding ideals—that individuals should be free to pursue happiness and reach their potential—laid the groundwork for what became the American Dream.

For most of American history, each successive generation has experienced a higher standard of living than the one before. Rising incomes, improved health outcomes, increased educational attainment, and access to homeownership were consistent markers of generational progress throughout the 20th century. According to the Pew Research Center, 84% of Americans born in 1940 earned more than their parents did at the same age, adjusted for inflation. This sense of progress became an essential part of the Dream’s promise [4].

Origins of a Dream

The phrase “American Dream” was coined by Pulitzer Prize-winning historian James Truslow Adams in his 1931 book The Epic of America. Writing in the depths of the Great Depression, Adams sought to clarify what made America unique. His definition of the Dream was:

“The American Dream is that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement. It is a difficult dream for the European upper classes to interpret adequately, and too many of us ourselves have grown weary and mistrustful of it. It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.” [2]

James Truslow Adams

Adams was influenced by the ideals of the American Founding—especially the Declaration of Independence and the belief that “all men are created equal” and endowed with “unalienable Rights” including “Life, Liberty, and the pursuit of Happiness.” He believed America was set apart by its dedication to opportunity over aristocracy, merit over birth. As historian Sarah Churchwell notes in Behold, America, Adams was pushing back against a rising materialism and sought to reclaim the moral dimension of the American experience [3].

He emphasized that the Dream was not simply about wealth, but about the chance to grow, contribute, and be recognized—to live a life of meaning and self-determination. America uniquely allowed people to escape societal limitations and imagine a better life, not through privilege but through perseverance.

At its heart, the American Dream is about striving to become the best version of yourself. It’s about unlocking your potential through talent, hard work, and opportunity. The American Dream gave people the belief and opportunity to reach for something greater—to not just survive, but to thrive. A place where you could build your dreams and make them a reality. That spirit of ambition and self-betterment is what has drawn millions to America’s shores and continues to define the nation’s promise.

Evolution of the Dream

The American Dream has continued to evolve; it expanded alongside the nation. From agrarian beginnings and waves of immigration to industrial might, suburban sprawl to Economic Super Power, the dream evolved with every generation. While the term wasn’t coined until the 20th century, the underlying ethos was present in every step of America’s development. The lived experience for each generation continues to change, here are some of the changes:

Post-War Boom (1945–1965):
The U.S. economy boomed post WWII, and a new middle class emerged. Government programs like the GI Bill provided millions of veterans with home loans and access to higher education. Median household income rose from about $3,300 in 1950 (about $36,000 today) to $6,900 in 1970 (about $54,000 today) [4]. The average home cost just 2.2x the median income. College tuition at public universities was typically under $1,000 annually. Healthcare costs were modest—just 4.5% of GDP in 1960 [5]. The dream of a comfortable life expanded for a large number of Americans.

Household Cost Pie (1950s)

1970s–1980s: Inflation and Transition
From 1973 to 1982, inflation averaged nearly 9% per year. Median home prices rose from $24,000 in 1970 to $64,600 in 1980 [6]. Real wages stagnated. Healthcare spending grew rapidly, reaching 8.8% of GDP by 1980 [5]. Dual-income households became the norm.

Household Cost Pie (1980s)

1990s–2000s: Growth with a Cost
The tech boom and globalization expanded the economy but introduced volatility and expanding wealth disparities. College tuition at public universities hit $3,800 in 1990. Median home prices reached $120,000. By 2007, student loan debt averaged $18,000. Healthcare spending rose to 16.6% of GDP [5].

Household Cost Pie (2000s)

2010s–Today: Uneven Recovery and New Uncertainty
Following the Great Recession, economic growth returned, but unevenly. In 2023, average student loan debt exceeded $37,000. Homeownership among under-35s dropped below 40% [7]. Median rent in urban areas surpassed $2,000/month. Real wages rose only 5% from 2000 to 2020 [8]. Inflation from 2021 to 2023 echoed 1980s highs.

Household Cost Pie (2020s)

The composition of Household Expenditures continues to evolve with Housing, Healthcare, Student Debt, and Taxes taking larger portions of expenses, reducing Other expenditures including Discretionary spending all of which can alter sentiment.

Rising Costs of Government

The cost of the Federal Government continues to rise from less than 3% in 1929 to a peak of 30% during the COVID pandemic to roughly a quarter of the GDP today.

