1994 A Prediction

Governor of Colorado

All right, all right, I know that George Orwell's Nineteen Eighty-Four hasn't come true! The world isn't divided into three superpowers, Oceania, Eurasia and Eastasia, that battle one another constantly. No Big Brother hangs over Great Britain; no telescreens watch its citizens. Nineteen eighty-four is still scary, but in a way different from Orwell's prediction. I further know that it's hazardous enough for an author, let alone a politician, to forecast a dire future. He who speaks with the aid of a crystal ball usually ends up eating ground glass.

Yet a view of a future toward which trends are taking us can be a powerful tool in keeping it from happening. Nineteen Eighty-Four was a warning as well as a prediction and, thus, served a very important role. Because we create our futures by our choices, predictions can help sound alarms. The future is to be created; it's not a fixed result that we inherit. If it is predictable, it is preventable. "Trend," said René Dubos, "is never destiny."

I am not a pessimist by nature. Life has been very good to me. But in the ten years that I have been governor of Colorado, the American people have seen a massive change in our economy and a massive loss of our wealth. In 1965, the year before I was elected to the state legislature, one U.S. corporation, General Motors, earned twice as much income as the 30 largest German industrial corporations and the 30 largest Japanese corporations combined. By 1980, G.M. had reported a loss. In 1965, U.S. industrial corporations with sales of more than a billion dollars represented 70 percent of all such companies in the world. By 1980, that figure had fallen to 40 percent. In 1975, my first year as governor, the U.S. had a trade surplus; in 1983, we had a 61-billion-dollar trade deficit. Simply put, this country is rapidly losing its wealth. A more besieged America has evolved, and politicians must adjust their agendas to its new realities.

I believe we are now heading toward a gloomy future filled with major economic, political and social traumas, and it's not that we can't alter that trend but that we won't. Thus, we're careening toward disasters of our own making.

The oil disruptions of the Seventies and the inflation and recession we experienced weren't isolated incidents but a preview of the future. We live in a time during which some awesome forces are converging. Multiple problems will multiply. There is a gathering storm in the world as infinite needs run into finite resources.

It is my contention that there are no easy solutions, that our country's problems can be solved only by a series of very, very hard choices--and that our political system is not used to making those choices. In the U.S., politicians have traditionally been able to spend entire careers distributing a growing pie; thus, they're good at distributing pleasure but not at allocating pain.

But the future will not allow us to continue to ignore these hard problems. They won't get better, they'll get worse--unless attacked immediately. Because most of them are taken to the political market place for resolution, there is no better time than an election year to discuss them. I challenge all the candidates, in both parties, to confront these problems now. We cannot afford to wait.

What follow are my own best-guess predictions about where certain political, social and economic forces are taking us. I have borrowed a technique from Orwell, whose book projected 35 years into the future to help us conceive the inconceivable. In this case, I have merely added ten years to his date. One reviewer of Nineteen Eighty-Four said, "It is the most terrifying warning that man has ever uttered."

But I'm afraid I have to add a few terrifying warnings of my own.

The U.S. Economy

I predict that by 1994, interest rates will have risen to 25 percent at least twice, gold will have hit $2000 an ounce or more and inflation will have roared back to double-digit numbers at least twice. We will see a Depressionlike economic trauma before 1994.

As a society, we've been committing acts of political and economic malpractice. In his first 1000 days in office, Ronald Reagan has increased the national debt of the United States by half. The U.S. Government is borrowing approximately 30 cents of every dollar it spends. Our national debt is projected to grow from 1.4 trillion dollars in 1983 to two and a half trillion dollars in 1989. Democratic Senator Daniel Patrick Moynihan of New York warns that if Reagan serves a second term, his projected budgets will nearly triple the national debt in his eight years. In other words, he will add twice as much to the deficit as his 38 predecessors did over 195 years.

