Nothing has changed since Part I of this article: America’s economy is still bad.
Here are three more reasons why.
1. We don’t make anything anymore.
American manufacturing has been decimated. We used to be the world’s leading industrial power, not anymore.
In 1979, 19,553,000 Americans worked in good paying manufacturing jobs; last year, only 12,300,000 did. In a few decades we shed over 7 million jobs. That’s huge.
So what happened to those people? Two things. Many got new jobs, although most of them took a hefty wage cut in the process. In fact, the average pay cut for displaced factory workers was 17.5% (I guess it pays better to build cars than wait tables). The rest dropped out of the labor force altogether, and therefore no longer show up in the unemployment rate.
How did this impact the economy? Just look at the “rustbelt” (the hardest-hit area in the Mid-West and North-East): in many places, it’s become synonymous with urban decay and post-industrial rot. Look at Detroit. Look at Cleveland. Look at Camden. The list goes on and on.
But it’s not just jobs we lose; we lose capital equipment (factories, machines) and labor skills. We lose the ability to build things. For example, America no longer manufactures laptops (aside from one small, ironically, Chinese-owned factory), mobile phones, televisions, nor stuff as essential as light-bulbs, shoes, dress shirts (many come from Canada), and spoons and forks.
This would be comical were it not reality.
Even our most advanced industries, like aeronautics , IT, and pharmaceuticals, are hurting. This is dangerous because together they produce 17% of our GDP, employ 80% of our engineers, and file 85% of our patents. They’re our inventors and innovators. They build the future. We can’t afford to lose them, but it’s happening.
This is because we’re importing ever-more advanced products: last year alone we ran a $632 billion trade deficit in advanced goods. What’s worse is that 56% of the increase to our trade deficit over the last decade has been in advanced products. We’re offshoring our most lucrative, high-growth industries. Bad idea.
We’re literally giving away the crown jewels.
2. The trade deficit is unbelievable, believe me.
Although America’s run a trade deficit ever since 1974, it’s never been this big.
In 2015 the deficit was $736,018,617,300—$4,845 per employed person. That’s as big as the Netherlands or South Africa, or the Philippines. And it gets worse: if we include remittances, foreign aid or UN payments, and the value of stolen intellectual property (estimated at $300 billion), then we lost $1.16 trillion dollars in 2015.
That’s mind-blowing, and it happens every single year.
All told, over the last two decades the cumulative deficit is $11,386,010,210,000. That’s $81,725 per employed person— double what someone earning the median hourly wage makes per year.
We’re not out of the woods yet. The deficits are growing. Look at China: from 1986-2000 the average deficit was $29 billion dollars, while from 2001-2015 it was nearly $240 billion. That’s a big increase (23.63% per year to be precise).
Long story short, we’re buying tons of stuff from abroad, and it’s costing us investment and jobs.
But what do we get out of this Faustian bargain? Cheap goods? No. According to the consumer price index, the cost of living grew at the same rate as earnings, which means that goods are no cheaper now than they used to be.
We’re running insane deficits and we’re not even getting cheap stuff.
3. Foreigners are buying America.
Nothing comes for free. To pay for the deficit, we have to sell either assets or debt. In effect, we’re literally selling off America to pay for our cheap bobble-heads and Transformer toys.
Foreign investors now own 20% of all US equities, up from 12% in 2007. They’re also buying up our property: in 2015 alone foreign investors bought over $100 billion worth of US properties. You wonder why house prices and rent keeps going up? That’s why.
We’re also selling huge amounts of debt. This is especially pernicious: not only do we have to pay back the principle, but we owe interest too. Right now, foreigners own 43% of all US corporate bonds, and 47% of our national public debt, which is 13.5 trillion dollars— the largest it’s ever been. This means we owe over $6 trillion dollars to foreigners.
Just thinking of the interest payments makes me wince. In 2015 the US government paid $105 billion to foreign entities in interest. This will only get worse, since the debt we are owed will mature before the debt we owe.
Needless to say, $105 billion is a lot of money. To put it in perspective, the federal government only spent $70 billion on higher education, and $17.5 billion on NASA—we could fund five NASAs with our interest payments.
America’s in a Shambles
The data could not be uglier.
Our most advanced industries are lambs at the slaughter, and our trade deficit and national debt are smothering any chance we have left at rekindling prosperity’s flame.
Economic ruination is the new norm, and if we don’t do something now, the next generation will inherit a much poorer country than did the last.