The American economy

Comeback kid

America’s economy is once again reinventing itself

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Power to the people and respect of their rights improves everyone's lives in general. Reciprocal trade also plays a big part, real win-win, not this fake "I loan you money but you have to hire my people to work in your country" crap. This is why the West is the best while the BRICs are starting to trip over themselves through weak democracy or none at all.
Interesting article, I'm sure he'll be branded an Indian.

guest-isnnaam in reply to Democrates76

The funny thins that you actually are Indian and you cry about how Chinese people label people Indians too much on this forum. (Usually the Chinese people are on target, by the way.)

I mean I can understand why a non-Indian would not like to be labeled an Indian but when an actual Indian cries about being labeled an Indian is just very funny...

Democrates76 in reply to guest-isnnaam

I will take it you didn't bother to read the article or who wrote it.

Here's another interesting article, now analysts are speculating that China actually is fudging its books and statistics to help smooth out the leadership transition. Everything is just A-OK according to the propaganda dept.
China has figured out how to produce more GDP with less electricity apparently.

Singapore's exports took a surprise dip too today. I guess its unexpected with 5 people are trying to sell 10 of the same thing to the same customer.

guest-isnnwme in reply to Democrates76

I wasn't referring to the article. I was referring to the fact that you personally complain about being labeled an Indian very often on this website.

BTW all you're doing is digging up anecdotal evidence of the bad parts of China's economy, and there are lots of those. But guess what, you can find similar articles and op eds exploring the bad parts of the US economy, and the economies of any country.

But if you look at any summary of China's economic forecast, as published by The Economist 2 months ago (there was an issue that was dedicated to it), that of the World Bank, IMF, or any credible economic think tank, most people are optimistic about China's future in the next 2-3 decades.

I suggest that you read the special report in this issue:


For some reason, The Economist's recommendations aren't very convincing. How exactly will a Democrat/Republican president "do no harm" when it's Congress who will have to tackle the fiscal cliff (no pun intended)? And how will the president single-handedly solve the public services sector? I think what TE meant was that Congress, state politicians, and the like need to start working together to solve the root problems of the federal government - which is unlikely to happen.


TE wrote (in quotes)

"America’s economy is once again reinventing itself."

can-do adj
confident and resourceful in the face of challenges
a can-do attitude.

That is the Spirit of America, and shared by a few countries
like Taiwan.

Thumbs up for the U.S and Taiwan (free from Mainland China rule)

Joere in reply to guest-isnnjae

OK, maybe the US economy is slightly picking up but that is only a relative term when comparing it to the sick European state of affairs. Europe is in serious decline. America is in decline but capable, with solid leadership, to reverse the trend and end the profligacy which characterized the previous 20 years. It will do that but only without Obama. There is no comparison between the problems which plague America and the irreversible problems which will destroy Europe to come. In my country of Canada we look more to the USA and Asia to pull the world out of recession rather than Europe. They are hopeless.


With a host of goings on around the world like never before the USA is in an Election Year. Re-electing the first black President in the history of country who could become one of the greatest Presidents in their history is a real big deal. The economy will recover starting in 2015 (7 years from 2008, as predicted) there is more money than ever and more people and of course larger markets with many wanting a larger piece of the action(s). There is a very quiet shift taking place from the industrial to the technology revolution and how governments will provide health and welfare for those left behind has yet to be defined a very complex task indeed. Provide jobs with livable wages to the youth in a world where technology reduces manpower (almost daily) and living wages for the parade of senior boomers that are living longer and know where the voting booths are.

Will Hayes

What a surprise. You are now all Keynesian, all the time? You are now openly shilling for legislated class equality or the Barry version: equality by fiat. You are called 'The Economist.' Please at least pretend to understand that all tax increases reduce growth. All federal spending cuts, that actually return money to the people, increase growth. The people and private equity spend money more efficiently and productively than the public sector does. That is a historical fact. The only way you can pretend that government spending is a stimulus, is if you pretend that if the government was not spending then nobody would be. The true counterfactual would be to compare the investment result of 15 trillion invested by the public sector with a government multiplier of less than one.

I forget when you became so predictably left wing, but it is disapointing. To pretend that president Barry Obama is roughly equivalent to any other candidate is a rejection of all economic principle and analysis.