That fiscal insanity is by no means all Reagan's fault, however; Congress must accept its share of responsibility. It is clear to me that the question isn't which political party can offer a way out of these tumultuous times but whether either party can. The Republicans can't say no to military spending and the Democrats can't say no to social spending. Together, they're repeating all the mistakes of the Sixties, attempting to give us both guns and butter. Before long, though, we'll have to pay for our excesses. We're living on a store of wealth built up by past generations, but the joy ride is coming to an end. Our economy, rich as it has been, can take only so much abuse.

It is axiomatic in politics that the earlier one addresses a problem, the more the alternatives and the easier the solutions. By not adequately attacking the deficit situation in 1984, we will be facing an undercut economy in 1985, after the Presidential election. The Federal deficit is a sword of Damocles hanging by a thread over the national economy. The U.S. is clearly going to have to cut the rate of spending and increase taxes. The solution isn't either but both. Whoever is elected next November will face a deteriorating economy and will ask himself, "Was it worth it?"

By 1994, the seemingly irresistible force of Federal spending will have run into the new reality of the static economic pie.

A static economic pie? Hasn't the U.S. always had a growing economy? Actually, family income in this country essentially has not grown since 1973. All wages, wage increases and benefits since 1975 have been wiped out by inflation, and in 1980, the average American saw a five-and-a-half-percent loss in real income. I predict that we will see our economy continue to gyrate between periods of hyperinflation and periods of deep recession. Furthermore, I believe that one of the most difficult political problems we will face between now and 1994 will be the new responsibility of politicians to allocate not abundance but scarcity.

For at the same time we have a static economic pie, we also have exploding demands. We built up such systems as Social Security, Medicare and Federal pensions in a time of a growing economy as though the boom would continue forever. Many other systems are built on similarly faulty assumptions. The intermediate requirements of the Social Security Administration (SSA) assume a nonstop growth in real wages of one and a half percent a year (substantially above what we have averaged in the past 15 years); they also assume an increase in the birth rate from the current 1.8 children per woman to 2.1 children and a steady five and a half percent unemployment rate after 1995. The SSA also assumes that there will be little growth in life expectancy despite the fact that that prediction flies in the face of America's experience over the past 50 years. I believe all of those assumptions will be proved wrong. Social Security is already facing a multitrillion-dollar imbalance over the next 75 years.

Thus, we have made promises and raised expectations beyond our ability as a society to deliver. I believe that America's systems are now out of control. We all know about the 1.4-trillion-dollar debt and the 184-billion-dollar annual deficit. As of 1983, the unfunded liabilities of Social Security stand at 5.1 trillion dollars, which, of course, is not considered in the 1.4-trillion-dollar national debt. Unfunded military pensions, in this society in which a typical enlisted man will retire from the Service at 39 and an officer at 43, amount to another 500 billion dollars. Pensions are forever: The U.S. still pays pensions to widows of Civil War veterans. The Federal Civil Service system's unfunded liability is another 500 billion dollars, which we will have to pay off in the future. Additionally, it is estimated that Medicare will be 97 billion dollars in debt in 1995; on top of all that is at least another trillion dollars that we will owe just to keep up our infrastructure, which is now rapidly deteriorating.

Consider the numbers: Our systems are not only actuarially unsound, they are a chain letter to the future.

By 1994, it will have become clear that the U.S. is a country in liquidation.

Last year's trade deficit was 61 billion dollars. Next year's is projected to far exceed that. The U.S. has learned to buy abroad but not to sell abroad.

It appears likely that our country will continue to lose its place in the international economy. We have gone from 30 percent of the world gross national product in 1970 to just over 20 percent in 1980, and that trend continues. The U.S. has seen its industries lose their competitive edge in the world market place and has seen trade deficits skyrocket. Even those industries in which the U.S. remains dominant, such as agriculture and aircraft production, are under very heavy attack. Robert Reich of Harvard has pointed out that during the Seventies, our share of world sales declined by 23 percent while every other industrialized nation except Great Britain maintained or expanded its (continued on page 94)1994: A Prediction(continued from page 84) share. Clearly, we will never dominate world markets again, because other low-wage nations have learned good lessons about marketing and mass production from us.

