The Scorecard One Year On – Is Anyone Winning? (Newsletter 071)
Greetings fellow travelers.
It's the one-year anniversary of our move from Switzerland to the United States! How does the interim scorecard look?
America 0 – World ?
I'll tell you why I give that score, and then discuss choices we each face going forward. First, recall only last week I described many things to celebrate and cherish. See Looking On the Bright Side. Living in America provides so much to be thankful for, it seems churlish to complain.
But we're not ungrateful. I remember the 1970s bumper sticker aimed at anti-Vietnam War protestors: America, Love it or Leave it. The feeling arises whenever criticism of the United States becomes too vocal. Here's the thing. You can deeply appreciate a place and still point out its flaws, with one critical distinction:
- I observe many detractors not only point out America's faults but say that its sins are irredeemable. These critics say our current system has failed and so must be torn down. This takes matters rather too far in my view.
- The noblest motive in identifying faults is to help fix them. It is an explicit statement that although things are not well, we wish them to get better. The patient only begins to heal upon acknowledgment they're unwell. Read today's newsletter in this spirit.
From the Archives
Because many readers joined in the past year, you might have missed this popular post.
America is Decaying from the Inside Out
Observing America over a longer time period with some distance makes it easier to see trends. Never mind the conditions at this exact moment. The interesting question to ask is whether we're making things better or worse over time.
You can see the decay spreading from the top down. The elites who run unions and hedge funds. University deans, politicians, and bureaucrats. People in positions of power charged with keeping us prosperous, educated, healthy, and safe. Lately they are failing these tasks by wide margins.
When we point out their underperformance, leaders' responses run in two directions. Either they double down on the failed policies (We just need to try harder!), or they deny the problems exist (Crime, what crime? Inflation? That's transitory.). What we don't often see is honest self-reflection or careful evaluation about whether we could do better.
But citizens should not be smug either, for we cannot help but notice the decay spreading from the bottom up. A single trend illustrates the point: the work force participation rate has been steadily dropping for the last 25 years, from the high sixties to the low sixties. If this doesn't sound bad to you, consider that across the total population today more people are not working than working.
The government's main activity is now redistributing income across citizens. How so? Most government spending (about two-thirds) consists of transfer payments to U.S. households. Good news first: thanks to this massive redistribution we've largely eliminated income inequality among the bottom three quintiles, i.e. 60% of households. Now the bad news: it's come at a cost, chiefly a nosedive in labor force participation in low-income households.
Only 36% of working-age households in the bottom 20% are working. This compares with 85% and 92% working in the next two quintiles. Nonetheless, and thanks to transfer payments, the bottom 20% of households now receive more income per capita than both the second quintile and middle quintile households.
For details, see The Myth of American Inequality, by Phil Gramm and John Early. Mr. Gramm is a former chairman of the Senate Banking Committee. Mr. Early served twice as assistant commissioner at the Bureau of Labor Statistics. Here's a quote from their related editorial Income Equality, Not Inequality, Is the Problem:
Given the surge in transfer payments since the war on poverty, it isn’t surprising that the percentage of working-age people in the bottom quintile who actually worked plummeted from 68% in 1967 to 36% in 2017. [T]ransfer payments [give] recipients about as much for not working as they could earn working ...
Government transfer payments have equalized incomes but eroded the work ethic. People are noticing. Who in particular? Those 40% of Americans working full-time but earning less than the 20% subsisting on handouts. This dynamic creates resentment and instability. I fear it cannot last.
External Challengers are Just a Symptom of Our Malaise
How quickly the aggressors pounce! China flexing its muscles, Russia waging war, Iran sponsoring terrorism. These countries' opportunistic moves reflect that America is distracted by internal struggles. While they may be happy to see us divided, they haven't caused our divisions.
Ironically, in the short-term we may welcome the external threats. Why? Common enemies may cause us to temporarily come together. Or they may not.
Only We Can Save Ourselves
We can turn America's score around if we want. But first we have to accept that no one else is coming to do it for us. No one internally and no one externally. It was individual citizens who created the American system with all its benefits. And it will be citizens who either preserve America or preside over its continued decay.
PS – Klugne gets the most controversial topics, but not all. This week's Career Path article lays out a possible rationale for why diversity programs have failed to make substantial progress. That thought experiment is also designed to spur progress.
Would you score America's performance differently? If you were inspired to think today, even it was to disagree, share the opportunity with a like-minded friend by forwarding this mail to them. (And if you are the lucky recipient, you can subscribe to my free weekly newsletter, click here.)