What Went Wrong?

When I was a Junior in high school (1957), I watched my older friends (Seniors) go out and within a week, or two, get a job. That job was collateral enough for many to purchase a car, get married, and some were well on their way to parenthood and home ownership when I restarted school the next Fall. The overwhelming majority of married women had a non-wage paying job of homemaking and rearing children. It was considered important work in those ancient days. This was the “middle class” ideal.

Frankly, I thought that would probably be my life path as well. It wasn’t, as it turned out. Instead, I went to college, and eventually went into teaching in the public schools. I know what teaching was like in the mid and late sixties. I know what teaching was like in the early nineties. The changes were not all positive.

In those years between, I continued onto grad school, got my MA plus the equivalent of two more in graduate hours. I married. My wife was a teacher, who later got her MA as well. We raised three kids. One now has an MA, one a BA, and one decided that high school had stifled his soul sufficiently.

In those same years, the hourly wage of most workers, adjusted for inflation, has not materially changed. Families have adjusted by being forced to send Mrs. Homemaker, Mommy, out into the workforce to find employment that helps the family budget stretch to the end of the month. That means Mom was not home to raise their children and impart all the myriad lessons of manners, ideals, morals, and deportment.

My intention is not to bewail this change, but only to note that it happened, at exactly the same time that saw the unfolding of the greatest social experiment in the history of the planet. That experiment was the contest between socialism and “modified” capitalism.

Capitalism won. Not because of the “rightness” of our cause, but because we out spent the Soviet Union, and apparently would be able to continue to out spend them without end. How could we do this? Because of one of the least heralded acts of a grateful government after World War II, the GI Bill. We invested in our human capitol at the upper end for the most immediate payoff return. We’d ripped young people away from their usual self-interested life paths and sent them off to war. After the war was won, we gave the survivors a shot at schooling and self-improvement. It paid off handsomely.

The flowering harvested from that act of seed sowing created the great American Middle Class a.k.a. the “pig in the python”, the boomers. That immense group generated the economy that created the wealth that was taxed to out spend the socialist theory of economy and governmental organization. Atomic bombs did not level the Berlin wall. Exhaustion from the 50 year economic footrace to sustain a large military with a flawed economic system did. Socialism, by definition, does not generate excesses. Only excesses can be taxed without injuring the golden goose. I think it was Jean-Baptiste Colbert that said something like, “Taxation was the art of plucking the goose in such a way as to get the most feathers with the least hissing.” He knew something about geese and their attachment to their feathers.

Somewhere around 1975 to 1980, I believe that lesson was lost to greed. Somehow wealthier people “forgot” what conditions made it possible for them to gain that relative economic comfort. This is not the first time in history that a society has waxed fat and happy, developed memory loss, and decided to eat the “golden goose” that made it all possible. Our governmental system is unique in that it is more vulnerable to the internal pressures of wealth on its political stances and tax structure than almost any other, as de Tocqueville noted.

We have been consistently rewarding for about twenty-five years the well-off through the tax system by lowering their taxes proportional to income, while at the same time penalizing the less well-off by raising their taxes proportionally to their income. We have been systematically unbalancing the progressivity of our tax system. At the same time we have failed as a nation to learn and capitalize on the lessons of the GI Bill, apply them to the much broader needs of the larger population for a better education (not necessarily college) that would continue to sustain our economy. Poor, uneducated people do not have the earning capacity to pay taxes. They do not have any income to tax. Or, being smart enough to realize that they cannot escape the economic trap, decide to go fishing.

Wealthier, educated people pay taxes. They have an income to be taxed. The social, political system under our government created an environment in which they could thrive and become wealthier. The changed progressivity reduced the taxes available for investment in our human capital, which at our advanced economic level must start at the earliest educational beginnings (preschool) not at the trailing college end. The better the beginning, the better the possibilities at the end.

I do not argue with those who state that our educational system is woefully inadequate and is in need of radical renovation and even surgery. I agree. Go ahead. Stop talking about it, and just do it. Anything you like. Just remember that remodeling and post-op recovery can be very expensive indeed. The current model is not perfect. It needs new styling, a new engine, better tires, and a new racetrack, but it did get us where we are. This might not be the time to throw the baby out with the bath water. There may not be time to start a new baby.

This long period we have experienced of constant lack of investment in our human capital is called putting the golden goose on a slow starvation diet. This my be a diet that eventually causes egg laying to stop. Some economics commentators are already strongly suggesting that our golden eggs are getting smaller and fewer in number. i.e.: Patent applications. The goose could become weak and vulnerable to the smarter, faster fox. The goose could even die. Of course, the current riders of the goose are likely planning for long stays in Switzerland in that event.

Look at the actions of our international economic competitors. They have been smart enough to bet on the positive long term results (10, 15, even 20 years past the next election) of human capital investment in their people. They are starting to see real results in the competition of the international market place. Just the numbers of Chinese engineers in their economic pipeline is staggering. Collegiate engineers start with math instruction in preschool. That is called lead time.

Right now, the Chinese are simply soaking up our exported industrial capacity, building infrastructure, and running flat out as fast as they can go. When they have an opportunity to catch their breath and begin to creatively apply all that brain power that they have been developing, while we have been sitting on our hands and wallets for fear of paying a few more dollars of taxes to educate our under achieving economic classes, we will all be taking Chinese language correspondence courses.

We, on the other hand seem to have fallen in love with the South American concept of a thin layer of extremely rich people at the top living like floating scum on a boiling cauldron of extremely poor masses. It has not worked well for those economies. It will not work well for ours. We will not be the same country.

We have a head start already. We’ve imported 11 to 20 million latinos, and others, exploited them unmercifully, and will probably find a way to guarantee our large corporations that we will not export away that pool of cheap labor back to its countries of origin.

(c) Copyright 2006: George Wallace recently published a book on religion which lashes out at nearly all of the comfortable ideas about God, the trappings of organized religion, and the priesthood. His pithy comments and suggestions for a return to a God-centered personal religion will interest everyone. This article may be freely reprinted so long as all copyright attributions, and the full content of this resource box are included. www.OhGodIsThatYou.com

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