Revitalizing America: The Arithmetic of Social and Economic Reform

By Nicholas Eberstadt

The COVID-19 pandemic, well into its third calendar year, has been America’s greatest crisis since World War II.1 In 2020 and 2021, according to the Centers for Disease Control and Prevention (CDC), nearly 850,000 Americans were killed by strains of this coronavirus—and by the summer of 2022, the CDC reported the death toll had exceeded one million.2 This ongoing public health disaster has placed our society, economy, and political system under extraordinary pressure.

Key Points:

  • America’s economic and social ills—slow economic growth, careless government spending, and overreliance on government—have intensified in the wake of COVID-19.
  • Fiscal or entitlement reform must seek to couple economic growth with widespread prosperity, thereby improving the nation’s social health.
  • Americans must pursue a multipronged policy agenda to avert long-term consequences—including incentivizing innovation and growth, promoting work over welfare, encouraging stable family formation, and giving all Americans the tools to build wealth.

That pressure resulted in some spectacular accomplishments. Months into the pandemic, crash programs by US and other Western researchers and pharmaceutical companies came up with highly effective coronavirus vaccines: a success many experts would have deemed impossible on the very eve of the crisis.

On the other hand, the strain of the pandemic exacerbated preexisting social and economic ills—including problems that had somehow largely escaped the notice of America’s describers and deciders. And the unprecedented emergency pandemic measures the government implemented in the name of staving off an economic and financial collapse also entailed unintended consequences of a comparably vast scale, inadvertently constraining long-term growth and compromising prosperity.

On the eve of the COVID-19 pandemic, America’s engines of material advance and personal success were already in serious need of repair. The US capacity to create wealth remains astonishing and unrivaled: By year-end 2021, private-sector net worth approached $150 trillion.3 Yet at the same time, a creeping failure has been afoot for decades: a failure for our nation to generate and deliver its great benefits to all. The unvarnished truth is the American dream has not been working out for growing contingents of our fellow citizens. Far too many Americans have become familiar with faltering living standards or have found themselves mired in a “New Misery.”4

The continuing spread of welfare dependence through the American population is one of the markers of this New Misery—both a cause and a consequence, organically linked to it. Never before has America been as rich as today; never before have so many Americans sought and accepted government benefits available only for those who see themselves as poor. In the pernicious new political economy on the rise since at least the end of the Cold War, government social programs—means-tested benefits, disability payments, and perhaps universal basic income (UBI) or other new entitlements yet to come—are dispensed to compensate Americans for the slowdown in popular gains from the market economy.

Slower economic growth and entitlement dependence are insidiously connected. And while self-styled conservatives tend to be alert to the proposition that explosive entitlement claims can impair national productivity, they are less attentive to the risk that prolonged subpar growth will whet the public appetite for entitlements.

Reviving dynamic, broad-based economic growth therefore lies at the heart of any strategy that aims, at one and the same time, to increase US living standards and reduce entitlement dependency. The arithmetic of reviving national productivity involves entitlement reform—but also much more. Social and economic revitalization can spark a dynamic upswing in progress—and prosperity for all—as COVID-19 subsides. But this will mean addressing the social and economic flaws that increasingly impaired our national performance even before the pandemic.

The Other COVID Crisis: Unintended Effects of Pandemic Policies

To prevent catastrophic collapse of the US economy and the American financial system from the nationwide COVID-19 lockdown in March 2020, Washington unleashed a tidal wave of public resources to float businesses and families through the emergency. Mindful of the policy mistakes that deepened and prolonged the Great Depression nearly a century earlier, Congress and the White House reacted rapidly, authorizing extraordinary fiscal and monetary interventions. Through several rounds of spending measures, many trillions of dollars in emergency COVID-19 benefits were dispensed from March 2020 until September 2021. The Federal Reserve was also permitted—in fact, encouraged—to flood the US economy and the international system with liquidity and venture into other territory our central bank had never before dared to enter.

Washington can take credit for preventing a national (potentially global) economic and financial panic in 2020–21 through its actions. With the economy in free fall, the impulse to act urgently and “go big” was surely the right call at the outset of the emergency. Yet urgency also meant the largest single “state surge” in American history was necessarily improvised, characterized by not only immense intended consequences but perhaps even greater unintended ones.

