We are first-class passengers on a sinking ship
“A specter is haunting the United States—the specter of decline.” Richard Lachmann explains why the United States will not be able to sustain its global dominance.
A specter is haunting the United States—the specter of decline. Discussion of decline leapt in 2016 from academic treatises to the forefront of public debate as the winning presidential candidate made his slogan “Make America Great Again,” which implied America was no longer great, as it once had been. Trump built his platform on the notion that drastic action was needed to recover from a decline brought on by America’s own government. The 2008 crisis and the government’s response made obvious the extent of economic and political inequality in the United States, and the absolute decline in wealth and well-being for a growing fraction of Americans.
Evidence of decline is manifest to those of us living in America in the first decades of the twenty-first century. Spending on infrastructure has stagnated as bridges collapse, water and sewer pipes and dams burst, air and road traffic become ever more snarled, and passenger trains on a shrinking network struggle to reach early-twentieth-century speeds. From the arrival at the airport to the high-speed train or subway trip into town, a visit to most countries in Europe and East Asia can seem to an American like a journey to a Tomorrowland, never to be realized in the United States outside of Disney World.
Student achievement at the primary, secondary, and university levels has fallen from the top ranks. US students, who attend ever more decrepit schools, are performing less well than their peers in countries with much lower levels of income or educational spending. The United States, which pioneered mass higher education with the GI Bill of 1944 and held the lead in the percentage of its population with university degrees for the following five decades, has now fallen to fourteenth among developed nations.
The United States does spend lavishly in two sectors, health care and the military, but its relative standing in both realms has been falling for decades. This is the case despite the fact that medical spending in the US was 17.1 percent of GDP in 2013, almost 50 percent above the next highest country, France, at 11.6 percent. Per capita and adjusted for differences in the cost of living, the United States spent $9,086 in 2013, 44 percent above the runner-up, Switzerland, at $6,325 (Commonwealth Fund 2015).
Why does the United States get such a poor return on its health care spending, or, to ask the question another way, why is it so expensive to provide worse care than people get in other wealthy and not-so-wealthy countries? It is not because Americans use so much health care; Americans, in fact, go to the doctor less and spend fewer days in the hospital than people in other OECD countries. Instead, Americans pay much more for doctors, drugs, medical devices, and hospital stays than anywhere else on Earth because Congress has repeatedly rejected cost controls and forbids the federal government from negotiating prices.
America also devotes more than twice as large a share of its medical spending to administrative costs as any other OECD nation. This is so because multiple for-profit insurance companies, each with their own set of procedures and reimbursement schedules, need to hire armies of administrators to process their distinctive forms, while hospitals and doctors’ offices hire medical “coders” who seek to classify the care provided to patients in ways that maximize reimbursements, leading insurance companies to hire yet more administrators to check and challenge the bills submitted by hospitals and physicians. Of course, none of that contributes in any way to patients’ health and longevity.
The US military has become ever less able to win wars, even as its advantage in spending and in the amount and sophistication of its armaments has widened over its actual and potential rivals to a level unprecedented in world history. America’s only unambiguous military victories since World War II came in the first Gulf War of 1991, a war with the strictly limited objective of expelling Iraq from Kuwait, and in various “police actions” against pathetically small and weak opponents in the Dominican Republic in 1965, Grenada in 1983, and Panama in 1989. The US war in Korea had an ambiguous result, while Vietnam was a clear defeat.
In both those wars, the United States faced significant enemies backed by the rival superpower, and in Korea fought hundreds of thousands of Chinese troops as well. None of those conditions hold for the wars in Iraq and Afghanistan, which, even though they did not end in outright defeat, failed to achieve most of the objectives for which they were fought. Any single defeat can be attributed to particular and ad hoc circumstances, but America is unique among the world’s dominant powers of the past five hundred years in its repeated failure to achieve military objectives over decades. Those failures are even more extraordinary because they occurred in the absence of a rising military rival and as America’s ability and willingness to produce and pay for the weapons needed for military supremacy remained undiminished.
Outside of the lavishly, if ineffectively, funded military and medical realms, the outlook is bleak. At the very moment when further investment is needed for infrastructure,1 scientific and industrial research and development,2 education, and environmental repair, the capacity of the federal and of state and local governments to muster those funds is weakening. Following the Bush tax cuts, federal receipts fell in 2004 to 16.3 percent of GDP, the lowest level since 1951.3 To hold spending steady as tax revenues decline, public debt has increased vastly since 2000, mirroring American families’ use of credit to sustain their spending in the face of stagnant incomes.
Federal debt as a percentage of GDP more than doubled from 31.7 percent in 1981 to 67.7 percent in 2008, and then after the Great Recession, federal debt further increased to 101.8 percent of GDP in 2015.4 Private debt, held by individuals and firms, increased as a percentage of GDP at an even faster rate in those three decades, and right before the financial crisis totaled four times the federal debt. “Between 2000 and 2007—the total [of household debt] doubled to $14 trillion and the household debt-to-income ratio skyrocketed from 1.4 to 2.1.”1 However, the fastest increase in debt was on the part of financial firms, which rose from 19.7 percent of GDP in 1979 to 117.9 percent in 2007.
Many commentators have described America’s decline, and many have proposed solutions.3 America’s loss of military and economic supremacy, and its citizens’ continued fall from the first rank in education, health, and well-being, have been accompanied by numerous suggestions of policies that could reverse the process. Yet increasingly those proposals are put forward with a resigned belief that they will not be heeded because the United States is no longer capable of mustering the political will to actually appropriate the revenues needed and has lost the organizational capacity to bring large-scale projects to completion. In essence, American progressives and realists express political options as a series of regrets:
Yes, we know the economic leader of the twenty-first century will develop a green energy sector, and that to do so will require massive governmental investment, efficiency mandates, and taxes on fossil fuels, but America lacks China’s resources and the EU’s willingness to tax and regulate, so such a sector cannot really grow here.
Of course, we understand that a government-directed and -financed universal health care system is the best (perhaps the only) way to lower health care costs and improve outcomes, but the insurance, pharmaceutical, and hospital industries will never allow that here, so America will have to continue to pay more for worse outcomes.
Every country with better educational results has a single national system and recognizes teachers’ professional worth with high levels of autonomy and pay, but America has a tradition of local control, and in any case we can’t afford to pay enough to get capable professionals, so we had better settle for closely supervising teachers by testing their pupils on basic academic skills, even though students who pass those tests are not prepared for university education or international competition.
When commentators do not fall into despair about the consequences of a supposedly unique American approach to politics and governance, they indulge in magical thinking, hoping for a savior or for the spontaneous eruption of a social movement.
— An edited excerpt from First-Class Passengers on a Sinking Ship: Elite Politics and the Decline of Great Powers by Richard Lachmann
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