Numbers show a second-rate US
August 28, 2006 (Christian Science Monitor)


The United States is the world's only military superpower and has the globe's largest economy. Yet, by some measures, the US is a second-rate industrial nation - at best.

"Compared to other advanced economies, our market-driven model yields highly varied results regarding the living standards of our citizens," notes a study by the Economic Policy Institute (EPI), a nonpartisan think tank in Washington.

It's an open question as to whether most Americans are better off than most Western Europeans.

"We leave a lot of people behind," says Sylvia Allegretto, an economist at EPI.

"We are a dynamic economy," says Timothy Smeeding, an economist at Syracuse (N.Y.) University. "A lot of people are doing well," he adds. But for those with median incomes ($40,000 a year) or less, it is a "second-rate" economy. They "are not getting much help."

The US has about the same or worse income mobility between generations. The poor have a slim chance of escaping their parents' poverty, says Professor Smeeding.

Our smartest kids do as well as smartest kids anywhere," he says. But that's not the case for low-income families. The odds of their children entering or graduating from college are not good.

The usual comeback to such comparisons is that the US has a marvelous job-creation economy. But the EPI study find this claim "exaggerated." US job growth since 2000 has been "lackluster" and "far worse" than several other well-to-do nations belonging to the Organization for Economic Cooperation and Development.

AntiSpin: Even while the US economy is still doing relatively well, evidence of discontent among "those with median incomes ($40,000 a year) or less" is growing in the form of a rapidly increasing violent crime rate. A recent Washington Post article Violent crime returns with a vengeance explains:
After a welcome decline, cities such as Philadelphia, above, are seeing a resurgence of violent crime.

The United States is losing the war in Iraq; more specifically, Philadelphia is. This war is at home, in the city’s 12th Police District, where shootings have almost doubled over the past year, and residents have spray-painted “IRAQ” in huge letters on abandoned buildings to mark the devastation.

It is a story being repeated up and down the East Coast and across the nation. In Boston, where the homicide rate is soaring, Analicia Perry, a 20-year-old mother, was shot and killed several weeks ago – while visiting the street shrine marking the site of her brother’s death on the same date four years earlier. Recently, Orlando’s homicide count for this year reached 37, surpassing the city’s previous annual high of 36 in 1982. And in Washington, D.C., where 14 people were killed in the first 12 days of July, Police Chief Charles Ramsey declared a state of emergency.

Many factors drive crime – poverty, inequality, racism. But to those we should add the spread of a subculture once found only in the toughest urban areas: the culture of respect.
Rather than show a US government pursuing a deregulated economy, the report shows the US government as no less interventionist than other governments reviewed in the study, but shows that government intervention in markets in the US "tends to favor business more than the poor."

As reported by the Christian Sience Monitor, Alan Greenspan, in testimony before the Joint Economic Committee June 2005:

Greenspan's comments at a Joint Economic Committee hearing last week were typical, for him. Asked a leading question by Sen. Jack Reed (D) of Rhode Island, he agreed that over the past two quarters hourly wages have shown few signs of accelerating. Overall employee compensation has gone up - but mostly due to a surge in bonuses and stock-option exercises.

The Fed chief than added that the 80 percent of the workforce represented by nonsupervisory workers has recently seen little, if any, income growth at all. The top 20 percent of supervisory, salaried, and other workers has.

The result of this, said Greenspan, is that the US now has a significant divergence in the fortunes of different groups in its labor market. "As I've often said, this is not the type of thing which a democratic society - a capitalist democratic society - can really accept without addressing," Greenspan told the congressional hearing.
No question, few European nations offer a panacea for problems of racial, ethnic and economic equality of opportunity. The riots in France last year offer a clear indicator of deep rooted problems in European society. However, more than a decade of failing to address the problems of income immobility between generations and between rich and poor, compounded by a regulatory blind eye turned toward predatory lending within these communities, will come back to haunt the US during the next major economic recession that is now in its early stages.

US policy makers need to develop a
culture of respect toward the portion of American society that the EPI study reveals as losing from a set of policies of government intervention in markets over the past decade that favor wealth concentration. Instead, there appears to be a culture of contempt which, as the economy heads into recession, is likely to produce a level of civil unrest that may put American democratic society to its greatest test in 70 years.