Consider the Fed’s all-in monetary interventions during the COVID-19 emergency.5 With these measures, the US money supply and Fed security holdings suddenly spiked. Between January 2020 and January 2022, the former—for which America’s money stock (M2) is a proxy—jumped by 40 percent (Figure 1). (The latter leaped by over 140 percent.)6 Consequently, the “velocity” of money in circulation, which had been dropping since the turn of the century, suddenly plunged to unprecedented postwar lows7—levels suggestive of a widespread willingness to hoard money rather than spend it, despite near-zero interest levels, as would be expected perhaps in a “liquidity trap.”

Figure 1. US M2 Money Supply

Source: Federal Reserve Economic Data, “M2,” June 28, 2022,

The Fed’s actions took America into a monetary terra incognita: a terrain that the central bankers themselves patently lacked a map for charting, much less navigating. The thought that a sudden, radical expansion of the money supply might affect national price levels apparently did not occur. As inflationary pressures gathered in 2021, accelerated in early 2022, and continued to surge upward from there, US monetary authorities remained a step or two behind events, only finally recognizing the inflationary threat after it had assumed frightening proportions. Nor were they the only economists to get the new inflation wrong.8

There is greater clarity about the unintended consequences of emergency pandemic fiscal policies. Washington’s deluge of spending during the COVID-19 emergency was mainly financed by deficit spending, with federal debt jumping by over $5 trillion between the end of 2019 and the fall of 2021.9 That torrent of transfers did not simply stabilize disposable income during the emergency. Rather, it propelled US household incomes to their highest levels in history—well above where they would have been had the expansion underway before the pandemic simply continued. (See Figure 2.)

The transfers were so immense that Americans did not end up spending them. Instead they banked much of the pandemic emergency windfall. In 2020 and 2021, the US private savings rate more than doubled, the upsurge in these personal assets mirrored by the ballooning government deficits. (See Figure 3.) Since the net national savings rate did not appreciably change from pre-pandemic levels during the emergency,10 this means that government borrowing was in effect being banked into private accounts.

Figure 2. US Personal Disposable Income vs. Personal Consumption Expenditures (January 2000–May 2022)

Source: Federal Reserve Economic Data, “Personal Consumption Expenditures,” accessed July 12, 2022,; and Federal Reserve Economic Data, “Disposable Personal Income,” accessed July 12, 2022,

Figure 3. US Personal Savings vs. Federal Deficit (January 2017–May 2022)

Source: Federal Reserve Economic Data, “Personal Saving,” accessed July 12, 2022,; and Federal Reserve Economic Data, “Federal Surplus or Deficit,” accessed July 12, 2022,

The emergency measures were rife with moral hazard, only the most familiar of which was the famous $600 a week “pandemic unemployment insurance” benefit. Individuals could obtain the initial $600 a week in additional unemployment benefits if they were not working, or were not working enough, almost regardless of the recipient’s wealth or annual income. Those pandemic benefits, remember, came on top of benefits from the existing unemployment insurance system. When added to regular unemployment benefits, the pandemic benefits pushed payments for the jobless above the median wage level in 36 states, according to one analysis for the New York Times.11

Pandemic unemployment benefits, in other words, turned out to be a jackpot for many—and you did not actually have to be unemployed to take home the bonus. In July 2020, the national unemployment level was about 17 million, but more than 30 million Americans were reportedly collecting some form of unemployment insurance. For almost a year and a half, the number of unemployment insurance beneficiaries was larger—often much larger—than the number of Americans unemployed. (See Figure 4.)

Figure 4. US Monthly Unemployment Level and Weekly State Unemployment Insurance Claims (January 2019–June 2022)

Note: Data are not seasonally adjusted. US Bureau of Labor Statistics monthly job reports estimates for unemployment are dots for the week in which the monthly survey was conducted. The Department of Labor unemployment insurance claims total is for all individuals covered, including those covered by special pandemic benefit programs. Source: Federal Reserve Economic Data, “Unemployment Level,” accessed July 8, 2022,; and US Department of Labor, “Unemployment Insurance Weekly Claims,” press release, July 2022,

Wittingly or not, COVID-19 America was toying with something like a UBI. Proponents of UBI may not be aware of exactly what they would be subsidizing by paying adults not to work. The patterns are clear enough when looking at pre-pandemic self-reported time-use trends of prime-age men (age 25–54, ordinarily peak working years) who are already neither working nor looking for work. (See Table 1.)

