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News Report on Public Confidence
in the State of the Nation
2013
Foundation Project II:
The American Dream

Part 1: The Future of the American Dream

Part 2: Social Security, Medicare, and the American Dream

Part 3: Does Globalization Help or Hinder the American Dream?

Part 4: Making the World Safe for Democracy

Foundation Project II:
The American Dream

       For millions of American families today, “getting ahead” can feel an awful lot like “falling behind.”

       The great achievement of the United States has been to forge a middle-class nation based on a growing economy and government policies deliberately aimed at strengthening and sustaining the middle class.

       Now many experts are asking whether the middle-class American Dream is beginning to slip away. Over the past two decades, the American economy has enjoyed healthy growth--much faster than the economies of most other developed countries. Yet the benefits of this growth have been distributed unequally across the population. The wealthiest American households have been absorbing an ever-larger share of the nation’s yearly income, while the middle class and ordinary wage-earners have generally been gaining fewer economic benefits. Growth has been slow to translate into higher wages and new jobs. As income inequality has grown and labor markets have become tougher for workers at nearly all levels, the question arises whether a middle-class standard of living will fall out of reach for many Americans.

       The shift has implications for our democratic way of life. The belief that hard work will enable wage earners and their families to achieve and maintain a middle-class standard of living has been the essence of the American Dream. And political observers since Alexis de Tocqueville have understood that a strong middle class was one key to the strength and stability of American democracy.

       Several forces seem to be chipping away at the American Dream today, including transformations in technology and the nature of work, fierce global competition threatening jobs and wages, and a philosophy of government that places less emphasis on the government’s role as “referee” of the economy and more emphasis on unfettered free markets. The issue is complicated by the coming “age wave,” the imminent retirement of the Baby Boom generation, which will place enormous new strains on the federal budget through new demands on programs such as Social Security, Medicare, and Medicaid--and indeed create pressure on the economy as a whole.

       Is America in danger of losing its middle-class character? If not, then why have so many commentators worried over this supposed trend? If so, what, if anything, can be done about it? This project will provide a balanced look at the future of the American Dream and assess the economic health of America’s middle class. It will review possible answers to some of the new challenges facing our economy and provide an honest estimate of each proposal’s benefits and costs.

Part 1:
The Future of the American Dream

       The notion that democracies tend to be most stable when they have a sizeable middle class dates back to Aristotle. In modern times, the key to creating and sustaining middle-class-based democracies has been a continuously growing economy. Over the past decade, the American economy has grown faster than the economies of most other developed countries. Yet income inequality has grown, raising the question of whether a middle-class lifestyle is falling out of reach for many Americans. One reason is that wages for ordinary workers have largely stagnated, even as the overall economy has grown. A bigger and bigger share of income is going to the richest households. Today households with the top 20 percent of incomes take in nearly 50 percent of all income in the country. The disparity has grown steadily over the past forty years. Part 1 will report on the growth of income inequality. Is income inequality something we should be worrying about? In a democracy, is economic opportunity a right? How as a democracy have we dealt with this issue in the past? On the one hand, by almost any measure--size of houses, numbers of cars, consumer goods--most Americans are clearly enjoying a higher standard of living than forty years ago. On the other hand, families at or below the median income in the nation feel hard-pressed. What does it really mean to be poor in America today? Does the government have the responsibility--or the right--to intervene in economic life to sustain an American middle-class way of life?

       “The hardest thing in the world to understand,” Albert Einstein once said, “is the income tax.” It is perhaps consoling to think that Einstein was no less frustrated than the rest of us when April 15 rolled around each year. Americans have never liked taxes--the American Revolution itself started as a tax revolt. And our failure to protect our nation and its capital in the War of 1812 was largely due to the absence of a tax structure to support our troops. But as our democracy has progressed, we have come to understand that taxes are necessary to support such common goals as providing for the common defense and ensuring that our retirees have at least a minimum to live on in their old age. Taxes have been at the center of American political debate for the past twenty-five years. Yet perhaps in no area of public policy are there more misconceptions. How much in taxes do Americans really pay? Who pays what? How do taxes Americans pay compare with those in other countries? What are American taxpayers getting for their money? How much “pork” is in the federal budget? Do lower taxes lead to greater economic growth, as some argue? Are deficits a drag on the economy? Part 1 will attempt to clear up the confusion about taxation and clarify the choices Americans face in financing government in the coming decades. It will ask to what degree taxation policy is an issue with repercussions for democracy itself. What is the democratic root of the idea of progressive taxation? Can taxes be too high or too low to be compatible with a viable democracy? How does one define fairness in taxation?

Part 2: Social Security, Medicare
and the American Dream

       Without question one of the most profound internal challenges confronting American democracy in the coming decades is the aging of the U.S. population. Since the New Deal, we have relied on a government managed retirement system economically based on funds provided by younger workers who vastly outnumbered retirees. Beginning in 2011, when the first members of the Baby Boom reach age 65, the ratio of young workers to retirees will rapidly begin to shrink. The “age wave” raises issues of intergenerational fairness that are important for a democracy--since supporting our growing population of retirees will necessarily impose greater burdens on younger workers and their families. How will we find a fair way to distribute this burden? Politicians and pundits have begun to discuss the major problems facing Social Security and Medicare as the Baby Boom reaches retirement age. But few Americans fully understand the implications of the challenge, or the options that we have for meeting it. Is our present approach, which relies heavily on regressive payroll taxes to finance Social Security and Medicare, appropriate, or do we need to rethink our philosophy of taxation to find a more democratic solution to this demographic shift? Or should our taxation policy shift to a less progressive system based on the theory that flat tax policies will increase overall economic growth? Part 2 will explain the major policy choices to be made, and the costs and benefits associated with each.

Part 3: Does Globalization
Help or Hinder the American Dream?

       A democracy needs a strong middle class. Yet a middle class can only be sustained if there is a plentiful supply of jobs paying middle-class wages. The post-World War II U.S. industrial economy was able to provide relatively high-wage jobs to millions of workers who had little in the way of advanced education or special skills. Growing U.S. industrial productivity led to rising wages for manufacturing workers--wages that effectively turned much factory work into middle-class employment. Yet over the past two decades, and especially in the last few years, tens of thousands of American industrial jobs have disappeared as U.S. multinational firms shut down American manufacturing facilities and moved production abroad, first to Mexico and later to China. Once upon a time America was the world’s manufacturing powerhouse. Today many if not most durable goods that Americans buy--everything from computers, printers, and refrigerators to automobiles and iPods--are manufactured in whole or in part abroad. America’s trade deficit has risen to historic highs, and continues on the upswing. In addition, American firms are increasingly replacing American workers--from call center customer service reps to computer programmers and radiologists--with workers based in India and other foreign nations. The decline of the manufacturing sector, and the rise in outsourcing or “off-shoring,” has gone hand in hand with a new segmentation of the economy into a smaller pool of high-paying “knowledge jobs” and a much larger pool of low-paying service jobs that require little in the way of skill. Will the shift from a manufacturing-based to a service-based economy change the face of American democracy? Many economists see benefits to this new global division of labor--primarily in the form of cheaper consumer goods and healthy global economic growth. Others have begun to argue that the loss of productive capacity and jobs is undermining the U.S. economy, worker well-being, and the U.S. national interest. Part 3 will provide a balanced look at the issues raised by globalization, with a particular emphasis on its effect on the American middle class. It will attempt to assess how continued globalization will affect the lives of Americans and America’s economic and democratic future.

Part 4: Making the World
Safe for Democracy

       When Woodrow Wilson spoke of making the world “safe for democracy,” he was describing a role that America tends to play almost by its very nature. Does the fact that the most powerful nation on earth--whether measured in economic or military power--is a democracy help ensure the survival of democracy on the planet? And what if this were to change? What if America were to slip from superpower status and a non-democratic state suddenly dominated the global scene? The United States inhabits a globe undergoing almost unimaginably rapid transformation. America remains the most powerful nation on earth. But other non-democratic nations and groups of nations are gaining on the United States. China’s economy is now the second largest in the world. Russia can eventually be expected to regain some of the strength it lost in the aftermath of the Cold War. Moreover, the United States faces a growing threat in the form of the proliferation of deadly nuclear, biological, and chemical technologies and still confronts terrorist networks eager to commit a major attack against the American homeland. At the moment, the United States is widely hated throughout the Arab and Muslim world and disliked in most other countries. How well positioned is the United States to manage these new challenges? Are the principles that guide our present foreign policy likely to sustain our position and diminish these threats, or have our recent policies undercut our long-term position? Given the demands of problems at home--particularly the growing costs of an aging population--will we have the financial resources to support our military forces and sustain the kind of global presence we have maintained for the past half-century? Can we build an “idealistic” foreign policy implemented by “realistic” means? Or are we willy-nilly committed to pursue an idealistic policy at a high cost in “blood and treasure” or a “realistic” policy that rejects a commitment to supporting the growth of democracy both in the United States and in the rest of the World? Does the survival of our democracy demand a forward-based strategy? Or will the time come when America retreats from the world? Part 4 will help citizens identify the major “camps” in today’s foreign policy debate. Is America destined to remain a superpower, or must Americans prepare themselves for a new world in which American influence is a wasting asset? Part 4 will discuss the ways in which we can muster the will and the resources to ensure the survival and strength of American democracy in the 21st century?

Foundation Project II:
The American Dream

Part 1: The Future of the American Dream

Part 2: Social Security, Medicare, and the American Dream

Part 3: Does Globalization Help or Hinder the American Dream?

Part 4: Making the World Safe for Democracy

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