WT Economist in reply to Will Hayes

Hey Will, how long have you been reading The Economist? Because I remember this newspaper recommending slashing the wages and benefits of U.S. workers as a cure for unemployment. The Economist's views have changed because the facts have changed: we have a crisis of demand due to the concentration of income at the top and global dependence on rising U.S. indebtedness.

Moreover, the TE was warning about debt driven bubbles 15 years and two bubbles ago. I remember my boss at the time, who probably agreed with you but has probably now changed his mind in light of new information, claiming that the problem was TE seemed to think the U.S. economy needed a good thrashing to get back on the wagon, but the reckoning never came. Well it did. I read it here first, and have a good memory.

That said, let's go over the cliff shall we? I'm tired of the blackmail. Bail us out or you'll get a Great Depression. Accept a lower standard of living or we'll outsource your jobs. We can't cut our senior benefits, but accept half or we'll run up the debt so high you'll get nothing. Raise taxes and cut benefits for today's seniors, and the economy will tank. And then it happens anyway, over decades.

Will Hayes in reply to WT Economist

I have been reading The Economist since 1981, and I strongly believe it has changed.
I love it when people pretend to have sole access to the 'facts' and then only cite personal opinions with no factual basis or causal relationship to anything being discussed.
'We have a crisis of demand due to the concentration of income at the top,' is an opinion and you offer nothing to support it. It would be difficult to support and impossible to prove.
Fifteen years ago, I think the economist was far less liberal/Keynesian/predictable than it is today.
After that, nothing you write made any sense at all to me.
Nobody is talking about raising taxes and cutting benefits for anyone in the US, except for from rich white men. If they are in the UK, which is arguably more socialist than the US, I would expect that The Economist would oppose such an action.
The cliff you speak of is the lie that only government spending and regulation can take care of you. The cliff is the lie that without massive federal government, there would be no benefits, and nobody would make enough to live on. The US Government has grown larger ever year of my life and we don't seem to be creeping towards shangra-la. The war on poverty is still on. The war on drugs is still on. The war against racism and sexism and every other ism is still on. They will never end, because wars are a great excuse to expand government. That's my opinion.

WT Economist in reply to Will Hayes

I've learned not to trust any opinion. So with regard to the federal government, I downloaded data on detailed revenues and expenditures, calculated it as a percent of GDP, tried to compare similar economic years (because taxes go down and spending on basic needs go up in recession), and posted the results here. The data goes back a long way, but good data lags, so any discussion of the Obama legacy is preliminary.

Two posts with my opinions followed in case you are interested; otherwise, just look at the spreadsheet linked from the post above.

Here is subsequent post on taxes and generational equity.

Conservatives would like to claim that all the money goes to the poor, immigrants, and those in older central cities while liberals would like to claim that it all goes to the Bush wars. You seem to agree with both, but I find neither is really true when compared with the past.

fairtax dave in reply to Will Hayes

Will - simply not true that only those being asked to suffer are rich white men. While it fits your argument, you are leaving out - to name a few - the republican proposed changes to medicare, slashing of education, food stamps and other programs that keep the head above water for many poor and attempt to create the educated masses that are missing from our labor ranks today - i do not have much sympathy for the rich white men who today pay the lowest effective taxes in a century - and how have those temporary 10 year tax cuts done at letting those 'job creators' create jobs these last 10 years? Selective fact inclusion is just as bad in my book.

saraalan in reply to Will Hayes

The phrase "all tax increases reduce growth" is incorrect and historically unsupported. It's true that excessive taxes harm the ecomony, but taxes are necessary to build and maintain infrastructure, maintain law and order, and care for those who otherwise would lose out in the competitive marketplace. There is no historical precedent for a major country where the entire infrastructure is privately owned and maintained (so imagine all our bridges collapsing because Republicans just don't want to pay to fix them), there are historical precedents for societies without the ability to maintain law and order (walled compounds for the rich, and gang rule elsewhere), and there are historical precedents for societies brought down by perception of inequality and unfairness when too much wealth is concentrated in the hands of too few individuals. And then there is the environment, and if you wish to return to the smog-choked northern cities with poisonous rivers of the 1970s, you are in the minority. But that period demonstrates the historical precedent that unregulated business can often overlook long-term societal needs to obtain short-term gains (therefore we NEED the EPA). I am not left-wing, and neither is The Economist. Both of us are appalled at the plans of the newly elected French government, and both of us agree that taxes on the wealthy in the 1970s were too high. But now they are too low, with the ultra-rich paying much lower rates than the merely rich and upper middle class. I don't always agree with The Economist, but in this article the newspaper is absolutely right.