Table 1. Self-Reported Time Use: Prime-Age (25–54) Men and Women by Employment Status 2015–19 (Average Minutes per Day)

Source: US Bureau of Labor Statistics, US Census Bureau, American Time Use Survey, 2020,

The picture provided by Table 1 is not pretty. Today’s unworking men while away their days in front of screens—television, internet, handheld devices, and the like—on average close to 2,000 hours a year. This is their full-time “job.” And nearly half of pre-pandemic unworking prime-age men said they took pain pills every day.12 Would any taxpayer really want to pay for more of this?

In any event, the de facto UBI experiment came to an end when the pandemic unemployment benefit ran out—but perverse paradoxes in the US labor market continued. Despite a roaring demand for workers—with over 11 million jobs going begging at the end of 2021 (Figure 5)—labor force participation rates (LFPRs) stagnated from the summer of 2020 through the end of 2021. In mid-2022 the US labor force was still slightly smaller than just before the pandemic—and millions short of where it would have been if pre-pandemic LFPRs were still obtained. (See Figure 6.)

Figure 5. US Job Openings (January 2011–May 2022)

Note: Data are seasonally unadjusted. Since November 2020, empty workforce positions have increased by nearly five million. Source: US Bureau of Labor Statistics, Job Openings and Labor Turnover Survey, 2022,

Figure 6. US Labor Force Participation Rates (January 2011–June 2022)

Note: Data are seasonally adjusted and include those age 16 and up. Source: US Bureau of Labor Statistics, “Labor Force Statistics from the Current Population Survey,” accessed July 12, 2022,

Low and stagnating LFPRs in the face of unprecedented peacetime job openings are all the more intriguing now that three-quarters of the US adult population is fully vaccinated.13 The current extreme worker shortage likely has multiple causes, and unintended side effects of COVID-19 rescue policies are no doubt one of them. But US LFPRs have been faltering since the late 1990s—that is, for nearly a generation before the pandemic erupted. Ironically, by some metrics, US LFPRs are now lower than those of the European Union—a region Americans have long caricatured as a work-free zone with sclerosis-inducing welfare states. For example, the EU’s LFPRs for the age 25–64 cohort surpassed America’s almost a decade ago. (See Figure 7.)

Figure 7. Labor Force Participation Rates for Adults Age 25–64, US vs. EU (1980–2021)

Source: Organisation for Economic Co-operation and Development Data, “Labour Force Participation Rate,”

Anemic work rates are just one of the worrisome new socioeconomic realities exacerbated by the pandemic (or the policy response to it). Another is the long-term slowdown in US economic growth and worker productivity.

If the US had managed to maintain its earlier (1950–2000) postwar growth rates into the 21st century, per capita output on the eve of the pandemic would have been over 20 percent higher than the levels actually recorded—and the gap would be even greater today. (See Figure 8.)

Figure 8. Real 2012 GDP per Capita, Quarterly, January 2000–January 2022

Note: Exponential trend line represents 1950–2000. Source: Federal Reserve Economic Data, “Real Gross Domestic Product per Capita,” June 29, 2022,

Looking forward, the Congressional Budget Office (CBO) perhaps reflects the current consensus among leading economists: It envisions real gross domestic product (GDP) growth of under 1.7 percent per annum for 2024–32, with output per adult rising at less than 1.5 percent a year—an implied doubling time of about 48 years.14 Sluggish as this prospect may seem, however, those projections do not take account of any coming recessions—even though recession may lie in store, possibly sooner rather than later. Thus far in the new century we have already experienced three of them—and our country’s actual 21st-century per capita growth rate to date has averaged barely 1 percent a year, a tempo requiring almost 70 years for a doubling.

The US growth slowdown has been conjoined with another overarching trend bearing on American life: a seemingly insatiable desire to finance federal spending—most of which is entitlement transfers—through government deficits, which is to say ever more public debt. Paradoxically, what may be most troubling about 21st-century federal-debt buildup is the relatively small share due to the COVID-19 emergency: The pandemic crisis of 2020–21 accounted for only about a quarter of the run-up from 2000 to 2021 and about 30 percent of the jump since 2007.15 In fact, government debt has accounted for the majority of America’s credit increase between 2000 and year-end 2021—and over 60 percent between 2007 and year-end 2021.16 (See Figure 9.) Is this what the path to crowding out the private sector looks like?

