Abandoning America

The U.S. government is broke, heavily in debt and over the past two fiscal years it has run up $2.7 trillion of red ink. It is on track for another trillion dollar deficit in fiscal 2011. You don’t have to be an economist to see that these are signposts to financial ruin.

Since the 2010 midterm election, several authoritative commissions have released recommendations on how to restore fiscal health. While prescriptions differ, they all list hard — even impossible — choices. Raising taxes or cutting spending will be painful, suicidal for politicians and deadly for the economy, which remains stagnant even though federal deficits are providing nearly 10 percent of GDP. But neither higher taxes nor lower spending will work. The only way out of the fiscal hole is to return the economy to growth. The question is how.

Myths About Government

Americans believe that they’re heavily taxed. Yet, we pay less in taxes than citizens in other rich countries — while spending more on defense than the next dozen nations combined. In 2009, our tax burden measured 9.2 percent of personal income, versus an average of some 12 percent over the past half-century. Our taxes have not been this low since 1950.

The current anti-government ethos is rooted in myth. The public sector may not be efficient, but it provides goods and services which the private sector, driven as it is by the profit motive, simply doesn’t. Over the past 70 years, the federal government fought and defeated Germany and Japan, created the postwar global economic system and built history’s most formidable military. In science, federal programs harnessed nuclear energy and developed the space program. The government created the Internet and its military contracts gave a leg up to the high-tech sector, from Silicon Valley to Boeing.

Federal and local authorities constructed interstate highways, underpinned the world’s best academic research establishment and defeated the crime wave of the 1970s and 1980s, to list a few examples.

These successes have been vital for U.S. business at all levels. Without them, businesses large and small would never have prospered. In fact, throughout postwar history, the greatest American achievements have all been public-private partnerships, with Washington taking the initiative and harnessing the ingenuity, expertise and managerial talent of the private sector. It stands to reason that if we are to overcome current challenges, we should rely on a model that has worked so well in the past.

In November, Google gave a 10 percent raise and a bonus to its employees in order to prevent defections. With the jobless rate nearing 10 percent, this validates the claim by businesses that they have trouble finding qualified personnel to fill job openings. As part of unemployment benefits, the government and the high-tech sector should be teaming up to provide training to workers who lost their jobs in manufacturing and construction. If the U.S. doesn’t spend money to upgrade its workers’ skills, those jobs will migrate to countries that do.

What’s Good for GM

But big business doesn’t seem interested in this kind of partnership.  The 2010 campaign was the most expensive midterm election ever, costing nearly $4 billion. Conservatives outspent liberals by around 2-to-1. Corporate donors, taking advantage of the Supreme Court ruling last January protecting their donations, have been a major factor in this disparity. Businesses often fund both parties on issues of practical importance, but by some estimates in last year’s elections at least $300 million of corporate money went to purely ideological anti-tax, anti-spending causes.

More than anybody else, corporate executives understand that to make money you need to invest. It stands to reason that the U.S. needs to invest in education, science, technology and infrastructure in order to prosper. If big business has a stake in American prosperity, then it is shooting itself in the foot.

The problem is it doesn’t have any such stake.