The Dream Today

The belief in the American Dream still resonates today, though how people define continues to evolve. For some, it’s still about homeownership and a stable job and more material means. For others, it’s about freedom of choice, living with dignity, and having the opportunity to pursue what matters most to them. Despite economic uncertainty, the idea remains a powerful motivator.

Some say the Dream is dead, that upward mobility and improving quality of life are fading and studies show that only 50% of Americans born in 1980 earn more than their parents at the same age compared to 90% in 1940. [10,11]

“The American Dream is not dead, but it is on life support—especially for those outside the upper classes.”

Brookings

While Pew Research shows only 37% of Americans believe the next generation will be better off than the last [9], the U.S. continues to offer unmatched opportunity in many areas. America leads not only in tech, biotech, green energy, and education, but also in innovation, entrepreneurship, cultural influence, scientific research, and capital and financial markets. From arts and entertainment to global philanthropy, the U.S. provides a platform for people to make a global impact. The promise of the Dream—to reach one’s full potential regardless of background—still exists, though it may be harder to attain than before.

Keeping the Dream Alive

The American Dream was never meant to be a finished product; it has always been a work in progress. We’re currently faced with many challenges including more than 20 years of structural budget deficits, historic national debt, ballooning interest payments on the debt, rapidly rising healthcare costs, exploding student debt, inflation and stagnating wages, greater global competition and AI and Climate Change clouds on the horizon. So preserving the Dream for future Americans will take a commitment, in something we pass to future generations as our parents did for us. The Dream was built not just for the comfort of the present generation, but for the benefit of those to come. That principle demands foresight, discipline, and sometimes, sacrifice.

To preserve and strengthen the Dream, we must make conscious choices today. Government Financial Literacy can help us better understand those choices—whether it’s how we fund education, invest in infrastructure, structure taxes, and how we manage debts, deficits and other obligations. A more informed public can help steer policy toward long-term prosperity, not just short-term gain.

We must recognize that preserving the Dream may require adjusting our expectations, rethinking what success looks like, and ensuring opportunity is not limited to the privileged few. If we value a society where hard work and character matter more than birth or connections, we have to build and protect the institutions that make that possible.

Final Thoughts

The American Dream once defined the America as unique: upwardly mobile, open, a land of opportunities where you could go as far as your talent and ambitions could take you. While the path has narrowed, and some say it was always a myth, the belief and the opportunities endure. It must be adapted to fit new realities without losing its essence. With effort and clarity, the Dream can once again inspire and unify. It remains not just an idea of what America was, but what it still can be.

Citation

[1] Margaret Thatcher, quoted in various speeches/interviews (c. 1980s). Commonly cited variant: “Europe was created by history. America was created by philosophy.”

[2] Adams, James Truslow. The Epic of America. Little, Brown & Co., 1931.

[3] Churchwell, Sarah. Behold, America: The Entangled History of “America First” and “the American Dream”. Basic Books, 2018.

[4] Pew Research Center. “The Fading American Dream: Trends in Absolute Income Mobility Since 1940.” Based on analysis from the Equality of Opportunity Project. https://www.pewresearch.org/fact-tank/2017/12/12/american-dream-global-views/

[5] U.S. Census Bureau. Historical Income Tables: Household. Table H-5. https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-income-households.html

[6] Centers for Medicare & Medicaid Services (CMS). National Health Expenditure Data. https://www.cms.gov

[7] Federal Reserve Bank of St. Louis (FRED). Median Sales Price of Houses Sold for the United States. https://fred.stlouisfed.org

[8] U.S. Census Bureau. Quarterly Homeownership Rates by Age and Region. https://www.census.gov/housing/hvs/data/index.html

[9] Pew Research Center. “Most Americans Say Children Will Be Worse Off Than Their Parents.” 2023. https://www.pewresearch.org/social-trends/2023/06/27/americas-financial-future/

[10] Brookings Institute. Dream Horders 2017 https://www.brookings.edu/books/dream-hoarders/

[11] Science. The Fading American Dream 2017 https://www.science.org/doi/10.1126/science.aal4617

Expense Sources:

The American Dream: Origins and Evolution

The American Dream: Is it slipping away?