Figure 9. US Debt: Total Credit vs. Government Debt, 1986–2022 First Quarter

Note: Data are shown annually from 1986 to 2015 and then quarterly (seasonally adjusted) from 2016 to 2020. Government debt is federal plus state and local. Source: Board of Governors of the Federal Reserve System, “Financial Accounts of the United States—Z.1,” September 23, 2021,

The CBO, incidentally, now projects net federal debt will be about twice the size of the US economy in 2050—roughly two and a half times the pre-pandemic level—and further upward revisions may await.17 Thanks to ultralow interest rates in force since the crash of 2008 and the Great Recession, the burden of debt finance has thus far been comparatively mild for this new mountain of taxpayer obligations.18 America had already used much of the “fiscal space”—the difference between the debt limit and current debt—it enjoyed before the Great Recession by 2019, according to International Monetary Fund estimates,19 and is on track to have used up much of the remainder by 2025, implying that future shocks or crises will be more difficult and painful to manage.

Slow growth, low and continuously declining velocity of money, super-high public debt, and super-low interest rates: All these formerly unfamiliar hallmarks of America’s emerging new political economy are already quite familiar elsewhere—namely, in contemporary Japan, the home of the modern “lost decade” phenomenon. The specter of “Japanification” should not be cheering, nor should symptoms of that affliction be greeted with equanimity. There are reasons to fear that a Japanification with American characteristics could be more unpleasant—indeed, more miserable—than the original version that beset Japan.

Modern America’s New Ills

From a distance, the summary record of America’s performance over the past generation is a marvel to behold. No nation has ever been as powerful and rich as the United States is today. Thirty years ago, the US won the Cold War and became the planet’s sole superpower—a title it still holds. Never before has the world seen a system that could generate so much national strength and prosperity.

But during our unipolar moment, a New Misery was also spreading in America. Symptoms of our new social and economic ailments abound. They might be called paradoxes of plenty, the unnatural pathologies of daily life in America’s second Gilded Age. They are afflictions that predated the coronavirus pandemic but are now even more acute thanks to the crisis. Diagnosing them is essential to the effort to revitalize our nation.

Consider these symptoms of the New Misery:

  • Although our nation has never been so rich, never have so many Americans been dependent on poverty-conditioned, means-tested benefits.
  • Although survival odds for young and middle-aged parents are vastly more favorable than in earlier times, many more children today live as if orphaned: with just a mother, just a father, or sometimes just grandparents.
  • Although we enjoyed a so-called “full-employment” economy on the eve of the pandemic, the 2019 work rate for prime-age American men mirrored the level in early 1940, at the tail end of the Great Depression.
  • Although our national net worth has been soaring for decades, real net worth for the bottom half of households was barely higher on the eve of the pandemic than when the Berlin Wall fell 30 years earlier.

What accounts for these miserable contradictions?

The conventional answer is “structural economic changes” in our age of globalization and rapid technological advance. There is some truth in this explanation, of course—but it is not the whole story, nor even perhaps most of the story.

Family breakdown, rising welfare dependence, “deaths of despair,” and the explosive growth of our ex-con population: Such features of the New Misery have their roots in other factors—social changes, changing mores, and changing political choices and priorities. Taken together, these other changes have ensnared our immensely wealthy and amazingly powerful country in a domestic “tangle of pathologies.”

That fateful phrase was coined by Daniel Patrick Moynihan, in his 1965 report on the crisis of the black family in America.20 Moynihan warned that family breakdown and its ramifications—illegitimacy, broken homes, absent fathers, welfare dependence, and more—were undermining social and economic progress for black Americans and would limit the gains that civil rights reforms seemed to promise.

What he could not have known back then was that the turmoil evident in black families in the 1960s would be a leading indicator for the rest of the population—a prefiguration of the trends that would lie in store for citizens with no such legacy of race-based mistreatment.