Finally - to counter your swipe at the President, we have avoided a second great depression, and the economy is growing. Ninety years earlier the Republicans in charge let the country go, and had McCain and the Republicans won in 2008 we would likely be in the same boat. They would have let the auto industry go and laid off millions of federal workers, so unemployment today would be double digits, and plummeting demand would have destroyed the ecomony. But Obama brought in real economists and listened to their "economic principle and analysis", something Republicans appear loath to do.

HsiungNuisance in reply to Will Hayes

Is Will Hayes an alias for Grover Norquist? The only thing the GOP wingnuts are speaking of these days are cutting all benefits aloing with taxes. Have fun building and enjoying your giant tract mansion with a delapidated or non-existent roads, sewer, water, along with misc and sundry utilities and services. Maybe there would be lower taxes AND better public services IF the wingnuts did not invoke gov't for their crusades. The "left" and the "right" share equally in this abuse. And the GOP right always loves a new war, abeit this is the first time they started one and cut the revenues necessary to pay for it. And you wonder why the US cannot "afford" to help the poor, elderly, and very young?

grinnell in reply to Will Hayes

But you miss the point that government spending is not necessarily supposed to be more efficiently and productively spent than private spending. The ROI of American spending in WWII was probably not terribly impressive but I personally appreciate the results.

grinnell in reply to Will Hayes

Would you be able to provide more details on how the federal government has grown larger every year of your life. I was curious about this and so looked around for some information. The most obvious is tax receipts as a percentage of GDP since that's really what the government takes from us. That varied in a fairly narrow band between 15 and about 20% from 1950 to the present with peaks around 2000 and a couple of troughs in the mid 1970s and mid 2000s. No real trend there. Then I looked at total number of federal employees. Excluding military, the total number of federal Executive branch employees (I excluded Judicial branch because it didn't seem fair to include the exploding prison populations in the past 3 decades or so) has varied between about 2,700,000 and 3,200,000 with the peak being between 1985 and about 1992, the glory years of Reagan and Bush Sr. Since about 1993 or so the total number has been pretty static at about 2,750,000. I guess I don't quite see where you are seeing this inexorable rise in the size of the federal government.

Audi Man in reply to Will Hayes

"All Federal spending cuts, that actually return money to the people, increase growth." Are you suggesting here that the government ought to cut spending and cut taxes at an equal measure? Or are you suggesting that by the government simply cutting spending, money will magically appear through some other vehicle? The Federal Government's spending goes to many dynamic private companies. Some large ones like Boeing and Lockheed Martin of course, but also tons of staffing and other types of servicing companies. And what of the facts of still-huge private debt overhang, and that large companies are still hoarding cash, despite the fact that interest rates are near zero?? Ultimately, in these circumstances, the government simply acts as the largest market participant in the economy.


Trust the Economist to bring sanity to the discussion.

But I wonder how much of what is said on the campaign trail is just political posturing. That being said, it is time to have a real discussion about issues that really matter and that really hurt us instead of pandering to the extreme wing of both parties. Healthcare, education, and immigration are all in a dismal state right now and do need urgent attention to secure a bright future for the US. In addition, we need to resist all forms of protectionism. It is ridiculous, given how integrated the world economy is today, that people are still fussing over "made in the US" or "made in China"

HsiungNuisance in reply to treut

So the de-industrialized US MidWest, impoverished textile towns of the US Carolinas, and Shenzhen, China are figments of the imagination? "not made in the US" and "made in China" are only too real. Its not "protectionism" to recognize reality and ask what measures can repair the damage wrought. The only real questions are what measures are most effective in doing so.


Sometimes the economy is subject to a self fulfilling prophesy. It only takes a few, sometimes only one chicken little to cause a stock market crash (remember Joe Granville?). With the Republicans constantly reminding us of every disappointment it is inevitable that the economic attitude will be cautious, if not downright gloomy.


