The Decline and Fall of America

or: why living in the U.S. in the 21st century probably won't be as much fun as living here in the last half of the 20th century has been

You've probably heard a lot of gloom-and-doom predictions of the future. (I know I have.) At least since the publication of 1984, dystopian novels have been popular. Non-fiction writing has had its share of negative predictions of the future as well.

The sad fact is, however, that at least some of the predictions are going to come true. And I think there are some other problems that are going to come to the forefront that haven't attracted a lot of attention yet. I will offer some signs of hope, however, so this won't be a totally depressing tale.

The budget deficit: it's worse than you think

The politicians in Washington are crowing about how they have balanced the federal budget. To give them their due, some progress has been made. But there are also a lot of non-sustainable factors that make things look better on paper right now than they really are.

Social Security is a big one. Right now, the system is taking in more money in taxes than it spends on benefits. The claim is that these surpluses will help fund future benefits. Don't believe it. The surpluses are not being saved; they are simply being applied to current spending, helping to decrease the deficit. In another 15 years, as the Baby Boomers start retiring in droves, there won't be any surpluses any more; there will be deficits in Social Security collections. Unless, of course, we raise taxes or reduce benefits.

Interest on the national debt is another big factor. (It's the single biggest item of spending these days.) Right now, interest rates are low, making the interest payments manageable. But a big part of why interest rates are low is the fact that economies in other parts of the world are in terrible shape right now, making investment in the U.S. more appealing. The foreign capital flowing in looking for places to invest keeps interest rates down. As the rest of the world recovers, interest rates here will go up.

The politicians are, as usual, doing things that improve the picture now, at the expense of making things worse down the road. A notable example is the recent promotion of Roth IRAs. In a traditional IRA, the money you contribute, and any interest it earns, are not taxed until you retire and start withdrawing. In a Roth IRA, the money you contribute is taxed now, but any money it earns is not taxed - ever (until the politicians change their minds, anyway); more tax collected now, but at the expense of less tax collected later.

We've also been putting a lot of societal maintenance costs. Roads, bridges, buildings, aqueducts, and so forth are running down faster than they are being replaced and repaired. That helps for a while, but eventually the bills have to be paid, and they may be worse because of trying to postpone the pain.

Finally, of course, simply balancing the current budget isn't enough. There is also the huge existing debt to work on; to make any real progress, we will have to generate budget surpluses for a long time. It's been hard enough to cut enough spending to get to where we are now; the next $200 billion per year in cuts will be harder.

The aging of America

You've heard the predictions about how our population is getting older. People's lifespans have been increasing all century. For a while (especially during the Baby Boom years of the 1940s and 1950s), the effect of that didn't affect the age distribution of the population all that much, because the birth rate was high. But the birth rate has dropped dramatically since then, to the point where the U.S. would achieve Zero Population Growth soon were it not for immigration. The net effect is that the average American is older: there are fewer children and more retired people around.

As with so many things, there are both good and bad points to this. First, increased lifespans are certainly a boon to the individuals who live longer; people now live long enough to enjoy their senior years and retirement. More older people around is likely to lead to more social stability and less crime. (On the downside, stability can mean stagnation.) Children can be noisy and disruptive, and many people are probably pleased that there aren't as many of them underfoot.

But the big issues are going to involve finances and political power. I mentioned the problem of Social Security financing earlier. There are a number of possible solutions, none of which will be popular with everyone, and the decision of which course to take will pit the interests of the young against the interests of the old.

First, of course, you could simply raise taxes. But taxes are paid by the people still working, not by the retirees for the most part. (Social Security benefits are tax-exempt for most people; the very rich lose the exemption.) But the working people are already paying 15% of their income; they won't enjoy the prospect of paying more. (Yes, I know that unless you are self-employed, half of that is hidden as an "employer contribution". If you believe that the money isn't really coming out of your pocket, I have a bridge to sell you.)

Second, you could reduce benefits. This can be a straightforward cut, or it can be disguised in a few ways, such as reductions in cost-of-living increases or taxing more people's benefits. This one won't play with the AARP.

Third, you could increase the retirement age. This spreads the pain around; the old folks don't get to enjoy the retirement they were looking forward to as soon, and the young don't get to move into the leadership positions that they had been expecting to get when their elders retired. Not everyone will be able to postpone retirement, however; some people may not be in sufficiently good health. And more people in the work force means finding more jobs for them to do, and the elderly aren't likely to possess the up-to-date technical skills that employers are looking for.

Cheap energy: here today, gone tomorrow

Most of the activities of an industrial (or post-industrial) society depend on energy, and currently most of that energy comes from fossil fuels (coal, natural gas, and especially oil). We need energy to heat and cool our homes and offices, to run all the electronic gadgets on which we have come to depend, and for all the moving of people and goods that makes our highly mobile society work.

In the recent past, we have been enjoying a period of incredibly cheap energy. In real dollars, gasoline, heating oil, and other fuels are cheaper now than at any other time in our nation's history. But the world's oil supplies are beginning to deplete, and none of the other currently available sources are as convenient or cheap.

Natural gas is hard to move around or use in vehicles. Coal is heavy, and burning it is less environmentally clean than oil. Other energy sources don't lend themselves to vehicle use at all (unless you use them to produce intermediate fuels like hydrogen, or use battery or flywheel powered vehicles), and they have their own problems as well. (Nuclear power leaves you with large amounts of dangerous waste, plus the danger of catastrophic failure of the plant. Hydroelectic dams destroy waterways and fish habitats. Geothermal and wind power sites are limited. Photovoltaic solar power looks promising, but costs are still high.)

