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Poor outlook: political polarization cripples future viability of the U.S.

The U.S.A. is only ranked 26th in a comparison of OECD and EU countries / Economic recovery barely arrives at middle class / Growing social inequality and alarming child poverty rate / Great need for reform of social, environmental, and economic policies / Tense security situation / Growing political polarization hampers work of governmentIn an international comparison of all 41 OECD and EU countries.

What is especially striking is the great need for reform in the areas of social inclusion policy (27th place), environment (33rd place), tax and budgetary policy (39th place) as well as on internal security issues (40th place). Moreover, the recent positive economic development is spurring less employment growth than did previous economic booms. The middle class is struggling with stagnating income. Social inequality has increased (now only 38th place) and the child poverty rate is at nearly 20 percent (35th place).

Generally speaking, the study attests to the American government apparatus a relatively large degree of steering capacity (seventh place). In actuality, however, necessary reforms are falling by the wayside as a consequence of the intense political polarization. This is the result of an international comparative study (Sustainable Governance Indicators, SGI) of the German Bertelsmann Stiftung, which applied 136 indicators to assess the government actions and reforms of all countries of the EU and OECD.

Overall, the Scandinavian countries achieved the best results, with Sweden ranking first, followed by Switzerland and Germany. Of the largest national economies, only two G7 nations (Germany and the United Kingdom) are among the top ten. Canada ranks 17th and Japan 23rd. Greece continues to come in last in the comparison among countries.

Despite the economic boom, social inequality is on the rise

On the whole, the American economy has recovered so well from the consequences of the financial and economic crisis that in terms of economy the U.S. even ranks first in the comparison of EU and OECD countries. The objective of the expansive fiscal policy – to stimulate the economy by way of increased demand for consumer goods as well as public spending, for instance in the service and health sector – thus seems to have been achieved, at least for the time being. Yet the national debt level (105.8 percent of the economic performance) has continued to rise slightly in the international comparison (35th place).

The situation on the labor market in particular has improved considerably over the past two years. As a result, the unemployment rate could be reduced to a record low of 6.25 percent in 2015. At the same time, however, the employment growth rate was lower than during previous periods of economic boom and was accompanied by a further exacerbation of social inequality: “In recent years, there has been persistent poverty along with exceptionally large gains for the top 1% and especially the top 0.1% of the income scale,” found the study, in which American scientists were involved as well.

The ratio of employed individuals earning less than two thirds of the median wage income is now at 24.9 percent (consequently, the U.S. is only ranked 38th in the EU and OECD comparison). The current poverty rate is 17.6 percent (36th place). Especially for single mothers and over 60-year-olds, it is one of the highest among developed industrial countries. Child poverty is alarmingly high at 19.6 percent (35rd place) – with roughly 1.3 million homeless children.

So far, social policy (27th place) and tax policy (39th place) have failed to noticeably reduce inequality. On the contrary: the fact that the American tax system is strongly geared toward particular interests makes it not only highly complex but also ineffective in terms of redistribution effects.

Polarization hampers urgent reforms

When it comes to internal security, the performance of the U.S. is particularly poor in the international comparison (40th place). The skyrocketing number of homicides, particularly in big cities such as New Orleans, Detroit, and Chicago, as well as killing sprees show the importance of imposing stricter gun laws. Yet due to the ideological gap between the parties and thanks to the lobbyism of the National Rifle Association, attempts to initiate pertinent effective legislation have failed so far.

It is precisely this division between the congressional parties that prevents serious progress in many issues of environmental and climate protection. In the comparison, the U.S. is only ranked 33rd in environmental policy, along with Greece. To be sure, progress has been made, for instance in the form of raised fuel efficiency standards for cars and small trucks as well as new CO2 standards for new coal-fired power plants. Yet due to the lack of congressional and public support, the government has not been able to persistently pursue its ambitious climate objectives.

In the category of the Administration’s governance capacities, the U.S. is in a relatively good seventh place, behind the leading Scandinavian countries plus New Zealand and Luxembourg. However, when it comes to implementing political plans, the situation is difficult considering the enormous institutional and constitutional requirements for consensus and the currently very pronounced political polarization. A second point of criticism concerns the low political participation competence of American citizens (22nd place). Here the study is particularly critical of the below-average information level of citizens in matters of current but also fundamental political decisions and processes.

“If the OECD and EU countries wish to improve their future viability, they must focus on strengthened cooperation and coordination as well as policies aiming for long-term solutions rather than national isolationism. The political systems in the Nordic countries and New Zealand are still particularly well-placed in this respect. They are at the top of the SGI Governance Index and could serve as models of good governance and accountability for other countries”, says Aart De Geus, Chairman and CEO of the Bertelsmann Stiftung.

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