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Friday, May 9, 2014

America's Decline

      This is a direct copy and paste from my weekly Kevin Brady email, my congressman in the US House of Representatives.

“I don't know about you, but I'm tired of losing ground to America's global competitors when it comes to technology and innovation.  While China's percentage of global research and development continues to increase exponentially, America's share continues to decline. In fact, experts predict that China could surpass us by 2022. That's unacceptable and I've been working for several years to do something about it.”

      I get similar notifications from John Cornyn and Ted Cruz. I have all Republican representation and they have a consistent answer. Lower taxes, reduce government, and spend more on the military. As a small innocent child, I remember my grandfather telling me the same solutions. This approach is very old, if it worked we wouldn’t be in the condition we are in now.

      Senator Ted Cruz’s email outlines “The Legal Limit Report No.4”, in which he catalogues President Obama’s unconstitutional abuses of power. 78 reasons to arrest the tyrant. Does anyone seriously think this will improve the condition of middle class Americans? The politicians are being political, nothing unusual there, but I would expect at least one offical out of over 400 elected representatives, to be concerned about America’s future. Can’t we get just one to start with?

      This decline in America’s world standing is a continuation of a trend that started in the 1980s, the stagnation of wages is a trend started in the 1980s. At the start of the 1980s America dominated all measures of wealth, technology, education, health, science, etc. We stood above everyone by any measure.

      Starting with President Reagan we adopted a fiscal policy of “Supply Side Economics”, the Reagan white house called this “Trickledown economics”. Whatever the name, the idea is to lower barriers for companies and reduce the marginal tax rate on companies. This preferential treatment for companies will then result in higher rates of employment, and somehow, higher wages.

      My question is simple, with 40 years of supply side economic policy, where are the promised middle class wage earners benefits? The rich have certainly benefited, the nation’s GDP has benefited, the average working stiff has not benefited.

      We have fallen behind on all metrics, if Supply Side Economics is so great, shouldn’t we have improved somewhere? We continue same policies and now expect a different result?

      I find all this very frustrating, while some Americans think all this happened in 5 years, the data clearly indicates this happened in 40 years. We all actually agree that things are worse. While some Americans rationalize the precise cause (Obama/Democrats), I think it is a larger question of overall government policy. We did very well from post WW2 to the early 1980s, then we lost ground from the 1980s to 2014. Blaming President Obama does not explain the 40 year data trend.

      Much has happened since the 1980s. A fiscal policy shift to Supply Side Economics, Globalization, technological destruction (remember Kodak Co.), the wage earner’s ability to negotiate has become essentially zero, a monetary policy shift at the FED, the rise of China/India/Brazil, etc., the collapse of the USSR, the repeal of banking laws, overall a very long list. Much of this change is due to the rise of other nations, while we kind of set still and argued about politics. Other nations used “Best Practices” while we pretended our “Exceptionalism” protected us from change.

      All the politicians are playing a similar game, streaming platitudes and bumper stickers, while blaming the other team, as America continues falls further and further behind. Political scientist (if there is such a thing), write that a Democracy can only change at a moment of crisis. (Yes, I know, we are not a Democracy, we are a Republic.) This is a sad statement about politicians, a statement I would agree with, for clearly politicians do not understand government, economics, or history. Their sole skill is campaigning for office.

      Crisis is a dangerous method for creating change. The last mega-crisis was the “Great Depression”, a worldwide economic collapse. From that crisis we got Hitler and FDR, one a negative solution, the other a positive solution. Based on that example the odds are 50/50 for any improvement.

      I do not know the answer, but then, I’m not getting paid $175,000 per year (plus great benefits) to deal with these problems, and to find solutions. Based on performance, 40 years of performance, our political leaders are a failure. There is not a single political leader, from either party, proposing any “best practices” policy. I would use “best practices”, I would investigate what countries are ahead of us, and ask how do we copy that, how do we improve on that. This approach worked at company after company across my career. It is also how the other countries caught up with us, and then surpassed us.

      China studying America’s manufacturing “best practices” did not change China into America. Our studying Sweden’s educational “best practices” will not change America in Sweden.

1 comment:

Shirley said...

What I really appreciate about your views is that you are not blindsided by labels, but that you can think an issue through. I often wonder if the decline started in the 1970's when America's oil supply was outpaced by demand. What do you think?