The debt ceiling is over—finally. But what was missing in all of the partisan bickering?
Front and center should have been reduced spending, or at the very least a spending freeze—and it did occur to an extent. Entitlement reform was hardly discussed, even though other reforms like work requirements were included, reducing the long-term burden of welfare spending while getting Americans back to work.
Still, today’s Congress is a case study in short-termism. The long-term trajectory of the debt and America’s broader economic health depends on one thing: If we’re able to have a growth-minded, dynamic economic strategy, regardless of the theatrics that come with the debt ceiling debate every so often. It remains a big “if.”
Because the United States is still more dynamic than most other countries in the world, appreciating entrepreneurs (at least in polls, if not in policy actions), we can still afford to not worry as much about defaults and higher debt levels. However, the hope that a dynamic America economy represents—based on entrepreneurship—is fading fast. We desperately need a new dynamism, along with an optimistic vision of the future.
In a recent op-ed column, Andreesen Horowitz (AZ16) partners Katherine Boyle and David Ulevitch highlight the need for a dynamism agenda, predicated upon private-sector investment in companies and technologies that spur economic growth. To their point, entrepreneurs comprise one of the most important pillars of the dynamism movement. It is indeed a philosophy that is part and parcel of American life, or at least it should be.
Unfortunately, there are troubling trends that point to an overall decline in U.S. dynamism, not to mention a cultural shift from valuing economic dynamism to seeking greater economic security.
Economists such as John Haltiwnager and Ufuk Akcigit have documented the decline of business dynamism since the 1970s. The Economic Innovation Group’s Index of State Dynamism, which measures factors like the startup rate and share of workers in firms under five years old, shows that business dynamism is 30 percent lower than what it was in the early 1990s. On another front, occupational licensing has increased barriers to entry, making many occupations less dynamic. In the 1970s, only one in 20 occupations required a license, whereas the figure is currently closer to one in four.
When it comes to policy discussions around social mobility and income inequality, there is a greater focus on security and safety than dynamism. Many policy proposals target a guaranteed basic income, baby bonds, and universal pre-K and childcare benefits, in addition to tweaking the safety net (i.e. the earned income tax credit or food stamps). These proposals have less to do with personal responsibility and more to do with a guarantee of stability.
In his book Mass Flourishing, Nobel laureate Edmund Phelps shows how the dynamic economy that we enjoy today—responsible for lifting millions out of poverty and leading innovation in countless fields—occurred not only because there were key innovations in entrepreneurship and legal institutions, but also because there were important cultural developments centuries ago. These developments created positive social narratives related to entrepreneurship, innovation, and dynamism, all of which are necessary ingredients for economic prosperity.
Americans need to have a dynamic mentality to solve modern problems. In the past, America was able to dream and complete grand projects like the Brooklyn Bridge and the Hoover Dam, reminding us human beings are builders of material things. But that’s not all: As doers, we are also builders of our own destinies. We need to feel like we have the agency to do, to find our meaning in life.
However, we can’t be doers or builders in a dynamic country if modern-day narratives place us in a constant state of alarm. Case in point: The debt ceiling debate, which brought fear and anxiety that the federal government is overspending and defaulting on debt. Americans can’t live in fear that we’re running out of resources to fund critical services.
Research has shown that people become more anxious and more defense-oriented when they are anxious and feel under threat. They also become less motivated to take the kinds of risks that lead to new discoveries. The more anxious people are, the less likely they are to engage in entrepreneurial activities—the less likely they are to be dynamic.
In our own surveys, Americans say that they remain optimistic about their own future. People believe that the American Dream is alive. But, at the same time, people feel pessimistic about the future of America. This is problematic, given that optimistic people are more patriotic than their pessimistic peers, and patriotism is integral to prosperity.
A dynamic future simply will not happen if we’re defensive or alarmed, instead of growth-oriented. Americans need to coalesce around narratives like the American Dream, seeking to live better, richer, and fuller lives—regardless of where they started in life.
Dynamism is what built the United States, and it continues to inspire people to push the frontier of economic development in our country. Let’s never forget that, even when Congress returns to its partisan bickering. Let’s never forget what it means to be a dynamic people, to have more paths to flourishing—and why it is so important.