When I saw the headline, I immediately let out a long sigh: Are America's Best Day's Behind Us? Really, Time magazine? I thought, Does the world need another essay about American declinism? Are the demands of a weekly news magazine so great that we have to recycle this tired question while the Middle East is burning, China is slowing and European debt is spiking?

Well, shame on me. Fareed Zakaria's essay is excellent. In the process of making a common point, that America is and has long been at risk of losing its competitive edge, it makes a uncommon point: The business of the American government is changing.

The Money Report

Fifty years ago, the US budget was a different beast. Defense spending made up 40 percent of government. We spent five times our current share on infrastructure, and twice as much on research and development. For every dollar we spent on health care, we spent two dollars on education. America was a younger country then, and younger countries invest in their future.

But the investments we made in the 1950s and 1960s -- the interstate-highway system, our public-education system, and forward-looking immigration policies -- are under siege. In 2011, overall infrastructure fetched a D rating from the American Society of Civil Engineers. US students are falling behind Scandinavia and East Asia according to almost every international standard. 

We've become an old, rich country, and we've done what old rich households do: Focus on preserving our wealth and health.  Like an aging couple shifts its spending away from kids' clothes and tuition toward pills and doctor visits, the U.S. government has transformed itself from a defense-technology-infrastructure investor to what Ezra Klein has compared to a "national insurance conglomerate." Washington spends $4 on elderly people for every $1 it spends on those under 18, Zakaria points out. The business of America is preserving, rather than investing in, the wealth and health of Americans.

This isn't horrible. It's actually reasonable. Social Security is reasonable. Medicare is reasonable. Income security programs are reasonable. But when you add it all up -- the government welfare, the benefits to retirees, and health care spending -- these programs account more than 60 percent of the budget. With defense adding another 20 percent, that doesn't leave much room for education, science, technology, innovation and infrastructure.

At the end of the day, this is what a deficit debate is about. It's about asking questions like: How can Washington make the economy more productive, and is it possible to restore the middle class' buying power while raising their effective tax rates? These aren't questions about accounting. These are questions about the business of the American government; about how we balance spending to preserve our wealth and investments to make us wealthier.

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As a coda, I want to point out that even if Americans choose again and again to spend more on health care, that's their right. But there are implications to this vote. Health care is our fastest growing sector and the bedrock of the next decade's employment growth. But it is also one of the country's least productive industries. That means that, unlike almost every decade in US history, productivity growth and employment growth are scheduled to occur in polar opposite industries over the next 20 years. That might be a formula for making us healthier. But it's not a formula for making us wealthier.






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