Fading optimism in “new normal” America

By Bernd Debusmann
December 23, 2010

Bernd Debusmann is a Reuters columnist. The opinions expressed are his own

Optimism is so deeply embedded in the American national psyche that it withstood the Great Depression in the 1930s and a string of recessions since then. But in the era some economists call “the new normal” in America, optimism is fading.

So say public opinion polls that ask Americans how they see the future, theirs and their country’s. One recent survey, by the respected Pew Research Center, found that depression era Americans were more optimistic about economic recovery in the near future than people questioned in a Pew poll this October, when only 35 percent said they expected better economic conditions in a year’s time. In response to a similar question in 1936 and 1937, about half expected general business conditions to improve over the next six months.

The phrase “new normal” was coined by PIMCO, one of the world’s biggest investment funds, and is shorthand for an American future that includes lowered living standards, slow growth and high unemployment. Joblessness now stands at 9.8 percent, up from 9.6 percent in October. Add workers who have given up looking for jobs and people forced to work part time and the rate climbs to 17 percent, a powerful reason for declining optimism.

But it’s not the only one. A slew of studies, surveys and reports show that a growing number of Americans – some surveys say more than half – no longer believe that their country is a land of unlimited opportunity, where all it takes to rise to success is hard work and determination.

“The end of American optimism,” as a headline over an opinion piece in the Wall Street Journal proclaimed this summer, has not quite arrived. But Americans increasingly believe that the rich just get richer and the poor just get poorer. They have good reason to think so. The rich-poor gap in the United States is wider than in any other developed country.

That has rarely been a matter of concern for most Americans but the recession that began in December 2007 turned inequality into a topic of public debate, on occasion with peculiar twists.

In November, a widely-read New York Times columnist, Nicholas Kristof, compared the United States to Latin American banana republics. To see countries where the richest one percent take home more than a fifth of the national income, he said, it was no longer necessary to leave the U.S.

Two weeks later, he followed up with a column reporting that the comparison had drawn protests from readers who deemed it glib and unfair. Latin Americans thought it hurtful and invidious. After checking into the matter, he came to the conclusion that “I may have wronged the banana republics.”

Unlike in the U.S., he said, Latin America had become more equal in recent decades.


There is no reason to believe that American income inequality will shrink soon – the next Congress will be dominated by Republicans, many of whom firmly believe in “trickle-down economics,” the notion that giving tax and other financial breaks to the rich and the super-rich will result in increased profits for corporations which reinvest them, and then create new jobs. Money trickling down from the top. In theory.

This was the idea behind Republican insistence on an extension of tax cuts, introduced by George W. Bush, that included America’s wealthiest. Congress voted in favour of a two-year extension on December 17 after Republican leaders and President Barack Obama agreed on a compromise many in his own Democratic party saw as an abject surrender.

While considerable attention has been focused on the gap between rich and poor, wider than at any time since just before the Great Depression, there is perhaps an even weightier reason for Americans to lose their optimistic, can-do spirit — for many millions, the notion that they can climb up the economic ladder is more myth than reality.

Half of those starting at the bottom 20 percent never leave that level. “The…American economy tends to help those at the top stay there while making it difficult for those at the bottom to move up,” according to a study by Ron Haskins and Isabel Sawhill of the Brookings Institution, a Washington think tank.

That is true despite the rags-to-riches stories that underpin the American dream and have fired the imagination of countless immigrants. President Obama himself could be a poster child for upward mobility, a black man reaching the pinnacle of power after an unconventional childhood that included a spell of subsisting on his mother’s food stamps.

Obama’s Republican opponents portray him as a latter-day Karl Marx, intent on an economic model that distributes income from each according to his ability, to each according to his needs. That perception gained currency during Obama’s election campaign, when he used the phrase “spread the wealth around” in an exchange on his tax ideas with an Ohio voter named Joe Wurzelbacher.

Wurzelbacher became an instant hero to the American right as “Joe the Plumber.” He need not have worried. Obama never used the term again and wealth distribution looks likely to continue in one direction – upwards. In the “new normal,” there is reason for optimism for those at the top, not those in the shrinking middle or the bottom.

(You can contact the author at Debusmann@Reuters.com)


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I am one of those “rich” people who make just more than $200,000.00 per year. For the past 20 years I’ve invested as much of that money as I could. I live well, but I do not consider myself rich. I employ 15 to twenty people. Not only do I pay a high tax rate, but most of the tax deductions are phased out as income approaches 200,000, even the Roth Ira’s, school loans for my kids and others. I started working when I was 14 years old, have worked very hard all my life to get where I am today. I am grateful for the blessings that God has given me, and I’m gratefull to my country as well, but I realize that I will never be allowed to be truly rich – there is a point, and I am there, that you must pay so many penalties for being “rich” that you can’t advance to the next level of income. I am not whining, just giving my side of the story. When you consider that a ballplayer or talk show host can make millions of dollars a year – those are the really rich – and they have ways to get out of the taxes. I am for a flat or a sales tax!

Posted by zotdoc | Report as abusive

I won’t be commenting on the substance of the article but I certainly agree that the new Normal is depressing.

