Is America in Decline?

A new book by the two economists Glenn Hubbard and Tim Kane “Balance: The Economics of Great Powers from Ancient Rome to Modern America” analyzes the decline of many of the great empires and civilizations in human history.  According to the authors, they all declined (or are now declining!) primarily for internal economic reasons rather than from external military threat.  The authors conclude that America’s own existential threat is fiscal.  Our lowest debt level in recent years was 23.9% of GDP in 1974 ($344 billion) which has climbed to 75% of GDP today ($12 trillion) and is predicted to keep growing worse in the years to come.
Our political system is too polarized to solve our huge debt problem.  Republicans want lower taxes; Democrats want higher spending.  If Republicans succeed in cutting spending, it upsets the voters and gives the Democrats an advantage.  If Democrats succeed in raising taxes, it upsets the voters and gives the Republicans an advantage.  So we end up with low taxes, high spending, fiscal imbalance and political stalemate.  This is the dilemma we are in.
But the authors propose a solution: a flexible balanced budget constitutional amendment where total outlays for a year do not exceed the median annual revenue collected in the seven prior years.  A three-fifths supermajority of each house of Congress can declare a one-year emergency exemption.  Additional one-year exemptions may be approved only by escalating votes in each house of Congress.  The amendment would take effect in the seventh year following ratification by the states.  During the seven year transition period the deficit would be reduced gradually each year until it reached zero.
Messrs Hubbard and Kane provide an excellent, nonpartisan analysis of the deep predicament in which our country now finds itself as well as an attractive means of extricating ourselves from this precarious situation.

2 thoughts on “Is America in Decline?

  1. Jack: Your summary provides an excellent assessment of our current situation.The solution proposed here is to put a time based vote escalation to force a solution. I don’t see this happening. Politicians are like spineless squids. At soon as a program or entitlement is cut, people will be out in the streets. Within a month, the squids will rescind the law. The problem is identified but no solution.

  2. The virtue of a constitutional amendment to balance the budget is that nothing specific has to be cut until the amendment is passed. and takes effect. Then it becomes harder and harder for Congress to avoid making cuts or, alternatively, raising taxes. The idea is to force the spineless squid politicians to do what has to be done. Repealing the newly passed amendment would take so long that it couldn’t forestall the painful decisions which have to be made in the meantime!

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