AMERICA, FRACTURED

Where We’re Headed and How to Change Course

Let’s take a look at a quick snapshot of the American economy.

Divided. Factional. Fractured.

You might have heard it’s the 99% vs. the 1% or the 53% against the 47%, “the makers and the takers”, the haves and have nots, class warfare. However we view it, somehow we just know it’s definitely divided. Income inequality is of concern and there exists a fawning opportunity gap across the nation, with many people and places locked out of any sort of recovery or renewal.

The numbers bear this out. While overall unemployment is low, it is much higher for African-Americans, Hispanic-Americans, and millennials. Unemployment is down, but underemployment remains high, and many Americans that were employed full-time a few years ago are struggling to get by on two or three jobs now. For many, we try to get ahead, but it seems we’re stuck running in place. We feel like we have lost some value to society, and, to be sure, we are.

The common vocabulary now is to divide Americans by those who are more privileged and those who are not as privileged.

First, the more privileged Americans:

The Americans most valuable to the economy have what is called social capital — the cumulative resources of knowledge, networks, and experience that makes them more valuable as employees and contacts. They have had access to the best education, can afford to attend college, own homes, save for retirement, obtain health insurance, and maintain well-paying jobs with guaranteed benefits for themselves and their families. Their children are privileged too, for now, and they are currently the leading consumers and producers, the demand-side and the supply-side, of the economy. They are the middle-income and upper-income earners of America, net taxpayers, and the least likely group to rely on any government benefits until retirement. Most are white and most white people are among this group — white privilege is no misnomer.

The other Americans have inherent value but they’re struggling. They lack the resources that comprise social capital, live in unsafe, often violent, homes and communities. They have attended worse schools and lack for opportunities at gainful employment. They’re more likely to rent a home than own one, and they spend more on bills than they do on new products so they’re not the consumers driving the economy. They’re not net taxpayers, and they’re most likely to rely on government benefits. Let me be clear, most are less privileged through no fault of their own. Society has failed them. It is a diverse and broad group but heavily tilts against minorities and immigrant families.

What is happening in America now is that the latter group is growing while the former is shrinking. The population has increased but at the same time many of those currently or recently in the more privileged class are beginning to lose their access to social capital as the cost of healthcare, education, and housing increases and the number of jobs for the college-educated decreases. Scarcity in the job market has lead to more college-educated workers taking jobs in middle-management and even bottom levels, decreasing the value of a college degree overall.

This is typically the time that an emerging generation breaks away from relying on social networks from their past and uses their social capital to get ahead. That is happening but on a much smaller scale than usual, a new normal in which adults in their late twenties and early thirties are refraining from starting families or owning homes of their own. Many will be forced to rely on government-subsidized health insurance after turning 26 and are more than likely unable to pay back the exorbitant loans they had to take out to attend college in the first place. Sending a child to college, even taking on enormous debt, was considered a responsibility for middle-class families but as tuition rose, so did the number of students needing loans, and before the country now is an unsustainable bubble in student loan debt that hinders economic progress.

So as more Americans find themselves priced out of the experiences that used to accompany middle-class jobs, they fall in line with much of the less privileged crowd. If they’re not making enough to pay back loans, there’s hardly a chance that they’ll become net taxpayers or find jobs with guaranteed protections. Relying on the government for health insurance will surely evolve into dependency on a nightmarish bureaucracy, but for many, that is preferable to relying on a broken market system. They’ll want for better schools for their children but will be priced out of the best charter schools and experience many of the drawbacks plaguing the most impoverished communities in America. A vicious cycle will take hold as generation after generation is forced to take low-wage jobs, live in substandard housing with more people, move more often, and forgo higher education. They will begin to run into the harmful “cliffs” whereby earning more money or getting married diminishes a welfare payment or pushes them into a less affordable tax bracket. For those complaining about privilege now, just wait, the road we’re on guarantees that those having grown up privileged will experience many similar hardships soon enough. They’ll still be privileged in the sense that they will face less discrimination, lower incarceration rates, higher home ownership rates, but not to the degree they enjoy now, and only further diminishing.

Renting will be the norm. Used car loans will be replaced by one-to-three-year used car rentals if only to shield consumers from predatory lenders. Bicycles will be a growing market — homeowners buy cars, renters buy bikes. Anti-theft devices will become a must-have accessory for those who do buy cars — homeowners park their cars in safer places than renters. Household products will be marketed to individuals instead of households. The pool-building business should take a hit, as should home improvements. And realtors might have to rely on “rent with option” deals in order to fill the many vacancies left by foreclosures and landlords that would rather offload a devalued property.

