How Our American Dream Unraveled

The Age of Entitlement
If you grew up in the 1950s, you were constantly treated to the marvels of the time. At school, you were vaccinated against polio, until then a dread disease. At home, you watched television. Every so often, you looked up into the sky and saw the white vapor trails of a new jet. You stared until the plane vanished. There was an endless array of new gadgets and machines. No problem seemed beyond solution. Good times and the power of American technology: these were not lessons learned, they were experiences absorbed. You took prosperity for granted, and so, increasingly, did other Americans. Thus quietly began the Age of Entitlement. We came to believe that prosperity was inevitable-and that it would automatically create the Good Society. On these two pillars of faith rested our national identity and hopes for the future.

Every age has its illusions. Ours has been this fervent belief in the power of prosperity. Our pillars of faith are now crashing about us. We are discovering that we cannot, as we had once supposed, create prosperity at will. We still remain prey to the economy's euphoric expansions and dispiriting declines. Worse, we are learning that even great amounts of prosperity won't solve all our social problems. Our Good Society is disfigured by huge blemishes: entrenched poverty, persistent racial tension, the breakdown of the family and staggering budget deficits. We are being rudely disabused of our vision of the future. The result is a deep crisis of spirit that fuels Americans' growing self-doubts, cynicism with politics and confusion about our global role.

Our crisis of faith has been building since the late 1960s, when the automatic advance of prosperity became less automatic. The Gallup poll regularly asks whether Americans are satisfied with "the way things are going in the United States." In the past decade a majority of respondents has said "no" two thirds of the time (page 33). In a sense, this is what the New Hampshire primary was about. The outcome was less a triumph for any candidate than evidence of pervasive uneasiness. Pat Buchanan's strong showing was a protest vote that blamed the nation's ills on government. Democrat Paul Tsongas's victory provides a hint that Americans yearn to be told the truth. But do they really? For the message is inevitably sobering. It is that we require sacrifice in government-fewer benefits or higher taxes-and that popular expectations have grown wildly unrealistic.

"Entitlement" (a postwar term) best captures what we have expected. We have felt entitled to a great deal: secure jobs, rising living standards, global economic preeminence, a clean environment and much more. Through effortless economic growth, we could shape and control our future. We felt entitled to entitlement. The sense of struggle that always characterized American life would gradually disappear. We would be shielded from anxiety and uncertainty. Well, we aren't. Our expansive notion of entitlement grew increasingly romantic and unrealistic. But we still feel embittered and confused that it hasn't materialized.

It is not that the economy has permanently stagnated or that life for most Americans is miserable. Quite the opposite. The long economic expansion of the 1980s, despite obvious flaws (too much debt, for example), was real. Even with a recession, the economy's output was 28 percent larger in 1991 than in 1980. In many respects, we have achieved the American Dream since World War II. Family incomes have roughly doubled. The quality of life has improved in countless ways, from better health care to earlier retirement. Most Americans aren't affected by our most publicized national ills. They aren't unemployed. They don't face staggering health bills (about 87 percent had health insurance in 1989). They aren't victims of violent crime.

Indeed, most Americans remain personally content. The Gallup poll also asks whether people are satisfied with their own lives. Four fifths of respondents routinely say "yes." What connects high personal satisfaction and low national confidence-an apparent contradiction-is growing fear for the future. Life is OK today, but will it be tomorrow? Americans believe that upward mobility is our birthright. More than 90 percent of us place ourselves somewhere in the middle class (page 34). The "middle-class way of life" promises the opportunity to get ahead and the security to raise families and find self-fulfillment. Now these ordinary ambitions seem increasingly threatened.

Superficially, the cause of our discontent is clear. We simply don't have enough prosperity. Productivity growth-improved efficiency, which is the basic source of greater national wealth-has slowed dramatically. From 1947 to 1970, it increased nearly 3 percent annually. Since then, growth has averaged only about 1 percent. Presto: we can no longer satisfy all our wants, from higher living standards to a stronger social safety net. Government seems overextended and Corporate America seems "uncompetitive. " When blue-chip companies (General Motors, Citicorp, AT&T) lay off career workers, everyone worries more about job security. Flagging prosperity implies less opportunity and more insecurity.

