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America in 25 years: Here's what to expect

A quarter century ago, America had a brand new income tax system and an emerging position as the world's lone superpower. Whites dominated a political debate conducted on television, and baby boomers had just become 40-somethings.

A quarter-century from now, every one of those conditions will have vanished—with profound implications for the nation's economy, diplomacy, politics and culture.

As the release of House Ways and Means Chairman Dave Camp's tax reform proposal this week showed, there's rising interest in the sort of fundamental rewrite of the IRS code that last occurred in 1986 under President Ronald Reagan. But some veterans of the Washington wars foresee the gradual emergence of a different option: a system that moves toward taxing not income but consumption—especially consumption of energy—to achieve economic and environmental goals at the same time.

"This reminds me very much of the kind of transformation when horse-and-buggy days were made obsolete by Ford and by others," said Steve Bell, a longtime Republican tax and budget aide on Capitol Hill. "I do think we will move to a carbon tax of some kind. The carbon tax will be one piece of a consumption regime."

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Accompanying that shift would be a move away from taxing income that may only leave a surtax on the highest income earners. The idea would be to spark economic growth by spurring savings and investment, accelerate the worldwide push to curb carbon emissions and limit climate change, and in the process foster development of the renewable energy industry.

Bell, now at the Bipartisan Policy Center, said the continued development of America's natural gas resources, by pushing down energy prices, will help make the shift economically viable. And to those who argue political hurdles are too high, he added: "We're going to need economic growth so much that future presidents will do some strange and unlikely things."

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Economic growth will be critical to preserving America's power and influence in the world. If the 20th century was known as The American Century, Asia could take pre-eminence in the 21st. Within two decades, forecasters predict, China may pass the U.S. to boast the world's largest economic output.

That won't necessarily displace the U.S. in other ways. Richard Haass, president of the Council on Foreign Relations, noted that America's GDP per person would remain at least three times China's under any scenario. And by deepening partnerships in manufacturing and energy with neighbors on its northern and southern borders, America can muscle up to compete with growth in Europe, Asia and Africa.

"The United States, Canada and Mexico combined could be a powerhouse of 600, 700 million people," Haass said. "It could become a real global economic engine."

Economic prospects depend on how each country handles thorny domestic issues such as trade, taxation and immigration. In terms of diplomacy and military might, a key variable will be the public's tolerance of international engagement—which is strained at the moment by long wars in Iraq and Afghanistan.

"These things tend to go in cycles," Haass said. "What kinds of threats emerge? How effectively are we when we do intervene around the world and that will affect the appetite. And more than anything it will probably depend on how things are perceived to be on the home front.

"What kind of employment and unemployment rates do we have? What's the quality of life, the standards of living continue to rise, and if so what pace? So I think the better things are at home and the more effective we are abroad, that will encourage American global leadership."

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The American electorate that will drive the answer to those questions will look much different. Whites have always made up a majority of the U.S. population, and still do. But by the mid-21st century, the Census Bureau predicts, the continued growth of the Hispanic population will make America a "majority-minority nation" in which whites are the largest group but less than 50 percent of the total.

America's shifting mosaic will look different geographically as well. If the 19th century saw America turn from an agrarian to an industrial nation, and the 20th saw the rise of suburbia, the 21st century will see cities and suburbs merge into giant metropolises.

Such shifts have aroused deep concerns, especially in rural areas worried about losing population, economic vitality and cultural traditions. But if the face of America changes, history suggests its character may not.

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"As much as people think that Hispanics are different, the generational polling so far among Hispanics really doesn't seem much different actually," said Dante Chinni, a demographer at American University. "Once you get a couple of generations in, a lot of the ties to the homeland weaken, the language tie weakens, it becomes much more about being American."

The digital revolution has just begun to transform American politics. The data-driven Obama campaigns of 2008 and 2012 have pointed to the day when Americans can register, learn about candidates, and perhaps even vote on mobile devices. Television ads have been declining in influence for years in a fractured media environment—a trend likely to continue.

"A lot of people watching this probably remember a time when there were three TV stations, and you had to pick one of them if you were going to watch TV, and you couldn't fast forward through the commercials," said Teddy Goff, an Obama digital strategist. "People coming up and voting in 2014 and 2016 never lived in that time and never will.

"Their entire experience of content consumption and figuring out what they want to believe in and how they want to decide how to vote has everything to do with two processes which are very, very unlike plopping down in front of the boob tube on the couch. The first is obviously search—going out and figuring out what information you want and consuming it and the second is social," Goff added. "That 's the opportunity to look at something your friends have shared with you rather than what CNBC, ABC or CNN wants to put in front of you. That's a real fundamental shift."

And baby boomers, who drove so many societal changes in their youth, will keep doing the same thing in their retirement over the next quarter century. They will dramatically swell the ranks of Social Security and Medicare, straining the government's long-term solvency. But those strains will also help drive shifts in the pattern of health-care delivery and retirement living.

Increasingly, health care will be delivered by teams of providers that include physicians but also nurse practitioners. And it will be delivered in different places, such as retail pharmacies.

And at the same time, the cost and undesirability of nursing home care will spark a new home-care industry as an alternative.

"What can we do to help people stay in their own homes?" said Nancy-Ann DeParle, a top health adviser to presidents Bill Clinton and Obama. "A nursing home setting would be reserved for people who need custodial care or active medical care.

"We haven't quite figured that out yet but it's a great business activity to do things to adapt to people's homes that figure how to provide home-based chore services and those sorts of things. Those are things that I predict baby boomers are going to want to buy. It's already a market, and it will be a huge and growing market."

—By CNBC's John Harwood. Follow him on Twitter @JohnJHarwood.

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