The slow death of the American economy

ageing us businesses

The descent of the United States is taking so many different forms but economically it is heading down towards the middle of the pack and will fall lower before it even begins to turn around. This story from the Wall Street Journal looks at one aspect of this demise: Why It’s Worrying That U.S. Companies Are Getting Older. The effect of public spending and low rates of interest are not just inflation but also come in the form of a crumbling capital stock. In fact, this decay of capital is more insidious since it is harder to identify but eventually there is no doubting that the process is in place and that it is having a devastating effect.

Meanwhile there is this fully related story although modern economic theory would have trouble seeing how the are connected: $7,060,259,674,497.51–Federal Debt Up $7 Trillion Under Obama. How do you suppose this will eventually work its way out?

As of June, there were 115,097,000 households in the United States, according to the U.S. Census Bureau. The $17,687,136,723,410.59 in debt the federal government had accumulated as of the end of July equaled $153,671.57 per household.

The $7,060,259,674,497.51 in new debt that the federal government has taken on during Obama’s presidency equals $61,341.82 per household.

An absolute shambles and with no one in charge.

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19 Responses to The slow death of the American economy

  1. Marion of the Glades

    An absolute shambles and with no one in charge.

    On your choice of data evidence the Chinese look much better Steve. Is that your preference?

    Personally, I prefer to have no one “in charge” of business and commerce.

  2. steve

    Hard to have sympathy for the yanks. They saw what Obama was like and voted him in again. A bit like Labor being ahead in the polls here. There is something fundamentally wrong with our version of democracy. We can all see the tsunami approaching and yet we stand and watch like stunned mullets.

  3. Craig Mc

    They’re fucked, and they’re not coming back. Lets hope whatever replaces it is as benign to us.

  4. I am the Walrus, Koo Koo K'Choo

    Craig, pretty much every major country in the world is heavily indebted, if not insolvent. And they all insist on implementing welfarist/socialist economic policies which discourage the investment and production needed to meet their obligations and raise living standards.

    Most of western Europe tipped over the edge 10 years ago. Their social security systems are unaffordable. It’s just a matter of time till the money runs out.

    Here’s a thought for you: the only entity with tonnes of surplus cash, an enthusiastic young population and plenty of vigour at the moment is ISIS-Caliphate! The future isn’t going to be rosy.

  5. Ant

    Of course all of this profligate spending is channelled through the House of Representatives, which has been controlled by the useless Republican ‘establishment’ for years, apart from a brief even more disastrous 2 year period at the start of Obama’s presidency.

    These Republicans have the power to bring it under control but they won’t because that would take a pair of Newt-sized political testicles that would derail John Boehner’s post-politics lobbying career at the US Chamber of Commerce, or some such.

  6. stackja

    “If we want a vibrant, rapidly growing economy in the future, we must find ways to encourage and make room for the startups of the future that will commercialize similarly influential innovations,” said the authors.

    Ronald Reagan: “Government is not the solution to our problem government IS the problem”

  7. john constantine

    if not for the super storm that scared a handful of american voters into voting for the man that could save them from global warming, obama would have been one term.

    the australian socialists have close ties to team obama, so we can expect a ‘fundemental transformation to change australia forever’ in 2 years time.

    open borders, with australian ships picking children up from foreign shores, changes to ‘thought hate’ laws to silence anybody trying to argue non-lefty thought, so anybody against mass immigration of unskilled customers for the welfare industry will be legally silenced.

    in victoria, we had a green politician riding her bicycle through the country areas, laying her vision out for the economic future of the countryside.

    basically the green politician said: mass migration of unskilled people into high unemployment areas will be a massive economic boost, as their welfare payments will bring money in, and the well paid social support workers they will need to service them will lift the tone of the redneck backwoods.

    plenty of room for millions of locked in generational customers for the welfare industry.

    we have gone from ‘overpopulation is evil’ say the left, to ‘populations must grow exponentially, funded by borrowed money’ say the left.

    gillard won, oakeshott and windsor and thompson and slipper gave her the extra 3 years to lock in all the spending and stack all the government departments. recruiting the obama convoy of transformational voters is just a matter of time.

