Make-or-Break Moment At Hand for America Over Economic Growth, by Conrad Black.
GDP growth declined from 4.5% annually in the last six Reagan years, to 3.9% in the last six Clinton years (as the current-account deficit and the housing bubble ballooned), to 2% in the George W. Bush years, to 1% in the Obama years. If per capita GDP had increased in the first 15 years of this new century as it had in the years between 1945 and 2000, families and individuals in the United States would be 20 percent wealthier than they are. …
These are extremely dangerous trends. The average American is aware of a 15-year flat-lined income in terms of buying power, and the absence of job security despite an official level of unemployment of a very acceptable 4.7%. Most would know, from their own experiences or acquaintances, that the labor force has shrunk, in fact by 15 million people.
There are now over 20 million Americans of prime employment age (25 to 54) who have dropped out and are sustained by the benefit system, especially Medicaid-supplied painkillers, food stamps, and activities that generally escape official compilation. Many of these are among the 750,000 people released each year by the bloated and corrupt prison system, which does all it can to demotivate, stigmatize, and render unemployable those released — and make more likely the return to its embrace. The system in any case always imprisons at least as many new convicts each year.
If the Trump administration does not get a tax bill through that rekindles economic expansion, the entire American project is going to face its greatest crisis since Roosevelt came in to grapple with the Great Depression. Naturally, as part of the magic-carpet ride the press gave to the Obama administration, the extreme doldrums of the country’s economy were not much mentioned and overmuch was made of the practically irrelevant official unemployment number.
To return the economy to a normal healthy state, the huge bubble of money/debt since 1982 has to be reversed. The money supply needs to return to 150% of GDP, and (no-risk) interest rates to 6%. There is too much debt in the economy for substantial real growth now, and interest rates have to be ridiculously low or the economy crashes (so savings are devalued and saving discouraged).
The US and the whole world will have a basically stagnant economy until the debt is reduced. There are two ways: either a massive depression (the reduction required is much greater than in 1930), or inflate the currency (by “printing” — creating money without matching debt) until the nominal debt shrinks into irrelevance. Politicians will choose the later. But who is brave enough to start down that path? Who will bumble into it? The move will almost certainly start in the world’s big economies, the US and China — so here’s looking at you Trump and Xi.
There was a fair amount of discussion about people living “from paycheck to paycheck” and some comment on the strained purchasing power of much of the middle- and working-class people. But it was all in the context of the slow recovery from the financial crisis of 2008, which was laid entirely at the door of George W. Bush, though the pieces of the disaster were put in place by President Clinton and his overrated collaborators, Robert Rubin and Alan Greenspan.
This is a make-or-break moment, not just for the administration, but for the American people. … It must happen in the next year.