By the early 2020s, entitlement spending will likely drive ever larger US budget deficits. In 2023, for instance, so-called mandatory outlays will be 14.1% of GDP, a percentage point higher than today. And another decade out, they could equal nearly 17% of GDP. So the clock is ticking. The faster we reform entitlements, the better.
But there is another race going on that’s even more important, the race between technological innovation and the ability of society to provide workers with the skills to succeed in a world of accelerating change. A new report from McKinsey Global highlights a host of new technologies and their potential economic impact. (See above chart.)
It then goes on to warn about how these disruptive technologies might affect the bulk of the labor force:
By 2025, technologies that raise productivity by automating jobs that are not practical to automate today could be on their way to widespread adoption. … Given the large numbers of jobs that could be affected by technologies such as advanced robotic and automated knowledge work, policy makers should consider the potential consequences of increasing divergence between the fates of highly skilled workers and those with fewer skills. The existing problem of a creating a labor force that fits the demands of a high-tech economy will only grow over time.
The issue of technological unemployment is one I have frequently blogged about. America’s future does not have to be “Bladerunner with food stamps.” But to avoid that, we need entrepreneurs to keep inventing new ways of combining technology and better-educated workers to create new industries and innovations. And government has a role to play in creating a fertile environment for education and entrepreneurship.
Failure could mean, writes Walter Russell Mead, the US ends up with the “mother of all welfare states [where] something like 80 percent or more of the population is going become superfluous to the economy. There will be no jobs where the work of this group could command a living wage; the state must somehow make provision for them or wait for them to fall into poverty and risk the social explosion that will probably follow.” And a demoralized, stagnant society is more likely to push for redistributionist policies that will ensure the stagnation is permanent.
Successfully running this race against the machines – with the machines, really – should be a prime policy goal for Republicans and Democrats (though I highlight the former in the headline). As The Economist puts it, “Policymakers need to think as hard about managing the current wave of disruptive innovation as technologists are thinking about turbocharging it.” If the GOP is looking for a focus beyond debt reduction, this might be it.