I see little hope for America and little hope for my future. I am employed, married, college educated with a masters degree. It has nothing to do with my status in life or my income.

I am concerned for my future because of the following:

- DC is filled with bickering self serving (and rich) career politicians. They ALL lie, all cheat and look after themselves. Their words and their actions most often do not agree.
- Our government is bloated and inefficient. We have a tax code that requires hundreds of thousands of CPAs and attorneys to interpret for us
- We have an enormously inefficient military that can’t even find bin laden
- We encourage children, in the name of progress, to find themselves and encourage and protect homosexuality as if its normal. How normal and prosperous would a society of gays be? Hint, there won’t be a second generation…you call that normal, call that progress?
- Our tax punishes those who work hard and rewards people for having children (even if they can’t afford them – refundable child care credits)
- Our politicans have us hating each other through class warfare and divisive speach
- Terrorists derived from one single religion are trying to kill those who disagree with them. They willingly murder civilians to prove their strentgh.
- We, the USA and nations of the world have chosen to ignore nations like N. Korea and Iran who repeatedly speak of hate and murder.
- We pretend that a world without nukes will ever exist. In what world will a nation not strive to better itself by picking up a stick when all others hold straw?
- We pretend that entire nations are not run by the mafia (Russia) and strike deals with them to limit our defenses against our own enemies
- We ignore the rule of law regarding immigration and allow criminals into our country via a blind eye. And we make those who enter legally to wait and wait and wait.
- We cry foul against latino nations who supply drugs to our country while doing nothing to limit the demand within our borders (harsher sentences for drug crimes of AMERICAN citizens)

and my favorite: We pretend that government was not the cause of the housing crisis. The CRA, passed by Carter, expanded and empowered under Clinton, cheered on by Bush, encouraged and required under penalties the lending of money to those who did not deserve homes sometimes establishing racial quotas (sound free market to you). We did this for decades and yet ‘banksters’ are to blame. Its the evil banks who wrote mortgages with little or no proof of income. Did those who agreed to mortgages not realize the debt they were taking on? Did the banks come knocking on their door? How does someone who falsified their income or assets suddenly become a victim? And Fannie and Freddie were guaranteing millions & billions of dollars worth of mortgage backed securities thus feeding the demand for banks all over the world. Housing became a right. Market forces did not create the housing bubble. The market tells you not to lend money to family with $30k in income. Government tells you to do it because he deserves a home and they will insure against default. Were banks to blame? Sure, partly. But the party started in DC. Don’t let anyone tell you otherwise. Easy rates and piss poor regualtion were also contributors.

If you hope in your contry you hope in the wrong place.

Posted by BHOlied | Report as abusive

BHOlied I understand everything you said. I’m Australian, and offer the following for consideration. Is it possible because America has declined its people for the first time in over 100 years are beginning to feel insecure not having the financial strength America once had to protect them? If that is right then it does America no good for its people to walk around wringing their hands over a situation your governments created. I come from a generation of Australians that was told by my parents and grand parents to never forget America saved us in the battle of the Coral Sea during world war two. Americans saved us not the US, were have those Americans gone?

Posted by Tat | Report as abusive

The future for most US residents is grim indeed and there has been a lot of commentary on it. Unfortunately there’s too much hyperbole and wishful thinking. So here is a short list of things to do to start making things better:

1. Stop shopping at Wal*Mart. Buy quality stuff, not crap that is so cheap you have to replace it in two months time.

2. Vote for politicians who will downsize the military. You are paying to police the world. Can you afford that?

3. Vote for politicians who will impose tariffs on goods from countries that don’t have our same environmental AND social constraints. Free trade is fine as long as it is fair trade. This will even the playing field and bring back good jobs that pay better than Wal*Mart.

4. Stop whining about taxes. The US pays the lowest taxes of the developed world. Where would we be without roads or schools? We’d be in the third world. Where do you think our prosperity comes from? It comes from our society and our society needs roads and schools. Taxes are necessary. Cheap stuff from China is not. And all the mean spirited talk doesn’t help either.

Posted by LEEDAP | Report as abusive

Tat is 100 percent correct. Americans don’t want the government to do anything, but when they don’t do anything they complain. It is called getting off your butts and working no matter what taxes you have to pay, no matter what cheap imports there are, and no matter how expensive things are. That is what America did in the past and it got us through economic decline and depressions before. Now, Americans are soft and despite saying they don’t want the government to do anything, they actually want the government to do everything. Tax breaks are a government action after all. I only have a gloomy outlook for the US if people continue this crying and government dependency.

Posted by hujintaosson | Report as abusive

Hello, All. I’ve had to dig deep lately, but I maintain that the Goodness in most human beings, will triumph. However, first and foremost, we must get real control of the Borders; eliminate illegal immigration (NO Amnesty of any kind), lower legal immigration levels(currently 5 times higher than traditional). Also, start training those already here for jobs Americans, are, supposedly, unqualified for since NO ONE NATION can be a LIFEBOAT for the entire planet. Prosperous countries should assist poor ones in developing their own economic & social resources. But, the US needs to provide for its own citizens first. Peace & Love, Bread & Justice.

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