So how will we cope? In part, the cost of living will just go up, and we'll have to do without some other things. Technology will help some; more efficient vehicles like gas/electric hybrids will come along. Improved batteries and fuel cells will allow power from non-portable sources to be used for vehicles. And the breakthrough in fusion power that physicists have been saying is "just around the corner" for many years might finally happen.

But I suspect that there will also have to be lifestyle changes, and some of them will reverse the trends of the 20th century. Cheap transportation (of which cheap energy is a big element) has led to the centralization of production of food (grow it in friendly climates like California and ship it all over, rather than growing it locally), and in the suburban dispersement of the population. Increased transportation costs will cause a revival in local farming, and a trend toward people living closer to their workplaces. We may also see an increase in telecommuting, though whether it will ever become widespread remains to be seen; the real obstacle is management acceptance, not technical feasibility.

The upcoming water shortage

Much of the American west and southwest faces a problem even more severe than the energy crunch: a shortage of water. In short, millions of people are living in places that don't get enough rainfall to support them, let alone the water-intensive irrigated agriculture that a lot of land is being used for.

Arizona and New Mexico are in perhaps the worst bind. These states have desert climates with very little rainfall. Their burgeoning populations are currently depending on large groundwater aquifers that build up over thousands of years, and are being depleted rapidly. Right now, people cope by drilling deeper and deeper wells. In other 20 years, when the aquifers run completely dry, they will face a more difficult problem, with no simple solution in sight.

Southern and central California aren't much better off. Most of their water comes from sources in the northern part of the state. Political divisions in the state may make this an increasing contentious situation.

Societal polarization: the left and the right grow farther apart

Here in the city, it seems (judging from the people I spend time with personally) that society is moving towards equality of women, freedom of reproductive choice, acceptance of sexual diversity, and rejection of censorship. But then I go and visit family in Pennsylvania, and it's a whole different world, where fundamentalist religious values hold sway.

It seems to me as though there are two mutually contradictory movements going on at the same time: the mostly coastal and urban trend toward the social left, and the heartland and rural trend toward the social right. The center isn't holding; we're increasing becoming a nation of two different social agendas, which are becoming more strongly held, and little middle ground. Governments find themselves torn between the two poles, and whipsaw back and forth with shifts in the political wind.

So far, the net result has been an impasse; Congress and the various state legislatures have managed to do relatively little of import. (There are exceptions, such as the gay-rights law that passed in Maine, and was then repealed by a referendum backed mostly by the religious right.) On the few occasions that Congress has done anything (like the Communications Decency Act), the courts have declared the efforts unconstitutional.

Perhaps the impasse will remain, and nothing will happen. But I suspect that some states, at least, will manage to pass laws that meet state-constitution muster - and some of them will come from the left, and others from the right. Both will make a lot of people unhappy, and tensions will rise.

The rich get richer

The recent history of the United States has moved us toward less progressive tax policies. If you include the impact of the Social Security and Medicare taxes (15.3% on your first $65,000 and change of income, and only 2.9% after that) and sales taxes (which hit the consumer goods that the poor buy, but often exempt the real estate and other investments that the rich make), the itemized deductions that the rich get to take advantage of, and the special tax treatment for capital gains, the total result is that the tax structure is barely progressive at all; the rich pay about the same percentage of their income in taxes as the middle-class, and only a little more than the poor.

Of course, figuring out how much to tax, and how to distribute the burden, is a difficult problem. In the words of Dennis Moore (a character in a Monty Python sketch who robbed from the rich and gave to the poor - or so he thought), "this redistribution of wealth is more difficult than I thought". Taxing the poor heavily makes their already difficult lives ever worse. Taxing the rich decreases the incentives for generating wealth; the fate of the socialist countries suggests the problem with this approach.

There has also been a move toward less regulation on financial markets. A consequence has been a rash of mergers between already-big companies to make even bigger ones, leading to a concentration of economic power in relatively few hands. As with all monopoly and near-monopoly situations, this tends to lead to poorer service and higher costs for small customers.

Technological trends, especially the importance of software (a commodity with high development costs and negligible production costs) have furthered economic concentration. In other types of business, there has been a natural limit to economies of scale; the increasing difficulty of managing a huge enterprise tend to offset other efficiencies. Software, because it costs just about nothing to duplicate, changes that; the more customers you can amortize your development costs over, the lower your unit cost is. (Support, of course, is a whole different kettle of fish.)

Anyway, the net effect of all these trends is that the benefits of the recent prosperity have not been evenly distributed. The bulk of the population is little or no better off, while a small group at the top have gotten very wealthy indeed. Increasing concentration of wealth is likely to be a socially unstable condition, leading to unrest and possible revolution.

Technology: some hope for the future

There are some technological trends that may ameliorate the effects of some of the trends mentioned above. Here are some things to hope for:

Medicine continues to improve. We can cure a lot more diseases, and some progress (though not enough) has been made on the slow degenerative sicknesses. New drugs and other treatments that improve the health of older people will help take some of the sting out of a world where retirement recedes to an older age.

Fuel cells will make hydrogen-powered vehicles a possibility. The benefit is that power from non-portable sources can be used, alleviating the shortages of oil. In addition, this will be a much cleaner source of power, easing the air pollution problems in our cities.

Communications keep getting cheaper. Fiber optics mean more land-based capacity, and cell-based digital wireless systems make mobile communications accessible to everyone. In a future where travelling is more costly than now, videoconferencing and telecommuting will take on an increasingly important role.

Further in the future, there are the prospects of biotechnology and nanotechnology. It's hard to predict at this time what the effects will be, but these things have the prospect of changing everything. Nanotechnology could conceivably mean the end of material scarcity, a transformation that would make all the changes of the 20th century seem insignificant by comparison. But I suspect that things will get worse before this potential cure will make them better again.