The American Opportunity
Ad Astra concludes the US economy series by putting our era into historical context and proposes a plan to reignite the American Dream
Don’t miss Part 1: Introduction
Part 2: Legacy of the Great Recession
Part 4: Welcome to the New Gilded Age (monopolies)
Part 5: American Aristocracy (higher education)
Part 6: The Plague Economy (COVID-19)
Part 7: The Sickening of America (healthcare)
In the summer of 1945, WW2 was over and the unemployment rate in the US stood at 1.2% - still the lowest in American history.[i] Between 1940-1945, the entire country mobilized into the “arsenal of democracy” and supplied the global war effort. For the next thirty years, the US enjoyed the broadest economic expansion in the country’s history. Veterans came home, went to college, and found jobs. Women flocked into the workforce. People moved to the suburbs, bought cars, and purchased new houses. War weary couples had lots of kids (the Boomers).
America finds itself with such a historic opportunity again. After fifty years of the economic policies implemented in the 1970s, the US economy is a wasteland. As Ad Astra’s series has shown, the middle class has been hollowed out and economic inequality is at Great Depression levels. Manufacturing supply chains have gone overseas and left broken communities in their wake. Information monopolies roam this wasteland and use human behavior as the raw material to feed their growth. A broken higher education system has created a frozen aristocratic class and killed the American Dream. Our failing healthcare system has left us sick and our lives shorter. And to top it all off, a once-in-a-century pandemic just made all these problems worse.
4 in 10 Americans feel worse off financially than before the pandemic, a record for the poll which started in 1986.[ii] 71% of Americans “think things in the nation are generally on the wrong track”[iii]. Political conditions are ripe for bold change. Manufacturing supply chains are coming back to the US. New technologies are transforming the nature of work and making workers more productive. COVID-19 and remote work altered the economic geography of America, revitalizing depressed areas.
But this economic opportunity could slip away if we don’t seize it. It is henceforth Ad Astra’s mission to highlight America’s potential. This post will roll out a 5-point plan to reignite the American Dream.
The End of the New Gilded Age
The conditions for an economic boom are due to the convergence of two factors: 1) the end of a fifty-year cycle of neoliberal economic policies and 2) the end of the US-led global security order.
America in the 2020s is in the late stages of the New Gilded Age. Neoliberal economic policies started a cycle of unfettered globalization and capitalism that is crashing to a halt. Most political disagreements are about the economy (most real arguments anyway, not performative culture wars). Democrats and Republicans have been arguing about how to grow and redistribute the economic pie since the Civil War. Since the 1970s however, they have generally been in agreement about neoliberal economic policies. And they were partially successful – the economic pie has grown 3x since the 1970s. But those gains were not fairly distributed.
At the same time, the US-led global security architecture implemented after WW2 is coming to an end. For the past eighty years, the US Navy has guaranteed free maritime trade. But two botched foreign wars and rising great power competition from China and Russia has led to America’s withdrawal from abroad. America lacks both the money and the political will to continue guaranteeing the security of the entire world. Container shipping routes are the arteries of the global economy and enable global supply chains. Without US Navy security guarantees, global supply chains are not viable. Firms are reading the writing on the wall and relocating supply chains to end consumer countries. The US is the primary beneficiary.
Figure 1: Maersk container ship
The Opportunity
In addition to supply chains coming home, several other trends are aligning to create an American opportunity.
1. Demographics
Much of the rest of the world, namely Western Europe, China, and Russia, are facing unfavorable demographics. Their populations are shrinking or soon will be. Those nations will soon have far more retirees than workers, straining pension systems and labor markets. In contrast, the US is demographically #blessed. Thanks to the Boomers and their echo the Millennials, the US is going to have plenty of workers and consumers through 2050. And if we need more, there’s a whole continent to the south filled with people who would love to be Americans.
2. The Digital Revolution
The Industrial Revolution transformed technology, the economy, and politics in the nineteenth century. The ramifications took decades to sort out. The Digital Revolution is of equivalent magnitude and we’re just in its early innings. The US is home to Silicon Valley, the incubator for the most innovative digital firms on earth. The US will also soon be home to the best semiconductor supply chain on the planet, a resource as important as oil was to the Industrial Age. Digital technologies will boost productivity and transform the economy. America is well positioned to become the most innovative country in the world.
