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The State of the Real Economy

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For all of its terrible consequences, lawless capitalism has not destroyed the US economy which is a testament to the fundamental strength, character, and resilience of the American people.

Let’s start with productivity. The US is the third most productive economy on earth in terms of GDP per capita. In terms of out put per man hour today’s American worker is five times more productive than in 1945. In fact, since 1995 America has seen an above trend productivity surge as evidenced below:

Indeed, American workers are the envy of the world in terms of productivity growth:

Similarly, the US was recently ranked the 7th most innovative nation in the world by Insead business school.  The US ranks third in the world in patents per capita behind only Japan and South Korea.

According to the OECD the US worker ranks 9th in the world in daily minutes of actual work. As recently as 1997, the US worked more hours per capita than any other nation.

We as a nation face serious economic challenges. First and foremost, we failed to deleverage after the crash of 2008 (by, for example, letting all the excessively leveraged banks fail which would have permitted them to discharge massive debts) and now live in an economy addicted to unsustainable debt (which bond guru Bill Gross terms a credit supernova).

Second, due largely to our failed efforts to revive our economy (because mainly we just pumped massive liquidity into the megabanks which they hoard), our employment participation is still stagnant.

Third, in the wake of the crisis too many Americans took shelter in disability and other forms of government aid which is also unsustainable. More Americans need to return to work.

Finally, unfunded liabilities in terms of entitlements have soared (up to $100 trillion) as growth and employment contracted. As I have argued before we must reform entitlements and gradually raise taxes to the historic norm of 18% of GDP. If there are freeloaders in America today it is clearly the same economic elite that crashed capitalism in 2008, which now refuses to impose a rational tax burden upon themselves:  




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