Can America summon the will to invest in the future?
Surf the web or watch TV and you will probably conclude that American politicians and American pundits don’t agree on much at the moment. But that polarized public discourse obscures the equally important fact that Americans are remarkably united when it comes to determining what the big issues facing the country are.
This isn’t a moment when the nation is divided between isolationists, who want to focus on domestic issues, and expansionists, who want to focus on the rest of the world; nor is this an era when the political debate is about whether social policy—those old standbys like abortion, gay rights and family values—or economic concerns—be they poverty reduction or business growth—should be pre-eminent.
Instead, everyone is pretty much agreed on the big challenges facing America: stimulating economic growth, balancing the budget and finding a place for the United States in the world economy. There is even consensus, at the broadest level, on what the country needs to do to achieve all three: save more and spend less; invest more in social and physical infrastructure and less in personal consumption.
Here’s how Nobel-prize winning economist Michael Spence framed the problem—and the basic solution—when I interviewed him at a recent conference. “Let me describe China thirty years ago,” said Spence, who is advising the Chinese government on the twelfth, and latest, five-year plan. “Thirty years ago China had a per capita income of $400, changed direction, and started saving at 35% and investing at 35%. OK? Now when you have a $400 income and you’re saving at 35%, that means you’re consuming 65% of $400. That is a huge commitment to the future as opposed to the present, right? Now you either make the commitment, as the Chinese did and all the other high-growth developing countries, or you don’t.”
That’s a tough message, but it’s not actually a particularly controversial one. The hard part has been finding a consensus on how to pay for that investment in the future.
No surprise there. ‘Who pays?’, or, as Lenin more forcefully liked to put it, ‘kto kogo’ (‘who whom’) — is a, maybe the, central question politics exists to resolve. What is proving harder for the U.S. to come to terms with is that the battle today is largely a class divide.
Americans are accustomed to framing their political battles around race, region, religion, gender and even sexual orientation. But when it comes to money, the classic dividing line in the politics of so many other nations, Americans get decidedly squeamish. That’s probably because the classless society, or at least one in which wealth depends on achievement rather than birth, is so central to the American idea.
The problem today is that, even if you believe that America is a perfect meritocracy—something the most ardent libertarian is unlikely to assert—you can’t deny that globalization and the technology revolution are enriching the super-elite and hammering everyone else. Unemployment is still hovering close to 10 percent, but CEO compensation, according to a calculation by the Wall Street Journal this week, rose by 3 percent in the latest fiscal year. That continues a thirty year trend, which has seen the top 1 percent rise from taking home 9 percent of the national income in 1976, to 24 percent today.
This yawning class divide—and that is what it is, even if Americans are loathe to call it that—makes investing in the future particularly hard for the country to agree on. Nancy Pelosi’s constituency is too enraged by the gains of the super-elite to consent to cuts to social security or social services.
The super-elite, who regret America’s national economic malaise as a matter of theory, but who are personally doing better than ever, are finding it much easier to back flashy personal philanthropies than to go along with swinging increases in their own tax bills.
Authoritarian regimes, like Communist China, can coerce their people into investing in the future. Democracies need to persuade them. One essential part of that pitch is convincing voters—and taxpayers—that their sacrifice will be shared. In today’s two-speed America, that’s not an argument anyone is yet making.