The question is, will we be innovative enough to beat our new competition? I'm afraid not. Our inability to meet the demands of international competition is seen particularly in capital-intensive, high-volume industries. The U.S. proportion of world automobile sales has declined by one third since 1963; sales of industrial machines have declined by one third, agricultural machinery by 40 percent, telecommunications by 50 percent, metalworking machinery by 55 percent. Goods are being made wherever they can be made cheapest, regardless of national boundaries. In the past ten years, America has spent 318 billion dollars more on foreign goods than we have received for our products abroad. Unless we find ways to improve our productivity, a U.S. worker, at, say, $15 an hour, can't compete with workers in the many nations that pay 50 cents or one dollar an hour. And we certainly can't compete with the Japanese when our capital expenditure per worker is $250 and theirs is $650. A South Korean steelworker makes one eleventh the wage of a U.S. steelworker. It would seem unavoidable that the most efficient places for mass production of standardized commodities in the coming years will be Third World countries.

There's enough blame to go around for everyone. Big unions, bad management, lack of research and development, too little attention paid to productivity--all play a role. But, more than any other factor, we simply find that our insulated continental market place has turned into a cannibalistic international one in which we're competing with countries with highly skilled, low-priced labor. Jobs flow toward cheap skilled labor.

It's hard to find a scenario that restores the United States' shrinking share of the world economy, especially with an overvalued dollar that effectively puts a tax on all our exports. I predict that we'll continue to lose many high-paying industrial jobs to the Third World and will replace them with lower-paying service-economy jobs, if we're able to replace them at all. Right now, the 20 fastest-growing new jobs in the U.S. pay annual wages that average $5000 less than those 20 occupations in the steepest decline.

Nineteen ninety-four will see the U.S. with a substantially reduced middle class, and we will have moved toward a two-class society.

If we fail to increase our productivity and develop new international markets for our manufactured goods, we won't be able to offer our children high-paying jobs in commerce and industry and, as a result, we'll have a greater gap between rich and poor. I predict that by 1994, the U.S. will have less of the middle class upon which our democracy was founded. We will have moved toward a society of two classes, the rich and the poor; and, as we have seen in other countries, a marked difference between rich and poor leads all too often to social unrest. The middle class serves as a bridge between the haves and the have-nots. If it goes, so goes political stability.

The Work Revolution

Nineteen ninety-four will see a bitter battle over a shrinking number of jobs.

For millions of Americans, job opportunities are being destroyed by the combined pressures of automation, international competition and obsolescence. Dr. Gail Garfield Schwartz and William Neikirk, in their book The Work Revolution, predict that after 1990, it will take perhaps 75 percent of the work force to do 100 percent of the work. We'll have more people than we have jobs, a terrifying imbalance.

The technological revolution will bring both good news and bad. We'll have jobs for highly skilled workers but not for semiskilled ones. American workers are vulnerable to foreign imports because our market place is wide open and foreign goods are cheap and of high quality. And at the same time we're losing jobs, a constant stream of American women into the work force, as well as the human tide of illegal immigrants, will further increase the number of people seeking employment. Also, evidence shows that the elderly, pushed by economic need, will work longer, thereby occupying jobs that won't turn over as fast as in the past.

Nineteen ninety-four will clearly see America move into a new world of the structurally unemployed. More and more occupations will require fewer and fewer workers to produce more and more goods and work. Layoffs of the future will become attributable less and less to temporary recession or inevitable business cycles and more and more to permanent work dislocation. Technology and international competition are shrinking jobs at just the time many new job seekers are trying to enter the American economy.

