What's Wrong With America?

Reflecting on the recent shutdown/debt ceiling debacle, the resolution of which is only a few months' respite until the same self-imposed deadlines reappear, you've got to wonder: what's wrong with America?

Certainly this is the question I'm hearing from friends and other observers from abroad. Economic authorities, like the IMF or Asian bankers with large US holdings are understandingly expressing alarm. According to a British critic, "the rottenness of modern Washington makes outsiders gasp. The pomposity of its architecture can no longer dignify the log-rolling, the gerrymandering, the lobbyists' egregious power, the money sloshing everywhere and the partisan polarization that drips from every news program." The Chinese news agency, somewhat oddly when you consider the value of their dollar holdings, argued for a "de-Americanized world" that would include a "new international reserve currency that is to be created to replace the dominant U.S. dollar."

It's particularly hard for foreigners with whom I've interacted in recent months to grasp the idea that Obamacare is somehow implicated in this latest round of dysfunction. They view our health reform much as I do, as I wrote a few weeks ago: a technical solution to a hybrid public/private good problem, about as interesting and subversive as a utility company. How could this set of arcane changes to our health care delivery system possibly lead politicians to willingly default on our debt?

I suspect the answer to the question of what's gone wrong has many answers. My readers know mine: it's the result of the toxic, and uniquely American, cocktail of concentrated wealth and money in politics. That combination blocks the policy set that would begin to address the challenges we face and promotes the ones you see around you: constant fiscal squabbles powered by rhetorical obsession with public debts and deficits that has a) nothing to do with our actual fiscal challenges (ones that Obamacare-type changes may actually behelping us to meet) and b) is "rhetorical" in the sense that it's not about real solutions as about reducing taxes and shrinking government.

Listening to the punditry over the last few days, the answer I hear most often is that we as a nation and an electorate are deeply polarized. There's solid evidence for that but allow me to assert, without counter-evidence, that this explanation seems thin to me. I wonder if this is just another symptom of my primary explanation. I wonder how deep this divisiveness really goes. I wonder if it could be relatively quickly changed by leaders and movements speaking truth to economic and political power.

The U.S. economy has left large swaths of people behind. History shows that such periods are ripe for demagogues, and here again, deep pockets buy not only the policy set that protects them, but the "think tanks," research results, and media presence that foments the polarization that insulates them further.

Meanwhile, the alleged political representatives of the rest of us do not offer much of a counter-narrative. At the highest levels of political and policy power, the inequality, immobility, wage stagnation, sticky poverty rates, persistently slack labor markets are written off to the benign forces of technology and globalization. Other than some redistribution, even progressive leaders don't really know what to do to address these trends.

If you think that all sounds too pat, ask yourself: why, after the debacle we've just been through, the policy debate did not move at all toward that critical list of economic issues noted just above, but instead to... deficits and debt?

What would happen if a political leader were to organize solely around these economic issues, without folding in the usual stuff about balancing the budget (OWS never got there)? Not to ignore that it is absolutely essential to get on a sustainable budget path but to put that all-encompassing debate into its proper perspective. It's the tail, not the dog.

Imagine a platform based not on deficit reduction but on the realization that lots more people need jobs that pay living wages, which means higher minimum wages, work supports, manufacturing/trade policy, full employment fiscal and monetary policy, direct job creation, and work sharing. BTW, that's not an expensive agenda (the only new cost would be direct job creation, and I've got a pretty cheap model in mind; good fiscal policy is a cyclical cost -- not saying it pays for itself, but in terms of lost output, it's expensive not to do it).

OK, enough blue-skying on a beautiful blue-sky, autumn day. All I'm saying is: I can easily see why the world is deeply nervous about where America is and where we're headed. But I'm not convinced our electorate is so polarized that we can't change course. We've just got to give people a better choice.

This post originally appeared at Jared Bernstein's On The Economy blog.

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