The Mood of the Country

In a few words, the mood of the country is glum.  Majorities of Americans are not satisfied with the state of the economy.  They are not satisfied with the direction of the country either.  And yet, despite this backdrop of gloomy assessments, Americans are spending at healthy rates, the GDP grows quarter after quarter, and unemployment is at near record low levels.  So, what’s the matter with Americans?

To start with the economy first, a recent opinion essay in the New York Times by the economist Karen Petrou put its fingers on some economic realities that can remain obscure when we focus only on aggregate economic numbers.  First, Petru reminds us that the U.S. came out of the pandemic with greater economic inequality than before.  The concentration of total household income and wealth within the top 1% and 5% of Americans, respectively, has risen above its pre-pandemic levels.  Currently, 64% of American households make it paycheck to paycheck each month.  A recent content analysis of Tik Tok videos reported in the NYT shows unprecedented levels of economic despair among the young people of generation Z.  Living in a world full of information about the lifestyles of the better off, it doesn’t take a dive into economic statistics to realize how you fare economically.  Behavioral economics tells us that people judge their economic wellbeing not by their own absolute income but by how it compares to that of others.

The pessimism about the future is particularly worrisome.  One would expect that amidst the current explosion of technological advances (as in AI) and the great promises they hold for humankind (at least as told in the media) people would be wildly optimistic about the future.  But should they?  Americans have seen how earlier breakthroughs in technology and global trade have intensified, not lessened, the flow of the spoils to a small fraction of winners. 

The pessimism about the future is reflected in surveys.  In a recent NBC News poll only 19% of the respondents agreed that the next generation will live better than their own generation.  Is there any hope that things will change any time soon?  In his recent book The Rise and Fall of the Neoliberal Order, Gary Gerstle, a Cambridge University professor, contends that the order of unfettered capitalism is on its way out to be succeeded by a reformed version of capitalism that is more inclusive and more focused toward serving the common good.  But again, how can this happen in an era of big money in politics and powerful corporate interests?

In addition to being dissatisfied with the state of the economy, Americans are also unhappy with the direction of the country and the dysfunctional political system.  An overwhelming majority, 78% of the respondents to be precise, think the country is headed in the wrong direction according to a recent poll by the Associated Press and the NORC Research Center.   An ABC News poll found that this opinion is shared by majorities of Republicans, Independents, and Democrats.  A Pew Center poll found that 65% of respondents say the American system needs major reforms, and 57% believe the U.S. is no longer a model of democracy.  All these views collectively signify a radical reassessment of the American narrative that has heretofore painted America as the land of unlimited opportunities and a paradigm of democracy.

So, what explains this overall mood and especially the souring about the health of the American democracy?  For answers, it is time we turned to the U.S. constitution itself and how it has produced an increasingly counter-majoritarian political system. 

In their latest book The Tyranny of the Minority, Harvard professors Steven Levitsky and Daniel Ziblatt explain in stark terms how the constitution, written more than two centuries ago and under the compromises imposed by the political realities of that time, is now responsible for undermining the fundamental democratic principle of majority rule.  This in turn, has opened up a persistent gap between the popular will and legislative outcomes.  In short, sparsely populated states and rural districts are now over-represented in the Senate, the House of Representatives, and most importantly in the Electoral College.   As a result, we have presidents elected without winning the popular vote and the Senate skewed toward senators elected by a minority of American voters. 

The ultimate outcome of a non-representative (in terms of popular votes) Electoral College and Senate is a Supreme Court itself dominated by justices who have been appointed thanks to the over-representation of a minority of the popular vote.  In addition, a minority of forty-one senators can block any proposed law thanks to the mechanism of filibuster, an anomaly not found in the constitution nor in any other western democracy.  This is in essence what Levitsky and Ziblatt call a counter-majoritarian political system that makes American democracy less of a democracy.

How could then this counter-majoritarian system be relevant to how Americans feel about the direction of their country?  First, many voters feel their vote is diluted.  Second, the popular will on major issues is not translated into a majority of votes to facilitate the passage of popular legislation.  Voters who feel strongly about major issues, related to abortion, gun control, the climate or immigration, know that despite the popularity of their positions there is no chance of legislative success.  Obviously, this contributes to their pessimism.

We also need to take account of another important factor.  Presently, America stands at the crossroads of either developing a functioning multiethnic-multiracial democracy or sliding back on its aspiration to become a better union.  Levitsky and Ziblatt point out that majorities of white Americans are feeling an existential threat to their influence and standing in the emerging multiracial America.  Whether their fears are rational or not matters very little.  On the opposite side stand those who fear that their civil liberties and voting rights are under attack.  The fluidity and ambiguity as to which road the country will take leaves many Americans with anxiety and doubts about the direction of America.

Perhaps nothing exemplifies better the unsettled times we live in than the resignation of significant numbers of Republican and Democratic members of Congress.  They cite political dysfunction and futility in effecting constructive changes as the main reasons of their walking out.  I am inclined to think that their exasperation reflects the more general sentiment that in a country full of potential for bigger things political minorities and self-interests stymie the progress to a better future.

Author: George Papaioannou

Distinguished Professor Emeritus (Finance), Hofstra University, USA. Author of Underwriting and the New Issues Market. Former Vice Dean, Zarb School of Business, Hofstra University. Board Director, Jovia Financial Federal Credit Union.

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