by Bill Clinton
Stagnant wages, relatively lower college graduation rates, and limited job growth have also hurt our international rankings in an area we think of as essential to America’s character: social and economic mobility. According to the latest survey, several countries have surpassed us in this category too. Two recent studies, one by the Organisation for Economic Co-operation and Development (OECD), a group of the world’s wealthiest countries, and the other by two University of California scholars, conclude that slower economic growth and the increased concentration of the benefits of that growth among people who are already wealthy have reduced income and occupational mobility, a fancy term for a young person’s chances of getting a better job with higher pay than his or her parents had. In other words, the chances of living the American Dream are not as good in a society with slow job growth, stagnant wages, and rising inequality.
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Both studies say these trends have been under way for some time, one using the mid-1970s, the other the early 1980s as a starting point. The studies both rank Canada, Sweden, and Norway higher than the United States in terms of job mobility, with the United Kingdom, France, Italy, and Germany (which emphasizes world-class vocational training rather than universal access to college) ranking about the same as us.
In terms of income mobility, both studies agree that the chances of earning more than your parents are greater in Canada, Finland, Sweden, and Norway than in the United States, with the United Kingdom about even with us. The OECD study says there is also more income mobility in Denmark, Australia, Germany, France, and Spain (the study was made before its recent troubles), ranking the United States tenth in an area we are accustomed to believe is a fundamental part of what it means to be an American.
It is heartening that people all over the world want to pursue their own version of the American Dream but troubling that others are doing a better job than we are of providing it to their people.
Both mobility studies conclude that the success of the nations doing better than we are is due to government policies that equalize opportunities and prepare their people to seize them.
Of course, economic mobility also depends on the availability of good jobs. In the twenty-first century, the ability of a nation to create those jobs is determined in part by the quality of its infrastructure and its information technology networks. How are we doing in those areas?
The next two charts give us an idea. The first is the World Economic Forum’s assessment of the overall quality of a nation’s infrastructure, including roads, bridges, railways, airports, ports, water and sewage systems, power systems, and broadband connections. On this, the United States ranks twenty-fourth out of 142 countries measured, behind all our wealthy competitors except the U.K., Australia, and Norway. Americans who have spent hours in traffic jams and at clogged airports won’t be too surprised.
Americans lost $4.8 billion in earnings and 3.9 billion gallons in wasted gas while stranded in traffic last year, according to the Texas Transportation Institute. The American Society of Civil Engineers says travel delays and substandard infrastructure (like potholes) cost Americans almost $130 billion a year. That doesn’t count the economic losses of lower productivity, missed export opportunities at ports and airports, or the household costs and environmental damage created in populous areas of America where people must rely on septic tanks because there are no municipal sewage systems, or heat their homes with home heating oil rather than natural gas or electricity.
Most people also may not know that the United States spends only 1.7 percent of GDP on infrastructure, compared with 4 percent for Canada or 9 percent for China, which is trying to catch up. A big reason for this is our reluctance to raise the gas tax. That’s understandable, because Americans drive a lot and their budgets are tight; buying gasoline consumes more than 10 percent of the income of many lower-income Americans. But millions of Americans pay even more in the cost of time and gas wasted in traffic jams, not to mention the costs of car repairs and lost business opportunities.
Click here to view a larger image. (Illustration credit 5.7)
The second chart ranks nations on the quality of their broadband connections, based on the percentage of households with access, the speed of the connections, and costs. The United States ranks fifteenth out of the thirty nations studied by the Information Technology & Innovation Foundation, behind all our wealthy competitors except Germany. On the speed measure alone, we rank even lower, at twenty-eighth, according to a 2009 survey by Speed Matters. As every American knows, if only the percentage of cell phone calls interrupted by loss of the connection were measured, we’d rank even lower.
What most Americans don’t know is that the average download speed of number-one-ranked South Korea’s broadband connections is four times faster than ours, because the Korean government made rapid, efficient broadband a priority. The stimulus bill provided $7.2 billion to bring high-speed Internet connections to rural areas. It will help, but it will cost more than that to move the United States into the top rank of nations. Does it matter?
It matters a lot, because speed determines the possibilities for using the Internet to create jobs and maximize innovations in telemedicine, education, energy conservation, user-friendly government services, and other areas.
WELL, ENOUGH OF THE BAD NEWS. Let’s look at America’s strengths. America still has by far the world’s largest economy. Our per capita income is still high. According to the World Bank, it ranks sixth among the world’s larger economies, tied with Finland and behind Norway, Switzerland, Denmark, Sweden, and the Netherlands. The CIA’s World Factbook, which measures GDP per capita, ranks the United States higher, behind only Norway and Singapore. So, in spite of our high degree of income inequality, we’re still doing pretty well. On overall competitiveness, the latest World Economic Forum report ranks the United States fifth, highest of any large economy, behind Switzerland, Singapore, Sweden, and Finland, just ahead of Germany, followed by the Netherlands and Denmark.