American economy is growing albeit at a slow rate.
At this rate unemployment will stay high which would
constrain the growth. As TE pointed out that exports
are growing but with the slowdown in China and other
BRIC countries and recession in Europe the prospects
don't look bright.
The most importan constraint on growth are the stagnant
wages. This was the contributing factor in pre-crisis debt
frenzy.The banks have tightened the credit standards and
easy access to loan and shopping spree is unlikely to be
repeated. Private sector with its innovation will lead
the growth but it may not rise above 2% for few years.In
the long run we are all dead.

Will Hayes

They removed my post. There was no offensive material in there unless you are a leftist. This proves that liberal just equal authoritarian. Refute me, you hacks.

Will Hayes in reply to grinnell

I had a post up with seventy replies. It was removed for 'voilating The Economist posting policy.' I asked for clarification and got none. This is like removing the CNN interview with Gov. Ventura because he endorsed Gary Johnson: Vapid and transparent.

grinnell in reply to Will Hayes

I think that was yesterday. I got an email from TE saying my reply along with others had been deleted. Don't remember anything particular about the original post or why they would have deleted it. Strange that the moderator would not have told you how your post violated rules.


The Economist points to "Europe" because that is easy and fits into the narrative that environmental rules and unions are bad while pumping chemicals into the ground and carbon dioxide emissions are good? It is not Europe that is old, it is the Economist.

Canadian Engineer 1917

It’s telling, when the Economist speaks of the bank’s pre-crisis excesses and the resulting misshapen economy, but then calls Ron Paul’s responsible finances “madness”, that would “drive the economy over a fiscal cliff”. The Economists idea of “doing no harm” is only dealing with annual deficits over the long term. Of course bankers would love to preserve debt levels this high, raising taxes and lowering public services to ensure the continual flow of their interest income, but economists too? Now that’s madness.

DONT SPEND MONEY YOU DONT HAVE, so that you’re not dependant on those lending you money and so you don’t have to pay interest!


But the American economy looks strong with steroids (-8% budget deficit) I wonder what would be the GDP growth of the U.S. in 2012 with a -1% budget deficit like Germany (which will grow 1%)


"America’s houses are now among the world’s most undervalued . . . American banks have had to write off debts and raise equity faster than their peers . . . American capital ratios are among the world’s highest. And consumers have cut back, too: debts are now 114% of income."

Uh, all of these things are signs of economic STRENGTH? Our housing market is still in the tank, our banks are writing off massive amounts of debt (basically, lost money), and are keeping massive amounts of liquidity in reserves rather than lending it out, and the American consumer is still digging out from debt and not consuming.

If these are signs of economic reinvention, then you could just as easily claim that a cancer patient's hair falling out, nausea, loss of appetite, and physical weakness and deterioration is a positive sign that they are recovering from cancer. Maybe... but then again maybe it is simply a foreshadowing of things getting much worse.

jason9139 in reply to LexHumana

While your concerns make sense, approach the same thing from a recovery point of view:
Our housing market is hurting, but healing. The deflated values have stabilized and possibly have begun to grow again. This is the opposite of the housing bubble (where prices are far above the 'fair' value). Our banks have written off massive debt, which is to say they have cleared their balance sheets finally, instead of holding onto or hiding the poisonous debt still longer. Our banks have a much stronger position with capital ratios and thus ability to withstand another shock without collapsing than other banks in Europe or elsewhere. Yes the American consumer has pulled back considerably, but the scale and speed at which the debt has fallen is a sunny side that they might begin to spend again (growing the economy back) or continue this slow-pace economy while still further reducing debt by leaps and bounds.

In summary, these might all be bad signs from the healthy economy perspective, but they signal brighter times ahead considering the cliff-edge we were all looking over in late 2008/early 2009, when the world was melting before our very eyes.


Non development and war spendings should be reduced. Strict regulations on manufacturing sector should be reduced. Age restrictions should be imposed on citizens receiving social security and at the same time soft loans to the SME sector with suitable incentives should be offered to improve emplyment situation.


