America is on the skids and time is running out. The core of Edward Luce's 'Time to Start Thinking' is about the decline of America's middle class; other topics covered include public education (we're now ranked below #20 in international comparisons of math and science achievement), the need to overhaul our government, eliminate polarization of politics, the pursuit of empty-headed ideologies, and end our seemingly never-ending campaign season. Summarized into a single sentence, the U.S. is in relative economic decline, and our political system lacks a coherent response and is making things worse. Or, as former Joint Chiefs Chairman Admiral Mullen put it, 'We're borrowing from China to build weapons to face down China - this can't continue.' A decade ago the U.S. accounted for almost one-third of the global economy - now it's less than a quarter and likely to fall to about one-sixth by 2020 when China becomes the world's leading economy.
All net job creation since 1990 has been in the non-tradeable sector and McKinsey predicts no growth in the tradeable sector through 2021; almost all of this was in services, with about half in health care and half in government (sectors with essentially no productivity growth). Many areas have suffered from massive job losses in manufacturing over the last generation. Gambling is one of its most frequent replacements, bringing low-wage jobs, pimps, and drugs as replacements. Economists earlier told us that service jobs were superior to those manufacturing jobs moving to Asia, but that's not bearing out. Too many of the new service jobs are dead-end and part-time w/o benefits, and/or in health care - a sector that cannot continue to grow. At the same time, the proportion of workers covered by employers' health insurance has fallen from two-thirds to half in just the past decade; it costs $2.38/hour for health caer coverage, vs. 98 cents for the rest of the developed world. Billionaires increasingly make their money from activities generating few jobs - software (Facebook, Instagram, Google), hedge funds (John Paulson), and Wall Street (George Soros), or mostly low-paying jobs (eg. Adelson's Sahara), or mostly overseas jobs (Steve Jobs and Tim Cook - Apple).
This has become the age of the 'disposable worker' - lawyers, accountants, and engineers included. Annual incomes of the bottom 90% of families have risen only 10% in real terms since 1973, while incomes of the top 1% have tripled. Between 2002 - 2007, 2/3 of income growth went to the top 1%, while the top 0.1% gained 1/3 of the growth; median income declined by $2,000 - the first time income has fallen from the beginning to end-points of a cycle. U.S.l median household income fell 3.2% to $53,518 from 2007-2009, and another 6.7% from 2009-'11 to $49,909. The Walton family's assets equal that of America's bottom 150 million people. Political influence wielded by those at the top is rapidly growing. Sheldon Adelson, gaming magnate, has spent $16.5 million supporting New Gingrich and is prepared to spend up to $100 million to reshape American government and boost its support for Israel. This is the first year that corporate, individual, and union funding of Super PACs will lack limitations.
Southwest Airlines is the only American airline in the world's top ten. Over 80% of Intel sales are overseas. In the late 1990s we had a $30 billion/year trade surplus in advanced manufactured goods, now it is a $40 billion deficit. In 2003 IBM had 6,000 employees in India, 135,000 in the U.S.; now 110,000 in India, more than the number in the U.S. G.E., the world's largest manufacturer, has five R&D centers, only one of which is in the U.S. (near Albany, vs. Bangalore, Rio de Janeiro, Shanghai, and Munich).
China's Politiburo Standing Committee has 9 members, 7 of whom are engineers. Gridlock now dominates our politics. Filibusters in the Senate are used to block 70% of legislation in the Senate, up from 8% in the mid-1960s. Last year we nearly defaulted on our debts, our trade and federal deficits continued to grow, and politicians spend about 1/3 their time in fundraising. Yet, many still blindly believe in 'American Exceptionalism' and most adhere to either one or another set of simplistic ideologies.
China's share of citations within international papers will exceed that of the U.S. by 2020. Many of the best U.S. technical universities (eg. Cal Tech, Carnegie Mellon) are setting up campuses in Eastern Asia. Over 70% of U.S. PhDs in physics go to foreign students. Similarly, over half of U.S. patents are granted to foreigners.
Luce doesn't offer much in his comments about American education, other than to point out obvious problems with class discipline, and parental priorities for their children (feeling good, playing football - eg. higher pay for coaches than teachers). He could have also added declining respect for education - eg. 'creationism' vs. evolution, anti-climate change rhetoric, blocking the use of some stem cells for research, and frequent political denigration of those with Ivy League education.
Silicon Valley VC funds raised $200 billion in 2000; the largest since then was $30 billion, and its now down to $20 billion or less - a sum even less than Wall Street bonuses. More and more of VC projects are now 'me-too' endeavors - eg. 'Facebook' clones. America has the 18th most generous R&D tax credit, and even that has to be renewed annually by Congress. Federal research monies (DARPA) let to the Internet.
Intel set up an $8 billion plant in China, and doing so saved $1 billion in land, taxes, and capital costs over the first decade. Employee wages were not the issue. Berlin spends about $1 billion/year on trade fairs, while the U.S. Commerce Department has a $30 million/year budget for such. It takes an average of 15 years to obtain approval for a new drug via the FDA. In 2008 it only inspected 100 of 190,000 foreign food plants and 30 of over 3,000 foreign drug plants - its budgets have been cut since 1994, while 100+ areas of responsibility have been added. The Pentagon has over 2,300 different IT systems, mostly incompatible. Overlapping and duplicated programs - we have 56 programs promoting financial literacy, and 82 for improving teacher quality. Each of the 12 House appropriations subcommittees exist in parallel to its authorizing counterpart.
Limbaugh's audience is about 20 million, exceeding that of CNN, MSNBC, the Washington Post, and NYT combined. Glenn Beck is at about 6 million.
The Federal Register of regulations totals 70,000 pages. Homeland Security is overseen by 22 congressional committees. Less than half of government contracts awarded in 2004 were done via open bidding. The number of federal contract employees and grant recipients has risen to 10.5 million (5X the number of federal employees) from 0 in 1951 when the number of federal employees was capped. About 1,000 presidential appointees require Senate confirmation - in JFK's time this took 10 weeks, 20 weeks for Reagan, and Obama - 10 months. The financial disclosure form's directions runs 12 pages.
Instead of battling China at its every move, we should consider something innovative such as allowing it a 'green light' vs. Taiwan in exchange for pushing North Korea to reunite with South Korea.
We're facing long odds on reversing our decline. Crying 'wolf' too often, consumer pressure for low prices, the high cost of health care (encourages use of part-timers, outsourcing, and automation), and separation of powers all create blockages.
Polarization of American politics started with the backlash against the Civil Rights Act of 1964; the middle-class crisis started at about the same time via technology and globalization. They've now become connected via the Republican Party blocking efforts to improve economic opportunity for the middle-class. Wall Street and Main Street are no longer linked.
Newborn mortality in the U.S. is double that in Scandinavia, Germany, and Japan, our obesity rate is double that of other wealthy nations, we have 5X the prison population ratio of the #2 developed nation (G.B.), about one-fourth of mortgages are underwater, and one in seven are receiving food stamps.
Bottom-Line: Luce's 'Time to Start Thinking' provides an excellent dose of 'the truth.'