That same tangle of pathologies is rampant nowadays in 99 percent nonblack New Hampshire, where a third of births are out of wedlock, 26 percent of children live in single-parent homes, and 35 percent of children live in homes receiving at least one means-tested benefit. Even predominantly Mormon Utah, likewise 99 percent nonblack, is no longer immune from these pathologies: Nearly one baby in five in the Beehive State is born to an unwed mother, and a quarter of the state’s children live in households that receive means-tested benefits. (See Figure 10.)

Figure 10. Comparison of Social and Economic Indicators: Maine, New Hampshire, and Utah, Pooled 2014–18

Source: Author’s calculations using Sarah Flood et al., Integrated Public Use Microdata Series, Current Population Survey, Version 7.0,; Joyce A. Martin et al., “Births: Final Data for 2018,” National Vital Statistics Reports 68, no. 13 (November 2019): 1–47,; Joyce A. Martin et al., “Births: Final Data for 2017,” National Vital Statistics Reports 67, no. 8 (2018): 1–50,; Joyce A. Martin et al., “Births: Final Data for 2016,” National Vital Statistics Reports 67, no. 1 (January 2018): 1–55,; Joyce A. Martin et al., “Births: Final Data for 2015,” National Vital Statistics Reports 66, no. 1 (January 2017): 1,; and Brady E. Hamilton et al., “Births: Final Data for 2014,” National Vital Statistics Reports 64, no. 12 (December 2015): 1–64,

Worklessness and crime also figure in the modern American tangle. Back in 1965, one in eight prime-age black men was not holding down a job; in 2019, in a supposedly booming economy, the corresponding rate for American men of all ethnicities was even higher. By 2010, nearly 20 million Americans had a felony conviction in their past21: Every eighth man in America was an ex-con by then. And by 2018, over 110 million American adults—over two-fifths—had criminal-arrest records, according to figures from the Bureau of Justice Statistics.22

Politics has also played its role in this tangle. When postwar economic growth began its long slowdown, America in effect entered a new social compact with the poorer half of its people. We tried to buy social peace by underwriting further improvements in how the other half lives—but through welfare and debt. The truth is that this approach enjoyed deep bipartisan support; that fact accounts for its endurance.

Between 1985 and 2016, according to the Census Bureau’s Survey of Income and Program Participation (SIPP), the share of Americans in homes depending on means-tested benefits more than doubled, vaulting from 15 percent to 36 percent. Over those decades, according to SIPP, America’s means-tested population nearly tripled, shooting up by 79 million, even though total US population grew by just 85 million over those same years. And the SIPP figures may be underestimates.23

The relentless increase in social-welfare recipience also transformed the face of dependency in modern America. These programs are no longer just for struggling women and children. Grown men in the prime of life, ordinarily society’s providers, are now a major constituency for need-based public aid.

According to the Census Bureau’s Annual Social and Economic Supplement (ASEC) to the Current Population Survey, something like 30 percent of America’s prime-age men of the civilian noninstitutional population are now in homes that seek and accept disability payments, means-tested benefits, or both. And this high rate of dependency is not solely due to programs supporting the needs of children living under the same roof as the aforesaid men. In 2021, according to ASEC, nearly one in five households with prime-age men but no children was likewise dependent on disability, welfare, or both. And ASEC, remember, is notorious for its underreporting of such public benefits.24 (See Figure 11.)

Figure 11. Prime-Age Men Receiving Means-Tested Assistance

Panel A. Percentage of Prime-Age Men in Households Receiving Means-Tested Assistance: Census ASEC

Panel B. Percentage of Households with Zero Children and at Least One Prime-Age Man That Received Means-Tested Assistance: Census ASEC

Note: Means-tested programs included energy subsidies; Supplemental Nutrition Assistance Program; Special Supplemental Nutrition Program for Women, Infants, and Children; Temporary Assistance for Needy Families; rent subsidies; free lunches; Medicaid; and Supplemental Security Income. This figure accounts for ASEC-weighted individuals and households. Source: Sarah Flood et al., Integrated Public Use Microdata Series, Current Population Survey, Version 9.0, 2021,

Yet curiously, in all the commentary on the factors threatening the American middle class, rising welfare dependence is almost never mentioned. Quite the contrary—to much of the commentariat, the unaddressed danger to the middle class is of the need for even more government benefits!

As the lower half of the income scale became increasingly dependent on means-tested public largesse (and such spending now averages around $6,000 per recipient), their personal finances also grew strangely precarious, as moral hazard theory might predict of government-welfare programs.

