Category Archives: America’s Economic Future

Persistent U.S. Federal Budget Deficits

In various posts as well as seen in the “America’s Trojan Horse” discussion, I have discussed various aspects of both the federal deficit and federal debt.  Both of these issues remain highly problematical in many ways.  At the same time, many aspects of the problems and their future implications lack recognition, either partially or fully.

One notable chart that I recently came across depicts, on a long-term basis, the level of the federal deficit as a percentage of GDP.  This chart is from the Peter G. Peterson Foundation, and is dated March 10, 2016:

deficits as a percentage of GDP

I find the depiction above to be notable in many ways.  As one can see, prior to 1950 (substantial levels of) deficits corresponded with wartime periods, and many other periods showed budget surpluses.  Beginning at around 1950, deficits became not only commonplace but also increasingly larger as a percentage of GDP.

Also notable is that over (roughly) the last 15 years, the U.S. has been unwilling and/or unable to produce a federal budget surplus.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2082.78 as this post is written

Impact Of Interest Rates On The Federal Debt Interest Payments

On March 12, The Wall Street Journal published an editorial titled “Uncle Sam’s Teaser Rate.”  The subtitle is “Low interest rates disguise the federal debt bomb.”

I find this editorial notable as it highlights a variety of important issues that lack recognition, including the refinancing schedule of U.S. Treasury debt, the sensitivity of debt interest payments to rising interest rates, and the Federal Reserve being among the largest buyers of U.S. debt.

A few notable excerpts from the editorial include:

First, a couple facts: the U.S. Treasury currently has $10.7 trillion in outstanding publicly-held debt, and more than $8 trillion of it must be repaid within the next seven years. More than $5 trillion falls due within the next 36 months.

This relatively short-term debt sheet is no accident. Like a subprime borrower opting for a low teaser rate, the government has structured its debt to keep current interest payments low. This is a political temptation for every Administration because it means lower budget deficits on its watch.

also:

As of January 2012, taking into account all the various notes and bonds issued by the federal government to the public, Uncle Sam is paying an average interest rate of 2.24%. The government expects to spend in the neighborhood of $225 billion this year making interest payments.

also:

If the government had to pay the 5% rate that it was offering before the financial crisis on today’s debt, the annual interest payments would be $535 billion…

 

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1392.92 as this post is written

The Economic Future For Young Americans

On May 2 Gallup had a release titled “In U.S., Optimism About Future for Youth Reaches All-Time Low.”

Although the entire release is worth reading, I found the following excerpts to be particularly notable:

Forty-four percent of Americans believe it is likely that today’s youth will have a better life than their parents, even fewer than said so amid the 2008-2009 recession, and the lowest on record for a trend dating to 1983.

also:

Gallup uses the same question other survey organizations have asked intermittently over a longer period of time. Selected trends from CBS News, New York Times, and Roper Organization polls reveal that Americans currently express greater pessimism about what the future holds for today’s youth than any of these organizations found in surveys from 1983 to 2003. The most positive result occurred in a December 2001 CBS News/New York Times poll in which 71% said American youth would have a better life than their parents.

also, from the concluding paragraphs:

Confidence in the traditional American dream — that each generation can work its way up in the world and have a better life than the previous generation — appears to be slipping away. Americans are less likely to believe this to be true today than at any time on record, including during the worst of the recent economic crisis.

Fewer than 4 in 10 high-income Americans — who presumably have the greatest access to opportunity and resources to gauge what the markets will do going forward — believe today’s youth will be better off than their parents. This level of pessimism may also reflect the massive destruction of wealth that high-income Americans experienced from the economic meltdown.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1325.69 as this post is written

Economically Counterproductive Policies – Incandescents

In the March 28, 2011 edition of Forbes, Steve Forbes wrote an article titled “Ban Bulb Lunacy.”

An online caption of the article reads “Next year the federal government begins the phaseout of traditional incandescent lightbulbs, giving us yet another enlightening example of politicians short-circuiting free markets.”

In the article, Steve Forbes says “This prohibition of the standard lightbulb is justified on the grounds that it will save energy. Well, if that were true, don’t you think consumers would figure it out for themselves?”

The article goes on to challenge the safety and comparative longevity of the CFLs vs. that of the standard incandescents.

My comments:

In my opinion, it appears, from an “all things considered” basis, that the regulatory “phaseout” of incandescent bulbs is a prime example of not only overregulation, but also (and more importantly) economically counterproductive policy.

The purported economic and environmental benefit of CFLs over incandescents seems at best nebulous, and, at worst, dubious – which some may view as duplicitous.  As Steve Forbes alludes to in the aforementioned quote, it would seem that if CFLs were as beneficial as claimed, consumers would heavily favor CFLs and incandescents would eventually (naturally) disappear from the marketplace.  Instead, we have regulation to force incandescents from the marketplace.

Milton Friedman spoke at length on the issue of harmful regulation in his “Free to Choose” television series, especially in Volume 7, “Who Protects the Consumer.”

I am sure that many people view this incandescent bulb phaseout as inconsequential, as it may seem trivial in the larger “scheme of things.”

If this represented an isolated example of economically counterproductive regulation, it wouldn’t be of great concern.  However, when such regulation proliferates, its existence should become a major issue of concern.  This is so for a number of reasons.

In the article “America’s Economic Future – ‘Greenfield’ or ‘Brownfield’?” I mention the issue of policies that are inherently economically counterproductive.  Of these economically counterproductive policies, I wrote:

“There exist innumerable examples of these types of decisions; and their aggregate negative effect on the nation’s well-being (and strategic position) should not be underestimated.”

