A Historical Perspective;
Following the conclusion of World War II, the United States stood as a beacon of industrial prowess, virtually unscathed by the ravages of war. This unique advantage positioned America as the global leader in manufacturing and trade. Over the ensuing three decades, a period marked by remarkable economic growth, a belief took root that perpetual prosperity was an entitlement.
By 1980, however, the tides had shifted. Post-war reconstruction efforts had borne fruit, and nations like Japan had successfully rivalled or even surpassed American manufacturing capabilities. Undeterred by these challenges, Americans turned to an innovative source of prosperity: credit. This newfound financial tool allowed individuals to realize their desires in the present, even if it meant working towards them in the future.
During this era of economic transformation, consumer debt as a percentage of disposable income soared from 66% in 1980 to a staggering 144% by 2007. This doubling of purchasing power facilitated a continued sense of well-being.
Simultaneously, the government, witnessing the nation's voracious appetite for consumption, was tempted to engage in deficit spending, tripling the national debt from 33% of GDP in 1980 to 100% by 2012. This approach, however, expanded citizens' capacity to acquire what they couldn't initially afford.
The pinnacle of this era was marked by the financial crisis of 2008, shattering the illusion of limitless borrowing. Suddenly, the specter of diminished prosperity for future generations loomed larger than ever before.
Today, America finds itself at a crossroads, where political parties are reticent to communicate the sobering reality: there are no longer easy fixes or resources to appease constituents without jeopardizing the nation's fiscal health.
Inequity looms as a looming threat. The middle class, once the backbone of American society, faces unprecedented challenges. In just four years, their net worth has dwindled by 42%, largely due to an absence of collateral to facilitate further credit-based consumption. This shift has disarmed the middle class's ability to artificially inflate prosperity.
Conversely, the affluent, who wield significant influence over domestic industry, continue to thrive by catering to a burgeoning global middle class. The establishment of businesses like Taco Bell in countries such as India, China, and Africa offers fresh avenues for growth and profitability.
Amidst this landscape, a debate rages over taxing the wealthy and their enterprises to rectify the nation's financial woes. Yet, such attempts are fraught with complications, as the affluent can effortlessly relocate their operations to more favorable jurisdictions, leaving the American economy in a vulnerable position.
The present reality is sobering. A legacy of borrowing and deferred responsibility now beckons Americans to embark on the arduous journey of fiscal restitution. This task is underscored by the recent actions of the Federal Reserve, which injected nearly $5 trillion into the economy, matched by substantial governmental borrowing. Despite these efforts, the recovery remains tepid, with approximately 15% of the population experiencing unemployment or underemployment.
In conclusion, the narrative of American prosperity has shifted dramatically over the years. The wellspring of perpetual growth through credit has run dry, forcing a reckoning with the consequences of excessive borrowing. The nation must chart a new course towards a sustainable and equitable future, recognizing that borrowing and monetary policy alone can no longer hold the key to long-term prosperity.