God, it depresses me that there's always so much economic nonsense in the comments section (see Will Hayes et al), I would hope that people reading The Economist would actually understand the basics, but evidently not. First, whether you like it or not, Keynes was at least partially right- government spending is an effective method of generating growth- this is pretty much a proven scientific fact. There are too many investments, such as infrastruture, that are just not cost effective enough to be developed by the private sector, but which end up having a huge positive impact on the economy. Furthermore, there are other areas, such as the the military and the police, where it is in the interest of the public for there to be no private interferance. Secondly, when discussing government intervention in the economy, we need to be thinking about maximising welfare, and thus cannot only focus on GDP. Other metrics, such as equality and quality of life are also important.

Andrew Ryan in reply to TheodoreBagwell

I wholeheartedly agree. Regardless of whether or not one chooses to acnkowledge it, efficient and targeted federal spending in areas such as infrastructure and education only serves as a boon to the economy. The argument that "any increase in taxes/federal spending" stifles growth is patently false and proves dogmatic hang-ups rather than legitimate economic consideration. That point of view is unmerited and does nothing other than hinder national economic advancement.

That spending must be geared toward creating and maintaining a well-educated workforce (via affordable education ranging from vocational schools to high-quality public universities), and bolstering the private sector. The private sector also must be overseen by an independent committee rather than individuals with political agendas, in order to avoid excessive regulation (which is what truly cripples economies and pushes corporations overseas).

All of that said, spending cuts in the federal government are obviously necessary. Excessive bureaucracy isn't the same as appropriate oversight.

Saying that "we musn't tax" or "we musn't cut" is foolish. What we must have is a balanced approach to solving this problem, as outlined in this article.

Kroneborge in reply to TheodoreBagwell

"government spending is an effective method of generating growth"

You almost got it right, government spending CAN be an effective method for generating growth, it just depends on whether the spending has a positive net present value. There are infrastructure projects that we could be spending on that are positive, but the stimulus that was passed was mainly not.

In addition to get the stimulus in a timely manner, a LARGE number of regulations would be waived (for example the years it takes most projects to get off the ground as it goes from committe to committe)

Kroneborge in reply to Andrew Ryan

@ Andrew,

Our problems in education aren't related to funding they are related to the system. The US spends more per student than most countries and yet still under performs. The solution being more competition through Charter schools and vouchers etc.

You are completely incorrect sir and you can look at what's going on around you. For example government spending and intervention is the reason why the economy has failed. Obamacare, the car manufacturing bailout out, the three wars... I could go on. All of these problems are a result of government spending.

Look at Europe, all the social welfare problems have caused the collapse of the European economy. If they didn't have these programs... There would never have been a problem!

Will Hayes in reply to TheodoreBagwell

So, socialism is fine as long as the ruling class determines that it 'maximizes welfare,' that private wealth/inequality is evil, and that 'suitable equality' is a goal worth sacrificing jobs and growth for?

Keynes wrote that federal spending stimulates an economy when that 'stimulus' money is accrued during times of economic expansion. Borrowing funds to 'stimulate' and paying interest on that debt for decades(at least) blows all economic multiplier effect models out of the water.

Even if that spending is paid for, private sector investment and venture capital has rough a 6:1 multiplier return ration to public 'investment.'

The primary lie of your fantasy world is that if massive government didn't do these things, they wouldn't get done. That was the argument used when US welfare reform was predicted to put millions of people out on the streets. That is always the argument. The total US Federal debt in 1980 was less than 900 billion dollars. How did anyone cross abridge? How did hospitals accept anyone? How did states pay for the huge burden that they were forced to shoulder? None of those things happened. Individual took care of themselves and their communities and those who needed help.


Great picture and I hope The Economist is right and I am wrong. However, I think this rosy picture painted by the Economist is way too optimistic. For example, the employment in high tech is negligable compared to the size of our economy. Furthermore, the temporary liquidity being created by the FED is not a long term solution and, in fact, all that liquidity is going to come back to haunt us.
We have serious fundemental issues in the US economy and way too much financial, government and individual debt. We live way beyond our means and have wasted way too much money on foreign wars. Our government is not just disfunctional - it is a total chaos. The only reason things look decent right now is because we have the reserve currency and all major investors are buying treasuries and the US dollar. This will not last forever. When the interest rates start going up and/or when the confidence in the Dollar diminishes, we are going to have a major crisis.



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