Nearly three in eight American homes today are rentals, and most renters find themselves all too near a hand-to-mouth existence. In 2019, on the eve of the COVID-19 pandemic, half of all renters had a net worth of under $6,500—and not because they were all newly minted PhDs awaiting their first big job.25 Half of renters 55 and older had less than $7,000 to their name. An astonishing half of all female-headed renter families reportedly had barely $2,000 in net worth in 2019.26

Moreover, the bottom half in America, renters and homeowners alike, saw their households’ mean net worth fall sharply between 1989 and 2016—by at least 38 percent and perhaps even more, depending on which measure of inflation one prefers.27 Over those years, personal debts and loans ate away the net worth of Americans in the lower half.28 Not until late 2019 did real mean net worth for this group of Americans finally claw its way back to the level attained 30 years earlier—that is, just before the fall of the Berlin Wall and the end of the Cold War.29

But our social enervation and increasingly fragile finances (both private and public) also find an echo in our national economy, in which dynamism seems to be steadily ebbing. True: America’s top corporations are world-beaters, still best in class and the envy of regulators in other lands. Our trillion-dollar gladiators cast a long shadow. Maybe that is why we don’t always notice what is going on in the rest of the private-sector arena.

Simply put, there is less creative destruction, the lifeblood of free enterprise. The ratio of new startups to existing businesses has been falling for over 40 years—for as long as we have been keeping such records, in fact.30Accompanying the decline of American “garage entrepreneurialism” was a drop in labor market churn—switching jobs.31 (Currently, with the so-called Great Resignation, we observe a pause in the downward trend in job churn; how long the hiatus will last remains to be seen.) Overall, residential mobility in America is at an all-time low: Americans today are less than half as likely to move as in the early 1980s32—yet another warning sign of gradual hardening in America’s entrepreneurial arteries.

Structurally, American business is increasingly gray and top-heavy, dominated by larger, older corporations with easy access to capital at highly favorable rates that smaller businesses cannot obtain, aided by fixers and regulatory counsel smaller firms can’t afford. By some important yardsticks, we see increasing market concentration and decreasing knowledge diffusion—more laggards falling behind on the learning curve.33 This is not a recipe for healthy improvements in productivity. It should not be a surprise that the decade of recovery from the Great Recession was the weakest snapback ever recorded for the American economy.

Thus, as we look beyond COVID-19, the arithmetic for US economic growth may be increasingly troublesome. The problem signs are both social and institutional.

Over the long run, economic progress in a modern economy depends greatly on human resources and business climate. Yet over the past generation, despite our unaccountably expensive health care system, health progress has been agonizingly slow: barely one extra year of life expectancy per decade. From 2014 through 2017, the US actually suffered slight, continuing declines in life expectancy,34 partly because of white America’s opioid crisis.35 With the pandemic’s impact, moreover, US life expectancy at birth fell sharply36—back to levels last seen in the previous century and roughly five years below other advanced Western democracies.37

After leading the world in educational advance for the century following the Civil War,38 America’s progress in attainment suddenly threw a gear; for more than a generation it has been limping along at barely a third of its historical pace, as others surpass us in mean years of education. (See Figure 12.)

And while some appreciate the tax cuts, it is hard to argue that America’s business climate overall has improved thus far in the 21st century. To the contrary: Although subjective, such varied measures as the Cato Institute’s Economic Freedom in the World,39 the Heritage Foundation’s Index of Economic Freedom,40 Transparency International’s Corruption Perceptions Index,41 and even the World Bank’s Ease of Doing Business Index42 all show some drop in US ratings and rankings for quality of institutions and policies over the past two decades.

These trends influence long-term economic performance. Unless they change, the US is in danger of an unexpectedly weak recovery from the COVID-19 crisis, followed by a run of much slower economic growth than Americans were long accustomed to. We could find ourselves drawn closer and closer to our own form of Japanification—a version, for reasons already mentioned, quite possibly much more unpleasant than the Japanese original. If we are to redeem the promise of the American future, we need to be thinking right now about how to achieve escape velocity from a future of stagnation and dependence.