Up to a point, our anxieties do stem from slower economic growth. But the deeper (and less palatable) truth is that prosperity could never satisfy all our expectations. It is not quite the social stabilizer that we thought. Economic growth-the creation of new industries and technologies-can be disruptive. It abets insecurity and creates new global and domestic competition. It also spawns excesses-overinvestment, too much borrowing or speculation-that bring recessions. Finally, some social problems (crime, for instance) are beyond prosperity's power to cure. Our faith in prosperity was an infatuation, and, like all infatuations, we were seduced by its pleasures and blinded to its shortcomings.

The Age of Entitlement is winding down. Eras end when popular assumptions shift about what is normal, possible and desirable. The Civil War settled the issues of slavery and survival of the union. The Great Depression enlarged the role of government. World War II ended U.S. isolationism. We are now undergoing a similar transformation. The two ideas that dominated the postwar era were our belief in prosperity and the crusade against communism. Both these bulwarks of popular consciousness are crumbling. We are being forced to face basic questions. What should America's role in the world be? What are the obligations and limits of government? And more important, what are the responsibilities-as well as the rights--of individuals and families?

This reappraisal is bound to be wrenching. Government can't work effectively without major changes in policies ranging from health care to student loans. But the changes will be difficult, precisely because the pursuit of prosperity has always been such a powerful bonding force in our politics. Chasing the American Dream is a religion that everyone can practice despite many different personal religions and backgrounds. What's ominous now is that its unifying power is fading even as others splintering conflicts--greater racial, ethnic and generational tensions-grow stronger. But to see where we might be going, we must first understand where we've been.

The Lessons of War
Our postwar vision was never laid out explicitly in a manifesto. But the type of society that Americans envisioned was no mystery. It featured a "mixed economy" of Big Business and Big Government. Guided by superior U.S. management, Big Business would produce a growing stream of national wealth. Enlightened companies would also embrace new standards of behavior. For their employees, they would provide secure jobs, satisfying work and generous fringe benefits. Big Government would stabilize the economy-avoid another depression-and ensure that the nation's wealth was produced and distributed in socially acceptable ways. Government would help the poor, the disabled and the elderly. It would protect against the adverse effects of free markets, from environmental damage to consumer deception.

This was also our vision for the world. The politics of prosperity was our cold-war strategy. We wanted to Americanize other nations: not colonize them but convert them to our way of thinking. Middle-class societies would not be seduced by communism or torn apart by class struggle. With rising incomes, everyone would benefit. Our military alliances were a subordinate part of this grand strategy. They would allow the basic strategy time to succeed. Free trade was part of the scheme, because it would foster prosperity and reduce nationalistic conflicts. Countries would be bound together by mutually advantageous trade. In this world, America would dominate. Our economy and democracy would set the standard against which other countries would measure themselves.

These ideas were embraced by most Americans. Gone (or muted was the old fear that Big Government or Big Business invariably impinged on individual liberty. Rather they were increasingly seen as essential to individual happiness. All this flowed from the Great Depression and World War II. They are a chasm in U.S. history. Both overwhelmed individuals. They tempered our traditional faith in self-reliance and a laissez-faire economy. In the 1930s, unemployment averaged 18 percent; even those with jobs were frightened. The war showed that isolationism was a failure. The lesson seemed to be that, at times, only big institutions could protect individuals.

People were acutely aware they couldn't control their own destinies. As a 22-year-old bombardier said in 1944: "The more I think about it-and I've thought about it a lot lately-the more it looks as if I've been a cog in one thing or another since the day I was born. Whenever I get set to do what I want to do, something a whole lot bigger than me comes along and shoves me back into place." The New Deal had not ended the Depression-in 1939, the jobless rate was still 17 percent-but the war seemed to demonstrate that government and private enterprise could collaborate for the common good. In the war, government agencies set production priorities and regulations. But private enterprise did the producing that made America "The Arsenal of Democracy."

