Corporate profits are setting records. Companies hold mountains of cash. Private-sector output is growing 3 percent per year, in line with historic norms.
But jobs? The middling July numbers warn that it’s likely another half decade before the U.S. returns to full employment. How about prospects for a raise? Make us laugh. The future? Scary. The panic of 2008 has subsided, replaced by an ambient anxiety.
Crushed by debt, American households can’t afford to buy enough to put everyone to work. Even when households can afford to buy more, they are often buying products made by Chinese and Indian workers who work very nearly as well as Americans for a lot less pay. All of us are left to wonder: What happens to me in this new world? When can I retire? Where do I put what’s left of my savings? Will Medicare still exist when I need it?
In this election year, both presidential candidates are competing to offer a response to the anxious mood. President Obama urges Americans to put their trust in more and bigger government. In an important speech in Kansas last year, the president defined his vision for the American middle class: more government employment, more government contracting to stabilize employment in the private sector, and higher taxes on wealthier Americans to pay for it all.
Challenger Mitt Romney has not been so explicit, but his message is equally clear: don’t fight anxiety—embrace it. Medicare will become a voucher for Americans under 55. Medicaid and other social programs will radically shrink. Restrictions on the financial industry will be rolled back. Even less will be guaranteed than today—in the hope of unleashing pent-up dynamism.
About 46 percent of the country rejects the Obama approach. Another 46 percent rejects the Romney proposal. There’s not much enthusiasm anywhere for either. Four years ago, Americans looked to politics for “hope” and “change.” Today’s mood is bleaker. The incumbent seems defeated by the nation’s worries. The challenger seems indifferent to them. Altogether, the political system seems overwhelmed.
Fewer than one third of Americans believe the country is on the right track. Suicides are up; birth rates are down. Business leaders say they can’t hire because they feel so uncertain about future government regulation; consumers won’t buy because they feel so uncertain about their future incomes.
In past periods of economic distress—the 1890s and 1930s—Americans protested in the streets. Not this time. Occupy Wall Street has gone home. The Tea Party has been absorbed into the Republican Party. Today, Americans have been left to face their worries alone.
Perpetually Deferred Retirement
Rich or poor, we all get old-and then older still. If an American lives to age 65, he or she can expect to live nearly 20 years more. Which is great, provided the money lasts.
Yet even as Americans have lived longer, they have become less zealous about saving for the future. They counted instead on gains from stocks and houses to top up their Social Security benefits. Those gains have vanished-or turned into losses. Nearly half of workers say they have less than $25,000 in savings. Two thirds of workers worry that they won't be able to pay their bills on time.
No wonder, then, that people in their 60s are postponing retirement when they can. "Sixty-eight is becoming the new 65," according to one financial planner in New York City. The human-resources consulting firm Towers Watson has found that 39 percent of workers near retirement intend to delay it by at least three years.
Unfortunately, postponement is easier said than done in the weakest job market since the 1930s. Even Walmart is getting rid of its famous retiree greeters (typically by assigning them new and more physically demanding duties). The companies most hospitable to older workers, meanwhile, tend to be the weakest companies: Eastman Kodak, American Airlines.
Regardless, three more years of work is unlikely to cover the rising cost of retirements that can last decades. Getting old is very expensive: in only the five years from 2007 to 2012, the median cost of a year of nursing-home care jumped from $65,700 to more than $81,000. Medicare does not cover nursing-home care, and while Medicaid does, Washington, D.C., is abuzz with plans to squeeze spending on this program for the poor.
Ominously, as government prepares to shrink expenditures on aging boomers, the evidence is accumulating that they will need extra help. Physically and psychologically, the baby boomers are in worse shape than the generation immediately above them: Only 27 percent of the people born between 1946 and 1964 are of normal weight. One third are obese-compared with only one quarter of the "silent generation," those born between 1929 and 1945.