Figure 2: Intel constructs a semiconductor fab in Arizona
3. COVID-19
The COVID-19 pandemic was a tragedy, but the silver lining is that it reshaped the economic geography of the world and of the US. Global lockdowns and the ensuing supply chain disruptions made it clear to everyone that it was critical to have domestic supply chains. Within the US, remote work relocated people from expensive cities to less expensive regions. This is a tremendous economic development opportunity on par with post-WW2 suburbanization.
The American Opportunity Plan
Ad Astra has a 5-point plan to escape America’s current malaise and to take advantage of the current economic moment. Going forward, all policy recommendations will fall into one of these five planks.
1. Level the playing field (inequality)
2. Make the US worker competitive (economic competitiveness)
3. End the culture wars (political polarization)
4. Get healthy (healthcare)
5. Be a resilient superpower (foreign policy)
1. Level the playing field
Regulate big tech (future article) - The information monopolies (Google, Meta, Apple, Amazon) engage in surveillance capitalism, an unprecedented mutation of commerce. The Industrial Revolution brought about new firms that turned resources from nature into value. Surveillance capitalists turn human natureinto value. Its not clear that antitrust laws from over 100 years ago or tweaking regulation at the edges by repealing Section 230 will be enough (although those things might help). We need new laws to regulate Big Tech.
Ban stock buybacks (future article) - Ad Astra discussed how stock buybacks worsen inequality, harm innovation, and distort the market in the US economy series. Firms pour hundreds of billions into financial engineering schemes annually rather than investing in things that generate real value. The SEC only changed the rules to allow stock buybacks in 1982. They should repeal that rule change.
2. Make the US worker competitive
Cut environmental permitting time by 5x (future article) - In 2016, the average time to get an environmental permit in the US was five years. This means that the average amount of time needed to get permission to build a project is now longer than the total time it took— from start to finish—to build the Hoover Dam or the Golden Gate Bridge. In 2022, Senator Joe Manchin (D-WV) proposed permitting reform that would have streamlined both oil and gas and renewables project permitting. Progressives killed the legislation. This process needs reform.
Reform higher education (future article) - As discussed in American Aristocracy, the cost of college and student debt must be reduced. The federal government, through its research funding and subsidization of student loans, has tremendous influence to help solve the problem. A start would be to expand inexpensive online classes and trim ridiculous campus landscaping costs.
3. End the culture wars
Future articles
4. Get healthy
Investigate private equity ownership in healthcare
Declare national fentanyl emergency (future article) - Fentanyl (a synthetic opioid) overdoses are the leading cause of death for Americans aged 18-45[iv] and accounted for 56,000 total deaths in 2020.[v]Synthetic opioid-involved death rates increased by over 56% from 2019 to 2020. The rate of overdose deaths involving synthetic opioids was more than 18 times higher in 2020 than in 2013.[vi] This is a national crisis.
5. Be a resilient superpower
Negotiate to end the Ukraine War
The Challenge Ahead
Realizing this opportunity will not be easy. The US is entering a new economic cycle after fifty years of neoliberal economic policy and after fifteen years of ridiculous monetary policy. Decades rather than years is the proper frame of reference to expect success. But the conditions are set for a historic expansion if the moment is seized.
Note: going forward, most Ad Astra posts will include an issue and an accompanying policy prescription. The future topics will be varied, but the policy prescriptions will always adhere to our principles. Think of them as where we stand.
[i] https://www.history.com/news/post-world-war-ii-boom-economy
[ii] https://abcnews.go.com/Politics/record-numbers-worse-off-recipe-political-discontent-poll/story?id=96884607
[iii] https://www.documentcloud.org/documents/23589424-230032-nbc-january-2023-poll-v2-129-release
[iv]https://static1.squarespace.com/static/61f366b9dd05336e4a3ce776/t/6305834bc3bafe6396d12910/1661305675942/Fentanyl+Deaths_Top+10+COD.pdf
[v] https://www.cdc.gov/drugoverdose/deaths/synthetic/index.html
[vi] https://www.cdc.gov/drugoverdose/deaths/synthetic/index.html