(MintPress) – Last week, the U.S. Department of Labor announced that the nation’s economy gained 146,000 jobs in November, lowering the unemployment rate to its lowest level in four years, as reported by Bloomberg. Along with a housing rebound, rising auto sales, healthier consumer finances and strong composite leading indicators — as determined by the […]
(MintPress) – Last week, the U.S. Department of Labor announced that the nation’s economy gained 146,000 jobs in November, lowering the unemployment rate to its lowest level in four years, as reported by Bloomberg. Along with a housing rebound, rising auto sales, healthier consumer finances and strong composite leading indicators — as determined by the Organization for Economic Co-operation and Development — the economy has gained steady momentum toward returning to full health.
This could all change, however, if Congress and the president cannot agree in time on a comprehensive set of spending cuts and tax increases that would prevent the economy from going over the “fiscal cliff” — the financial double whammy of the end of the Bush-era tax cuts and the beginning of automatic budget cuts agreed upon when the “SuperCommittee” failed to create a comprehensive debt cutting plan — on Jan. 1. As with many things involving this nation’s economy, bickering and partisanship have taken the place of compromise and leadership, and the “fiscal cliff” problem represents more of the same; as of the writing of this report, no deal has been reached in Washington.
This brinksmanship that now optimizes American politics threatens its dominance as a world leader. In a report released Monday by the National Intelligence Council — an analytic component of the Office of National Intelligence — China is poised to become the world’s number one economy, with India nearing its gap. The United States, Europe, Japan and Russia are expected, according to “Global Trends 2030: Alternative Worlds,” to continue on their slow decline. The report predicts an expansion of the global middle class, with more people having access to educational opportunities, adequate health care and avenues toward personal empowerment than not.
As such, the report predicts that the developing world — with China at the forefront — will dictate the world’s economy in 15 to 20 years. In addition to China and India, Brazil, Colombia, Indonesia, Nigeria, South Africa and Turkey will become essential players in the global economy, with the American, European and Japanese share of the world’s income dropping from 58 percent today to under 50 percent in 15 years.
Technology is also expected to be affected. The United States — the world’s technological leader — will likely lose firms and innovations to emerging markets in Asia and Latin America. Social networking will become an essential check to governments, enabling more direct democratic participation. New Internet startups would have the benefit of real-time data and mountains of collected data to influence and affect on governmental scales.
The United States is unlikely, however, to be dethroned as world leader. As stated in the report:
“How the United States’ international role evolves during the next 15-20 years—a big uncertainty—and whether the US will be able to work with new partners to reinvent the international system will be among the most important variables in the future shape of the global order. Although the United States’ (and the West’s) relative decline vis-a-vis the rising states is inevitable, its future role in the international system is much harder to project: the degree to which the US continues to dominate the international system could vary widely.
“The US most likely will remain ‘first among equals’ among the other great powers in 2030 because of its preeminence across a range of power dimensions and legacies of its leadership role. More important than just its economic weight, the United States’ dominant role in international politics has derived from its preponderance across the board in both hard and soft power. Nevertheless, with the rapid rise of other countries, the ‘unipolar moment’ is over and Pax Americana—the era of American ascendancy in international politics that began in 1945—is fast winding down.”
The United States in 2030 would likely be energy-independent and would be a healthy number two economically behind China. However, for most of us, this is still shocking, as the U.S. has been number one in all national measurements since the fall of the USSR.
This begs an important question: Ahat is the nature of this decline, and what does it means for the United States?
A song of fire and ice
“The 2008 crisis and its long ‘tail’ raise the prospect of an extended crisis that would undermine the social and political fabric in many Western countries and create long-term destabilizing effects. Historical studies indicate that recessions involving financial crises tend to be deeper and require recoveries that take twice as long.
“McKinsey Global Institute’s (MGI’s) recent study of debt and deleveraging indicates that in the years since the onset of the financial crisis, ‘major [Western] economies have only just begun deleveraging.’ Total debt has actually grown or most major Western economies with the exception of the US, Australia,and South Korea, where the ratio of total debt to GDP has declined. Previous episodes of deleveraging have taken close to a decade. The report concludes that this pattern is likely to continue. ‘No single country has all the conditions in place to revive growth.’ Most of the leading Western countries could therefore suffer the consequences of low economic growth that lasts longer than a decade.”
—National Intelligence Council, Global Trends 2030: Alternative Worlds
It is no secret to those who follow the news that this country’s political process is seriously in trouble. Brinkmanship has replaced compromise as the default mode of operations for the federal government, with conservatives demanding their way on the threat of blocking the government to the point of non-operation. For example, during July and early August of 2011, this brinkmanship almost forced the United States to default on its debt for the first time in its history when consent to raise the debt ceiling — the aggregate limit on the bond amount the United States is allowed to issue at any one time — was denied by the Republican-controlled House of Representatives. Raising the debt ceiling was seen as a formality, for, as the Government Accountability Office explains, “The debt limit does not control or limit the ability of the federal government to run deficits or incur obligations. Rather, it is a limit on the ability to pay obligations already incurred.” The president submits a budget with a detailed plan to pay incurred debt — which may include raising the debt ceiling — and the House automatically approves the plan when they approve the budget.
That’s how it is supposed to work.
