The Strengths and Weaknesses of the U.S. Economy


If the U.S. is going to be able to solve its serious economic and fiscal problems, there needs to be a realistic understanding of what they are. My last post, “Is the U.S. Economy Really in Good Shape?” discusses a recent Op Ed in the Wall Street Journal by Martin Feldstein.  Mr. Feldstein makes the case that it is in pretty good shape right now even though there are big problems on the horizon. Unfortunately, such an assessment is likely to lead to complacency and inaction towards our long term problems.
Capture0Let’s look at the overall situation.

Our Economic Strengths:

  • The world’s largest economy, twice as large as our nearest competitor, China. The 2.2% GDP growth since the Great Recession ended in June 2009 is not especially robust but it’s among the best in the developed world.
  • World leadership. The U.S. dominates international finance, technology, higher education and popular culture. Everybody else wants to emulate us and to have what we have.
  • The U.S. Dollar dominates world currency because of its strength and stability. This protects the value of the dollar relative to other currencies.

Our Economic Weaknesses:

  • Massive Debt. The public debt (on which we pay interest) now stands at 74% of GDP, the largest since right after the end of WWII. As our currently low interest rates inevitably continue to rise, interest payments on the debt will skyrocket creating a huge burden on future generations.
  • Demographic Challenges. Payouts for Social Security, Medicare and Medicaid are continuing to grow rapidly, thereby putting upward pressure on annual deficits as well as accumulated debt.
  • Slow Growth Environment. The economist Robert Gordon makes a persuasive case that the explosive economic growth which the U.S. enjoyed from 1870 – 1970 will be very difficult, perhaps even impossible, to duplicate in the future.


The big picture is that we are going to have to work hard to achieve the degree of economic growth which will be needed to propel American society forward in the future as it has in the past.

Follow me on Twitter:
Follow me on Facebook:


Does the U.S. Care About Europe?


“After Paris, Islamic State’s rise and Syria’s agony are shaking a weakened Europe – and the broader international system,” writes the Brookings Institution’s Robert Kagan in yesterday’s Wall Street Journal. “Can the U.S. summon the will to respond?”
Capture“What the U.S. now does or doesn’t do in Syria will affect the future stability of Europe, the strength of trans-Atlantic relations and therefore the well-being of the liberal world order. … Just as in the 1990s, when Europeans could address the crisis in the Balkans only with the U.S. playing the dominant military role, so again America will have to take the lead, provide the troops, supply the bulk of the air power and pull together those willing and able to join the effort.”
Such an effort would require:

  • Establishing a safe zone in Syria to avoid having more refugees flood Europe and provide a place to return for those who have already fled. This would require not only U.S. airpower but also ground forces numbering up to 30,000.
  • An additional 10,000 – 20,000 troops to uproot Islamic state from its havens in Syria and Iraq.
  • An internationally negotiated transition in Syria ushering Mr. Assad from power and establishing a new provisional government to hold nationwide elections.

As Mr. Kagan reminds us the U.S. has taken lots of police actions in the last 70 years since the end of WWII:  Korea, Vietnam, Panama, Kuwait, the Balkans, Afghanistan and Iraq being the big ones.  “Not today.  Americans remain paralyzed by Iraq, Republicans almost as much as Democrats, and Mr. Obama is both the political beneficiary and the living symbol of this paralysis.  He may be the first president since the end of WWII who simply doesn’t care what happens to Europe.”
Mr. Kagan concludes, “Perhaps there are Europeans today wishing that the U.S. will not compound its error of commission in Iraq by making an equally unfortunate error of omission in Syria.  They can certainly hope.”

Follow me on Twitter:
Follow me on Facebook: