America’s Future as a Superpower
I argue in my recent book, Lament for America: Decline of the Superpower, Plan for Renewal, that the United States is in relative decline for three fundamental reasons: (1) the rise of competitor nation-states or groups of nation-states such as China and the European Union; (2) the powerful combination of globalization, unprecedented technology change, and what the Austrian-American economist Joseph Schumpeter called “creative destruction;” and (3) fifteen major “fault lines” found within the United States itself. By mid-century, the U.S. will still be a military superpower but will have slipped somewhat in other important categories, and this slippage will have important ramifications for the quality of life within the U.S. as well as the configuration and conduct of international relations in 2050.
I conclude that the degree of relative decline in the U.S. will largely be determined by the American people themselves. The United States continues to have many strengths and, historically, Americans have manifested a great deal of resiliency and fortitude in the face of adversity. For example, the worst war in U.S. history in terms of the loss of American lives was the Civil War, but within a generation or two the United States had become the world’s largest manufacturer. Americans later endured back-to-back mega-shocks with the Great Depression and World War II, but would emerge in 1945 as perhaps the world’s most powerful nation-state ever, accounting for half of global economic production, possessing a superior military capability, and holding a monopoly on atomic weaponry. Perhaps a similar rebound will occur over the next few decades.
U.S. Households under Siege
I identify one of my key fault lines as U.S. households. Of course, the nature of households has been changing dramatically since the 1950s, and the Census Bureau’s American Community Survey indicates that in 2006 only 22 percent of households were comprised of a married couple living with their minor children.
The Boston Consulting Group estimates that at the end of 2006, the United States accounted for 37 percent of the 98 trillion dollars in total wealth in the world.  By the conclusion of the first decade of the twenty-first century, many U.S. households were absolutely shell shocked as a good part of their wealth had disappeared and conditions were more precarious for them than at any time since the end of World War II. Even though an entire decade had passed, there were fewer private-sector jobs in September 2009 than there had been in October 1999, in spite of the overall population increasing by almost 30 million during those ten years.  In 2008 alone, 11 trillion dollars in household wealth disappeared, representing 18 percent of total household wealth and a sum greater than the annual GDP of Japan, Germany, and the United Kingdom combined.  Adding losses in 2007 and 2008 together, households saw about a quarter of their total wealth vanish. Stunningly, the median family income in 2008, adjusted for inflation, was lower than it had been a decade earlier.  Forty million Americans were also living in poverty in 2008, representing almost 14 percent of the entire population, the highest in a dozen years. 
Household wealth in the United States is derived from three major sources: jobs, home equity, and retirement accounts. In the wake of the Great Recession, unemployment and underemployment shot up to the double-digit range, the worst since the Great Depression. Men were particularly hard hit, with double-digit unemployment hitting them by mid-2009, in part because male workers are overwhelmingly concentrated in the devastated construction and manufacturing sectors, and in part because they are not as well educated as women.  Underemployment, which includes those too discouraged to look for jobs or those working part-time but seeking full-time employment, hovered near 18 percent and one in eight Americans was using food stamps.  Housing equity had plummeted by an average of 30 percent from its 2006 peak, and retirement accounts which are heavily invested in the stock market suffered a similar percentage decline.  Roughly a quarter of homeowners were “under water,” owing more on their mortgages than they could possibly receive if they were to sell their houses. In the first quarter of 2009, 67 percent of homes in Las Vegas had a negative equity, and several communities ranging from Orlando to Phoenix to Riverside, California were above 40 percent, with the worst results found in the so-called “sand states” of California, Florida, Arizona, and Nevada. 
Unfortunately, household debt had also doubled to 14 trillion dollars in the seven-year period leading up to 2008 and many homeowners had used their home equity as ATM machines. Income growth stagnated for most families but this household debt continued to grow rapidly from a manageable 65 percent of disposable income during the period spanning the quarter century after 1960 to a staggering 130 percent by 2008.  The average American household was also saddled with nearly 8,400 dollars in credit card and other revolving debt by the end of 2008.  In the spring of 2009, the net worth of the average American family was less than it had been in 2001. 