Figure 12. Mean Years of Schooling by Age Group: Americans Age 25–64, 1962–2021

Note: Fitted data are based on trends between 1962 (the first year for which census microdata are available from IPUMS) and 1980. Source: Sarah Flood et al., Integrated Public Use Microdata Series, Current Population Survey, Version 8.0, 2020,

Toward Prosperity and Self-Reliance for All

Revitalizing America requires a vision of where we want to take our nation tomorrow. We can describe that objective—and identify some of the tasks on the road before us—clearly enough today.

We can imagine a more dynamic, rapidly advancing, and self-reliant America: an America that can generate prosperity for all, one with more freedom and stronger families and communities, and one in which our people are less weighed down by government debt, less dependent on infantilizing state handouts, and more fully in charge of their own pursuit of happiness.

And we can identify the tasks before us in getting there.

The Arithmetic of Revitalization. The arithmetic of American revitalization depends, first and foremost, on a sustained upswing in national productivity. As we have seen, US economic performance has been ever anemic in the decades leading up to our current crisis.

We already know the main elements required for restoring rapid productivity growth in America. We need more and better research, both public and private. Like any resource, funds for research and development (R&D) can be squandered if they are not used wisely. But in a revitalizing America, we would be investing much more heavily in this aspect of America’s future than we do today. Israel, South Korea, Taiwan, and even Sweden: All now devote more of their economies to R&D than America does.43 We used to lead the world in this—and we should want to again.

We need more and better education and training for Americans from all backgrounds—again, much more. By “education and training,” I mean actual knowledge and skills—not indoctrination or ideologized cant passing as learning. As noted already, over the past four decades, America has been stricken by a strangely unexamined slowdown in educational-attainment advance. If we had only maintained our previous tempo of long-term advance, our working-age population today would average about two additional years of schooling—even more for younger adults.

Rough rules of thumb suggest these educational shortfalls have lowered current US output by many trillions of dollars. And that slowdown in educational progress has not only depressed our national income but also skewed the distribution of opportunities unforgivingly. In what economists call America’s “race between education and technology,”44 lagging education makes for labor displacement, with flagging wages for the less skilled to boot. Should we really be surprised by what has happened to our nation’s employment and earnings profiles since our great slowdown in educational progress set in? More and better education applied across the US population will help generate better wages, especially at the bottom; increased opportunity; and that welcome, vibrant churn once again.

Then there is America’s other big innovation problem: the sclerosis, complacency, and rent-seeking in our private sector, especially in big business. America cannot succeed unless a lot of its firms fail—including some of its largest ones. Bankruptcy and reallocation of resources to more productive ends are the mother’s milk of dynamic growth in a competitive market. There should be no room for corporate welfare in a revitalized America. Bring on the “zombie apocalypse” in our corporate sector. We will not only survive it; we will thrive by it. (Let’s also save some creative destruction for those increasingly essential but bloated government-dominated sectors, health and education.)

Rolling Back Welfare Dependence. A revitalized America must offer a pathway from dependence back to self-reliance for individuals and families. This will of course be easiest with dynamic growth, but in any case, it will require rethinking our sprawling and largely dysfunctional social-welfare system.

To the fullest extent possible, American social-welfare arrangements should be reconfigured based on a work-first principle, with active employment or job seeking conditioning other benefits. The concept of a living wage for working families is worth exploring as well. Of course, a panoply of unintended consequences could attend subsidizing employment, so reorientation to a work-first principle bears careful consideration. This will unavoidably create problems of its own, but if we pursue this policy correctly, we will likely be trading a larger set of problems for a decidedly smaller set.

Demographic Revitalization. This brings us to demography, the vital factor that may spare us the plight of a shrinking, atomized society. Perhaps the two most important demographic questions for a revitalized America concern family and immigration.

Family is the basic building block of our society and our nation, so the health of our country depends on the health of our families. Without presuming the Solomonic acumen to judge any single family situation or circumstance, we can nonetheless confidently prefer more intact families to fewer of them; more rather than fewer lasting, committed marriages; more rather than fewer children born within marriages; and more time at home, not less, for parents with their children.

We also know that strong bonds of kinship are the very first safety net our species developed. Weak and fractured families spawn big national welfare systems. More than a century of modern social policy has demonstrated that the state is a highly imperfect substitute for the father and is even more misbegotten when attempting to step in as mother. Our public policies should reflect these realities.

