The USA is clearly in trouble-we have a net negative savings rate, the present generation will be substantially LESS wealthy than their parents, and our manufacturing base is disappearing. I think there are a LOT of causes, to wit:
-foreign debt-we are the world’s biggest debtot nation
-the insane growth of government-the Fedral government is huge and growing-and makes no contibution toward GNP
-insane foreign wars-the Iraq disaster is costing $12 billion/momth, with no end in sight
-the cost of being the “worlds policeman” -we have bases around the world, and maintain a huge navy-it is breaking us
-the loss of our manufacturing base: everything is now made in China
-energy imports: we ship a huge amount of money out of the country, to feed our oil addiction. NOBODY in government wants to rackle this. Detroit cranks out 12 MPG trucks, SUVs, as if the supply of oil is endless
So, are we doomed?
I agree with some of these, but I don’t consider the loss of manufacturing to China to be as bad as you do. China makes things cheaper than we do, so we end up with more stuff for less cost. The only way loss of manufacturing could hurt America is through the employment rate, which doesn’t seem to have been negatively affected.
Also, energy imports are sustaining the economy. Without shipping in oil, we don’t have energy to run power plants or freight trucks. I think that reducing our energy consuption by becoming more efficient is important, but I don’t think importing oil is costing us more than it’s returning.
These are the details of the big picture. Our consumption is consuming our infrastructure. In other words we are selling the cow to buy milk. The solution is less toys and fun and more saving. I dare any presidential candidate to say this on the stump. So are we doomed? Hmmmm… yep. At the least I think that we can expect to see a shake out in wealth between the poor and wealthy nations. Americans may see a substantial reduction in their standard of living.
You solved your own question in your first thirteen words.
Someone in another thread mentioned a story on NPR. A guy claims in his book that the business regulations in this country make the rich richer and the middle class lose ground. One example I remember is that a Wal-Mart store might be exempt from paying taxes that the local stores must pay. So the local stores make less profit and some close. Meanwhile the Wal-Marts profits go to Wal-Mart instead of into the local community in the form of business taxes. If the rich get the money and the middle class don’t, then the middle class will have less money to spend.
It’s notable that nobody running for president this year has much of anything to say about “industrial policy.” They have things to say about trade policy, reforming NAFTA, etc., but nothing about helping the American manufacturing sector revive.
Do we really care about the manufacturing sector? Why?
What I’m afraid of: a big (taxpayer financed) bail out of the banks and brokerage houses that CAUSED the sub=prime mortgage diaster! That way, people like me, who lived within their means , paid their bills, and saved their money will get screwed! WE will wind up paying for this-either through outright taxation, or theft of our savings through inflation!
You might want to compare the U.S. economy to others before claiming that the U.S. is worse off than elsewhere. The U.S. economy has been growing at a fantastic rate over the past decade. European economic growth is anemic compared to the U.S.
Second, the cost of the military/wars is not a significant factor. The U.S. spent almost twice as much on the military as a percentage of GDP during the height of the cold war as it does now.
This just a typical business cycle slowdown/recession, triggered by the mortgage crunch. It may or may not be worse than previous ones - it depends on how the mortgage problem shakes out. There’s a potential for this to be a very serious recession, or there might not be a recession at all - just a few quarters of very low growth.
For one thing, only the manufacturing sector has a good record in providing large numbers of high-wage low-skill jobs. This was the basis of working-class prosperity in the years between WWII and the oil shocks – the basis, indeed, of the social advance of the working class to self-identified middle-class status.
For another, the manufacturing sector is the sector that creates wealth, for a very narrow and basic value of “creates.” I remember back in the '80s, Lee Iaccocca warning that if current trends continued, “You and I will be selling each other insurance and nobody will make anything.” I don’t know how economists feel about the matter, but most people would assume a service-oriented economy is a sandy beach on which to build true national prosperity.
For yet another thing, if we import most of our manufactured goods that makes us rather dependent on the manufacturing nations, doesn’t it? Not necessarily a bad thing – we need them, they need us, no one would think of war – but a lot of people prefer the U.S. should be in a position of strength and primacy in that regard, like we were in the '50s and '60s.
