The Trends Are Mostly Unappealing

By Karl Reiner

The war being waged by the competing Mexican illegal drug cartels to control the supply routes to the lucrative U.S. market continues unabated.  The Mexican government has announced that violence related to drug-trafficking killed 15,273 in 2010. This is a sharp increase over the 9,616 people reported killed during 2009.

The extension of the Bush tax cuts and the pumping of an additional $300 billion into the spongy U.S. economy through other government actions will hopefully spur growth.  The American economy could grow by 4% in 2011.  Although economists expect improvement, the stimulation efforts added to the federal deficit.  The recovery will continue to be slow when compared to past recoveries because banks and households are working off the mountain of excess debt incurred during the previous irresponsible decade. Once considered to be spendthrift, American households are now saving 6% of their disposal income.

The first group of the 78 million Americans born between 1946 and 1974 will reach the normal retirement age of 65 in 2011.  The large number of retiring boomers will put an added strain on the economy. The number of people enrolled in Medicare will grow from 47 million in 2010 to 80 million over the next 20 years.  The number of people receiving Social Security benefits will increase from 44 million to 73 million during the same period.

As the boomers leave the workplace, the cost of the two programs will grow from 8.4% of GDP in 2010 to 11.2% in by 2030.  As the boomers retire, the nation’s workforce will grow more slowly, thereby reducing the tax income needed to finance the benefits of the retired.  The growing imbalance between retirees and workers coupled with the inflation in health costs will make controlling the federal budget deficit a much more difficult task. The shrinking of the domestic workforce will have to be offset by immigration if the level of U.S. economic activity is to be sustained.   

China’s president, Hu Jinto, made a state visit to the U.S. on January 18-21, 2011. He was received by President Obama in Washington with all the pomp and ceremony due a visiting head of state. While the two presidents put a good face on their attempts to manage the thorny web of relationships affecting the two countries, China is becoming more assertive.  The relationship is changing. At some point during the next 20 years, China will replace the United States as the world’s leading economy.  

In the United States, medical spending per capita has nearly tripled since 1990.  The countries of the rest of the industrialized world have long accepted the idea that the provision of health care for the population is a responsibility of government.  Considering themselves unique, Americans continue to be hotly divided on the issue with 71% of Republicans being against the recently enacted health care package.  About 6 in 10 are against the requirement that people carry health insurance. Unique they are.  They are the only group of people in the developed world believing luck prevents serious illness or injury.  

Americans tend to avoid responsibility while being quick to place blame. The housing bubble that led to the Great Recession is a case in point. The Wall Street loan packagers, banks, shady buyers and lax regulators all blame each other for the collapse while avoiding accepting any responsibility. The country’s citizenry has become so politically factionalized that there is no longer a basic agreement on the role government should perform in society. Unlike the majority of the world’s functioning nations that believe efficient government and free market economies are compatible, a lot of blinkered Americans only see government as the problem. Our fractured republic will find it increasingly difficult to function in a fast changing world.