So this became our postwar model: government would set national goals, and business would carry them out. People believed in the power of technology and the huge productivity of the U.S. corporation. The war also created a pervasive analogy for the post-war era--war itself. Having triumphed, Americans were tempted to see all societal problems as small wars. Problems could be surmounted with the proper strategy and tactics. The analogy was sometimes explicit (as with the 1960s' "war on poverty" or the 1980s' "war on drugs"). As problems arose, we would solve them: privately, if possible; publicly, if necessary. Our exertions (we thought) would create a utopian capitalism, which would have all the virtues of a free-market economy without its vices.

The March of Progress Falters
Our idea has, despite glaring shortcomings, worked splendidly for most Americans. This is not merely a commentary on the end of the cold war. It is a simple statement of fact about the vast improvement in economic well-being over the past 50 years-or 15 years. A lot of today's pessimism is faddish. Most of us aren't inexorably slipping backward. The pop theory that today's young won't live (in a material sense) as well as their parents is almost certainly wrong. As long as productivity rises modestly, Americans' material prosperity will gradually increase.

True, we aren't getting ahead as fast as before. But this is not the same as slipping backward. Between 1950 and 1970, median family income rose 89 percent. Since then, it's increased only 13 percent. That's still a rise of almost a seventh. About 31 percent of families now have incomes exceeding $50,000 (in 1990 dollars), up from 25 percent in 1980 and 19 percent in 1970. That's a 60 percent increase in two decades. Things that were hardly known in 1970 are commonplace: home computers, VCRs, microwave ovens. Nor do income gains merely reflect more wives in the work force; that accounts for less than a fifth of the gain of couples' incomes. Some theories about collapsing living standards are nutty. It's said that many of today's young won't become homeowners. Well, we still build more than 1 million new housing units a year, and who's going to live in all the old homes as people die? Indeed, low mortgage rates have now made housing more affordable than at any time since the 1970s.

What's also overlooked is the larger sweep of change. Even if living standards had stagnated, they're dramatically higher than a half century ago. Any nostalgia for prewar America is mostly misplaced. The country was poorer, and life was harder. In 1940, more than a fifth of the population still lived on farms, less than a third of the farms had electric lights and only a tenth had a flush toilet. Among all Americans, 56 percent were renters. More than half of the households didn't have a refrigerator, and 58 percent lacked central heating. Nearly half the labor force worked at grueling farm, factory, mining or construction jobs. Home life was demanding. The famous study by sociologists Robert and Helen Lynd of "Middletown" (Muncie, Ind.) in the 1920s found that wives in working-class families (about 70 percent of the total) were typically up by 6 a.m. to start cooking; 40 percent rose by 5 a.m.

Postwar suburbanization represented a huge leap in living standards for most Americans. It is not simply that they had better housing or that more Americans became homeowners-about 64 percent now, up from 44 percent before the war. The quality of everyday life was superior. "People who live in Southern California are not richer or better educated than those who live in New York City," the political scientist James Q. Wilson once wrote of the early California suburbs. "The significant point about them is that they don't live in New York and don't want to ... Given their income ... life would have been crowded, noisy, cold, threatening-in short, urban."

Life has gotten easier in countless other ways. Jet travel, air conditioning, interstate highways, direct long-distance dialing and television are all essentially postwar developments. Can anyone who doesn't live in Maine or Minnesota imagine summers without air conditioners? Antibiotics hardly existed before World War II, when penicillin was first mass-produced. They've cut infant mortality and made many formerly life-threatening ills--from pneumonia to postsurgical infections-survivable. Automatic washers and dryers, as well as dishwashers, have reduced housework. In 1940, hand-laundering was common; only about half of all households had access to cumbersome wringer-washers. Prewar privileges are now widely available. Almost everyone retires. Before the war, only the well-off or disabled did so. In 1945, about half the men over 65 still worked.

