Written by: Eugene Steuerle
America may not be in full decline, but our government has surely scheduled it.
A recent New York Times article highlighted China’s growing view of the United States as a nation in decline. A Chinese report titled “Thank Trump” emphasized the impact of “tariffs, attacks on allies, anti-immigration policies and assaults on the American political establishment.” Certainly, few nations in the world now believe they can trust us or our word.
Still, there are many reasons to ignore the self-serving side of this Chinese propaganda. We’re still extraordinarily productive. As a recent Wall Street Journal article demonstrated, the U.S. has maintained its share of world GDP in the 21st century even as its share of the world population has declined. And I still believe in the basic goodness of our people. Whatever the cost to our nation of Trump’s autocratic fumblings, I would rely even less on China’s extraordinary autocracy as a path to some cherished future.
A major problem is that the decline didn’t begin and, without major reform, won’t end with Trump. About fourteen years ago, well before any Trump presidency, I testified before the Senate Finance Committee on what I called a Budget for a Declining Nation. Why the budget? It is through those spending, tax, and tax subsidy policies that the government performs most of its functions. Even much of its regulatory efforts derive from the rules adopted to implement those budgetary choices.
Forget political posturing and rhetoric. Budget choices reveal the nation’s preferences. By their fruits, not their outward clothing, shall you know them. Today’s federal budgets reflect even more than those in 2012 many of the same dominant choices. Social Security, health care, and federal debt continue their upward spirals, setting aside all other spending priorities except for temporarily addressing some crises that we pay for through ever more debt. Under President Trump’s recent budget proposals, more than 100 percent of real revenue growth would go to pay for the rising costs of Social Security, Medicare, and interest on the debt. Along with other health programs, those have been the nation’s ever-increasing spending priorities for decades. Of course, rising debt can temporarily pay for some other items, such as an increase in defense spending, but that only adds to interest costs down the road and further squeezes everything else.
Just as Social Security and healthcare have dominated the growth in (non-interest) ending policy for decades, the corresponding dramatic shift in tax policy has been to cut tax rates on capital income, roughly speaking, in half—through cuts in individual income tax rates, corporate tax rates, estate taxes, and taxes on dividends, and through Congressional unwillingness to attack new forms of sheltering, such as the conversion of largely taxable dividend payouts to largely untaxable stock buybacks.
In my 2012 testimony, long before the largely election-generated attention to the plight of the working class, I outlined how our budget had increasingly abandoned programs that promote upward mobility—well, at least for most people. The tax code does contain several programs that promote upward mobility, but not for those most in need of a helpful boost for their saving, work, and learning—for those, not increased consumption, are the measures of upward mobility. Many of the largest mobility-related tax subsidies are skewed toward those in higher income tax brackets—that is, those with upper-middle- or higher-income who have generally done OK in recent years.
In a sense, the nation does favor upward mobility…for the wealthy. Spending and tax policy together have long neglected programs that would promote opportunity for most of the population.
Those who read this column will know that I lay out much of this in my latest book, Abandoned: How Republicans and Democrats Have Deserted the Working Class, the Young, and the American Dream.
However, you don’t need to read that book or agree with anything I’ve said so far to confront the obvious long-term question of what, for the future, would be the most effective ways to promote the nation’s success? Or at least to define success. How would you establish new long-term priorities? Our existing multi-decade priorities for the same types of spending certainly cannot continue, if for no other reason than that those programs schedule cost growth to rise faster than GDP essentially forever. On the tax side, the current priorities lead us to become ever more dependent on the wealthy to finance capital formation and our consumption. Do you find those formulas for future success, or do you want something more?
Relying on binary thinking—that a better world depends on the success of one political party—isn’t much of an answer. Believe that, and you will have been asleep longer than Rip Van Winkle.
Our nation’s decline is hardly inevitable. Our current problems pale in comparison to those of our ancestors at the time of Bunker Hill, Gettysburg, Pearl Harbor, the Great Depression, Jim Crow, or Watergate. The big difference right now: we have a budget that literally schedules decline, and we refuse to admit, much less tackle, that problem.
Sometimes we flatter ourselves that these budgetary bad habits remain external to us. Yet, by slow civic osmosis, they cross the membrane between what we can do and what we can’t do, between actions and words we used to condemn and now tolerate, and eventually between what we tolerate and what we practice.
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