Meanwhile, a shrinking group of Americans will find themselves truly privileged to own homes, but education will be a longer-term prospect and careers will come with shorter retirements. They will no longer drive consumption but will be the producers, suppliers of goods and services. Before too long, give or take 20 years, this distinction will be reserved for the truly wealthy — the 25% of Americans that have obtained a graduate and/or professional degree, own their own business, or have retired to one of their homes.

It’s easy to see how the politics will favor the Democrats and socialists that will identify the smaller group as an exploitable source of revenue while offering an untold number of government guarantees to the rest. I don’t know how that will exactly play out but I know there’s many, many wealthy patrons that would happily finance politicians promising to rob Peter to pay Paul, even if they’re the Peter. The Bernie Sanders Democrats will surely gain prominence as the great guarantors of government benefits while the Republicans, as they are construed now, will be the party of the privileged class that all but forgot that America was supposed to be a nation of equal opportunity for all. Perhaps millionaire donors will help stack the deck against populist revolt, but that could only hold for so long.

It’s sad, really, to see demagogues and ideologues playing to the baser instincts of anxious Americans. Accosting free trade and automation will do nothing to revitalize the working class. Teachers unions, while noble in intent, are largely to blame for the practices that have rendered the nation’s schools failures at best and their opposition to public charter schools might be rooted in some valid concerns but it rings hollow as proven charter schools are unlocking the doorways to the American Dream for communities suffering from cycle after cycle of debilitating poverty. Affordable healthcare is anything but affordable, and affordable housing was the lie on which government-sponsored enterprise helped collapse the entire housing market. Energy policies designed to crush coal production and subsidize costly fantasies to combat climate change only raise costs for consumers and households. And immigration — restricting it is by no means a cure to high unemployment and increasing it has only added pressure to government services in trying to get entire generations assimilated quickly with predictable, disappointing results.

The biggest flaw in our political system is that it forces well-meaning people to choose a side and embrace every flawed idea they have even when a far more effective alternative might exist. The millennials think highly of socialism, for example, while the counterrevolutionary conservatives place our trust in markets, but, we are told, markets have little faith in us.

After all, all of the increasing division is driven by purely personal, economic concerns. But aside from some predatory lenders and managers, the middle and upper class workers today only want what is best for them and their families, not to deny it to anyone else. So what if they’re privileged, most would describe a life far from any notion of it, and the children of baby boomers have every right to give their children the very best chances in life. The safest housing, the best education, health insurance, yes, these are the privileges afforded by life in the middle and upper-middle class but they don’t have to be reserved for an entrenched few.

The only way to reverse this disastrous division is to bring these privileges to those struggling today and those who would otherwise join them in struggling tomorrow.

Everyone is valuable.

First and foremost, the barriers to the middle class need to come crashing down.

Within the vast expanse of impoverished and struggling communities are millions of hairdressers, welders, mechanics, teachers, artists, brewers, and even professionals. The dreamers of today can be the inventors of tomorrow, the visionaries America needs. But licensing requirements, capital formation, and extreme regulation are stifling their talents. Higher education is seen as the privilege of someone born better off, rather than an attainable goal for a child looking for a way out. It doesn’t have to be this way. States and municipalities could open up licensing, or do away with it entirely for non-hazardous occupations, and connect millions of job seekers with entrepreneurs willing to let them have a chance. Taking the vast amount spent on education and applying it to vocational training and apprenticeships would further enrich entire generations of skilled workers, building local economies from the bottom-up. Teaching one generation of professionals the skills they need to be successful starts a new cycle — so that some would start a business of their own, teach the next generation what they have learned, and replace the knowledge of street life with valuable social capital for a chance to make it into the middle class and beyond.

Tax policy should reflect this changing economic landscape. Instead of a focus on supply-side incentives, tax reform should work to strengthen the demand-side as well, with relief for families including increased earned-income-tax credits, childcare credits, a $2,500 child tax credit, a $2,000 to $8,000 tax credit for personal health savings accounts, and the elimination of mortgage deductions on second homes. Tax credits for wind and solar production and usage, tax breaks for luxury cars, and other examples of harmful waste, fraud, and abuse need to be eliminated to pay for increased tax relief. A tax structure to incentivize the development and growth of the private sector must balance with incentives for the development and growth of private life, for individuals and families.

The sons and daughters working now could become the independent contractors of tomorrow. The smartphone in our pocket grants access to an untold number of goods and services that can be provided by anyone with a car, a place to stay, or a skill. I always go back the example of Handy, a relatively newer app that connects repairmen and women to people who require their experience. Before Handy, the process involved calling the manufacturer or retailer, scheduling an appointment, waiting for the repair person, paying them a set fee, and hoping they won’t have to come back again next week. With Handy, the process is as simple as requesting a repair and paying a fee on a sliding basis, based on what the repair costs for someone similarly situated. No more middle man, no more retailer fees, just fast, dependable service rated by the customer in real-time. And, no, it’s no panacea. One might ask what happens to the salary and benefits that a Sears technician is guaranteed that a competitor using Handy is not. Similarly, what happens to the benefits a taxi driver might receive that an Uber driver does not? Disruption is never a cure-all but consumers drive the market, not these other concerns. The sharing economy is rapidly advancing right now and retarding this progress leads only to regression. Ideally, the next step for a country of self-employed contractors is to make retirement and health insurance entirely portable. With “jobs” replacing “careers”, that has to happen anyway.