Beyond these gains, postwar society represents a major advance in three ways.

First, there's more economic stability. Yes, we still have recessions. There have been nine since World War II. But they are milder and less frequent. Since World War II, the economy has spent about a fifth of its time in recession. Before the war (and excluding the Great Depression), recessions occupied about two fifths of the time. The change reflects growth of the service sector (spending is more stable than for big-ticket items like cars), the abandonment of the gold standard in 1933 and government anti-recessionary policies. Compared with prewar America, job security has improved. The typical 45- to 54-year-old male worker has been with his current employer for 12 years.

Second is a drop in discrimination-racial, religious and sexual. School segregation was the law in the South until the Brown decision in 1954; the segregation of public facilities was legal until the Civil Rights Act of 1964. The first black basketball player didn't enter the NBA until 1950. The TV networks didn't hire their first African-American reporter until 1962. Anti-Semitism was widespread before World War II. Even in 1960, John Kennedy had to overcome prejudice against a Roman Catholic in the White House. Most jobs were sex-stereotyped until at least the 1960s. Although discrimination endures, it has declined dramatically.

Finally, the rise of the welfare state has alleviated suffering among the old and the poor. Even in 1960, all welfare spending-including programs such as social security-represented only about 10 percent of the economy's output. Now it is almost twice that. In 1988, 38 million Americans received social security, 20 million got food stamps and 24 million received Medicaid. The social safety net has huge holes (many of them growing), but we are a more compassionate society than we were 20 or 30 years ago.

But, of course, our success story is qualified. It has a darker side. Things have changed for the worse in the past 15 or 20 years. Slower economic growth has hurt. The general advance in prosperity hasn't been strong enough to neutralize setbacks for specific industries, localities or income groups. Particularly hard hit have been low-skilled workers, who have been hurt by foreign competition, immigration and harsher economic times. Wages have been depressed for those with the least to offer. Single-parent families have also fared poorly. Altogether, the share of families with incomes under $25,000 (in 1990 dollars) has declined only slightly, from 36.7 percent in 1970 to 33.3 percent in 1990. (Of these, 16.8 percent of families had incomes of less than $15,000 in 1990, almost the same as 1970's 17.7 percent.)

What's also been lost is the psychology of plenty. Here, much of the baby boomers and most younger Americans are worse off than the generation that lived through World War II. The pleasure of the early postwar decades was that people spent beyond their expectations. There-was more of everything, from housing to medical care, than people had anticipated. Now the reverse is true. Our needs constantly seem to outrun our incomes. Government deficits, soaring health costs and heavily indebted consumers all reflect the same squeeze. The expectation developed in the early postwar years was that incomes would rise enough to satisfy all new needs as they emerged. This hasn't happened. The war generation expected low living standards and was pleasantly surprised. The baby boomers expected astronomical living standards and were unpleasantly surprised.

The paradoxical result is that, although we have not become poorer, we have become overcommitted. Our societal shopping list constantly strains at our pocketbooks. The effect is particularly devastating in government. It expanded on the presumption that the economic pie would always grow rapidly. Government would merely distribute some of the greater national wealth. The polities were irresistible. No one would be worse off, and some people would be better off. But once the economic pie stopped growing so rapidly, the polities changed. Yesterday's promises often can't be satisfied from today's pie. Making someone better off may mean making someone else worse off. The potential for conflict is huge, because dependency on government has mushroomed. In 1991,47 percent of all households received some government income transfer, from social security to student loans to food stamps (page 39).

Prosperity was supposed to spare us agonizing choices. Put simply, it was our answer to almost any question. Government could be increasingly compassionate, because we could afford it. Corporate America could provide job security and generous fringe benefits, because we could afford it. We could champion free trade, because we could afford it. (Workers in uncompetitive industries would be quickly absorbed by expanding industries.) Prosperity would make us happier as well as richer. Liberated from material wants, we could find self-fulfillment. Domestic and international conflict would diminish, because prosperity would eliminate the root cause of conflict: poverty and human want. We took all this for granted, but mostly it was wishful thinking.

