What color is the sky in your world?

The United States faces tremendous challenges of a magnitude which will require a national effort coordinated at the federal level. We are beset by problems that we have ignored for decades and are now come home to roost. It’s not just about recovering from the Great Recession: the recession brought into glaring relief the terrible structural deficiencies which have taken us to the very edge of ruin.

What was also made clear is that neither party has both a clear and serious vision for turning the situation around.

The Republicans have a vision, but it cannot be called serious. When I listen to the Republican primary debates, I am struck by the surreal nature of the event. I often wonder “what country are they talking about?” In the GOP’s fantasyland, every problem is caused by “bloated government” and every solution is either “lower taxes” or “cut spending”. They are conveniently blind to the terrible consequences of unregulated markets and unscrupulous “robber baron” business. And they seem to believe in the infrastructure fairy, who will magically build our roads, bridges, ports and railways without the public spending a dime.

The Democrats have some serious proposals, but they lack a compelling vision for America. Candidate Obama was on the cusp of creating such a vision; President Obama became mired in partisanship and failed to do so. The 2012 State of the Union address gave ample proof that the President has no over-arching plan. The Democrats, despite calling themselves progressive, are as wedded to the politics and economics of the mid-twentieth century as the Republicans.

Unplanned Obsolescence

The fact is that the old ways and modes of thought are failing, and failing spectacularly at that. Those who cling to them, will go down with them.

Our generation is living through a technological revolution that continues to change our world. It is the nature of these revolutions that they radically alter our preconceived notions of time, of space, of size. This has great and terrible implications for those who can adapt to these changes, and those who cannot. Think of some of the great revolutions of the past:

• The steam revolution – For two generations, Great Britain was the workshop of the world and established an unassailable superiority of economic and military power over formerly close rivals like France and Russia. Until the Germans and Americans caught up;
• The industrial revolution – “We have got the Maxim Gun, and they have not” – Rudyard Kipling. Even great pre-industrial societies, like Qing China or Persia, where helpless to stop the advance of insignificant numbers of European imperialists with access to modern arms;
• The electronics revolution – The United States led the way and by the late 1980’s had translated this technological advantage into an overwhelming military superiority over less capable nations (like Iraq). This capability is only now starting to be eroded by rivals.

Each revolution fundamentally altered society and changed the balance of power. China had been the wealthiest and most advanced nation in the world for 3000 years. It was eclipsed and humiliated by Europe in less than 50. Japan became so wholehearted a convert to the new paradigm that it went from medieval feudalism to industrial modernity and the defeat of Russia in Asia in just 35 years. Civilization went from being overwhelmingly rural, agricultural and somnolent, to urban, industrial and time conscious. Remember that until the advent of the railroad timetable, no one except astronomers and mariners needed a clock that was reliable to the minute, and time zones had not been conceived of.

Within nations, there were also winners and losers. Each revolution heightened income inequalities even as it created enormous wealth. Those who adapted – the middle class, the capitalist – secured the vast majority of the gains, while those who resisted – the aristocracy, the rural peasant – stagnated into irrelevance.

The challenges we face are no different. The technological and demographic revolutions are creating winners and losers, adopters and resisters. We are overwhelmed by the scale and pace of change, but that is no reason for despair. It affects everyone equally.

Those countries that produce conditions most favorable to the adopters are ultimately the most successful. The United States has historically been one of the most, if not the most successful adopter, thanks to our liberal markets, strong institutions, political flexibility and legitimacy, and educated workforce.

Today, we still have a commanding lead, but the cracks are beginning to show. For the past thirty years, we have failed to make the investments and the reforms our country needs to succeed. We became complacent.

The problems that trouble us are surmountable, but we need to understand them if we are to address them. We can group them into three broad categories:

1. Governance – our political system is a mess and our democracy no longer functions as it was meant to;
2. Economic – the US economy is as outmoded as the steam locomotive. Changes since 1990 have made it obsolescent;
3. Fiscal – the way we tax and the way we spend is broken at both the federal and the state level.

What´s more, the interrelation between these categories is such that we must resolve them in parallel. Fixing elements within each pillar of performance will only have a modest impact – we need a comprehensive approach with broad political and public support.

Challenging-  yes. Impossible – no.

Which horse to back?

We are left facing an unpleasant reality. The United States is a two party system; what do we do when neither party seems capable of providing the leadership we need?

One option is the traditional one in US politics: pick the least worst option. In this case, it is almost certainly the Democrats.

The Republican Party disqualifies itself by its rabid and fanatical aversion to tax reform (except downwards) and any role at all for government in the economy. This ideological inflexibility is precisely what the US cannot afford at this point. The Democrats display a discouraging lack of bold vision and outmoded models of the role of government in a modern economy, but at least they have demonstrated a pragmatism and willingness to compromise which will be fundamental in the years the come. The GOP has shown the opposite.

The other option is better, but far more difficult. Americans, citizens not politicians, need to create and back a third force in politics. A new centrist party: fiscally conservative, economically-savvy, pro-business but understanding the need for a progressive social policy and collaboration with labor. It would hopefully gather in a large segment of independents, blue dog Democrats and pro-business Republicans. The extreme wings of the Republican and Democratic parties, perhaps 25% each of the electorate, would provide the necessary balance.

Such a party, even without an absolute majority, would be able to govern effectively by making common cause with either of the traditional parties on key issues. A more successful version of Theodore Roosevelt’s Grand Union Party from 1912.

Reinventing everything

Whatever we do, we cannot continue the way we are and hope for the best. Simply tweaking the system – cutting some here, reforming some there – is an approach that can no longer be successful. At best, it can only delay our decline. Whichever party wins in 2012, it is highly unlikely that the electoral results will create a decisive preponderance of a single party in the executive and legislative branches. Nor is it likely that either party will be sufficiently chastised so as to abandon destructive partisanship.

Over the next few weeks, I will outline what I consider to be the key challenges facing us. I will focus on each of the larger categories in turn, describing the situation and developing possible solutions. Most of these problems can be simply described and simply dealt with, assuming we have the political will to do it. Some of them will require more ingenuity, but none are beyond the capabilities of America.

I’ll present a vision of what our house should look like by 2022, assuming we start rebuilding this year.

We are a most determined and innovative people. Working together, there is no limit to our greatness. Divided, there is no limit to how far we may fall.

Coming soon:

1. Bridging the Democracy Deficit
   1.1  Improving Political Competitiveness and Representation
   1.2  Electoral and Campaign Finance Reform
   1.3  Improving Government Efficiency through Metrics and Pay-For-Performance
   1.4  Right-sizing Government
2. The New Economy
   2.1  Rebuilding our Infrastructure
   2.2  Energy Independence
   2.3  The Next Generation of Industry
   2.4  New Labor
   2.5  Refunding R&D
3. Four Steps to Fiscal Fitness
   3.1  Simplify the Tax Code
   3.2  Reform Entitlements
   3.3  Align Military Spending
   3.4  “VAT” until we’re Debt-free