Dr. Schwartz and Neikirk predict, "The coming job crisis will shatter the uneasy tranquillity of the American workers. Setting worker against worker, it will ignite bitter wars between the old and the young, between men and women, between white and nonwhite, between native-born and new arrival." Essentially, then, we're moving toward a time when the economy won't be able to incorporate all the people who are desperately seeking work. The U.S. will see its first long-lasting job crunch.

Cities: Our Social Time Bombs

I predict that 1994 will see American cities largely full of angry, frustrated and unemployed minorities who will substantially change the face of urban America.

My first job out of law school was as a lawyer for Colorado's Anti-Discrimination Commission. My wife marched in Selma, Alabama. We had a great dream of an integrated society, a dream that, far from being fulfilled, is sliding backward.

A study by the Joint Center for Political Studies shows that in 1950 in the largest cities in the United States, one public school student out of ten was a minority; by 1960, the ratio was one out of three; by 1970, it was one out of two; by 1980, it was seven out of ten; by 1990, nine out of ten students in big cities will be minorities.

Many of these minorities live in slums and squalor with little expectation and little hope. Their other social problems are myriad. Fully 56 percent of all black children are being raised in fatherless homes. Currently, one out of ten children in the U.S. is supported by Federal Aid to Dependent Children. Clearly, illegitimate births know no color line, but a greater burden is borne by urban minorities. In Pennsylvania, 66 percent of all black babies are born out of wedlock; in Delaware, 63 percent; in Washington, D.C., 64 percent; in New York City's Harlem, 77 percent. Many of their mothers are children having children, which perpetuates a cycle of poverty and frustration. In the past decade, the number of single-parent families has almost doubled. When you add the illegitimacy figures to the divorce figures, you find that one quarter of all American children under the age of 18 are now living in one-parent homes. Research shows that regardless of race, only half of all teenaged mothers graduate from high school. Their infants are far more likely to be born prematurely, with greater risk of brain damage or other birth defects.

Despite the poor record of assimilation of our existing minorities into the American mainstream, the massive flow of Hispanics coming in from south of the border is creating another unassimilated minority (continued on page 144)1994: A Prediction(continued from page 94) in America. The flow of illegal immigrants has increased tenfold in the past decade alone, with authorities apprehending more than 1,200,000 illegal immigrants in 1983, most of them Mexican.

This means that soon we'll have two large minority blocs that don't share proportionately in our country's wealth. Statistics from the Joint Center for Political Studies show that the personal wealth, or accumulated assets, of black families is only 36 percent of that of white families: The average wealth of black households is $24,608 as compared with $68,891 for white households. In the past two decades, the yearly income of black families has remained at about 60 percent of that of white families. Although black households make up 12 percent of all households in America, they hold only four percent of the combined wealth of blacks and whites (211 billion dollars in personal wealth as compared with 4.875 trillion dollars held by whites). Fewer than half of black households have savings accounts, while 77 percent of white households have them.

The impact of those economic realities and demographic changes will be gargantuan, leaving our cities tinderboxes of frustrated, angry and underemployed minorities. The social time bomb is ticking.

The Health-care Drain

America's health-care system will be bankrupt by 1994.

We stand on the threshold of the age of the bionic man. A large number of organs are already transplantable, and transplants for virtually all of the others wait in the wings. Medical science is inventing much faster than public policy can pay for its inventions. By 1994, we will have attempted on three or four occasions to avert the bankruptcy of Medicare, but it will be very clear by then that health care has gotten completely out of control and will be consuming an unacceptable part of the gross national product. Already, ten and one half cents of every dollar in America is spent on health care. In the cost-of-living index, health care is growing two and one half times as fast as the other economic indicators.

