The Seven Fat Years: And How To Do It Again
The Bankrupting of America: How the Federal Budget Is Impoverishing the Nation
Today the ability of the American economy to provide rising incomes and expanding job opportunities is in greater doubt, and at greater genuine risk, than at any other time in recent memory. Even during the record-length business expansion that began in 1983 and ended in 1990, growth in US productivity was sluggish and the average American worker’s wage failed to keep pace with inflation. The 1990-1991 recession may have been mild in the aggregate—the increase of unemployment to 7.8 percent of the labor force in June does not approach the 10.8 percent unemployment rate in 1982—but it has affected companies and social groups that used to be thought immune from ordinary business downturns. Worse yet, there is little confidence that even after the recession is well behind us our economy will be able to provide a rising standard of living for most of the nation’s families. If it cannot, then in the years to come that economic failure will surely threaten the general character of American society, and it will sharply circumscribe the role that this country plays in world affairs.
Among the disparate forces that have combined to bring about these doubtful prospects, the one that can be most directly confronted is the now chronic drain on the nation’s saving caused by the federal government’s borrowing. Put in the simplest possible terms, the problem is that what we pay in federal taxes now amounts to 19 percent of American incomes, while what the government spends adds up to 24 percent. Closing this imbalance, if we are to close it, means either raising tax revenues or cutting government spending, or both in some combination. But a coalition of those who fear higher taxes and those who dislike much of what modern governments do anyway (often the same people) has firmly blocked the first solution, while those who are committed to (or rely on) what the government does have just as firmly blocked the second.
While this political deadlock persists, so too does the government’s budget imbalance and, consequently, the crippling drain on our saving. On average during the last ten years, the entire net saving of both American families and businesses amounted to 6.2 percent of our national income. The federal government’s deficit absorbed 3.7 percent of national income. We therefore go on, year after year, investing less than we should in just about all of the makings of a strong economy—factories and machinery, most obviously, but also research, worker training, bridges, airports, and the like—and both incomes and job opportunities have stagnated for a large majority of our citizens.
The initial enthusiasm for Ross Perot’s abortive presidential candidacy, notwithstanding his lack of details about the “waste” he would eliminate, or for a balanced-budget constitutional amendment, notwithstanding fears that in practice such a measure would not work anyway—might seem to have suggested that Americans have finally started to wake up to what has happened …
'Bankrupting America' November 19, 1992