Apr 15, 2025

In recent years, the idea that the current generation of Americans face a worse economic outlook than their parents has taken root in national discourse. Stagnant wages, rising student debt, unaffordable housing, and pessimism about the American Dream dominate headlines and social media. A 2022 Gallup poll revealed that only 42% of Americans believe today’s youth will have a better life than their parents—down from 71% in 1999 (5). Yet, deeper research shows the reality is more nuanced, with significant differences within generational outcomes and opportunities (2),(3),(5).

These perceptions, though, stem from real challenges that reflect deeper systemic issues—including a lack of public understanding about how macro trends creating these conditions and how our government works plays into the impact. Government Financial Literacy—when citizens understand how public money is raised, spent, and used —it is an essential foundation for a better future for America. Without it, Americans risk making decisions that prioritize short-term comforts over long-term sustainability, effectively robbing future generations of the stability and the quality of life that prior generations of Americans experienced while continuing to build upon for future generations.

Generational Comparisons

While it’s true that some younger Americans are doing better than their parents, the broader picture is far from reassuring. A Federal Reserve survey found millennials and Gen Z adults were nearly as likely as baby boomers to report being financially better off than their parents at the same age (5). However, this is largely concentrated among those following traditional middle-class trajectories: stable jobs, college degrees, and homeownership. A Cambridge University study found these individuals have accumulated substantially more wealth than Baby Boomers at similar life stages (6).

Unfortunately, this success is not universal. For many millennials stuck in low-wage service jobs or unable to afford independent living, the situation is worse than it was for comparable Baby Boomers (4). The wealth gap has widened significantly within generations. What we’re experiencing isn’t simply generational decline—it’s rising economic stratification (4),(6). And while some data show signs that the decline in intergenerational progress has slowed (5), ensuring all Americans can get ahead remains a central concern.

This phenomenon is not unique to the U.S. Globally, a median of 57% of people believe that today’s children will be financially worse off than their parents (3). That kind of pessimism reflects a common thread: people sense that structural systems are misaligned with future success (7).

The Growing National Debt: A Threat to Future Prosperity

One of the more concerning yet misunderstood threats to the next generation is the ballooning National Debt. As of 2024, the U.S. national debt has surpassed $36 trillion (9). To put that in perspective, the government now spends over $1.2 trillion annually just on interest payments—more than it spends on education or national defense (9).

The National Debt has increased over $10 trillion in the last 5 years alone, this trajectory is unsustainable (9). These interest payments are not investments in roads, schools, or healthcare—they’re payments to past lenders and serve no productive use to the people or the economy. If left unaddressed, these costs will continue to crowd out essential public services and squeeze future budgets (9).

Even more alarming is the fact that the U.S. has run budget deficits every single year since 2001. That’s more than two decades of spending more than we take in (9). For too long, policymakers have kicked the can down the road. But there’s a limit. Without intervention, interest on the debt could consume nearly 30% of all federal revenue within a generation (9).

Government Financial Literacy Matters

When does Government Financial Literacy become critical for our nation? Most Americans understand the importance of managing personal finances—budgeting, avoiding debt without commensurate returns, and saving for retirement. But relatively few apply the same logic to their expectations of government.

Many voters are unaware of how much the U.S. spends, what the largest programs are, how tax revenue is distributed, and how all of that impacts you and the health of our nation and its impact on America’s future, if they care at all. For instance, surveys repeatedly show Americans overestimate foreign aid spending by up to 25 times its actual amount, while underestimating the size of programs like Medicare and Social Security (10).

This misinformation leads to distorted public debate and ineffective policymaking. A financially literate electorate would understand that:

  • Most federal spending goes to mandatory programs (e.g., Social Security, Medicare, interest on the National Debt) (9)
  • Only a small portion of the budget is discretionary, and even smaller for things like infrastructure or education (9)
  • Spending increases should balance budgets with cuts or revenue and must be evaluated together, not in isolation (9)

In short, better public understanding could drive smarter priorities and realistic expectations.

Direct Impacts on Everyday Americans

You don’t need to be an economist to feel the effects of unsustainable government finance. Consider:

  • Less Bang for your Tax Dollar: When interest rates rise, the government pays more to borrow—which means fewer funds are available for services like health care, education, social services, etc. (9).
  • Inflation: Deficits and mounting debt can lead to inflationary pressure, eroding the value of the dollar impacting savings and raising the cost of living (9).
  • Opportunity: Programs essential to economic mobility—public education, transportation, broadband access—are increasingly underfunded or delayed, reducing opportunity (9).