Emotionally, too, the boomers' future looks frightening. Already one in three is unmarried-because they've been divorced, become widows, or never tied the knot in the first place. Meanwhile, because male longevity is improving slower than female longevity, we will soon see large growth in the population of boomer widows throughout the country.
The Unsustainable State
Who will look out for the boomers?
Big government? Not likely.
State and local governments are already shrinking. California alone has laid off 32,000 teachers, 11 percent of its teaching force. Altogether, America's state and local governments have dismissed more than 500,000 employees since 2009.
The federal government has thus far been exempt from the shrinkage, but that will likely soon change, too. Medicare and Medicaid are already looking unsustainable-and we are only at the very beginning of the retirement of the boomers. "If something cannot continue," quipped the economist Herb Stein, "it will stop."
In the past, rapid economic growth enabled Americans to honor commitments that looked impossible at the time. The debt from World War II was paid down in a single generation, at the same time as the interstate highways were built, a man sent to the moon, and a war waged in Vietnam.
This time, though, the road ahead seems to point to hugely rising expenses for boomer retirement at the same time as economic growth slows. Forecasters predict a half-decade or more of slow growth partly because of the crushing burden of debt on consumers and workers, partly because of the bad news besetting the European and Chinese economies, and largely because the future American workforce will be older, slower growing, and less skilled than the workforces of the recent past.
In fact, Educational Testing Service, the company that runs the SAT, issued a major report in 2007 warning that the future U.S. will experience an outright decline in both math skills and English literacy by the 2030s.
Demographic change at home unnerves Americans, too. While the immigrants of the 1950s and 1960s arrived with more skills than the native-born, post-1970 immigrants from Latin America have arrived with fewer skills. Even three and four generations later, the children and grandchildren of the post-1970 immigration wave are not catching up.
Latinos have already overtaken blacks as the country's largest non-European minority. The U.S. is fast becoming a country in which whites are no longer a majority. Majorities of both blacks and whites tell pollsters that these "trends are troubling," are "happening too quickly," and are fundamentally changing the nation's "character and values."
African-Americans fear that ethnic change is reviving antique prejudices that seemed to be fading away. Isabel Wilkerson, a leading historian of race relations, recently described in The New York Times a Duke University survey of racial attitudes in Durham, N.C. The study found that while only 10 percent of Durham's whites harbored malign stereotypes about blacks, 60 percent of Durham's Hispanics did so.
Native-born whites who are anxious about the pace of racial change are also gripped by pessimism about their personal situations. As Ron Brownstein has reported for the National Journal: "Whites uneasy with the transformation are almost twice as likely as those comfortable with it to say they have less opportunity than their parents did ... More than three-fifths of uneasy whites said they disapprove of Obama's job performance ... A majority of the uneasy whites said that the president's program is reducing opportunity for people like them."
The Young and Poor
It's the youngest and poorest who have the most to worry about. Families headed by people under 35 are almost 70 percent poorer today, adjusting for inflation, than they were in 1984. The causes: lower wages, more expen-sive housing, and student debt.
In 2010, students who borrowed to finance their education graduated with an average debt of $25,250. (This figure, calculated by the Project on Student Debt, omits both the affluent few who did not need to borrow-and the unlucky many who attended for-profit schools and ended up owing much more.)
Students borrow in the hope that a college degree will guarantee a good job. But the unemployment rate for new college graduates reached 9.1 percent in 2010, the highest since record-keeping began. And even those who do find work will have trouble servicing their debts. Between 2000 and 2005-well before the economic crisis-the average wage for college graduates actually declined. That's why some of the young have begun to wonder if they're borrowing to gain a worthless credential.
Of course, two thirds of American young people do not complete college, a rate that has barely changed in 30 years. (Once No. 1, America now ranks 12th in the world for college completion.) Those nongraduates face an even grimmer future than the college educated. Those who start college but do not finish end up in debt but with no degree, and have about the same (high) odds of unemployment as those who settled for a high-school diploma.
