What Kind of Country Do We Want?
The relevant question in this year's elections is not, "Are we better off today than four years ago?" It is, "Will we better off in four, 10 and 20 years from now?"
The well-being of current and future generations will be determined by the seriousness with which the U.S. confronts the dual challenge of emerging global competitors who vie with the U.S. for jobs, consumers and skilled workers; and the advances in information technology that are raising productivity standards, the skills required of workers, and an expanding set of global suppliers.
These dual factors are creating a tectonic change in the marketplace in which the American economy competes.
A recent book by noted global economics journalist Thomas Friedman, "That Used to be Us," provides some useful prescriptions for improving the health of our economy and restoring the U.S. to the land of opportunity.
Friedman's recommendations are based on the five pillars that constitute the formula for prosperity that has helped the U.S. successfully transition through similar changes. We must:
(1) strengthen our public education system to close the achievement gap between U.S. and foreign students and, within the U.S., between minority and nonminority ones;
(2) repair and modernize our infrastructure systems to support effective and efficient business interactions;
(3) move our immigration policies beyond providing a pool of low-wage labor to filling the skills gaps that exist in our labor force;
(4) increase public support for basic research and development of innovative products that provide good business opportunities; and
(5) implement regulations that ensure protection for the interests of smaller business enterprises and consumers.
To achieve higher rates of economic growth and broader-based prosperity, we cannot simply wish or decree it so; we must take tangible actions to make it happen. General "I'll fix it" prescriptions won't cut it.
Friedman cites a business adage that suggests the overall strategy: "You win in the turns." In this case, the turn is change in the marketplace. As any NASCAR fan knows, to get ahead when you enter a turn, you don't put on the brakes, you accelerate. We cannot grow our economy with spending cuts; we must make the critical investments that have been allowed to lapse, particularly during the 2000s.
One significant trend that is constraining sustainable economic growth is the increasing concentration of income and wealth.
I agree with the goal of a broader tax base and a larger percentage of the population paying income taxes. But it can't happen when an increasing share of total income is being captured by a decreasing percentage of households. In 2010, 20 percent of the population owned 84 percent of the country's total wealth.
This disproportionate distribution has worsened as the incomes of the top 1 percent have increased by 11.6 percent - representing 93 percent of total income gains - during the "recovery" while the other 99 percent have experienced an increase of .2 percent. When the "private market" produces these kinds of distributional distortions, some adjustment through public tax policies is both necessary and appropriate.
Actual experience has demonstrated that the investor class are not always job creators. Alan Greenspan, former head of the Federal Reserve, recently asserted that the U.S. economy has become very fragmented.
High-income individuals, large banks and big corporations have experienced a significant recovery, but most small businesses and a significant amount of the labor force are stuck and still struggling. Small and medium businesses report that lack of customers is a bigger constraint on expansion and new hiring than tight capital markets.
What can we expect when our middle class is declining? Our economic growth was strongest when the income share of the top 1 percent was in the 10 percent range and the top marginal tax rate was 70 percent. Over the past 50 years, the only discernible outcome of permanent tax cuts is increasing income inequality. Is that really where we want to be going?
We have a long, challenging path to restore our prosperity. Any farmer knows that it takes much longer to sow and grow a crop than it takes to harvest it. We, and particularly the 1 percent, have been harvesting the value-creating elements in our economy for the past 20 years. It is going to take more than four years to restore that capability.
The change process we are in, and need to go through, is going to produce some short-term victims. One clear example are the workers whose jobs will never return, and certainly not at the skill levels they possess. There are others. We must preserve the social safety net to meet the needs of these individuals.
Supreme Court Justice Oliver Wendell Holmes once said: "I like to pay taxes. With them I buy civilization." It is no coincidence that as our political discourse and governance process have become increasingly focused on taxes and tax rates, they have become increasingly uncivilized.
The forward-thinking investment strategies recommended by Friedman historically have been and continue to be the agenda of the Democratic Party. That is why a vote for an opportunity-based future is a vote for the candidates of the Democratic Party.
Brian Deaton lives in Pinehurst.
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