For those still working 9–5 to keep a roof over their heads and their children’s heads, more flexible overtime, health insurance, and family leave becomes a necessity. But even then, the differences between competing visions couldn’t be clearer.

The Democrats and socialists view opportunity as coming from the government. Think about it. To hear them tell it, equal opportunity doesn’t exist because too many Americans have been locked out of the privileges that come with life in the middle class, and the only to way to unlock unlimited access to the middle class is to subsidize access to those privileges. Health care isn’t affordable enough? Subsidies. Education? Grants and loans. Schools are failing? Increase spending on education. Family leave? Mandate it. Poverty? Welfare. Consumers getting ripped off? Regulation.

The Republicans and conservatives, on the other hand, view opportunity as coming from freedom and free markets. We understand that people are clamoring for a chance to experience the financial security that comes with a well-paying job offering full benefits but we recognize that government cannot provide it. Subsidizing health care, and mandating it, has been an abject disaster leaving millions of Americans dependent on the federal government for a health insurance plan that is often worse than the private sector would have provided. Making college loans more accessible has fueled a bubble that has given many students hope in a better future only to dash their dreams when the opportunities dissipate. Spending more on education, even through charter schools, has the yet-unrealized effect of locking more children into a depressing spiral of lower expectations. And the regulators hired to protect consumers are now cashing in teaching the very companies they were supposed to regulate how to navigate the rules so that they can find new ways to make a buck off someone else’s struggles.

To put it better than I ever could, Senator Marco Rubio:

“Government has a role to play. And we must make sure it does its part. But it’s a supporting role: to help create the conditions that enable prosperity in our private economy. That’s a crucial role but a necessarily limited one. It can’t substitute for what it is meant to enable — a thriving free economy. It is not the ever expanding reach of government, but rather having access to the benefits of a thriving economy that allows the poor to rise into the middle class. Not by making rich people poorer, but by making poor people richer.

To do that we need a limited and effective government. And you can’t have one without the other. Big government is not effective government. Big government has never worked. The promise of more government as the answer to all our problems is easy to sell. But when it is put in practice, it fails every time.”

Their way doesn’t work. Socialism won’t work.

Their backward approach portends nothing other than a more divided nation bitterly clinging to government on one side while asking ever more from a tightly squeezed group of Americans that are only trying reap the rewards of of lifetime of hard work and sacrifice. One wonders if the angry socialist demanding his share could empathize with them — he might realize he would do likewise. Perhaps then he wouldn’t be so quick to call for the class warfare that only diminishes everyone’s dreams.

Why did such bitter division become our reality? Is this “the inevitable response to an economic system that feeds Peter while starving Paul?” Or is this a contrived political effort to rile up easily agitated Americans against the inevitable tide of naturally-occurring income inequality? Our society was organized around the principles of freedom, limited government, the rule of law, and equal opportunity, but this was perverted into a grantee of positive rights, and using government to guarantee opportunity is inevitably going to lead to government controlling access to social capital. Income inequality is a mere symptom of unequal opportunity and it is only by empowering more Americans to pursue their highest aspirations that we can overcome the barriers to equal opportunity for everyone.

That is why the only hope for our divided nation is aspiration. If we work to imbue the working class with the type of social value currently enjoyed by the middle and upper classes — the job security that comes with having knowledge and teachable skills; the peace of mind that comes with having portable, universal health insurance, retirement, and family leave; the access to opportunities that could grant a pathway out of destitution; the independence that comes with gainful, full-time employment — they will come to view themselves as valuable too. If we all focus on our aspirations, away from work, we can overcome the forces that only lead to our further divide.

Above all, the final piece on the agenda is to replace this work-centric, class-centric, divisive view of the economy with one centered on enjoyment. We work to live, not the other way around. Leisure is not a luxury. So whatever goals we may have in life — to travel, to raise a family, to retire to a quiet home away from the bustle, to serve in elected office, to enjoy and explore cultures, to support a cause or charity — work is only a means to an end. For our purposes, there is no divide between anyone’s personal value to society, but instead a shared identity as Americans. For we are a people who toil and sweat, forever confident that we will enjoy our life, the way we want. That’s who we are, work is just what we do. But we must unlock this enormous potential for millions of Americans struggling today and prevent more from falling into traps of dependency and anxiety about the future. We cannot allow our divided present become our destiny. We have work to do.