The collapse of the housing and stock markets are just the most brutal manifestations of a very difficult period for many U.S. households. In public opinion surveys, upwards of 90 percent of Americans generally consider themselves as middle class, but many are struggling.  The average American works longer hours and takes fewer vacation days than comparable workers in the rest of the western world, but most have experienced no real income gains for many years.  Roughly 60 million U.S. workers have no paid sick leave, in sharp contrast to more than 160 countries that ensure all of their citizens receive some paid sick leave and more than 110 who guarantee paid leave from the first day of illness.  Only about half of Americans are covered by employer-sponsored retirement plans.  Everyone else will have to depend solely on Social Security, which will pay someone who turns 66 in 2020 about 2,400 dollars per month.  Many employers are now cutting back on their pension coverage and also forcing workers to pay higher premiums and co-pays for their company-sponsored health insurance plans. In 1985, roughly 80 percent of medium and large-sized companies provided their workers with defined-benefit retirement plans, guaranteeing the workers specific cash benefits upon retirement, usually based on years of service, age, and final earnings. By 2000, that number had dwindled to 36 percent.  Now most companies which continue to offer pensions have turned to defined-contribution plans, usually in the form of 401(k)s, with the worker deciding where to invest and putting up most of the money. Companies used to provide a certain match to encourage workers to save for retirement, but as the economy tanked in recent years, many of these companies have suspended or even eliminated these matching funds, with 110 of the S& P 500 companies stating early in 2009 that they would stop matching workers’ contributions.  Furthermore, as big corporations such as UAL, the parent of United Airlines, enter Chapter 11 bankruptcy, they jettison many of the pension and health-care obligations made to their employees. The federal government has in place the Pension Benefit Guaranty Corporation which insures 44 million private pensions, but its retirement disbursements to the 1.3 million people currently receiving funds are usually less than what the bankrupt corporation had pledged to provide.  This quasi-independent federal agency is also deeply in the red with unfunded liabilities totally 11 billion dollars at the end of the 2008 fiscal year.  Once again, the average taxpayer may be on the hook when a corporation self-destructs and no longer fulfills its financial commitments to its employees, even though the corporation may later emerge from Chapter 11 and continue to do business. The corporate world is not alone in the potential retirement time bomb, because many state and local government pension funds are also vastly underfunded, with state governments perhaps facing a 1.5 trillion dollar pension shortfall within the next 15 years. 
In an extremely difficult job environment, workers have very little recourse other than to accept the conditions placed on them by management. Unionization in the United States has been moribund in most sectors for many years, with only 7.6 percent of private-sector workers being members of unions in 2008 compared with about 35 percent in the 1950s.  More than half of workers now say that they would like to unionize, a sentiment up from one-third a decade ago, but very little headway has been achieved in bringing unionization to the corporate world.  Although corporate America has gone through its own share of trials and tribulations recently, the average U.S. worker has felt more pain and uncertainty than at any other time since the end of the Second World War.
Jacob S. Hacker and Elisabeth Jacobs sum up the problem quite well: “America’s globally integrated economy means less job security, more mobility, and ever-higher skills requirements for workers. Health care and education costs are rising. With most families relying on two incomes, the cost of caregiving is a real and growing pressure on millions of families struggling to support both young children and elderly parents. The combination of these rising costs and a volatile labor market means that families need to be continually prepared for change. For too long, we’ve left them to go it alone, and we’re seeing the disastrous consequences of that approach today.”  In essence, the United States has a very thin safety net for its citizens and many live within one or two paychecks of financial disaster. 
Almost 30 percent of American children now live in single-parent households, up from 12 percent in 1968, and poverty rates in these homes are almost five times as high as in two-parent households.  With so many U.S. households being battered from all sides, one should not expect that the American economy will be led out of the wilderness by a huge new surge in consumer spending. Before the crash, consumer spending had actually accounted for as much as 76 percent of the nation’s entire GDP, a figure far out of proportion with similar spending in other major countries.  Households are beginning to deleverage and save more because of their huge debt loads, the evaporation of so much of their wealth, and concerns about job security.  Moreover, many of these households have seen little in income gains, when inflation is factored in, for more than 30 years.  For far too long, America’s GDP growth was predicated on “consumptionitis” spurred on by the inflated home equity values and a willingness to chalk up huge credit-card debts. That period is now over and with the basic unit of U.S. society, the American household, in dire straits, the road to recovery for the country as a whole has become much more protracted.
Members of the LDS community need to reflect on whether they have adequately heeded the advice of church leaders concerning provident living. Over the next few decades, change in the U.S. will be more rapid and transformational than at any other time in American history. This forthcoming rollercoaster ride will be endured more easily by living within one’s means, shunning the excesses of materialism, maintaining family and personal integrity, emphasizing quality education at all levels, and keeping a hand securely anchored to the “iron rod.”
