Americans have grown fearful. Most believe, not surprisingly, that the country is headed in the wrong direction. For the first time ever, most Americans believe their children may not fare as well as they have. We spend nearly as much as the rest of the world combined on our military, chasing phantoms across the world. Conservatives in both parties rail about debt and deficits. They line up to support adding another $33 billion in emergency spending for the misbegotten war in Afghanistan, while blocking the $23 billion needed to forestall the layoff of a staggering 275,000 teachers across the country.
Washington is crazed about debt and deficits, but the real deficit is in fortitude, not finances. Consider the contrast between this country emerging from the Great Depression and World War II and now.
Then our debt was a far greater burden than now -- over 120% of GDP. The country had suffered a decade long Great Depression and a global war. The troops were coming home, but the entire economy was mobilized for war. Europe and Japan were devastated. And America was led by Harry S. Truman, a former haberdasher, product of the corrupt Pendergast machine in Kansas City.
But, having won the War, America had the confidence to face its future. Despite the massive debt, Congress passed the GI Bill, educating a generation of veterans. We financed the transformation of military factories to civilian production, investing in the industries -- from aerospace to automobiles -- that would transform the country. Congress passed subsidies to aid the purchase of homes, stimulating the growth of the suburbs. We passed the Marshall Plan to spur the rebuilding of Europe. A Republican President, Dwight D. Eisenhower, a hero of the war, put a lid on military spending, while building the interstate highway system.
With rare exceptions the country continued to run annual deficits and the accumulated debt continued to rise. But the country grew faster, the broad middle class -- the triumph of American democracy -- was forged, and the debt as a percentage of GDP declined steadily down to less than 32% when Ronald Reagan took office.
None of this was easy or smooth. There were strikes and upheavals. Inflation and unemployment plagued the post-war transition. The Korean War divided the country.
Conservatives at the time were as timorous and noisome as they are now. Led by Ohio Senator Bob Taft, they opposed the creation of NATO. They railed about deficit spending. They waged war on labor unions. They hunted communists at home and abroad, trampling basic liberties in the process. They conjured up preposterous conspiracy theories about treachery within. American politics were even more poisonous than now. And black GIs returning from the war found that their service did not exempt them from the legalized apartheid that still scarred the country.
But a confident America didn't let the frightened and the crazed get in the way of doing what was necessary to forge a prosperous future. Eisenhower reaffirmed the New Deal reforms. Social Security was preserved; finance remained shackled; top end tax rates stayed at 90%; labor's right to organize was weakened but not gutted. A confident and broad middle class replaced the extreme inequality that contributed to the Great Depression. We all grew together.
The contrast with the present day is stark. Now as we remain mired in two costly and endless wars, and emerge from the Great Recession, the timorous have taken control. Our national debt -- about 90% of GDP -- is far lower a burden than it was after World War II, but our deficit in confidence is far higher.
Instead of forging the new economy needed to revive a broad and prosperous middle class, we are focused on balancing our accounts. With states and localities facing crippling budget crises, with school districts shutting down summer school, eliminating after school programs from athletics to tutorials, laying off teachers and increasing class size, the Congress blocks vitally needed bills to provide aid to states, and to put people to work. The president acknowledges a staggering public investment deficit in the foundations of a new economy -- in education and training, modern infrastructure, research and development - and then calls for a three year hard freeze on domestic spending, while the military budget continues to rise. Republicans and conservative Democrats join with the banking lobby to weaken financial reform, with big oil to frustrate the transition to new energy, with the insurance and drug companies to sustain an unaffordable health care system.
Wall Street billionaire Pete Peterson enlists major foundations to rouse fears about debt, with "entitlements" -- meaning Social Security and Medicare as his major targets. The president sets up a deficit commission tasked with balancing the budget, not with defining the foundations of a new economy that would enable us to grow our way out of debt and rebuild a prosperous middle class.
President Obama is far better prepared for this moment than Harry S. Truman was. He has been clear about the need to build a new economy out of the ruins of the old. He has detailed core elements of that task -- public investments in areas vital to our future, making the transition to new energy, balancing our trade and making things in America once more, shrinking finance and curbing the casino, empowering workers to gain a fair share of the profits and productivity they help produce, fixing our broken health care system -- the source of those terrifying long-term deficits that Peterson brandishes and distorts.
But the president is now in retreat. His call to action has been muddled by pollsters and positioning. Conservatives peddle fear and conspiracies as they did after World War II, but this time America's leaders are cowed, letting the frightened block the bold measures needed to forge our future.
Needless to say, our current circumstances are far different than those at the end of World War II. Then we were victorious; now we are losing in Afghanistan. Then we were unified; the entire nation had sacrificed in the Depression and the war. Now we are divided, more unequal than ever; and the wars are fought by professionals out of the public consciousness. Then we had pent up private savings from years of wartime rationing; now household debt remains near record levels. Then the rest of the world was devastated; now America faces a surging and mercantilist Asia, an export addicted Germany.
But these are circumstances, not fate. The real contrast is in our confidence. Americans have grown fearful. We doubt our ability to pursue a common purpose. For good reason, we lack faith in our institutions - whether government or business or the banks. But instead of steeling our spine, we are daunted by the obstacles. Bluster substitutes for courage. We focus on balancing our accounts, not forging our future. That is a recipe for decline.