American Road Leads Off a Cliff by Holly Sklar

THE AMERICAN DREAM doesn't need to go on a diet in the new year. It's been shrinking for years.

We are becoming a nation of Scrooge-Marts and outsourcers -- with an increasingly low-wage workforce, instead of a growing middle class. Even two-paycheck households are struggling to afford a house, college, health care and retirement.

The American Dream is becoming the American Pipe Dream.

"The vast majority of American workers (70 percent) think 'the American Dream' has been or will be harder for them to financially achieve than it was for their parents' generation," according to the Principal Financial Well-Being Index.

We are living the American Dream in reverse.

The hourly wages of average workers are 11 percent lower than they were back in 1973 (adjusted for inflation), despite rising worker productivity. CEO pay, by contrast, has skyrocketed -- up a median 30 percent in 2004 alone, in the Corporate Library survey of 2000 large companies.

Median household income has fallen an unprecedented five years in a row. It would be even lower if not for increased household work hours. Americans work over 200 hours more a year on average than workers in other rich industrialized countries.

We are breaking records we don't want to break. Record numbers of Americans have no health insurance. The share of national income going to wages and salaries is the lowest since 1929. Middle-class households are a medical crisis, an outsourced job, or a busted pension away from bankruptcy.

The congressional majority voted the biggest cut in history to the student-loan program, at a time when college is more important, and more expensive, than ever. Public-college tuition has risen even faster than private tuition, jumping 54 percent over the last decade (adjusted for inflation).

Our shortsighted government, beholden to powerful campaign contributors and lobbyists, is cutting rungs from the ladders of upward mobility, while cutting taxes for the superwealthy.

That's not the American Dream.

Contrary to myth, the United States is not becoming more competitive in the global economy by taking the low road. We are in growing hock to other countries. We have a huge trade deficit, a hollowed-out manufacturing base, and deteriorating research and development. The infrastructure built by earlier generations has eroded greatly, undermining the economy, as well as public health and safety.

Households have propped themselves up in the face of falling real wages by maxing out work hours, credit cards and home-equity loans. This is not a sustainable course. The low road is like a shortcut that leads to a cliff.

We will not prosper in the 21st Century global economy by relying on 1920s corporate greed, 1950s tax revenues, pre-1970s wages, and global-warming energy policies.

We will not prosper relying on disinvestment in place of reinvestment. We can't succeed that way any more than farmers can "compete" by eating their seed corn.

As Business Week put it in a special issue on China and India, "China's competitive edge is shifting from low-cost workers to state-of-the-art manufacturing. India is creating world-class innovation hubs, and its companies are far better performers than China's."

The United States will not succeed by shifting increasingly from state-of-the art manufacturing and world-class innovation hubs to low-cost workers.

Contrary to myth, many European countries are better positioned for the future than the United States, with healthier economies and longer healthy life expectancies, greater math and science literacy, free or affordable education from preschool through college, universal health care, less poverty, and more corporations combining social responsibility and world-class innovation.

Among the world's 100 largest corporations in 2005, just 33 are U.S. companies, while 48 are European. In 2002, 38 were U.S. companies and 36 were European. CEO-worker pay gaps are much narrower at European companies than American.

The United States dropped from number one to number five in the global information-technology ranking by the World Economic Forum, whose members represent the world's 1,000 leading companies, among others. The top four spots are held by Singapore, Iceland, Finland and Denmark, with Sweden number six.

Instead of pretending the problem is overpaid workers and accelerated offshoring, we need to shore up our economy from below and invest in smart economic development. Let's make that our New Year's resolution for the American Dream.