On top of that, we'll soon face a day when medical science is able to prolong physical existence indefinitely, filling our hospitals with sick people who are alive but whose quality of life will be intolerable. We already have too many hospital beds, too many costly specialists and an overdose of medical technology; and now we're coming into the time when the growth of the aged population, combined with the explosion of health-care costs, is going to bankrupt a number of systems. In 1970, the number of individuals aged 65 and over was 20,000,000; in 1985, it will be 29,000,000. By the year 2030, when the children of the baby boom are well past the age of retirement and our children are approaching it, there will be 65,000,000 aged 65 or over in America. The hospital-patient days of persons over 65 are projected to increase from 105,000,000 in 1980 to roughly 275,000,000 in the year 2000, almost tripling the amount of hospital care for the aged in a 20-year period.

It is inevitable that we are going to have to ration health care in the United States. Health and hospital spending cannot be reduced unless there is some cutback in services to at least some patients. Geometrically rising costs are on a collision course with a financial system that simply cannot afford them. A million and a half people have heart attacks in America every year; how many should have access to an artificial heart? How many heart transplants can we afford; and, as technology further increases the ability to keep people alive, can patients get more than one transplant? How many heart transplants should we give to a smoker? How many liver transplants should we give to an alcoholic? We simply have not come to grips with the fact that medical innovation stands ready to break us as a country.

We already spend more money, a larger percentage of our gross national product than practically any other industrialized nation in the world, on an inefficient health-care system--and one that is heading for bankruptcy to boot!

Continuing Energy Crisis

We will have at least one major oil crisis before 1994.

After two crippling oil crises in the past decade, I am astonished that we still rely for a significant part of the free world's oil on one of the most anachronistic places on the earth, the Middle East. Europe and Japan depend even more on it.

This is a volatile dependency. Thirteen of the present Arab heads of state, or more than half of them, have reached power as a result of the forceful removal of their predecessors, and in the past 15 years, Arabs have fought Arabs in 12 fierce wars. The Islamic-fundamentalist revolution is sweeping the area--with grave anti-Western implications--and there have been four major Arab-Israeli conflicts, now threatened further by the crisis in Lebanon and the failure to resolve the Palestinian-autonomy question.

On top of all this, our own oil discoveries don't keep pace with production, and we have failed to begin to make the energy-efficient decisions that we should make to remove the waste from our society. I predict that by 1994, the Organization of Petroleum Exporting Countries (OPEC) will have reasserted itself and we will be back in the lap of the Arabs.

By 1994, payment of utility bills will be a major problem in the United States.

This prediction follows from the previous one, but even if OPEC doesn't find new power, it is clear that we have expended our inheritance of cheap petroleum and natural gas. The costs of utilities will rise dramatically in real dollars and as a percentage of household spending.

International Chaos

The Third World will be bankrupt by 1994.

I predict that by 1994, OPEC will be joined by the Organization of Debt Exporting Countries (ODEC), as a large number of Third World countries default on their debts to the developed world. Do we really think that 400,000,000 people in South and Central America will get up every morning and go to work for the Chase Manhattan Bank? It just won't happen. Third World nations will recognize these debts only as long as they're able to get them rescheduled and have additional money lent to them.

By 1994, the U.S. will have an international welfare caseload to add to its domestic welfare caseload.

We will add another billion people to the world by 1994. The demography of the future is awesome. While the population of Europe will grow only 4.5 percent in the next 16 years, that of Africa, which is already facing starvation, is projected to grow 65.9 percent, followed by that of Latin America at 44.6 percent. That means that in the next 20 years, we'll add the equivalent of 20 Bangladeshes to an already hungry world.

The Worldwatch Institute has made a study of what is likely to happen. Between 1979 and 1983, world economic growth expanded less than two percent a year. The effect of slower economic growth varied widely according to national population-growth rates. For example, a two percent annual economic-growth rate would still raise incomes by two percent in Belgium and West Germany, which have achieved zero population growth. But for Kenya and Ecuador, whose annual population-growth rate exceeds three percent, a two percent annual economic growth produces steady declines in income and living standards. There are 34 countries whose numbers are growing at three percent or more a year, most of them in Africa, the Middle East and Central America. Those countries will become America's international welfare caseload.

