America Becomes a Defeatist Nation

Rick Newman · Senior Columnist

Wed, Jul 24, 2013, 7:27 AM

People in Spain, Greece, Russia and China are down on America. That’s not surprising.

But Americans are down on America too, and the trend, paradoxically, seems to be getting stronger as working and economic conditions improve. The United States, it seems, is becoming a defeatist nation.

A recent poll by the Pew Research Center found, for example, that the percentage of Americans who feel China is becoming the world’s leading superpower rose from 36% in 2008 to 47% this year. Other polls show that 59% of Americans feel their nation is on the wrong track, up from 55% at the start of the year. The percentage of Americans satisfied with life in the United States is close to record lows, and of course Americans remain disgusted by the political antics in Washington, which 77% of Americans think are harming the nation.

There are legitimate reasons for this national dyspepsia. We’re clearly in the midst of an economic transformation that is upending the middle class and making it harder to get ahead. Unemployment is stubbornly high, real household income has declined during recent years, and nobody in charge seems to have any answers about how to reinvigorate the U.S. economy.

Still, as The Daily Ticker's Aaron Task and I discuss in the above video, Americans seem to be dramatically underestimating the prospects for their own nation while assuming the grass is a lot greener than it really is on the other side of the Atlantic and Pacific oceans. The U.S. economy has grown for 4 years straight, and while growth is still too slow, U.S. banks are healthy again, the housing market is recovering, and overspent consumers have largely repaired their finances.

Businesses have shown an impressive ability to shrug off the buffoonery in Washington and make money regardless. The Dow Jones Industrial Average has hit a new record high at least two dozen times this year, despite higher taxes and government spending cuts that have damaged the economy. Some sectors, such as energy and parts of the tech industry, are booming, and there are still opportunities to find prosperity. “We’re starting to see a lot of resilience coming back,” says Nariman Behravesh, chief economist at forecasting firm IHS Global Insight. “I’d rather have our problems than the ones in Europe or Japan.”

That’s because Europe remains mired in recession, with an unemployment rate of 12.1%, which is 4.5 percentage points higher than in the U.S. In Spain, unemployment is a ghastly 26.9%. Japan is showing signs of rejuvenation under Prime Minister Shinzo Abe’s aggressive Federal Reserve-style stimulus plan. But Japan is also coming off two decades of stagnation and it’s unclear how long it will take to emerge from the doldrums.

As for mighty China, well, it’s clearly on the rise, yet it’s a jagged progression that might leave China stuck in something economists call the “middle-income trap,” where developing nations plateau at a modest level of output. China is the world’s second-largest economy, but it also has 4 times the population of the United States and a command economy believed to hide massive inefficiencies and rampant corruption.

Income per capita in China is just $4,940, which ranks 114^th in the world, according to the World Bank. About 170 million Chinese—equivalent to nearly half the U.S. population—live in poverty. Per capita income in the United States, meanwhile, is about $43,000, or nearly 9 times the level in China. It takes money to be a superpower, and there’s really no way for any country to overtake the United States in a meaningful way with such a huge income disparity.

No doubt there are a few countries where people truly are better off than in America. Australia, perhaps. Scandinavian countries that usually rank at the top of quality-of-life indexes. Small, homogenous Switzerland. Canada, maybe. But life remains pretty good in America, compared to most other places.

What really has Americans bummed out, of course, is the impression that living standards are lower than they used to be. For many people that’s true. Real household income, adjusted for inflation, has fallen by about 9 percent since it peaked in 1999. That’s a real-life setback for millions of families that have a harder time making ends meet than they used to.

The Washington follies generate further despair, since many elected officials are preoccupied with political one-upmanship and seemingly indifferent to the struggles of ordinary people. A new Wall Street Journal / NBC News poll found that disapproval of Congress is at the highest level ever. Meanwhile, confidence in all branches of government has fallen sharply in recent years.

What Americans don’t notice so much is that economic and political conditions in many other places are worse. It may not be much of a consolation that other nations have declined more than our own, yet America remains the nation to beat. Even if the hometown fans have stopped cheering.

Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.

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