The United States has enjoyed an extraordinarily long period of economic growth with very little inflation. There have been setbacks caused by high oil prices, the attacks on 9/11 and the dot-com crash, but in general there have not been the wide swings from high inflation to deep recession that were common in past decades. Despite this good news, there are two major economic problems with this growth without inflation. First, the beneficiaries of this growth have been principally the very rich. The gap between the very rich and working-class Americans has grown. Those with stock portfolios have seen their capital assets grow while working-class Americans have seen their salaries barely keep up with inflation. At the same time, workers’ health benefits (if they are lucky enough to have them) have shrunk. Those at the bottom have seen no increase in the minimum wage. White-collar workers and even professionals have seen their jobs threatened by globalization. These pressures have kept wages steady while profits have soared, because workers are afraid to rock the boat lest they lose their jobs.
It is now widely taken for granted that to support a middle-class family, both parents must work. While women have every right to equality in the workplace, every family also has a right to a living wage so that one parent can stay home and raise their children if he or she wishes. The high price of housing is a special stumbling block for young workers trying to move into the middle class. It has become very difficult for young families to become homeowners without the help of wealthy parents.
This is not fair. A just economic system extends its benefits to all in society, especially those most in need. If the economy itself does not do that, then the government must intervene to correct the imbalances through tax and spending programs that spread the wealth. This is simple justice consistent with Catholic social teaching.
The second problem with the current American economy is that both consumers and the federal government are hocking their futures to spend for the present. All economists agree that it is the American consumer who has fueled economic growth in the United States and abroad. Our appetite for cellphones and other electronics, for the latest fads in clothing and shoes, for bigger cars and homes, has kept the world economy going. Madison Avenue has convinced Americans that consumption is the way to happiness. To finance these purchases we have borrowed and borrowed and borrowed. Low interest rates have made this both possible and attractive.
The federal government has done the same. For the first time in history, we are waging a war while cutting taxes. The Bush administration regularly presents its January budgets without including the cost of the wars in Iraq and Afghanistan. At the same time, the administration and Congress passed an expensive program for prescription medicines, which the administration now admits will cost much more than it estimated. The debt ceiling was recently raised to almost $9 trillion. If this were a Democratic administration and Congress, Republican fiscal conservatives would be up in arms. It is ironic that the last budget surplus occurred during the liberal Clinton administration.
The American buying spree has fueled the global economy by importing much more than the country exports. These massive imports have helped keep inflation low in the United States, while at the same time pressing American employers to keep wages down. This globalization is not all bad. It has provided thousands of jobs in developing countriesnot as well-paying as one might wish, but certainly better than these workers had in the past.
But how long can this American spending spree continue? How long can consumers and government continue to borrow with no thought for tomorrow? If foreigners use their dollars to buy up U.S. assets and companies, rather than its products and services, who will end up owning America?
Most of the credit for the American economy goes to the entrepreneurial spirit of the American people and the steady hand of the Federal Reserve Bank. Alas, the president and Congress cannot see beyond the next election. But someone has to look farther ahead. An aging workforce is heading toward retirement. A permanent underclass is trapped in inner cities without decent schools or employment opportunities. A war without end is draining resources in money and personnel. Demand for oil is growing as reserves are shrinking. Global warming is progressing as forests are cut down and more pollution is pumped into the air.
Our children’s future has been hocked, and it will soon be too late to redeem it.