By 1994, I predict, the Catholic Church will have ended its prohibition of artificial birth control, but the change will come too late to prevent demographic chaos. Many countries that cannot now feed themselves will dramatically add to their populations and will look to us for relief. We will see megafamine in parts of the Third World by 1994. The individual miracle of birth is becoming a collective tragedy.

We will see constant political turmoil on our Southern borders. Multiple Cubas will appear in our hemisphere.

We're not just fighting communism in South and Central America, we're fighting demography. Overpopulation causes increased poverty, unemployment and environmental degradation that add to political instability. Over the next ten years, we'll continue to see a massive flow of people into urban areas that are doubling in population every decade or two, with vast slum areas doubling in about half that time. By the year 2000, the world will have 56 cities with populations of more than 5,000,000, as opposed to only 29 now. About two billion people will live in Third World cities. The slum areas contain a high percentage of unemployed young men, living in appalling conditions next to wealth and privilege. This is a prescription for revolution. Most of these cities lack the capital, education, training or political system to improve. They will not get better; they will get worse.

Most countries in South and Central America are characterized by three traits that in the next ten years will cause massive instability: high population growth, a vast discrepancy between rich and poor and corruption as a way of life. We fool ourselves when we call these Third World countries "developing countries." Most of them are plagued by internal cultural division, tribalism, communalism, religious strife and traditionalism that render governance all but impossible. Instead of developing countries, they are, for the most part, never-to-be-developed countries.

As General Maxwell Taylor put it in a letter to a member of Congress:

Our national-security interest in maintaining a global balance of power and global restraints on Soviet aggression depends on the continued viability, and economic, social and governmental stability, of a number of strategically located developing nations. Our national strength also depends on a strong economy, which, in turn, depends on assured access to certain essential sources of raw materials--primarily oil and scarce minerals--located in Third World countries. Such access requires the maintenance of comparative peace and stability within these nations and their regional environment.

But such conditions cannot presently be assured....

The United States' strategic position in the world will continue to be undercut, though it is unclear whether that will necessarily benefit the Soviet Union. Nearly all the Third World countries in which the U.S. has vital security interests have serious population-growth problems. Egypt adds 1,000,000 people a year to a country that cannot feed those it has. Korea, the Philippines, Indonesia, India, Pakistan, Iran, Turkey, Kenya, Nigeria, Mexico and almost all the countries in Central America and the Caribbean are heading toward varying degrees of demographic nightmares.

It is clear that a number of Cubas will be added to the one too many that we already have in our hemisphere.

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The future is always full of surprises. World dynamics are so volatile that one should always expect the unexpected. Yet I believe that certain trends are so powerful that they can--if left unaltered--be predicted.

Politics is the management of expectations. The American electorate has come to expect a growing pie, with politicians arguing about how to distribute the growth dividend every year. But there has been virtually no growth dividend to distribute in the past ten years, and at the same time, it is obvious that we have serious problems in our military-procurement programs, our Social Security system, our health-care system, our other pension systems; but seldom do politicians--especially in an election year--even identify the problems, let alone the solutions. It is my thesis that America needs a dose of the philosophy of Alcoholics Anonymous: The patient gets well only when he admits to himself the full and desperate nature of his problem. We have to recognize that public policy needs a series of hard, sometimes even tragic, choices to bring our economy under control and ensure our future prosperity. We really need a political ticket that can offend everyone a little. It will not be easy. Few politicians have made a career out of asking for cutbacks or sacrifices. However, in a number of our programs, America has made more promises than we can now pay for, and it is imperative that not another Presidential campaign go by without the candidates' at least debating those issues.

I am haunted by John Locke's statement that "hell is truth seen too late." Will we as a society find the personal discipline and political will to see those new forces and correct our ways?

Nineteen ninety-four will be here before we know it.

"There's enough blame to go around for everyone. Big unions, bad management, lack of research...."

"It is inevitable that we are going to have to ration health care in the United States."