In 2011, however, Republicans, already set in their failed plan to discredit the president in a bid to win the White House in 2012, decided to make what was normally routine and turn it into high drama. On July 31, 2011, a deal that will live in infamy was reached: In exchange for signing a bill that was supposed to be automatically approved, the Budget Control Act was signed into law — which brought the failed “SuperCommittee” — which triggered a long series of sequestrations or automatic cuts …
… Which brings us here, looming over the impending “fiscal cliff,” where political pettiness threatens to make history repeat.
“The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. Despite this year’s wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge, and, as we see it, the resulting agreement fell well short of the comprehensive fiscal consolidation program that some proponents had envisaged until quite recently. Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending while delegating to the Select Committee decisions on more comprehensive measures. It appears that for now, new revenues have dropped down on the menu of policy options. In addition, the plan envisions only minor policy changes on Medicare and little change in other entitlements, the containment of which we and most other independent observers regard as key to long-term fiscal sustainability.”
There is no reason to imagine the acrimony between the Democrats and Republicans subsiding, and this presents a true obstacle to growth. Without able leadership that can respond to crisis and change effectively and efficiently, the nation will become staggered with little or no forward growth.
In Europe, the austerity crisis threatens to bring down the eurozone. A crippling amount of debt is compounding in nations ill-equipped to handle it and continued support of heavily-indebted nations threatens to bring down not only the financially-strapped nations, but the healthy ones, as well. A lack of governmental services, lack of protections for the poor and staggering unemployment have set up a situation that, even after the eurozone’s members’ budgetary debt have been resolved, the damage done from these austerity measures will not be repaired for several generations.
According to the Center for American Progress, middle class income in this country has stagnated from 1980 to 2000 before taking a hit in this past decade. Since 1968, the share of nation’s income claimed by the middle class has fallen nearly 8 percent. Since 1970, the number of households that makes middle-class incomes has dropped from 50.3 percent to 42.2 percent in 2010. Since 1970, despite incomes falling, the cost of expenses have risen: rent and utilities are up 41 percent, health care 50 percent and home expenses 97 percent. In addition, the median home debt has risen from $25,300 in 1989 to over $70,000 in 2010.
In short, the American middle-class is in danger of disappearing, and this is dangerous for the economy. In any open-market economy, the wealthy are not job creators. Jobs are created and lost in direct response to the demands and wants of the consumer class — the middle class of workers. Consumers have more money, so they buy more. Demand goes up, so supply must rise to meet expectations. That means manufacturers must hire new assemblers, distribution hubs must hire more packers and retail stores must hire more clerks to meet the rush. Vice versa, consumers have less money, so they buy less. Demand goes down, so supply drops to allow stored merchandise to sell. Less new merchandise being made means less assemblers are needed, fewer packers will be called to work and retail clerks will have their hours cut.
In an open-market system, the workers create jobs, and by trivializing them, the health of the nation as a whole is jeopardized. Favoring the rich as a means to financial security is a logical absurdity, but it is the modus operandi of modern American politics.
A year prior to his death, Franklin D. Roosevelt proposed a second Bill of Rights which protected and ensured the economic liberties of every American. Below is the full text of Roosevelt’s presentation, as given in his radio-transmitted “State of the Union” address Jan. 11, 1944:
“It is our duty now to begin to lay the plans and determine the strategy for the winning of a lasting peace and the establishment of an American standard of living higher than ever before known. We cannot be content, no matter how high that general standard of living may be, if some fraction of our people—whether it be one-third or one-fifth or one-tenth—is ill-fed, ill-clothed, ill-housed, and insecure.
“This Republic had its beginning, and grew to its present strength, under the protection of certain inalienable political rights—among them the right of free speech, free press, free worship, trial by jury, freedom from unreasonable searches and seizures. They were our rights to life and liberty.
“As our nation has grown in size and stature, however—as our industrial economy expanded—these political rights proved inadequate to assure us equality in the pursuit of happiness.
“We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. ‘Necessitous men are not free men.’ People who are hungry and out of a job are the stuff of which dictatorships are made.
“In our day these economic truths have become accepted as self-evident. We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all—regardless of station, race, or creed.
“Among these are:
“The right to a useful and remunerative job in the industries or shops or farms or mines of the nation;
“The right to earn enough to provide adequate food and clothing and recreation;
“The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;
“The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;
“The right of every family to a decent home;
“The right to adequate medical care and the opportunity to achieve and enjoy good health;
“The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;
“The right to a good education.
“All of these rights spell security. And after this war is won we must be prepared to move forward, in the implementation of these rights, to new goals of human happiness and well-being.
“America’s own rightful place in the world depends in large part upon how fully these and similar rights have been carried into practice for our citizens.”
In short, priorities need to be re-examined if this nation expects to grow. We must be big enough to see past selfish ambitions and greedy pursuits. If one of us fail, we all fail. That’s the nature of being an American; the fate of some affects all of us.
It is unlikely that China will ever fully replace the United States; China only qualifies as a world power economically — it is unlikely that China will ever build its military, geopolitical and diplomatic structure to fully compete with the US. However, as the gap between the prosperity of what we called “the developing world” and the U.S. shrink, new questions have to be asked: How great is a nation that cannot care for its citizens? Why is money the definition of worth in this country? Can a plutarchy truly be the moral world leader everyone expects?
Unless this nation can offer the promise of life, liberty and the pursuit of happiness to all of its citizens, the nation will deservingly continue to shrink as others rise and take its place.