These outcomes shape the daily reality of Americans. A nation’s budget is a reflection of its priorities. If we continue to borrow to fund consumption today, we are effectively asking our children to pay for it tomorrow—often with interest (9).

Knowledge will forever govern ignorance; and a people who mean to be their own governors must arm themselves with the power which knowledge gives.

James Madison

Tough Decisions and Shared Sacrifice

Improving America’s fiscal future doesn’t mean abandoning government support or social progress. However, it does require making tough decisions.

Sometimes, that means saying no to popular but expensive programs that lack sustainable funding. Sometimes it means accepting modest tax increases to secure long-term benefits like universal preschool or paid family leave. Sometimes it means delaying gratification for the good of future generations.

For a country founded on ideals of independence, self-governance, civic responsibility, and long-term investment in the public good, these decisions should not be unprecedented. However, with each passing generation of increased prosperity, we may have lost that connection due to the tough decisions, or lack there of, of the past. These decisions require an electorate that understands tradeoffs, accepts hardships, values sustainability, and is willing to act not just for today’s comfort, but for tomorrow’s opportunity. Even harder, sacrificing a little of their prosperity so that future Americans can enjoy theirs too.

Government Financial Literacy helps citizens:

  • Ask better questions (10)
  • Discern between realistic policies and political gimmicks (10)
  • Engage in constructive civil discourse (10)
  • Support leaders who prioritize stewardship over short-term wins (10)
  • Make more informed fact based decisions (10)

Building a Better Future

Organizations like the Tax Project Institute are working to help inform citizens and build that understanding, offering nonpartisan, accessible insights into how public finance works—and how it affects all of us. Our mission centers around transparency, accountability, and education: helping citizens become informed stewards of our future (10).

By informing the public to understand not only what government spends—but how, why, and what the consequences are—we can alter the trend of pessimism and help restore faith in the American Dream(10).

Our children’s future depends not just on innovation or entrepreneurship, but on collective civic duty to promote a properous future for all Americans. If we cannot manage our shared resources responsibly, we undermine the very foundation of opportunity we hope to pass on (9),(10).

Conclusion: Ignorance and Knowledge each have a Cost

America’s challenges are not insurmountable. However, they require a shift in how we engage with public life. We cannot rely solely on elected officials or experts to protect the future—citizens must be informed participants in the democratic process (10).

The national debt is growing at an unsustainable rate. The federal government has run deficits for over two decades. And interest on that debt threatens to consume nearly everything else. Meanwhile, Americans continue to underestimate the impact of their own votes, their own voices, and how these have real consequences to current and future Americans (9),(10).

The answer is not always “more government”—especially when that means borrowing more or spending on poor investments. It’s, also, not always “less government,” either. The answer is smarter government choices, guided by citizens who understand how the system works and what’s at stake (9),(10).

Government Financial Literacy is a Civic Duty and responsibility of each citizen in a Democracy, not something we can trust to a few elected officials, it’s a necessity. For the sake of our children, our communities, and our future as a free and prosperous nation, it’s time we all learned how the budget works—and how to make it work better (10).

Sources

  1. NASDAQ https://www.nasdaq.com/articles/generations-feel-financially-worse-their-parents
  2. Lending Tree https://www.lendingtree.com/debt-consolidation/millennials-financial-condition-study/
  3. Pew Research https://www.pewresearch.org/global/2025/01/09/views-of-childrens-financial-future/
  4. Phy.org by University of Cambridge https://phys.org/news/2023-11-millennials-worse-baby-boomers-rich-poor.html
  5. American Enterprise Institute https://www.aei.org/articles/has-income-growth-between-generations-of-americans-stalled/
  6. Cambridge University https://www.cam.ac.uk/research/news/boom-and-bust-millennials-arent-all-worse-off-than-baby-boomers-but-the-rich-poor-gap-is-widening
  7. Pew Research https://www.pewresearch.org/global/2025/01/09/economic-inequality-seen-as-major-challenge-around-the-world/
  8. CNBC https://www.cnbc.com/2024/04/03/survey-adults-say-theyre-doing-worse-financially-than-their-parents.html
  9. Congressional Budget Office https://www.cbo.gov/publication/60127
  10. Tax Foundation https://taxfoundation.org/americans-understanding-of-taxes-2023/

The American Dream: Is it slipping away?

Tax Project Institute

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