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America's Heartland in Cardiac Arrest
Coronary heart disease (CHD) is the leading cause of death in the United States for adults over age 20. Contributing risk factors include smoking, lack of exercise, diets rich in saturated fats as well as stress. An individual develops CHD when plaque builds up on the inside of the arteries that pump blood to the heart. Eventually, the arteries begin to clog and start shutting off the heart’s critical supply of oxygen and nutrients. At this point the heart becomes starved for oxygen and the individual might experience their first heart attack. Should the clogging continue unchecked, it is only a matter of time before a second or third heart attack occurs—each bringing one a little closer to fully cardiac arrest and death. It’s not just the heart that stops at that point, but the arms and the legs and the brain as well.
If the Midwest is the heart of our country, then its arteries are clogging with the plaque of economic stagnation, job losses and crumbling infrastructure. This shouldn’t come as a surprise to anyone. Middle America has had its share of heart attacks, each treated with a quick-fix angioplasty of policy solutions that fail to address the fundamental causes of the disease. The Federal government hands out around $43 billion in farm subsidies every year. Small towns and cities alike offer tax reductions or grants to keep manufacturing facilities (and jobs) in place. Ethanol production facilities crop up to take advantage of tax breaks. Unions willingly take pay or benefit reductions in exchange for job security.
But what is being done to correct the long term problems, like creating new businesses to reinvigorate the fading manufacturing sector, strengthening educational institutions or building an infrastructure system that doesn’t force people to rely on cars and $4.00 per gallon gasoline? When faced with the prospect of these sorts of long term projects, complaints inevitably arise that the infrastructure project is too big, smaller farmers would be in a world of trouble if subsidies were eliminated or it’s too difficult to retrain factory workers for more high tech or biomedical jobs. The Midwest is like the patient who tells their doctor, “Hey, thanks for the stents. But I don’t think I’m going to quit smoking, because changing is so difficult. And I don’t really like vegetables or exercise, so I’ll still be eating plenty of McDonalds at home on my couch. Oh, and I’ll be encouraging my child to do the same things too.” It’s simply foolish.
So while the Midwestern arteries were clogging, America’s coasts began diversifying their economies, creating financial services and technology hubs on both sides of the country. High incomes in those sectors support other industries and small and medium sized businesses. Diversification has clear benefits: the urban centers on the coasts have weathered the sub-prime mortgage fiasco and resulting housing slump far better than their Midwestern counterparts. The National Association of Realtors recently released a report showing that while housing sales fell 6% in the Midwest, Northeastern sales fell by only 4.4%, Southern sales remained constant and Western sales actually increased by 6.4%. Detroit leads U.S. urban areas in number of mortgage foreclosures. The relative strength of the other regions’ housing markets reflects the relative strength of their wage growth and job market. It should be no surprise that homeowners in cities with a 9.1% unemployment rate find it difficult to make their mortgage payments.
But to some extent, the gains on the coasts came at the expense of the Midwest. Cheap capital and the easy availability of credit fuelled a series of asset bubbles that encouraged people to live beyond their means and drew resources away from productive long term investments. Instead of investing in new factories or fixing our roads, bridges and rail lines, Wall Street encouraged people to load up on debt and buy stuff. Unfortunately, the powers that be in Washington seem to believe that more of the same is the solution: The recent Economic Stimulus package assumes that the best way to keep our economy growing is to encourage citizens to shop. And so our arteries keep getting clogged.
Just as the body can’t function when the heart stops, the rest of the U.S. finds itself in a precarious economic position despite their seeming economic stability in comparison to the Midwest. Our nation’s trade deficit in 2007 reached $708 billion—we bought $708 billion more in goods and services from overseas than we sold. Such a huge deficit is unsustainable - and part of its existence can be traced to the Midwest’s declining competitiveness in manufacturing. The region, which had driven industry and trade for the US for years and years, lost its competitive edge to countries like Japan or Mexico and more recently China. And as it lost its edge, more and more factories were closed, or employment was reduced. Over time, fewer and fewer goods were actually produced. And when you don’t produce anything, you can’t sell anything.
The negative effects on the rest of America extend beyond manufacturing. Agricultural subsidies require taxpayer money and high oil prices drive up the costs of petroleum guzzling agricultural production, thereby raising food costs across the country. The list of side effects could go and on. We are reaching the point at which the metaphorical lack of exercise and high-cholesterol diet can no longer be ignored or condoned. The Midwest needs a new regimen, one that forces the region in a new direction, toward new technologies, new organization and away from old habits.