Monday, August 29, 2016

"The US position is untenable"


That's the view of commentator Karsten Riise in an article hosted on the Web site of highly respected military historian and strategic analyst Martin van Creveld.

A vicious circle threatens the US economy.

When and how it may start, we don’t know.

The biggest driver of the US Federal debt is the aging of the US population. Today 15% of Americans are aged 65+. This percentage will increase by two thirds, so that by 2060 about 24% of the US population will be 65+. Until now, the USA has benefited from a young population. The strain on medicare and social spending of an aging population, even with the still limited entitlements in the USA, will be enormous.

The CBO has calculated, that just to keep the Federal debt at its present level, the balance between tax revenues and federal expenditures must be improved by 1.7% of GDP—every year the next 30 years. In other words, tax revenue must increase and government expenditures must be curtailed.

The US economy is becoming less and less competitive. One reason for this is because the USA has some of the worst 3rd world-like public infrastructure in the western world. Roads, bridges and railways in the USA are a sham. High-speed trains are non-existent. Not only is China building far more kilometers of inter-state high-ways than the US, but it is also one of the world’s leading countries in the field of high-speed trains; in fact, China may become the main supplier of America’s first high-speed railway line.

Furthermore, American public schools, hampered as they are by violence and other problems. are not exactly the best in the world, The US level of education is going down, as pointed out by the economic guru Michael Porter, who also points out, that the level of bureaucracy and red-tape hindrances to business are enormous in the USA. The middle class is disappearing in the USA, with now barely 50% of the population perceiving themselves as middle class. Median incomes have barely improved or even gone down the past 40 years, significantly reducing the middle-section of the tax base, which is normally the most reliable. The American Dream is a nightmare for most Americans. The Laffer curve, stating that heavy tax burdens on the rich will incur less total tax revenues, still applies for the top section of the US tax base. Any attempts to heavily taxate (fiscate) the upper 10% (or 0.1% !) of the US tax base will lead to US dollar capital flight, and acute economic crisis.

There's more at the link, including a sobering military assessment.

When you add up all the indicators that Mr. Riise puts together, it's a gloomy picture indeed.  It needn't be . . . but only if we shed the crippling burdens of entitlements, welfare, and social spending, and focus our economy and our resources on what's essential rather than what's politically correct.

I'm not sure whether either of the main candidates for the Presidency this year have wrapped their heads - or their policies - around that reality.

Peter

14 comments:

Glen said...

Her talk of High Speed trains invalidates her arguments. Those trains are prestige projects, and have very little economic value (i.e. they rarely make money).

Eric Wilner said...

Glen beat me to it (except that I wouldn't refer to Karsten Riise as "her", unless I'm looking at the profile of the wrong one). Trains for long-distance freight make sense; high-speed rail, presumably for passengers, is a colossal boondoggle, especially in the U.S. (as is evident to anyone who looks at a map of the U.S. and ponders the scale).
As with so many mass-transportation schemes, it's not fashionable to ask who'll use it, how often, nor how they'll get to and from the terminals.

Peter said...

@Glen and Eric: Don't get fixated on one point. Overall, the trend is clear - and that's not being addressed by any of our current leaders.

Austin in TX said...

I agree that the inclusion of high speed trains makes the rest of the assessment highly suspect.

Typically if someone makes a logical argument and then drops in nonsense it makes me doubt the validity of the logical argument and the quality of the arguer.

It's as if someone is talking about the importance of balanced nutrition and then mentions that meat is terrible for you and everyone should be vegan. Are you going to listen to the rest of the advice and nod your head?

Anonymous said...

Here are three links. Anyone else see what I see? The local, state, and federal government continue to shoot themselves and everyone else with their asinine bureaucracies.

The FDA just passed a ruling that vape shops will have to pay $250k per mixture for approval by the FDA. I don't vape or smoke, but this put these shops out of business. I wonder how many unemployed people that will be? And that is only one example.


The Number of People Per State That Receive Some Form of Cash Welfare

http://www.economicpolicyjournal.com/2016/08/the-number-of-people-per-state-that.html


http://www.theblaze.com/stories/2012/07/11/these-are-the-top-10-most-and-least-business-friendly-states-in-america/



http://chiefexecutive.net/best-worst-states-business/

Joe Mama said...

One factor contributing to the lagging productivity on the factory floor is that jobs must be designed to accommodate 45 year old (mid-career), fifth percentile woman. Consequently, factories will have 25 or 30 pound lifting restrictions that are applied to all employees. It does not matter that the employee works on a farm and can throw 40 pound bales of hay onto a wagon all day long. He must use lift-assist equipment to lift assemblies proven to stress 5%ile women.

Lift assists slow operators down...way down. Lift assists gobble up tooling money. But large factories insist on making all jobs doable by all employees out of fear of being accused of "discrimination".

mark leigh said...

The anti-competition, innovation stifling, Establishment controlled EPA, FDA, DEA, FTC commerce clause twisting of our business and personal lives by the parental State is what wrong with America.
The regulatory burden on every level of economic activity from a kids lemonade stand to creating space industry is destroying as much productivity and new enterprise as the tax burdens that support the entitlement and prohibition climate that is destroying hope.