Prosperity's Broken Promise
What went wrong? Our biggest blunder was presuming that we could engineer uninterrupted prosperity. We were gulled by two pseudosciences: macroeconomics and modern management. The first promised that government (following the advice of economists) could virtually abolish business cycles. The second promised that corporations (following the precepts of modern management) could effortless increase the nation's wealth. The combination of macroeconomics and modern management would rid us of economic insecurity and material scarcity. The main social task would be to decide how best to use new wealth to improve our "quality of life." After the 1950s, politics focused increasingly on which mix of government intervention and market forces would work best to maximize growth and solve social problems-poverty, pollution or whatever.

The extravagant belief in these pseudosciences did much harm. Overconfidence bred poor economic policies and bad management. Government programs to spur growth--starting in the 1960s-increased inflation from 0.7 percent in 1959 to 13.5 percent in 1980. The loss of price stability was a titanic misstep. It abetted speculation, encouraged excessive borrowing and undermined the savings and loan and banking industries. Likewise, the cult of management hurt Corporate America. Executives took their superiority for granted and were done in by it. In many industries (autos, for example), They became inattentive to product quality, costs and innovation. Corporate down-sizing has been so harsh precisely because so many companies grew so bloated.

As we envisioned it, prosperity was a blissful state that had only winners and no losers. This, too, was an illusion. It ignored a huge contradiction: we wanted both economic growth and economic security, but the two are often incompatible. Economist Joseph Schumpeter (1883-1950) long ago pointed out that capitalism involves "creative destruction." Consider the steel industry. In 1960, it produced 99.3 million tons of steel with 577,100 workers. By 1990, it produced 98.9 million tons with 207,700 workers. Steel demand was stunted by the growth of plastics and aluminum. Smaller cars hurt. Imports intensified competitive pressures. Squeezed, companies got more efficient--or went bust. We wanted the greater productivity. But we didn't want the social havoc: steel communities were often devastated as old plants closed.

Steel's story has been repeated in many different ways. One effect is that Corporate America can't fulfill all our expectations. Companies were supposed to be both prodigious producers and reliable welfare states, providing job security and welfare benefits (health insurance, pensions). But these roles often collide. To survive as producers, companies sometimes shirk their welfare responsibilities. Factories are shut, jobs cut, benefits shaved. Since 1979, the share of workers whose employers offer pension plans has slipped from 61 to 55 percent. The security that Americans expected from major companies is evaporating. Many venerable firms (Pan Am, Gulf Oil) have vanished.

In general, prosperity has been more chaotic than we imagined. It has brought many unintended (and unwanted) consequences. Economic growth around the world inevitably spawned industries that challenged U.S. dominance, which was artificially exaggerated after World War II. The move to suburbia-welcomed by most Americans-was bound to degrade the very qualities that made suburbia appealing. Congestion, grime and crime increased. Abandoned by the middle class, cities have become more vulnerable to poverty and decay.

But our most profound illusion about prosperity was to think that doses of it would solve almost a problem. We unwittingly adopted a view of human nature that assumed spiritual needs could ultimately be satisfied with material goods. We diagnosed all conflicts as economic struggles that could be resolved by more abundance. We minimized geography, ethnicity, race and religion as sources of hostility. Our crusade to Americanize other nations-to convert them to our way of thinking-foundered, because economic convergence does not create cultural homogeneity. Countries can be connected by economic ties and still be separated by vast differences of tradition. Witness the rancor between the United States and Japan.

