Is political polarization holding back the US?

How viable is the United States? How large is the country’s need for reform with regards to its economic, social and ecological sustainability? Let's just say this: there is work to be done.

This of one of our findings in this year’s Sustainable Governance Indicators (SGI) by the Bertelsmann Foundation. It’s an international monitoring tool which sheds light on the future viability of all 41 countries in the OECD and European Union. On the basis of 136 indicators, we assess government actions and reforms. More than 100 international experts are involved in our study.

In this year’s SGI, the US is only ranked 26th in terms of future viability. What is especially striking is the great need for reform in the areas of social inclusion policy (27th place), environment (33rd), tax and budgetary policy (39th) as well as on internal security issues (40th).

Moreover, recent positive economic development is leading to slower employment growth than previous years. The middle class is struggling with stagnating incomes. Social inequality has increased and the child poverty rate is at nearly 20%.

Generally speaking, our study offers a degree of steering capacity. However, necessary reforms are falling by the wayside as a consequence of intense political polarization.

In this year’s SGI, 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 10. 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

The American economy has recovered so well from the consequences of the financial and economic crisis that in terms of economy the US 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 – thus seems to have been achieved, at least for the time being. Yet the national debt level (105.8% of the economic performance) has continued to rise.

The situation in the labor market in particular has improved considerably over the past two years. As a result, the unemployment rate was reduced to a record low of 6.25% 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. We found that poverty in the US is persistent with exceptionally large gains for the top 1% and especially the top 0.1% on the income scale.

The ratio of employed individuals earning less than two thirds of the median wage income is now at 24.9%. The current poverty rate is 17.6%, putting the US at 36th place in our ranking of 41 countries. This is one of the highest among developed industrial countries, especially for single mothers and over 60-year-olds. Child poverty is alarmingly high at 19.6% – with roughly 1.3 million homeless children.

So far, social policy and tax policy 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.

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Polarization hampers urgent reforms

When it comes to internal security, the performance of the US is particularly poor when compared to other nations (40th place). The skyrocketing number of homicides, particularly in big cities such as New Orleans, Detroit, and Chicago show the importance of imposing stricter gun laws. Yet due to the ideological gap between the parties, attempts to initiate pertinent effective legislation have so far failed.

It is precisely this division between the congressional parties that prevents serious progress in many issues of environmental and climate protection. In our comparison, the US is only ranked 33rd in environmental policy, alongside Greece.

To be sure, progress has been made, for example 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 current administration’s governance capacities, the U.S. is in a relatively good 7th 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 pronounced political polarization.