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1303.13 as this post is written

Warren Buffett – “America’s best days lie ahead”

From time to time I post comments from Warren Buffett.  I find his perspectives interesting,  notable, and very unique, although in many cases I (at least) partially disagree with his thoughts.

His latest “Chairman’s Letter” in the Berkshire Hathaway 2010 Annual Report contained some interesting comments regarding the American economy, both past and future.  Here are the excerpts I found most notable:

“Money will always flow toward opportunity, and there is an abundance of that in America.  Commentators today often talk of “great uncertainty.” But think back, for example, to December 6, 1941, October 18, 1987 and September 10, 2001. No matter how serene today may be, tomorrow is always uncertain.

Don’t let that reality spook you. Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born. The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential – a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War – remains alive and effective.

We are not natively smarter than we were when our country was founded nor do we work harder. But look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and 1941, America’s best days lie ahead.”

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A Special Note concerning our economic situation is found here

SPX at 1321.82 as this post is written

Economic Impact Of Policies

On May 18 The Wall Street Journal had an article on a new lead-paint law titled “New Lead-Paint Law Heavy on Budgets.”

This law serves as a good example of an important issue I wrote of in my May 2009 article “America’s Economic Future – ‘Greenfield’ or ‘Brownfield’?”

In that article I wrote of the need for policies to be thoroughly assessed with regard to overall economic impact, compared with whatever “societal good” the policy purports to accomplish.

A thorough discussion of the benefits and costs of this new lead-paint law would be exceedingly lengthy and complex.  However, I believe that this lead-paint law, if thoroughly analyzed from an “all things considered” standpoint – taking into account both “societal good” as well as economic impacts – would be found to be (far) suboptimal in many respects.  Of particular concern is that this is yet another law that disproportionately (negatively) impacts small businesses.

While one may dismiss this new law as one that is limited in nature and thus relatively insignificant, it is important to note that it is just one example among many in which inadequate overall analysis was conducted.   Cumulatively, these poorly analyzed policies are very significant in determining whether America’s economic future will be that of a “greenfield” or “brownfield.”

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SPX at 1064.88 as this post is written

Largest Employers

Crain’s recently came out with their list of the largest Chicago-area employers.  What I found notable was that the top 5 employers are various government entities (federal, state and local).

Of course, this situation is not unique to the Chicago area.  Many states have a large percentage of their total jobs as government jobs.

While many might be indifferent to this situation – assuming that a “job is a job” – from an overall economic standpoint it is troubling on various fronts.

One such front that deserves special attention is that which I discuss in the “America’s Economic Future: ‘Greenfield’ or ‘Brownfield’?” article.

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America’s Economic Future – A Comment

Those familiar with this blog know that I believe (based off of my overall analysis) that our current purported economic recovery is not sustainable.

As I have indicated in previous writings, we as a nation need to be more “strategic” in nature if we are to attain true Sustainable Prosperity.

One critical question that we should be asking, from a strategic standpoint, is what is the value of a recovery if it is not sustainable?  The answer is that there is very little if any value to such a recovery.  In fact, a very strong case can be made that there will be strong negative repercussions stemming from such an unsustainable recovery.

Another issue, from a strategic standpoint, is one of opportunity cost.  The opportunity cost of attaining a recovery that subsequently fails vs. a true sustainable recovery is enormous.  This is especially true in our current economic environment where many factors such as the national debt are at truly ominous levels.

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America’s Economic Future

As a follow-up to yesterday’s post, here is a passage from Larry Summers’ March 13, 2009 speech that speaks of the importance of economic strength in achieving broader societal goals:

“Our single most important priority is bringing about economic recovery and ensuring that the next economic expansion, unlike it’s predecessors, is fundamentally sound and not driven by financial excess.
This is essential. Without robust and sustained economic expansion, we will not achieve any other national goal. We will not be able to project strength globally or reduce poverty locally. We will not be able to expand access to higher education or affordable health care. We will not be able to raise incomes for middle class families or create opportunities for new small businesses to thrive.”

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Our national goal to achieve a sustainable recovery (or what I frequently refer to as “Sustainable Prosperity”) has been and will continue to be a challenge, given various underlying fundamentals.

In order to achieve “Sustainable Prosperity” we will need to have a solid focus on planning our economic future and its dynamics.  Toward this end, I wrote an article in May of last year titled “America’s Economic Future – ‘Greenfield’ or ‘Brownfield’?” which can be found listed along the right-hand side of the home page.  That article, as well as others I have written, explores some of what I believe are pivotal issues that lack recognition with regard to our economic future.

All of my articles are also listed and summarized at this link:

https://www.economicgreenfield.com/prosperitybypencom-directory/

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The Global Economic Situation

On this blog, I have maintained a focus on the U.S. economy.  I have done so for a variety of reasons, many of which are explained in this June 21 2009 post:

https://www.economicgreenfield.com/2009/06/21/the-global-economic-future/

Additionally, from a practical perspective, from a time standpoint it would be prohibitive to attempt to comment on all global economic affairs that I consider relevant.

Although I focus on the U.S. economic condition, this is not meant to imply that the U.S. is the only country that faces an array of difficult economic challenges.  Much to the contrary – many countries currently face economic issues that are exceedingly problematical. 

It is very troubling that so many countries, especially those with large economies, are concurrently experiencing such difficulties.  Such a common and unified adverse condition will not bode well assuming severe economic weakness reappears.

Attaining Sustainable Prosperity is a global challenge.

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