CULTIVATING LIBERALISM
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Malaise, By George
Dawn of A Second-Rate Economy

The Soviet Union proved that military spending is a delusion of power if the civilian economy and the workforce supporting it aren’t getting their share. In 1991, the Soviet Union imploded. It was hollow at the core. The United States is a far cry from the Soviet Union in most regards, but not in the manner in which it is overspending its wealth, underinvesting in its social structure and leaving itself vulnerable to economic implosion. But if it’s not going the way of the Soviet Union any time soon, it’s at least heading east, the way of Britain after World War II, when the old empire became a shell of its economic past. Social and economic indicators point that way, as Niall Ferguson warned in a New York Times magazine essay last June: “Think of the economy of the United States as a dinosaur -- one of those huge herbivores whose bulk shook the ground. A brachiosaur. A brontosaur. A diplodocus. Like them, the U.S. economy is mind-bogglingly enormous -- two and a half times as big as the next largest economy in the world and almost as large as that of the six other members of the Group of Seven combined. The catch is that it has to consume almost incessantly to sustain its great heft.” But what if it’s spent its way beyond its means?

Take poverty. The rate has increased for four years in a row, ranking the United States dead last among the 16 wealthiest nations. On Tuesday, the Census Bureau released its annual report on “Income, Poverty and Health Insurance in the United States.” Against expectations, the poverty rate did not increase for the fifth year in a row. But it didn’t decline, either, or rather its decline was a statistically insignificant 0.1 percent, from 12.7 percent to 12.6 percent (it was 11.3 percent when Bush took office), while the number of Americans in poverty stayed the same: 37 million. Median household income had been dropping every year since 1999. It rose in 2005, but again, by a statistically meager 1.1 percent (compared, say, to double-digit increases in income for the top 1 percent of wage earners, the far steeper increases in wealth for that class, and historic increases in corporate profits). The number of uninsured Americans increased from 15.6 percent to 15.9 percent, or from 45.3 million people to 46.6 million. Look at that number again: 46.6 million Americans are without health insurance. If that’s prosperity, you can keep it.

It’s also tough for those making the middling household income of $40,000 a year (the median income is now $46,326). For them, it is a “second-rate” economy. They “are not getting much help,” says Timothy Smeeding, an economist at Syracuse (N.Y.) University. “Among the choices the US makes: It spends more than all other nations combined on defense. It spends relatively little on alleviating poverty. It chooses a private health system rather than a socialized, or partly socialized, system,” David Francis writes in the Christian Science Monitor. You then have these myth-busters: Mobility in the United States is no longer what it used to be. The chance of escaping one’s parents’ poverty are slim to none. The education system is adrift. Spending on health care is out of control, with no results: life expectancy is nil, compared with other industrialized countries. Still, the United States puts its faith in free markets above all (except when it comes to the military, making the Pentagon, with its $550 billion budget, the most centrally planned socialist economy the world has ever known), caring little for the support systems that render it more humane, even if slightly less lucrative for those at the top. As Thomas Frank wrote in One Market Under God, “We were learning to accept the market as the arbiter of all things: To bow before what it chose to do to our cities, our industries, our lives—so long as that little lift continued in our 401(k)s. In one great patriotic auto-da-fé we were sending the work of decades up in smoke—send the jobs south! put our neighbor on a twelve-hour shift! smash the downtown merchants!—whatever it took to keep the market smiling.”

Monday’s story in the Times sums up the last five years’ splurge on profits and productivity at the expense of workers and quality of life: “The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period. As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s.” What’s remarkable about the chart at the top of this piece is how clearly it sets out the turn-around when the American economy’s egalitarian tendencies, so pronounced at mid-century and until 1980, gave way to the inequality of the Reagan-Bush years. The trend was reversed during the Clinton years. Productivity, wages and equality all improved. But with Bush’s presidency, it’s been a disastrously steep return to the Reagan-Bush trends. The rich are skewing the averages. The economy is even worse than it appears, especially when the level of personal debt is taken in consideration.

And the rot at the core of the economy is beginning to smell a little: you can’t sustain this sort of disconnect without damaging the whole structure. “It is too soon to speak of extinction, of course,” the optimistic Niall Ferguson concluded in June. “But one obvious inference to be drawn from the British experience of an indebted empire and a sliding currency, as well as from the history of the diplodocus, is that eternal life is not on offer.” Specially when the living are in thrall to stupor. We’re not only second rate economically. We’re second-rate politically, because so far most Americans are content to let the status quo be, confusing their aspirations and assumptions of eventual riches with a palliative for their currently bleaker realities. As long as they keep up the delusion, there’s nothing pressing the polity to be any different than what it’s been. Good news for reigning Republicans and Democrats. Bad news for the rest of us dinosaur fodder.

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