Ross Douthat: How To Stop the Decline

To stop the fall, the Obama-era tilt toward government intervention needs to be balanced by a new growth-oriented agenda, thinks Ross Douthat; here's his op-ed from today's NY Times:

Here in the United States, we spent New Year’s weekend bidding good riddance to the awful, awful aughties — a miserable decade of bubbles and busts, rising health care bills and soaring deficits, domestic terror attacks and overseas quagmires.

Elsewhere, though, the decade’s turn was probably flavored by nostalgia. For much of the world, the last 10 years was a period to savor — an era of impressive economic growth, ever-higher life expectancy, relative peace and steady progress against poverty.

A billion-odd Chinese had a pretty good decade, and so did a billion Indians: their economies just about doubled in size, minting new millionaires and lifting countless peasants into a growing middle class. Brazil boomed, Indonesia prospered, and even Africa enjoyed a season of substantial growth. Nobody would mistake Vladimir Putin’s Russia for a liberal democratic paradise, but most Russians seem to prefer its stability to the basket-case republic Putin inherited from Boris Yeltsin.

Seen in this light, America’s lost decade looks less like a big zero and more like an inevitable corrective to the high-flying 1990s. The enormous Clinton-era gulf between the United States and its competitors was bound to narrow eventually. For now, at least, our decline is only relative — from hyperpower back to superpower, from the only nation that mattered to the one that matters most.

But as the 2010s begin, there’s reason to worry that America has further to fall. Our politics are polarized, our finances are still overleveraged, and our society is increasingly segregated — by income, education and family structure — between a thriving elite and a struggling working class. Worse, neither political party seems capable of forging a new policy synthesis to reckon with our domestic challenges.

In the unhappy aughts, we witnessed the exhaustion of Reaganomics. A quarter-century after Ronald Reagan’s mix of tax cuts and deregulation revived American competitiveness, George W. Bush’s attempt to imitate the Gipper produced only wage stagnation and skyrocketing debt.

This failure helped cost Republicans their majority. But instead of seeking a new post-Reagan consensus, the Obama Democrats are returning to their party’s long-running pursuit of European-style social democracy — by micromanaging industry, pouring money into entitlement and welfare programs, and binding the economy in a web of new taxes and regulations.

These policies may help smooth over the inequalities that have opened in our national life since the 1970s. But they threaten to cost America its position in the world along the way.

Social democracy has its benefits, but global competitiveness isn’t one of them. As Jim Manzi points out, in an essay on Keeping America’s Edge in the latest issue of National Affairs, from 1980 through today, America’s share of global output has been constant at about 21 percent. Europe’s share, meanwhile, has been collapsing in the face of global competition — going from a little less than 40 percent of global production in the 1970s to about 25 percent today.

If we hope to avoid a similar plunge, the Obama-era tilt toward government intervention needs to be balanced, and soon, by a new growth-oriented agenda. This will require more than the rote invocations of Reaganism that too many Republican politicians have fallen back on, however. The age of sweeping tax cuts financed by deficit spending is over. The policies of the 1980s will not keep America competitive in the 2010s. Our challenges are new, and we must think and act anew.

Manzi’s National Affairs essay, a tour d’horizon of our socioeconomic situation, provides a solid place to start. He proposes a fourfold agenda:

• unwind the partnerships forged between Big Business and Big Government in the wake of the 2008 crash;
  
• seek financial regulations that contain busts, by segregating high-risk transactions from lower-risk enterprises;
  
• deregulate the public school system, to let a thousand charter schools and start-ups bloom;
• shift our immigration policy away from low-skilled immigration, and toward the recruitment of high-skilled émigrés from around the globe.

To this list, I would add tax reform and entitlement reform. The former should broaden the tax base while cutting taxes on work, childrearing and investment. The latter should means-test both Social Security and Medicare, reducing both programs’ spending on well-off retirees rather than questing fruitlessly for their privatization.

This is a right-of-center agenda, broadly speaking, but it’s also one that you could imagine attracting bipartisan support, even in the current polarized environment.

Which is as it should be — since in the quest to make the 2010s a far, far better era than the grueling decade America has just escaped, we’re all in this together.

Ross Douthat joined The New York Times as an Op-Ed columnist in April 2009. Previously, he was a senior editor at The Atlantic and a blogger for theatlantic.com. He is the author of Privilege: Harvard and the Education of the Ruling Class (Hyperion, 2005) and the co-author, with Reihan Salam, of Grand New Party: How Republicans Can Win the Working Class and Save the American Dream (Doubleday, 2008).

(Zoon Politikon)