SiGraybeard said...

While the general conclusion that we're in trouble is hard to argue, the examples all seem to be centered on more big government projects. The Chinese spend more on interstates than we do? Sure - our system is built out. So what? They have more bullet trains? As has been pointed out, when traffic engineers look at those systems, they find very few places in the US where they make sense at all. Were traffic engineers involved in those decisions in China, or is it just "make work" to keep workers working, like the cities that no one inhabits?

Do we need better roads and bridges in places? You bet. And why is that an indication the country is going to collapse?

I can agree completely that our education system is failing, but I say the answer is to "nuke it form orbit". Destroy it. It's infested with socialists and wage-suckers from top to bottom. So we have nowhere to put millions of K-12 kids next fall? If the only reason we have public K-12 is to house kids some number of hours a day, that's exactly why the system stinks. It has been demonstrated in several studies that no matter how much we sink into "education", test scores don't improve. Does that sound to you like more spending is called for, or re-designing the system?

(and, seriously, what is it with big government people and their love for trains?)

JohninMd.(HELP?!??) said...

I agree the problem is government, not industry. Since when do we trust Govt. to spend money on what's good for the nation, instead of what's good for some officials and they're cronies? China is in dire straights economically speaking, the fact they spend money on big projects (cities no one lives in?) Doesn't mean it's spent well, or wisely.

Brad Richards said...

Some valid points, like the poor public schools, screwed up military priorities, and the insane level of public debt.

However, it also contains lots of nonsense. I really don't understand this: if you are going to write an article like this, why include stupid points that are obviously wrong? It discredits everything else you said. Here are some examples:

"the USA has some of the worst 3rd world-like public infrastructure in the western world. Roads, bridges and railways in the USA are a sham. High-speed trains are non-existent."

The US does better with freight than any other country in the world. That's how the US rail system is optimized. Passenger rail does, in fact, suck. On the other hand, the US is large enough that passenger rail is unattractive. In Japan, it makes sense to take a train from one end of the country to the other. In the US, not so much. You are better off flying.

Roads and bridges are, overall, in reasonable condition. In 2015, 142k of 611k bridges were classified as "deficient", for a total of 23%. Twenty years earlier, in 1995, it was 34%.

Not only is China building far more kilometers of inter-state high-ways than the US...

The US already built that infrastructure decades ago. It only needs modest expansion over time.

Uncle Lar said...

Everyone not terminally insane in our government knows we are headed for a train wreck.
Someday.
But they hope that someday doesn't come on their watch. That it holds off until they retire to a nice secure nest they've feathered on the public's dime.
Besides, the crash pales in comparison to their real concern, the next election. It's always about the next election, getting back in the cushy slot for another two, four, or six years to keep their own personal gravy train flowing.

Will said...

SiGreybeard:

re trains:

Any time the .gov/socialists bring up trains, you can bet they are looking at Europe and wishing to emulate them. Virtually EVERYTHING these idiots want to do here is a copy of what the EU is doing, or has done. Remember, they think Europe is the origin/pinnacle of socialism, their holy grail. (origin was actually NYFC!, 1880's, IIRC)

Anonymous said...

Out on the intertubes are various size comparisons between the US and Europe, one of the most informative being Yurp over the US; nearly all of Europe fits between Boston and New Orleans, without much at all extending west of the Mississippi River.

That map alone should quickly end any discussion of passenger rail, high speed or otherwise. If it doesn't, just talk to anyone who has driven across Texas.

As for "gosh, what's happened to our productivity," If one looks at the financials of any business today one will see very substantial sums devoted to compliance, the larger the business, the greater the sum. Compliance with what, one may ask? Government mandates is the correct answer, all driven by that amorphous bugbear political correctness, that, in turn, driven by feel-good leftist policies unrestrained by common sense or reality.

SiG is correct in his assessment of the government-operated (and government-driven) education industry: Nuke it, and keep nuking it until the radioactive rubble bounces. The same applies to our current tax code and nearly all of the Regulatory State.

None of which will happen, because "feelings" and fear that any reduction in regulation will lead to Suzie Creamcheese breaking a nail while building railroad locomotives, or something. It will all get fixed, someday, because in the immortal words of economist Herbert Stein "If something cannot go on forever, it will stop," Unfortunately, that "stop" will be akin to the guy falling from a tall building - "it ain't the fall that kills ya, it's the sudden stop at the end."

Until then, stock up on freeze dried food, ammunition and blankets while they're still available.

Boyd K said...

Two years ago took the six lane freeway that starts just east of Yangchun, out to the ocean. Three to four lanes both ways, center barrier that looked exactly like anything you'd see in the us. Long sweeping and gently sloped curves beautiful except that chunks of 8 inch thick concrete were thrown up like a moonscape of rectangular blocks. Sure, they can build lanes but you can see what the metrics are, and longevity/quality don't count. At least not on that massive stretch. We were in a luxurious tourist bus and spent more time on the "shoulder" then in a lane.
Yes our infrastructure is horrible, I'm not convinced it's necessarily "horribler", at least not worse then China all IMO