For high-school graduates, the situation is truly dire. They earn less, in nominal dollars, than their counterparts of 40 years ago. They are far less likely to be protected by health insurance. Their chances of marrying, staying married, and being happy within marriage have all collapsed compared with a generation ago.
As the families of high-school graduates crumble, their children's opportunities dwindle. Back in the 1970s, families of all educational levels spent roughly equal time interacting with their children. No longer. College-educated parents invest more time than high-school-only parents, with the gap yawning widest in the child's first year, which can lead to a lag in achievement down the road.
That's in part why the chances that an American son will rise to a higher social level than his father have dropped by nearly half since 1980. A child born poor is more likely to escape poverty in socialist France than the United States.
Poorer Americans may not know these numbers, but they feel the doors of opportunity closing. Nearly one half of white Americans without a college degree expect to see no improvement in their lives over the next 10 years. Only one third expect their children to live better than they do.
The Ordinary Rich
Obviously, it's better to be rich than poor. Yet times are desperately uneasy even among the maids-and-gardeners set. The trend toward economic oligarchy is every bit as visible inside the top 1 percent as it in the nation as a whole. The top 1 percent of the top 1 percent are pulling away from the merely ordinarily rich even faster than the top 1 percent are pulling away from American society as a whole.
In the single year 2010, the top 1percent scored an 11.6percent increase in their earnings. Nice! But the top 1percent of the top 1percent gained 21.5percent-twice as much.
The ordinary rich, what you might call the lower upper class, is gripped by deep pessimism. Forty-eight percent of certified financial planners report that their typical client is "somewhat" or "very" pessimistic about the U.S. economy.
Here's why: ordinary rich people don't have access to ultrasophisticated investment vehicles. They save as middle-class savers do: in real estate, stocks, and bonds. And since 1999, saving has paid poorly. Adjusting for inflation, the S&P 500 index still has not returned to its level of 2000. Small investors-and in modern finance, somebody with only a measly $1million or even $10million counts as a "small investor"-have seen themselves gouged and abused by a financial industry where everything from Libor to Facebook seems rigged in favor of an insider few.
A well-known book about Wall Street asked, "Where are the customers' yachts?" It's still a good question-and one that customers themselves are posing. Polls conducted by investment firms have discovered a collapse in investor confidence in the integrity of financial markets. As of the end of 2011, the total amount invested in mutual funds had not returned to precrisis levels, despite the recovery in stock prices. It doesn't help that studies find that portfolios owned by members of the House of Representatives outperform the market by 9percent a year, while senators' outperform by 12percent.
Those wealthier people who own and operate businesses worry about impending new rules and regulations. When the Affordable Care Act goes into full effect, they will face obligations to buy health insurance for their employees or else pay fines. The act promises health coverage for (almost) all, but it loads the costs upon the wealthiest few, with new taxes on investments and high incomes. That may explain why 53 percent of Americans earning more than $75,000 per year told the Gallup poll this spring that they expect to pay more in tax next year.
We fear above all what we do not know. In the past, there was one thing that Americans thought they knew for certain: tomorrow would be better than today. Now? Americans are no longer so sure.
Economic crises accelerate change. Many economists point to the 1930s as the single most innovative decade of the 20th century. The first freeway was built, ditto the first shopping center. Television was invented. The passenger aviation industry was born. Those were the years when postwar America took shape.
Many today fear that a new America is being shaped in this economic crisis-an America in which only a talented and fortunate few will find opportunities on a global scale, while the working many will experience a long slow decline in their living standards and life chances. Many fear that the days when it meant something special to be an American are drawing to a close.
In 1959, during the golden age of the American middle class, bestselling writer Allen Drury set the scene for his novel Advise and Consent by describing a world that "had seen America rise and rise and rise, some sort of golden legend to her own people, some sort of impossible fantasy to others ..."
This is the fear that haunts us now, the worry above all worries: Has the golden legend of America-the constantly renewed promise of a better economic future for its citizens-finally reached an end? And if so, what alternative future awaits us?