The dominant mood in America today is one of anxiety without pause. Millions of decent, self-reliant, regular Americans who had begun to fear that the prolonged recession means the American dream is over for them now brood that their children and even their grandchildren are also to be denied the prospects of the good life they took for granted just a decade ago.
Once, the vast majority thought they were in the middle class, not rich and not poor. Today, more and more Americans are starting to identify themselves with lower economic groupings and see no prospects of moving higher, whether in terms of job opportunities or earnings. The fear has grown that years of hard work will no longer translate into a better life for themselves and their families. The new normal is that millions of them are facing the risk, or the reality, of falling out of the middle class, losing all that this once meant in America—financial independence, sending your kids to college, having equity in your home, choosing where you live. Today, people in their 20s are hard-pressed to get jobs, and those who do are taking them at incomes lower than they ever imagined. For those who are surviving as middle-class families, they are facing years of financial insecurity.
Middle-class wages are stagnating or worse. Median household income in the United States is now about $50,000 a year, 5 percent less than it was in 2000. There is a palpable sense of a country that is becoming more and more unequal. From 1989 to 2007, the top 1 percent of the population gained 56 percent of all income growth, while the bottom 90 percent gained just 16 percent. The only ones maintaining their financial standards are the educated upper classes. Middle-income families have been pressured by advancing technology, offshoring, and growing unemployment, and white-collar professionals have been forced into lower-paying or part-time work. As author Barbara Ehrenreich starkly put it, those between the ages of 40 and 50 are "too old to hire, too young to retire. . . . This is an apocalyptic situation."
The result is a widespread, populist anger in the country, mostly directed at Washington and at the Democrats. The Republicans not only won a majority in the House of Representatives in the midterm elections but had stunning success at the state level—not only new governorships but some 675 legislative seats, representing the biggest victory for any party in the state legislatures since 1938. The Republicans will now control 25 legislatures, compared to 14 before. The Democrats will now control only 16, compared to 27. The Republicans will have control of the governor's mansion and both legislative chambers in 20 states, compared to only nine before the midterms. Their success has been particularly evident in the industrial heartland states such as Pennsylvania, Ohio, Indiana, Michigan, Wisconsin, and Minnesota.
The congressional Republicans promise to launch a full-scale attack on the federal deficits they helped to accumulate under the eight devil-may-care years of the George W. Bush presidency. They recognize that debt is a major feature of our downcast mood; accumulation of debt by the U.S. government is at a historically unprecedented and essentially unsustainable rate. Other than during and after World War II, the United States has not been so highly indebted since record-keeping began in 1792.
There are warning signs all around us of the dangers of America's breakdown of fiscal discipline. China downgraded its credit rating for American debt; South Korea refused a new trade deal; and the bulk of European and Asian nations joined in protest against the Federal Reserve's monetary policy of quantitative easing, which they interpret as printing more money to suppress the value of the dollar in order to make our exports more competitive in their countries.
The Republicans have so far little to say that is convincing about the other major depressant—jobs and output—relying simply on the efficacy of tax cuts. Getting Americans back to work and paying taxes is the single biggest ax we could take to chop back debt. Accelerating economic growth over the next 20 years by just half a percentage point would cut the deficit in half. Clearly we have to do both—cut and cut, and grow and grow.