Optimism

New York Times columnist David Brooks is playing contrarian, and expressing a high degree of optimism about America's future. To a great extent, I agree with his point of view. But not completely.

Brooks alludes to "a fiscal crisis" but doesn't discuss it in any detail. As I see it, if the U.S. is going to have any sort of bright future, we will first need to deal with the issue of Social Security and Medicare solvency. The choices are either some combination of benefit cuts and/or tax increases, or default on the unfunded obligations.

Immigration and its demographic effects, as described by Brooks, will ameliorate the solvency problem to some degree. But I don't think it will come anywhere near restoring the balance between workers and retirees that allowed Social Security to appear to work over its first few decades.

I see no basis for optimism about this country's future if that issue is not adequately addressed. Ideally, we should wean future generations off of the Social Security and Medicare Ponzi schemes as soon as possible.

I also take issue with the concept of national competitiveness, which underlies much of Brooks's argument. He notes that, on average, American workers are 10 times as productive as their Chinese counterparts. Is that a good thing? Brooks seems to take it for granted that the answer is "yes". But I disagree.

The more productive that Chinese workers become, the better off Americans are, on the whole. Of course, if Chinese workers get more efficient in making widgets, they might put American widget makers out of business. But an American is as likely to be a customer to the Chinese manufacturer as a competitor. A customer will benefit from greater efficiency on the part of a manufacturer, because that will decrease prices.

The U.S. gets some benefits from having the world's largest economy. It's the main factor making us the predominant military power in the world. We haven't always used that power wisely, and it's a bit of a mixed blessing when we're called upon to be the world's policeman, but, on balance, I'd rather be in our position than not. Also, we can borrow dollars from international creditors, and therefore we're shielded from the foreign exchange risk that can bedevil other debtor countries.

But we're nowhere near losing either of those advantages, regardless of how much China's economy grows in future years. So we have every reason to celebrate improvements in other countries' productivity, which will create better markets for our exports, and hold down the prices of our imports.

My view is that the concept of national competitiveness is based on the fallacy of composition. An individual business benefits from being more efficient than its competitors. But that doesn't mean that a country benefits from inefficiencies in other countries.