Economic Growth

The rise of America’s debt culture has fueled impressive levels of consumption but proven to be unsustainable. Combined with poor oversight of risky credit products, including mortgages and credit cards, it played a role in the advent of the Great Recession. A group of scholars have been convened by the Institute for American Values to consider the question of what comes next. What’s the upside to welcoming the return of a culture of thrift?

In their new report, they remind us that “thrift is the ethic of wise use. The root of thrift is thrive.” There are some values at play here, such as industry, frugality, and stewardship, which may generate collective benefits if adopted widely. As the authors of the report write:

Indeed, for much of our history, thrift has provided a way forward for aspiring Americans of every rank and description. It has pointed the way to saving and security… It has urged us all to conserve, repurpose, save, act as good stewards of small amounts and sums, and protect our natural environment… For generations, thrift was a core value in creating a wiser citizenry and a more broadly shared prosperity.

In making the case for thrift, the report lays out 20 propositions that paint the picture of what a new thrift culture can do for our families, our neighborhoods, our economy, and our planet. Here they are below in brief, but check out the book for a fuller discussion and be sure to glance at the long and diverse list of signatories (of which I am but one).

The last 30 years have witnessed the era of globalization which has been marked by the creation of an integrated global economy. Globalization has been the product of both policy and market forces, and U.S. policymakers have persistently been in the vanguard. However, what began as a project of globalization has been transformed with little explicit public discussion into a project of China-centric globalization.

Is America in decline? Is our global influence waning?

Expect that question to get plenty of airtime as the presidential campaign heats up. According to the Republicans, President Obama's fundamental foreign policy problem is that he thinks America is a fading power and all we can hope for is to "manage the decline."

For the past several years, Italy under Prime Minister Silvio Berlusconi resembled a political comic opera, with a larger-than-life character of ravenous appetites and tragic hubris. But the recent "political death" of Mr Berlusconi represents only the end of Act One. Two more acts remain, and this drama could turn from comedy to tragedy quickly.

There are many reasons why America’s system of economic security is not working. Chief among them is a common factor in almost all of our social policies: they are designed with the assumption that people are constantly employed. For example, most social insurance programs, from Social Security to Unemployment Insurance to Medicare, require people to build up years of contributions before they can access benefits.¹

In his January 2012 State of the Union address, President Barack Obama called for cutting taxes for companies that produce in the United States, especially high-tech manufacturers. He proposed eliminating deductions for firms that move jobs abroad. And he suggested a minimum tax on all multinational corporations.

Fear, in any real market, is a natural emotion. There is the fear of not making a sale, not landing a job, not winning a client. Such fear is healthy, even constructive. It prods us to polish our wares, to refine our skills, and to conjure up -- every so often -- a wonder. But these days, we see a different kind of fear in the eyes of America’s entrepreneurs and professionals.

President Obama used his State of the Union address to argue that rising levels of inequality are undercutting the promise of America. He said “we can either settle for a country where a shrinking number of people do really well while a growing number of Americans barely get by, or we can restore an economy where everyone gets a fair shot, and everyone does their fair share, and everyone plays by the same set of rules.” The concrete proposal was modest tax reform. It’s not fair that Warren Buffet and Mitt Romney have tax rates half the size of the people that work for them. True enough. CEO pay has skyrocketed as average wages have fallen. But there’s actually much more at stake and a need for a larger policy response.

The growing concentration of wealth is bad for our democracy. It tips the playing field and leads to monopoly power cuts off competition and short-circuits innovation. It also means there are fewer resources available for everybody else to deploy, which makes it harder for striving families to move up the economic ladder. Upward mobility in America is too limited, and is lower than it is in other developed countries. It is particularly difficult for those born into families living in poverty. A poor child has a less than one-in-five chance of ending up in the top 40% of earners (roughly $50,000). Obama missed a chance to articulate a policy agenda focused on helping people move up and out of poverty. Access to a good education and good jobs is a start, but it isn’t enough. To make the upward climb, we know that families must be able to save and build up some pools of assets. This is because savings can help families cope with unexpected hardship, such as a job loss or illness, or be strategically deployed to pay for educational or training opportunities. Savings are a foundation for economic mobility and the President should have identified a set of policies that would help families save for their future.

Any renaissance of American manufacturing must begin by fundamentally reversing our trade policies—both in general and in particular toward China. Over the past two decades, leading U.S. manufacturers, both the venerable (like General Electric) and the new (like Apple), have offshored millions of jobs—by one recent estimate, 2.9 million—to China to take advantage of the cheap labor, generous state subsidies, and low currency valuation that are linchpins of China’s mercantilist development strategy.