Boston Review – This essay is excerpted with permission from 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 by Richard Reeves, Brookings Institution Press, 2017.
“In January 2015, Barack Obama suffered an acute political embarrassment. A proposal from the budget he’d sent to Congress was dead on arrival—but it was the president himself who killed it. The idea was sensible, simple, and progressive. Remove the tax benefits from 529 college saving plans, which disproportionately help affluent families, and use the money to help fund a broader, fairer system of tax credits. It was, in policy terms, a no-brainer. You can easily see how the professorial president would have proposed it. But he had underestimated the wrath of the American upper middle class. As the 2016 election helped us see, the real class divide is between the upper middle class and everyone else. As soon as the administration unveiled the plan, Democrats started to quietly mobilize against it. Representative Chris Van Hollen from Maryland (now a senator) called his colleague, House Minority Leader Nancy Pelosi. Pelosi happened to be traveling with Obama from India to Saudi Arabia on Air Force One. As they flew across the Arabian Sea, she persuaded the president to drop the reform. The next day, White House spokesman Eric Schultz declared that the 529 plan had become “a distraction” from the president’s ambitious plans to reform college financing. The episode was a brutal reminder that sensible policy is not always easy politics, particularly when almost every person writing about, analyzing, or commenting on a proposal is a beneficiary of the current system. Pelosi and Van Hollen both represent liberal, affluent, well-educated districts. Almost half of their constituents are in households with six-figure incomes. I should know: Van Hollen was my congressman at the time. My neighbors and I are the very people saving into our 529 plans. More than 90 percent of the tax advantage goes to families with incomes in the top quarter of the distribution…”