There's no way to spin it: 2008 was one tough year for the American economy. Rising unemployment, mortgage defaults, bank failures, stock market losses, rising personal and national debt, and a slow holiday shopping season were capped off by news of Wall Street investor Bernard L. Madoff's collapsed Ponzi scheme.
Looking ahead, we are not facing another Great Depression, but the situation is pretty ugly. We have been relying on foreign credit too long. And now the federal government, in an effort to reinvigorate the economy and calm worried consumers, is about to go even further into debt to the tune of what may well exceed a trillion dollars. That's about twice the size of even the biggest annual deficits run by the government this decade. It's equivalent to roughly $7,000 in new borrowing for each of the 150 million full-time adult workers in the country.
Our national debt as a share of the gross domestic product has been higher at previous moments in American history, most notably in the years immediately after World War II, which witnessed the greatest expansion of the middle class the planet has ever known. (It is no coincidence that this period was characterized by the highest rates of unionization in American history.)
As Princeton political scientist Larry M. Bartels shows in his new book, Unequal Democracy, between 1947 and 1974, cumulative family incomes in the United States doubled, and the growth rate was very uniform across all income levels. "Over the past three decades, income growth has been much slower and much less evenly distributed," writes Mr. Bartels. "For less affluent families, [inflation-adjusted] income growth slowed to a crawl."
So there is a precedent for the country going deep into debt and growing our way out. The real question is what we do with a 13-figure chunk of borrowed money. Here again, we should look forward by first looking back.
Consider what are, arguably, the dozen most important technological revolutions of the past century: the automobile; the airplane; wireless radio; moving pictures; supercomputers and, later, personal computers; vaccination and disease eradication; the mass production of safe foods; atomic and nuclear weaponry; space exploration; cancer research; microprocessing; and the decoding of the human genome.
All 12 share two defining characteristics. First, the United States led the way in the invention or acceleration of each. Second, the collective, cooperative efforts of government and American entrepreneurs helped the U.S. become a leader in each. Think of the cities or regions whose names instantly - and globally - conjure the pioneering industries that sprang from their soil: Detroit, Hollywood, Los Alamos, Houston and Cape Canaveral, Silicon Valley, and Redmond, Wash. Some of these industries will become obsolete or move offshore. (Detroit provides a tragic preview.) But they helped America become the world's largest economy almost a century ago - a title we have never relinquished. Despite our recent problems, we still produce about a fourth of the world's total wealth. And we can do it again.
"The jobs we create will be in businesses large and small across a wide range of industries," President-elect Barack Obama said Saturday. "And they'll be the kinds of jobs that don't just put people to work in the short term but position our economy to lead the world in the long term."
The stimulus plan must help Americans who are struggling to meet their mortgages avoid foreclosure, find jobs for those who have lost jobs to globalization, and provide insurance for the unemployed. Surely Mr. Obama knows his 2012 re-election prospects depend upon near-term economic successes.
But, so far at least, the president-elect appears to understand that if he wants his legacy to be more than merely becoming the first re-elected African-American president, he must supervise the larger task of launching the industries and technologies for the century ahead.
Thomas F. Schaller teaches political science at UMBC. His column appears regularly in The Sun. His e-mail is email@example.com.