Thanks in large measure to our openness to immigrants, we’re still a relatively young country. The median age of our already wealthy competitors is higher than ours, so in the future, if we can restore economic growth and slow down the rise in health-care costs, we should have a better ratio of workers to retirees and more opportunities to create more broadly shared prosperity.
America is also still the world’s most entrepreneurial country. It’s easy to start a small business, and for several years small businesses have accounted for a majority of our new job growth. Though other countries are working hard to catch up and surpass us, the United States is still the world’s hotbed of innovation, with active research centers in university, government, and private labs and a vigorous group of venture capitalists to help early survivors grow. We’re still the world’s largest exporter of goods, services, and remittances, though China and Germany have surpassed us in the export of merchandise, and trade is a smaller percentage of our national income than that of several of our competitors.
American workers are highly productive and willing to put in long hours. We have untapped natural assets, especially in natural gas and in clean energy, where we rank first or second in studies measuring nations’ capacity to generate electricity from the sun and wind. And we have people here from all over the world, increasing our chances of selling products and services in fast-growing countries.
There are even large successful countries with a higher debt load than ours, led by Japan, with a national debt of more than 200 percent of its GDP, a rapidly aging population, and higher barriers to immigrants entering its workforce. The Japanese have weathered a long dry spell following their real-estate collapse in the 1990s because they have a personal savings rate of more than 20 percent of disposable income and a national passion to cut costs through greater efficiency in energy use and other areas.
The troubling thing about all these rankings and several others I haven’t bothered you with is not what they sa
y about where we are but what they reveal about where we’re going. We simply are not doing what we have to do to stay ahead of the competition for good jobs, new businesses, and breakthrough innovations. Lots of other countries are hot on our heels with rising incomes, declining inequality, increased educational attainment, and big investments in the key drivers of today’s and tomorrow’s economy.
Oh, I almost forgot one critical comparison, perhaps the most important one, given our raging debate over the role of government and whether taxes are always bad. If the antigovernment activists are right, the countries catching up to or surpassing the United States in all the areas discussed in this chapter must have done it by cutting taxes, spending, and regulations—there’s no other way. So here’s the last chart, I promise. The numbers are the percentage of national income paid in taxes by different nations, including, for the United States, federal, state, and local taxes. Of the thirty-three nations in the OECD, we rank thirty-first in the percentage of GDP directed to taxes, with only Mexico and Chile taking a smaller percentage, and we’re twenty-fifth in the percentage of GDP devoted to government spending.
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There are only three ways to view this. First, the obvious conclusion: low levels of taxation and weak government investments don’t necessarily bring prosperity, equal opportunity, and growth and, if too low, can prevent a nation from reaching its full potential in employment, rising incomes, and social mobility. Second, the “I don’t care, I still don’t like it” conclusion: even if it would be good for the country and our children’s future, we just don’t want the government to make these investments, especially with our money. Third, the ideological conclusion: all taxes are bad, all programs are a waste of money, and all regulations distort the perfect working of the free market. Therefore all charts in this chapter are wrong! Or, as my daughter and her friends used to say when they were younger, “Denial is not just a river in Egypt.”
If there are any militant antitax folks still reading this book, I can hear the counterattack forming in your minds: “Clinton wants European-style social democracy! He wants to tax us to death! He’s for too much government! He doesn’t believe in American exceptionalism! He doesn’t even love America anymore, or he wouldn’t be telling us all this bad stuff!”
That’s all nonsense. When I was governor of Arkansas, I raised taxes to fund education but supported tax cuts as incentives to get new jobs, eliminated the state income tax on 25 percent of our taxpayers (the bottom 25 percent), and kept our overall tax burden the second lowest in the country, just where it was when I took office. In the 1980s, Arkansas was one of the few states to gain manufacturing jobs and led our region in overall employment growth. By 1992, as I was running for president, Arkansas ranked first or second nationally in job growth all year long. When I left office as president, America’s overall tax burden was less than 20 percent of GDP, about our post–World War II average, and our federal spending was a little above 18 percent of GDP, both well below most other wealthy nations.
I do believe in American exceptionalism. My life has been graced by it. I just want it to be more than a hot-button campaign slogan. That’s why I want us to face facts, warts and all, and work together to give future generations the America they deserve.
Right now, in this fragile economy, I don’t favor raising taxes or reducing any government spending that can create or save jobs. But as the economy recovers, I want America to embrace a balanced approach that creates jobs, raises incomes across the board, and deals with our long-term investment and debt challenges.
The most important lesson you can take from this chapter is that in the twenty-first century, the American Dream requires progress we won’t achieve without effective government policies, including direct investments, incentives to speed business and job growth, and public-private partnerships to create an environment where these things can happen. Like it or not, there are a lot of things we have to do together. What are they, and what role should government play?