Many of our social ills simply reflect human nature. If prosperity cured crime, there would be less crime now than 50 years ago. In fact, there is more. Prosperity doesn't automatically create personal happiness or social peace. We consider prosperity liberating, because it affords us more freedom through more "choices." That's good. Well, not always. Choices made may later be regretted. Greater sexual freedom-to live together, marry or divorce-has bred family instability. Greater freedom for women to work has torn many mothers between jobs and family. New lifestyles breed new conflicts: between employed and at-home mothers, between straights and gays, between singles and couples. Family breakdown has abetted poverty.

Naturally, our confidence has eroded. We see ourselves as pragmatic problem-solvers. But our megasolution (prosperity) grows weaker, while our social problems grow stronger. The magic of prosperity politics was that it seemed to mute messy social choices. Economic growth could satisfy everyone. It doesn't. The economy will recover and revive our spirits. But that won't be enough. No conceivable rate of economic growth will end federal budget deficits. The social problems associated with family breakdown or inner-city poverty are too complex to be erased by a bit more prosperity. The defects of our health-care system will endure, regardless of whether the economy grows at a 2.5 or 3.5 percent rate. We will deal with these problems directly-or not at all.

A Responsible Society?
Our new era lacks a name, but its central challenge is clear: to restore the American Dream, we must reconcile our ideals with today's economic realities. We need to rethink private and governmental responsibilities. Counting on prosperity as a panacea bred irresponsibility in government, Corporate America and even our personal lives. To some extent, things correct themselves. Tougher competition has forced many companies to improve. There's a renewed awareness of the irreplaceable importance of families in rearing children into self-reliant and responsible citizens. But the one place where change can't occur automatically is government.

American politics excels at proclaiming worthy goals but shuns setting standards of accountability and obligation. The motto of our age became a parody of John Kennedy's invocation: ask not what you can do for your country, but what your country can do for you. Every social group judged itself worthy of public generosity. Government spent beyond its means and assumed commitments for social improvement that it could not fulfill. The need now is to overhaul government to meet today's-not yesterday's-social conditions. Reforms would be complex and details messy. But in broad outline, it's easy to imagine how we could clarify societal responsibilities. Consider:

When social security was enacted in 1935, most of the elderly were needy. This is no longer true. Why not then fully tax social-security income? Is there a good reason why someone with $35,000 of income should pay much less in taxes at 68 than at 38?

Affirmative action was intended to eliminate institutional discrimination. But now it isn't ending poverty among blacks, while it increasingly offends whites. The aggressive recruiting of workers, students or faculty members among minorities is appropriate. But when "goals" become quotas, affirmative action discriminates. It devalues individual effort and should be illegal.

Widespread insurance has made our health-care system a monument of unaccountability. Either government must control costs directly (through national health insurance with strict cost limits) or create effective market discipline by reducing subsidies for private insurance. This would force most families to pay directly for ordinary care, leaving insurance for catastrophes.

Every year, millions of students get federal college aid without meeting a minimum academic standard. Easy access to college is one reason why the average high-school student does less than an hour of daily homework. In turn, lax work effort helps explain why U.S. students score poorly in international comparisons. The government should require a test to qualify for college aid.

Government's ability to end poverty is limited. Despite huge spending, the share of people below the poverty line has stayed at about 13 percent for a decade. Some social services are essential for the poor. But critical in determining whether people escape poverty is what they do for themselves. The working poor need bigger tax breaks so they can reap the full rewards of their efforts.

Everyone wants to cut pollution and increase our energy security. But most people resist changing their personal habits. An energy tax would prod individuals and firms to favor energy-efficient machines, cars and appliances. Why not impose one?

Most politicians would cringe at this list. It would outrage many Americans and powerful interest groups: the elderly, civil-rights groups, the medical establishment, students. The dilemma is plain: changing people's relationships with government is painful; but unless they're changed, government will remain overextended. Perhaps the 1992 election will resolve the dilemma. The White House talks of a "new paradigm," and Paul Tsongas acknowledges the need to curb social spending. But these modest starts may be false starts. Politicians face a contradiction. They must pander to established constituencies and expectations even though all these can't be satisfied. The impulse is to make the familiar promise of faster economic growth as a way out.

