The Major Challenges Facing the United States

 

As I frequently remind my readers I am a fiscal conservative and a social moderate. I usually write about particular economic and fiscal problems facing our country.  But every now and then I like to step back and view our overall situation at one time.  The last time I did this was here.
Let’s take another look:

  • The economy is puttering along at 2% annual growth with a relatively low unemployment rate of 4.3% and a good indication that faster growth, up to 2.5% annually, is right around the corner, see here and here.  The economy, at least, is headed in the right direction.
  • Foreign policy. Long term our biggest problem is China, which has four times as many people as we do and is growing economically three times as fast. China will soon surpass us in both economic and military strength. Our best insurance for this inevitable day is to have lots of democratic friends around the world.
  • Global warming is real and getting worse. Our best strategy for dealing with it is a revenue neutral carbon tax, rather than depending on ad hoc regulations like the Clean Power Plan and ever increasing auto emission standards. If the U.S. demonstrates its seriousness with a carbon tax, it is likely that the U.S. and China (which is highly polluted) could work together to establish world-wide carbon emission standards.
  • National debt, currently 77% of GDP (for the public debt on which we pay interest), is predicted by the CBO to keep getting steadily worse (see chart)  without major changes in current policy. Right now our approximately $14.3 trillion public debt is almost “free” money because interest rates are so low. But sooner or later interest rates will return to more normal levels and, when this happens, interest payments on the debt will rise by hundreds of billions of dollars per year. This will inevitably lead to a severe fiscal crisis, far worse than the Financial Crisis of 2008.

Conclusion. I am relatively optimistic that we can maintain good relations with China and will have the good sense to better control carbon emissions. But our debt problem is politically very difficult to address because it will require spending curtailments.  How do we successfully address such a huge problem?

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2 thoughts on “The Major Challenges Facing the United States

  1. Jack,

    I am wondering whether or not the longstanding but steadily advancing share of our national economy devoted to health spending can be correlated with a corresponding decrease in our nation’s annual economic growth since 1960? And if so, was it more prominent especially in the last 18 years? In effect, was there a year when the increased health spending as a portion of the national economy began to measurably affect our nation’s economic growth? I suspect that, if so, it was @15% of the GDP. An associated decrease in our national investment in education would be the clearest answer. Remember, the return on investment for economic growth by a national investment in education generally is 3:1, and for early childhood education, it is 7:1.

    Paul

    • The cost of healthcare (as a percentage of GDP) has been steadily increasing for many years while economic growth has been steadily decreasing. So there is a very strong correlation here and perhaps a causal relationship as well.

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