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1 China has now surpassed Germany in the production, though not in the deployment, of solar cells.
2 This is not an oxymoron. Though they profess a hatred of government, they spend lots of time and money to get control of it. In 2011, fourteen states in which Republicans held governorships and legislative majorities imposed new restrictions on voting rights, including photo ID requirements, restrictions on voter-registration drives, the elimination of election-day registration, and fewer days of early voting. According to the Brennan Center for Justice at New York University these new laws and executive orders could “make it especially harder for more than five million eligible voters to cast ballots in 2012,” most of them young, minority, disabled, low income, and elderly. My favorite is Texas’ new law that accepts as proof of identity a concealed-weapons permit, but not a University of Texas student’s college ID card.
3 Dana Milbank, “How Rep. Austin Scott Betrayed His Tea Party Roots,” Washington Post, August 9, 2011.
4 See http://www.all4ed.org/files/Facts_For_Education_Adv_Jan2009.pdf.
5 One of the most interesting findings of the international student assessments is how well Finland is doing. Though it’s a small country, its students are a diverse lot. Forty-five languages are spoken in Helsinki schools. In the 1990s, Finland’s schools weren’t doing well. Instead of adopting a national testing program, Finland focused on defining excellence in teaching and learning. Every teacher has a master’s degree. Only one in ten applicants gets a teaching job. It’s the most respected, though not the highest-paid, profession. Though they don’t give any domestic tests, students do well on international tests. Only 4 percent of the schools are underperforming, and the country is rated among the very best in innovation and creativity, important twenty-first-century skills. In the United States, the approach most like Finland’s is that embraced by the KIPP charter schools. They have also defined excellence in teaching and learning. Based on their test scores and the fact that their poor minority students succeed in college at a higher rate than white students, it works here too.
PART II
What We Can Do
CHAPTER 6
How Do We Get Back
in the Future Business?
FIRST, WE NEED TO GET OUR game face on. Critics have been betting on America’s demise for more than two hundred years now. They derided George Washington’s military acumen, describing him as little more than a mediocre land surveyor. As Lincoln was about to become president, an Illinois newspaper editorial called him a “baboon” who would destroy the country. Nikita Khrushchev said the Soviet Union would bury us. In the 1980s, the Japanese were going to out-produce and out-trade us into oblivion. I could go on and on. You get the picture. No one can take the future away from us. But we can take it away from ourselves.
Not long before the United States entered World War II, Winston Churchill famously said that America always does the right thing, “after exhausting all other alternatives.” We can’t afford to waste any more time exhausting dead-end alternatives. It’s time to do the right thing. The right thing is to put America back in the future business.
As you saw from the previous chapter comparing America’s current standing in many areas with those of our competitors, the most successful countries have both vigorous market economies and active, effective governments working together to achieve common goals.
There is simply no evidence that we can succeed in the twenty-first century with an antigovernment strategy. To get more economic growth that is more broadly shared, we’ll have to pursue the strategy that works.
It shouldn’t be all that hard. After all, America developed it in the first place. From Theodore Roosevelt through FDR, government helped us shave the rough edges off the Industrial Revolution, stabilize the financial system, sustain older Americans, build great infrastructure, bring electricity and telephone service to rural America, mobilize to defeat th
e Depression, and win World War II. And the economy kept growing. After World War II, until 1981, government policies helped us build the world’s greatest middle class; reduce discrimination based on race, gender, and sexual orientation; lower poverty rates; open wide the doors of college; increase access to health care; and clean up our environment in a way that promoted, not undermined, economic growth. Through it all, the economy got stronger, and the competitive market created more wealth, more jobs, and rising incomes that lifted the middle class and reduced poverty.
Then we began to organize our politics around the idea that government is the problem, except for the eight years I served and President Obama’s first two years. In 1994 and 2010, the voters—including those who stayed home—gave Congress to a more radical, not conservative, brand of antigovernment activists. I was convinced then and remain convinced today that most Americans didn’t intend to take such a drastic turn in either election. They just thought they were getting too much government from the Democrats and wanted more balance. That became clear during my yearlong budget fight with Newt Gingrich and the Republicans throughout 1995. After the American people sided with my position, things settled down, and we began to work together.
How it develops this time remains to be seen. President Obama has a tough hand to play. Since the Democrats failed to raise the debt ceiling when they had the chance, in November and December 2010, his decision not to fight the Tea Party Congress and risk defeat in trying to get a bigger debt reduction deal with both spending cuts and tax hikes is understandable, though the agreement to raise the debt ceiling doesn’t create more jobs now or do much to solve the long-term debt problem. In early September 2011, the president outlined specific plans to create more jobs, including many ideas previously advocated by both Republicans and Democrats, and to reduce the debt by $3 trillion when the economy begins to grow again.