 Robert Frank, “Global Wealth Gap Widens,” Wall Street Journal, 3 October 2007. [Back to manuscript]
 U.S. Bureau of Labor Statistics, “Employment, Hours, and Earnings,”selected issues. [Back to manuscript]
 S. Mitra Kalita, “Americans See 18 Percent of Wealth Vanish,” Wall Street Journal, 13 March 2009. Wealth calculations were provided by the Federal Reserve.[Back to manuscript]
 Erik Eckholm, “Last Year’s Poverty Rate Was Highest in 12 Years,” New York Times, 11 September 2009. Data were compiled by the U.S. Census Bureau. [Back to manuscript]
 Ibid. [Back to manuscript]
 Carlos Torres, “Jobless Gender Gap Widest Since ‘Riveter’ Rosie: Chart of the Day,” Bloomberg.com, 8 May 2009. A good share of these men will eventually find new jobs, but often these jobs will have lower wages and fringe benefits than they had received in their previous manufacturing or construction jobs. [Back to manuscript]
 Jason Deparle and Robert Gebeloff, “Food Stamp Use Soar, and Stigma Fades,” New York Times, 29 November 2009. [Back to manuscript]
 The median price of an existing home was 143,600 dollars in 2000, 230,300 dollars in July 2006, and 175,000 dollars at the end of 2009. See Andy Serwer, “The ‘00s: Goodbye (at Last) to the Decade From Hell,” Time Magazine, 24 November 2009. [Back to manuscript]
 Ruth Simon and James R. Hagerty, “House-Price Drops Leave More Underwater,” Wall Street Journal, 5 May 2009. [Back to manuscript]
 Janet L. Yellen, President and CEO, Federal Reserve Bank of San Francisco, “The Outlook for Recovery in the U.S. Economy,” presentation to the San Francisco Society of Certified Financial Analysts, San Francisco, 14 September 2009. [Back to manuscript]
 Eric Dash and Andrew Martin, “Banks Brace for Credit Card Write-Offs,” New York Times, 10 May 2009. The credit card debt burdens were estimates from Moody’s Economy.com. [Back to manuscript]
 Meizhu Lui, “The Wealth Gap Gets Wider,” Washington Post, 23 March 2009. [Back to manuscript]
 James J. Gosling, Economics, Politics, and American Public Policy (Armonk, NY: M.E. Sharpe, 2008), 214. [Back to manuscript]
 “Counting the Hours,” OECD Observer, March 2008. For example, on average Americans take 14 vacation days a year versus 37 for the French. [Back to manuscript]
 “The Cost of Staying Home Sick,” New York Times, 4 May 2009. Statistics were provided by Dr. Jody Heymann, Director of the Institute for Health and Social Policy at McGill University. [Back to manuscript]
 David Ignatius, “Boomers Going Bust,” Washington Post, 7 May 2009, and Teresa Ghilarducci and Christian E. Weller, eds., Employee Pensions: Policies, Problems, and Possibilities (Champaign, Ill.: Land and Employment Relations Association, 2007), 1. [Back to manuscript]
 Ghilarducci and Weller, Employee Pensions, 1. [Back to manuscript]
 Ibid., with data obtained from the U.S. Department of Labor. [Back to manuscript]
 Randall W. Forsyth, “The Market’s Formula: A Square-Root Rally,” Barron’s, 4 June 2009. [Back to manuscript]
 Michael Kranish, “Pension Insurer Shifted to Stocks,” Boston Globe, 30 March 2009. [Back to manuscript]
 Ibid. [Back to manuscript]
 Roger Lowenstine, While America Aged: How Pension Debts Ruined General Motors, Stopped the NYC Subways, Bankrupted San Diego, and Loom as the Next Financial Crisis (New York: Penguin Press, 2008), 1. Lowenstine argues that “America now faces a crisis of epidemic proportions” with unfunded or underfunded pension funds, at a time when the number of seniors in society will increase from 38 million today to 72 million by 2030. In terms of state government problems, see Robert Novy-Marx and Joshua D. Rauh, “The Intergenerational Transfer of Public Pension Providers,” NBER Working Paper No. 14343, September 2008. [Back to manuscript]
 Philip M. Dine, State of the Unions (New York: McGraw-Hill, 2008), ix. [Back to manuscript]
 Ibid., 254. [Back to manuscript]
 Jacob S. Hacker and Elisabeth Jacobs, “Take Off,” New Republic, 15 April 2009. [Back to manuscript]
 See Jacob S. Hacker, The Great Risk Shift: The Assault on American Jobs, Families, Health Care, and Retirement and How You Can Fight Back (Oxford: Oxford University Press, 2006), x and 128. Hacker argues that the message today is “you are on your own,” and “social insecurity” has now become the watchword of the day. [Back to manuscript]
 Isabel Sawhill and Ron Haskins, “Five Myths about Our Land of Opportunity,” Washington Post, 1 November 2009. [Back to manuscript]
 In 2006 consumer spending reached 76 percent of nominal GDP, the highest ever recorded since quarterly data began to be tabulated back in 1947. See Peter Schrank, “American Consumers Struggle with Their Debts,” Economist.com, 6 May 2009. [Back to manuscript]
 In the 1960s and 1970s Americans saved almost ten percent of their income. It would not be surprising for them to return to saving rates in the seven to ten percent range. [Back to manuscript]
 In his book Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (And Stick You with the Bill) (New York: Portfolio, 2007), 10, David Cay Johnston argues that the bottom 90 percent of Americans have seen their incomes on a mostly downhill slide for more than three decades. [Back to manuscript]
Full Citation for This Article: Fry, Earl H. (2010) "Lament for America: The US Household Under Siege," SquareTwo, Vol. 3 No. 2 (Summer), http://squaretwo.org/Sq2ArticleFryLament.html, accessed [give access date].
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