This is a mirage, in part because advances in living standards are harder to achieve than in the early postwar years. With hindsight, those big gains may have been a fluke-a catch-up from the Depression and World War II. There was a huge backlog of demand for housing, cars and appliances. New technologies (TV, synthetic fibers and air travel, among others) were waiting to be exploited. All this is hard to duplicate. In some ways, our economy has performed better than people think. During the 1980s, for example, industrial output rose 29 percent; manufacturing productivity increased rapidly. Helped by a falling dollar, surging exports have restored the United States as the largest exporter. But manufacturing is only 19 percent of the economy's output. The service sector-everything from stores to utilities-is 57 percent, and its productivity growth averages less than 1 percent annually.

Something else also hurts our prospects: curiously, we have become less devoted to economic growth. Part of the change is deliberate. We sacrifice growth, for example, to protect the environment. Although we should argue over the choices involved, everyone agrees that a clean environment is important. But the drift away from a pro-growth ethic is also the perverse result of getting wealthier. The richer we've become, the more people prey on existing wealth as a way to enrich themselves. It's economic cannibalism. Corporate chief executives award themselves fat pay packages. Litigation against "deep pocket" defendants grows. Groups lobby for new tax breaks or benefits. Our work ethic hasn't collapsed. However, more of our energies involve struggles over old wealth-and not the creation of new wealth.

No economic or "industrial policy" can quickly improve productivity growth. Productivity is everything we do: it's too big to be manipulated. There's no technological magic wand. Consider this. In the 1980s, U.S. firms and households bought about 42 million computers. As yet, there's been no clear impact on productivity. No one knows why. Better schools, roads, more investment and less burdensome regulation might improve productivity in the long run. But the gains are uncertain. In the near future, the business cycle is the most powerful agent of change. Recessions compel companies to streamline. Service industries, hard hit by this recession, could emerge more productive.

What all this means is that economic recovery won't solve our social problems. The task of political leaders is to convince Americans that our well-being depends on a new sharing of responsibilities; that not all past promises can be met; that the country can't work unless its citizens take more responsibility for their own actions. We face a choice between a society where people accept modest sacrifices for a common goal or a more contentious society where groups selfishly protect their own benefits. Dashed hopes would then feed resentment. The poor would blame the rich and vice-versa. Whites would blame blacks and vice-versa. The old would blame the young and vice-versa. We all might blame Japan.

The potential for conflict is also being fed by powerful demographic changes. Hispanic and Asian immigration is altering our population. Blacks remain much poorer than whites, and the gap isn't closing. And America is aging. As baby boomers grow older, they become more security-conscious and less generous. Also, the costs of the elderly dominate federal spending. (In 1991, programs that supported the elderly accounted for about a third of federal spending . By 2000 that share may rise to half.) It's tempting for politicians to exploit these divisions. Some policies could also be self-defeating. Protectionism--if it triggered retaliation--could cripple our exports.

Whether we can regain our confidence depends on how well we cope with all these changes. It would help if we kept our perspective: to remember that, despite our problems, we have achieved remarkable progress. The record is something to improve, not to discard. What we have going for us is our innate optimism and tradition. Ours is a history of adapting (peacefully, for the most part) to change. Our strengths lie in diversity and an openness that allows (and prods) people to realize their ambitions. But whatever happens, we cannot recapture the past. The immense self-confidence of the early postwar decades reflected singular circumstances. Nor can we repeal new postwar realities. Big Government won't disappear, because too many of us depend on it. Corporate America has assumed enduring welfare responsibilities. Global trade and finance are woven into the fabric of our economy,

The Age of Entitlement was a creature of its times. It responded to the misery of depression and war. It built on the cooperative efforts of government and business. The lessons were not necessarily wrong, but they were taken to unrealistic extremes. The result was a vision whose basic flaw was its utopianism. It presumed that a perfect America lay somewhere in the future, that we could find it and then freeze society at this ideal spot. But history moves on and so one way or another-will we.