Then there is immigration. Immigrants have been a great blessing for our country. Current and future immigrants should play an important role in revitalizing America. People who risk everything to come here to start a new life embody the American spirit; that is why immigrants generally make such great Americans. And the magic of the American ethos seems especially suited to making loyal and productive citizens out of these newcomers.

There is an argument for favoring highly skilled immigrants in the future, and it has merit. But the grit, drive, and family values of immigrants with little formal education should have a place in our country too. Such strivers and their children make us more dynamic, for talent and entrepreneurialism do not always come with academic credentials.

Yet we must not forget this important proviso: Globalization should work for Americans—not the other way around. That holds for immigration. Our national sovereignty is nonnegotiable. We get to choose who is invited to join in our American experiment—no one else. My own preference is for fairly high immigration quotas. But whatever the level, immigration to our country should be legal immigration.

Illegal immigration is not only an affront to our rule of law; it is an affront to our democracy because it circumvents the people’s will. If our immigration process is badly broken, as almost all agree it is, we should fix it; that is what competent democracies do.

Wealth for All. A key indicator for our national revitalization will be wealth trends for the lower half in our society. We should want to see their net worth growing—in fact, growing a good deal faster than for the country as a whole.

And by wealth, we should mean private assets in their own immediate possession—things such as bank accounts, homes, college funds, and retirement accounts. A neoclassical economist can make the case that payouts from our national social-insurance system—Social Security—should be counted as wealth for these families, and the argument is theoretically unassailable. But some take this to mean we should not worry so much about tangible private assets for the less well-to-do. If we took this logic to its conclusion, we would be counting the net present value of expected future food-stamp use as wealth too. There is a world of difference between a monthly check from the government and a lump sum you put together through managing your own affairs. A free people deserve better than a life on allowance money and a debit card.

A revitalized America can provide the framework in which everyone can build their own wealth—with the help of more work, better wages, more two-parent families, and constantly improving opportunities and skills. But personal responsibility is the other element. Financial discipline, thrift, and other money habits determine a family’s savings, and consistently accumulated savings are indispensable to personal wealth. And as a practical matter, family stability is terribly important to a household’s wealth outlook. The struggle to save and get ahead is so much harder in homes with just one parent. Even in a revitalized America, that reality is not going to change.

The Macroeconomics of Revitalization. If America is to revitalize, then our government will need to adopt budget discipline. To be sure: There is a respectable Keynesian case for running big deficits in bad times and emergencies, just as there are special times when a family may need to live beyond its means. But unlike John Maynard Keynes, who said government should run surpluses in good times to balance out the deficits in bad times, we seem to find an excuse every year to spend more than we bring in. If we treat each and every new fiscal year as if it is an emergency, the prophecy will become self-fulfilling. The path to Japanification is paved with high budget deficits and unnaturally low interest rates.

If we revitalize America, ours will be a future of positive interest rates and low or negative net budget deficits. Taxes will have to be higher, too, for at least a generation, since in a revitalized America we will cease spending our children’s inheritance. But future generations will thank us for this—and if we attain dynamic growth, then the tax bite shouldn’t sting quite as much.

Concluding Observations

Lest it go unsaid: Revitalizing America will take more than a trustworthy policy playbook, essential as that ingredient may be. It will rely crucially on the fabric and integrity of our civil society and the moral sentiment of our population—essential qualities largely beyond the reach of the ameliorative state, and deliberately so in the case of our own American experiment in limited constitutional governance.

Lately our civil society and our nation’s moral sentiments have been under strain. Confidence in our institutions has ebbed. Distrust of fellow Americans is on the rise. Elite circles wonder, increasingly aloud, whether our American civilization—traditions, ethos, ideals—are actually worthy of them. They might be better served wondering a bit more whether they are worthy of the remarkable system they have inherited. More often than not, it is ignorance of the US political tradition and our fellow citizens—not familiarity with them—that breeds such contempt.

A bright thread running throughout the American story—thanks in no small part to the genius in the political design of the US—is the nation’s resilience in the face of setbacks and adversity. Again and again our country has demonstrated its capacity to mend its flaws, rebound, and flourish.

Yet another revitalization of our nation is within grasp now. All we need for it to unfold is for Americans to determine this will take place—and to resolve to bring it about, together.


Evan Abramsky and Peter Van Ness provided valuable research assistance for this chapter.