WILLIAM GALSTON JANUARY 6, 2010
I sit in one of the dives
On Fifty-second Street
Uncertain and afraid
As the clever hopes expire
Of a low dishonest decade
--W. H. Auden, “September 1, 1939”
It’s official: For the United States, the Naughts were a lost decade--zero job creation, declining household net worth, and the slowest GDP growth (by far) since the 1930s. And yet, Americans remain remarkably optimistic. In a just-released Gallup poll, 63 percent think the next 20 years will be good ones for the country—down from higher levels in 1990 and 2000, to be sure, but noticeably higher than the 51 percent recorded in 1980.
The question is whether our politics can redeem these hopes. We have survived, barely, a decade of evasion. What we need now is a decade of truth: politicians with the courage to utter it, and citizens with the fortitude to accept it. Let me offer a couple of suggestions.
During the next decade, we must save more, invest more, produce more, and export more. That sounds anodyne, but it isn’t, because it implies that personal consumption will have to grow more slowly than the GDP. And because personal consumption includes health care, which will continue to grow faster than GDP, other areas of consumption, such as home furnishing and restaurant-going, may have to flatten or even decline—an abrupt shift from 1995-2007, when consumption soared in nearly every category.
During the next decade, we better not borrow a trillion dollars a year, year after year, much of it from the rest of the world. I say “better not,” because at some point foreign lenders will come to doubt our long-term solvency and demand a higher risk premium, with devastating effects on U.S. interest rates and economic growth. There’s no way we can regain our balance with restraint in discretionary spending alone; everything will have to be on the table.
In our polarized political circumstances, what congressional experts call “regular order” offers negligible prospects for progress on this front. Many elected officials have concluded that an empowered fiscal commission along the lines of the one proposed by Kent Conrad and Judd Gregg is the only strategy with any hope of succeeding. (Their bill already has 35 cosponsors, well-balanced between the political parties; the parallel House bill has more than one hundred.
This sets up an early test for President Obama. If he endorses an empowered commission as part of a substantial increase in the debt ceiling (or in his FY2011 budget), he will signal his commitment to fiscal truth. If he constitutes a toothless advisory commission through executive order, he will signal just the opposite—and fool no one.
Serious analysts ponder the possibility of a Japan-style decade of stagnation; others fear an irreversible power-shift to China. But national decline, if it comes, will be our choice, not our fate. The next decade will test our capacity to govern ourselves, to exercise some much needed restraint in the face of dire economic circumstances. As George Bernard Shaw once remarked, “Democracy is a device that insures we shall be governed no better than we deserve.”