  8. Anto

    I would imagine the situation is similar in Australia. There is very little incentive to take the risk of establishing a business, and when you do you spend most of your time as an unpaid tax collector for government. [Company tax, PAYGW, FBT, GST, super guarantee, payroll tax, NRWT, stamp duties.] In all, around 40%-50% of total receipts in my small business go back out the door in one form of tax, or another. Failure to collect and remit it all results in penal rates of interest, potential liquidation and criminal conviction.

    If I was starting out again today, I’d never do it.

  9. Staphy

    This oligopolisation is both a function of crony capitalism (rife under both major parties), and of unrestrained free market behaviour.

    It’s fashionable and all too easy to simply ‘blame Obama’, but what it really shows is companies are getting better at gobbling up and keeping market share, crowding out competition. Don’t expect to see the trend reverse under either party barring a massive upheaval.

  10. Tel

    How do you suppose this will eventually work its way out?

    People are going to not get what they were promised. Simple as that. Kind of like the way the Australian government is working out.

    So now you know the difference: the underlings are expected to keep their promises, the overlords don’t need to worry about such things.

  11. Bruce of Newcastle

    and of unrestrained free market behaviour.

    I do happen to know a guy in the US with a SME. In the land of the USEPA and Obamacare, illegal 20oz fizzy drinks and Obama-banned cupcakes, your comment is so off with the fairies I doubt it could come back down within a decade.

    Try removing the bureaucracy and the other business impediments on the SME’s. The big boys can look after themselves since they can afford to hire swish accountants and legal eagles.

    Does vancomycin work on you, Staph?

  12. Percy

    but what it really shows is companies are getting better at gobbling up and keeping market share, crowding out competition

    What it really shows is that government is getting better at legislating out competition. Of course, governments answer to this problem is more legislation to restrict existing business from out-competing other existing businesses. A prime example here in Oz being the ACCCs banning of cheap fuel.

  13. Staphy

    Try removing the bureaucracy and the other business impediments on the SME’s. The big boys can look after themselves since they can afford to hire swish accountants and legal eagles.

    So ‘bureacracy’ has been increasing since at least the ’70′s, causing market entries to decline in a roughly linear fashion? C’mon Bruce, try fitting a model to the evidence first, your worldview second.

  14. Staphy

    What it really shows is that government is getting better at legislating out competition.

    How’s that then? Government tax receipts have been fairly flat since 1970, and have declined since around 2000 [1]. Pick a better explanatory variable.

  15. Percy

    Government tax receipts have been fairly flat since 1970, and have declined since around 2000

    Are you saying that business has had to deal with less legislation since 2000 Staphy, leading to a decline in tax receipts? Uh, good one.

    Pick a better explanatory variable

    Nice link, shows a nice increase in government spending and a corresponding drop in receipts. Government cannabilising its own funding source. Not sure how it proves your point though.

  16. thefrollickingmole

    Staphy

    My old business went from low cost startup, light regulation ($40,000 plus stock) to somewhere like $100,000 startup all through the magic of “compliance.

    You wont see it, the costs are passed on to you most of the time, but the existing “Big 3″ players in this field are now close to immune from competition. The government has effectively legislated in such a way that small one man/family businesses will have to shut or face hundreds of thousands in fines.

    It also coincidentally enabled the franchise owners the leverage (the wonders of compliance) to steal my business off me backed by the full majesty of “compliance”. Never mind that the financial regulator wrote those compliance laws with the “big 3″ in the room with them.

    TL:DR version: The government in the name of protecting the public effectively stopped all competition in this area ensuring higher prices for everyone.

  17. Roger

    How do you suppose this will eventually work its way out?
    Given US history, cultural divides and love affair with guns I fear it will lead to internecine warfare with racial undertones and the subsequent Balkanisation of the US. With Obama considering a fiat granting immunity to millions of illegal Hispanic immigrants, Chinese and Middle Eastern illegals are already lining up at the Mexican border to try their luck. Not that the economic decline has anything to do with race, but that’s how I see it panning out; to mangle TS ELiot: This is the way the American experiment ends: not with a whimper but a bang.

    Steve, do you have a chart with data for the entire 20th C. so we can this this decline in greater historical context?

  18. Roger

    The government has effectively legislated in such a way that small one man/family businesses will have to shut or face hundreds of thousands in fines.

    I’ve heard this many times from small business operators.
    As a result of the cost of complying with government legislation, we too are facing a drop off in new starts and businesses exiting the marketplace leading to much higher unemployment than we now have…and we haven’t even had a recession yet.

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