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Jeremy tackles the difficult issues head on!
Contact: jeremy@lowtax.net
What's wrong, America?
04 December 2010
The figures tell a horrid story:
The nation has been in deficit almost constantly for the last fifty years;
just briefly, around 2000, there was a small surplus, when public spending was
only 32%; today, the deficit is climbing towards 10% of GDP, and public spending
is 42% of GDP.
The national debt is USD14 trillion; that's USD45,000 for every man, woman
and child in the country, say USD100,000 per family.
GDP per capita is falling, yes, actually falling, from USD48,200 in 2007 to
USD46,000 last year.
GDP growth itself has stalled: after struggling up to 4.4% in 2005, the rate
has fallen steadily, and is estimated to be a negative 2.6% in 2010.
There was a Congressional hearing last week at which the Congressional Budget
Office pointed out that, over the past 40 years, federal revenues have ranged
from nearly 21% of gross domestic product (GDP) in 2000 to less than 15% in
2009 and 2010, averaging 18% of GDP over that span. It projects that, under
current law, federal revenues will again reach 21% of GDP in fiscal year 2020.
In other words, federal revenues cover barely half of spending; of the rest,
half is covered by state and local income, while the balance is deficit.
What has gone wrong? What has become of the land of opportunity? How has it
happened that a country with such natural advantages and such Keynesian 'animal
spirits' is being so dramatically outpaced by Asian and South American competitors?
One theory could be that there is a cyclical effect, that countries need shaking
up from time to time (often called 'revolutions') and that the energy released
by a revolution lasts for a while until the country falls victim to a sclerotic
condition of over-regulation and self-satisfaction, then declines gradually
until along comes a new shake of the kaleidoscope.
It is too simplistic, of course, but it does fit the history of the USA (revolution
in 1776), the UK (revolution in 1648), France (revolution in 1790), the Netherlands
(revolution in 1848), and Germany (revolution, if you want to call it that,
in 1946).
On that theory, China (revolution in 1946), like Germany, is in the first flush
of energetic expansion. Germany hobbled itself by taking on the basket case
of East Germany twenty years ago, but is still doing better than most of its
European peers.
The question has to be asked therefore, whether the USA can manage to dig itself
out of its Slough of Despond? The first step towards recovery from an illness,
it is said, is to accept that you are ill. Unfortunately, that does not fit
America at all: the country still believes itself to be in prime health, and
just suffering from a temporary blip caused (of course) by the bankers.
Congress continues to spend money like water, encouraged by a President whose
ideas are as far away as they could be from the sensible, prudent policies of
the Tea Party. Will this Tea Party lead to a revolution among America's leaders,
as did the last one?
The prognosis is not good, and what is in prospect is all too probably a long
period of post-imperial decline.
It doesn't have to be that way! Wake Up, America! We need you as you were,
not as you are. Shout it loudly, and hope that they can hear it on the Hill.
But they have cloth in their ears, those pumped-up legislators. Congress is
part of the problem, not part of the solution, as it once was. It's very sad.
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