One nation, dangerously divided
Crazy though it may sound to many who are living in the country today, when compared with other struggling nations, America would seem to have emerged from the global financial crisis in half-decent shape.
The unemployment rate has steadily fallen. Household and corporate balance sheets have improved. Structural problems, including long-term unemployment and high student-loan debt, will remain an issue but borrowing costs sank instead of jumping.
The budget deficit, which soared when Washington helped to bail out the financial system after the credit crisis of 2008, has fallen by 80 percent from its peak, and is likely for the next few years to be at its smallest since the country actually turned a surplus in the 1990s.
You might expect America, then, to be exhaling a bit, projecting some authority while trying to hide relief at certain international gatherings where other less advantaged nations are present. You might also expect America to be hurriedly tightening the screws at home, meanwhile, on the financial institutions whose sorry practices sparked the global financial panic in the first place. And expect it to be earnestly tackling the next big challenge—reforming the entitlement system so that the health-care and old-age pension system don't bankrupt the country in the future.
In a way, that is exactly what America is doing right now. Unfortunately, the method is madness.
America's parties are fundamentally split over how the entitlement system should be reformed; Democrats on the left want to fund the current system or even expand upon it by raising taxes; that ensures the size of government will at least be stable, if not growing, steadily larger on a relative basis at a time when much of the country already feels overburdened by regulation, bureaucracy, governmental overreach and oversight by intelligence agencies that crosses into spying.
Republicans, who champion the nation's founding principle of small and limited government, are understandably horrified at such a prospect of expansion, preferring instead to shrink the government as quickly as possible. Lower taxes, less spending and fewer promises made through the entitlement system are outcomes the GOP desires.
The trouble with a compromise that would bridge these differences in order to at least "bend the cost curve," of America's entitlement system is that it is almost by definition impossible to find middle ground between those two ideological positions.
The net result is either a small, suboptimal bleed of government spending (which subtracts from growth in gross domestic product) when the balance of lawmaking power is shifted in the GOP's favor—as it is currently.
Or an expansion of government promises when the balance is shifted in the Democrats' favor—as it was when President Barack Obama pushed his plan for a national health-care system funded in part by higher income and manufacturing taxes to cover the nation's uninsured and no longer refuse coverage to patients with pre-existing problems.
Because the country is split almost evenly down these lines, and because many Americans simply haven't made up their minds and are more likely to react when the needle moves too far away from their instinctive sense of what's "right," the result is a sclerotic, ineffective mess of policymaking.
That creates constant uncertainty about what course the nation is charting and turns even the smallest bit of lawmaking into a potential lightning rod over the larger issue. Little wonder, then, that there has been little legislative progress of late in areas such as immigration and financial reform, farm subsidies or the national transportation system.
This central disagreement, while as old as America herself, now threatens to render the country impotent in both internal and external affairs for as long as it remains ideologically split or ineptly governed. The privileged position which the unique governing principles of the United States have created—a nation that is relatively stable, peaceful and can potentially help to perpetuate that condition more widely—will not fully be appreciated until it has been entirely squandered.
And that is exactly what is happening to America's power and position in the world both today and as a chapter in history. Any empowerment a faction of the people may temporarily feel at seeing its objectives—whether for an expansion or shriveling of government—thrust on to the national stage, is thus an illusion. It is the projection of internal power to the detriment of external standing and world order. It is the gobbling up of a shrinking pie.
This is the real catastrophe that results when the nation's ideological split calcifies into political extremism. The more any political faction is told that it is "right" and others "wrong," that it is true and others are false, that compromise is akin to capitulation, that methods no matter how damaging are not only justified but required to achieve a given end (or the illusion of such an end), the more readily America retreats, distracted, from world affairs and threatens to collapse under the state of her own dysfunction.
That is how we have arrived at the present muddled, confused and confidence-busting state of affairs, with little prospect of real and lasting change on the horizon. A state in which China, Russia and Middle East extremists desperate to advance their influence in the world now seem to have found an unlikely ally: Americans themselves.
—By CNBC's Kelly Evans. Follow her on Twitter @Kelly_Evans.