The Post-American Economy

During the four years that marked President Barack Obama’s first term in office, the real median income of American households dropped by $2,627 and the number of people in poverty increased by approximately 6,667,000, according to data released Tuesday by the Census Bureau.

In 2008, the year Obama was elected, real median household income in the United States was $53,644 according to the Census Bureau. In 2012, the last full year of Obama’s first term, median household income was $51,017. Thus, real median household income dropped $2,627—or 4.89 percent—from 2008 to 2012.

If economic growth is the standard, this is all bad news. If the growth of government welfare and entitlement programs is the standard, then this is irrelevant news, so long as the government is growing (and it is).

If economic growth were the standard, Obama would never have been reelected President. He was reelected, however, fairly easily. His party was also returned to the U.S. Senate.

This suggests that to a majority of Americans, economic growth is no longer as important as government programs. This bodes well for a return of full control to Democrats in Congress next year, and election of another leftist Democratic President in 2016. No, these outcomes are not inevitable, but they are likely, if current trends prevail.

The real question here is: Will America become a genuinely two-party country, or will the two parties merge into variations of support for the transfer-of-wealth state?

Keep in mind that more and more Americans who are aging depend on Social Security and Medicare. All the politicians running for office need do is claim that their opponents seek to cut these programs.

The Democratic Party already has a lock on a predictable majority of the nonwhite population. But with the graying of the population, more segments of the electorate will be dependent on the government for Social Security and Medicare than ever before.

Because most people who obtain Medicare and Social Security benefits feel they’re entitled to them since they paid for them (in payroll taxes during years of employment), they’re going to be very protective of them. This all plays to the benefit of the Democratic Party.

Medicare and Social Security are unsustainable programs, as they presently stand. One reason for this is that too few young people will exist to pay for the exponential growth and demand for these programs. This would be true even if the economy were booming and growing, which it most definitely is not. This would be true even if the federal government had not borrowed and created a debt larger than any in human history, to date.

We’re about to encounter a collision in our culture, not only fiscally, but also socially. As more and more people feel entitled to programs for the aged, there will be more resentment among the young and middle-aged for having to pay for these programs. I can see the headlines now: ‘Tax Hikes Proposed to salvage Social Security and Medicare.’ Class warfare could morph into generational warfare. It’s not a pretty picture.

Up to now, what has kept Medicare and Social Security going are the periods of economic productivity and growth enjoyed in the United States since those programs were passed. We had periods of growth in the 1950s, the 1960s, the 1980s and part of the 1990s. Since then, little or nothing in terms of growth—and nothing on the horizon, especially with the Democrats in control of the agenda and most of the government. The private economy now produces fewer jobs than the federal government, based on figures released over the summer. Higher taxes and more spending and borrowing, more inflation of the currency, for as far as the eye can see, await us all, on our present course.

The Republicans can move in one of two directions. First option: Become a principled party in favor of individual rights, including the right to private property. This would lead to proposals for massive tax cuts and even more massive cuts in government spending—cuts in the trillions. Nobody will debate the need to keep Medicare and Social Security going for the current generation, but the next generations will have to invest and find their own away, hopefully in a rejuvenated private economy. To do all this, Republicans have to downplay or let go of their determination to fight ‘culture wars’ and obsess on issues such as abortion and homosexuality.

In short, Republicans—to survive and offer anything of relevance—will have to become a completely brand new party.

The other option for Republicans is to go along to get along, and compete with Democrats for a different type of welfare-entitlement state. They can drop the pretense that they really differ all that much from Democrats on economic and government programs, and keep their fixation on abortion and gay marriage as a way to distinguish themselves.

Either way, Republicans will likely become a more or less permanent minority. If they go the first (and principled) route, they can at least be a minority that matters. They could stand on principle and offer a completely different set of policies from the Democrats. When and if people finally become convinced to try another way, especially after more years of Obama-like policies, a real alternative would exist.

If Republicans stay on their present course, they’ll simply become irrelevant cranks screeching about abortion and gay marriage, with little else to offer a culture that has mostly moved away from their positions on those subjects.

If it’s ‘no longer the economy, stupid,’ then the future of America is truly unpredictable. If politicians are no longer judged by their ability to ensure that the economy grows and produces, and instead are judged by their willingness to make sure the government grows and redistributes, then we’re entering a completely new (and not happy) chapter in American and world history.

The American economy was always one where growth and innovation were the to-be-expected, or the norm. Given the assumptions most people now appear to hold about government and the economy, the post-American economy will be nothing like the old one.

The good news is that a future filled with growth and innovation is always possible. Unlike centuries ago, we now know the answer. Unfettered capitalism works, and it’s the only moral social system ever devised, because it protects the right of the individual above the clunky or cruel mechanisms of the state. We may turn our heads away from this discovery, for a time–and pay dearly for it–but the truth will go on being the truth, either way.


[Source for economic figures: Census Bureau’s report ‘Income, Poverty and Health Insurance Coverage in the United States: 2012″]

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