I believe the price of energy is by far the most important factor of the ones listed in the OP. The US evolved on cheap energy, it sustained a very high standard of life for even the lower classes. It allowed them to take jobs further from their work for a higher quality of life. It also drove down the price of all goods, including one of the most important one, the price of food, which is something we all need.
Now we have run into a bit of a snag due to oil prices. People don’t have that extra income for their own use plus things are more expensive, including food, due to increased fuel costs. Add to this biofuels which is taking some of the cheapest foods and converting it into fuel, which raises the base level of food.
Energy is still pretty cheap. Currently, gasoline is right up about where it was in the mid 1970’s, in constant dollars. And the economy is much more efficient now in terms of energy, only using about half as much energy per dollar of GDP as it did in the 1970’s.
And as you can see from this fact sheet, the price of electricity has been declining in real terms since 1983, and is about 25% lower now than it was then. And we do more with each watt of power than we did then.
Yes, but I think we are more dependent on energy for production then in the past also. We have to produce more efficiently because we have to to compete in the world market. Also IIRC the mid 70’s were no boom times IIRC, not exactly a great time to compare to.
I was going to say almost the same thing. I’d like to see the hard evidence that we’re really stagnating, and even if we are, isn’t the US economy like 40% of the world economy? So “stagnating” is very relative.
I’m not convinced that the US manufacturing sector is in such dire straits. I remember reading in China Inc that in the past 5 years, US manufacturing output has risen consistently every year. I believe what you are seeing is that SOME manufacturing sectors that focus on low-skill, labor intensive work is moving away, and the workforce is simply switching to higher-skilled, higher value-added stuff (not without pains, of course). Those kinds of statistics are open to interpretation.
Most of the stuff you see in Wal Mart that are made in China probably hasn’t been made in the US for decades, and would in the past have been made in one of the other Asian tiger countries like Taiwan or South Korea. Chinese wages have risen sharply in the past few years, and there are plenty of manufacturing sectors that are more capital intensive than labour intensive, and would realize no advantage from moving to China/India. European toymakers like Lego and Playmobile are one example, another would be cars - automated robotic assembly lines don’t cost any less in China.
Speaking of which, a large piece of the manufacturing base in the US, the Big 3 Detroit automakers, and their associated suppliers, have been floundering more due to their own mismanagement than anything else. I wouldn’t be surprised if at least one of them, probably Chrysler, goes the way of British Leyland, but you can’t really blame anyone else for that.
But you’re not. As I said, the U.S. uses about half the energy per dollar of GDP than it did in the 70’s. Factories have gotten more efficient, and the types of things the U.S. makes tend to have lower energy costs than the types of things it used to make.
Factories are much better now in the way they use power, in how much waste they generate, and how much waste is recyclable.
Just to clarify, you do realize that the VAST overwhelming majority of growth in government spending falls into three categories:
Interest on the national debt
Medicare and medicaid payments
Social security payments
You can solve the first by reducing the national debt but the other two are a little trickier. According top this site, medicare, medicaid, social security account for about 40% of our budget, ineterest on the national debt accounts for about 10%, the military and homeland defense account for 30%, welfare, food stamps, farm subsidies, unemploment etc. accounts for just over 10% and the government runs on the other 10%.
Well, in my area manufacturing used to supply the vast majority of the jobs. Now that it has left we have LOTS of unemployment. I care about that, because life is better when everyone (just about) is working and able to buy stuff instead of being depressed and turning to drugs or crime or both.
This may be true, but what the US has leveraged in the market is energy to lower the cost of production, while other countries have leveraged labor. We may use less energy per product, but that’s our competitive advantage. With energy price rising and labor prices of our competitors, such as China, artificially low due to their government, it puts us in a bit of a crimp, especially for products that have razor thin profit margins.
Factories are much better now in the way they use power, in how much waste they generate, and how much waste is recyclable.
This article from the AJC does a pretty good job of describing how subprime lending and easy credit got us into the mess we are in. And yes, we are in a very deep mess indeed, IMHO.
We have been doing the national equivalent of living well on credit cards. And now the bills are coming due.
But hey, on the plus side, pawn shops are doing a booming business.