Tuesday, November 15, 2011

Not Dead Yet

There’s certainly no shortage of doom and gloom to be found these days regarding the prospects for America’s future. Books, magazines, blogs, and radio and television programs feature pundits from all political persuasions predicting that the “American Era” is over and we’re now in the midst of an inevitable and irreversible decline. This belief that America is on the downswing encompasses many aspects from culture to global power and influence, but at its core it’s about economics. America’s status as an economic powerhouse is in jeopardy and this decline in economic standing will also mean reduced roles for America in other spheres.

So when an article appears headlined Europe, China, U.S.: Whose Economy Has It Worst? as it did in last Saturday’s WSJ, the answer may seem to be obvious. Sure, the US might still be better off than the now hopelessly divided and increasingly fragmented Europeans, but we can’t compare to the rising power of China. It’s the future and the United States is the past, right?

Ian Bremmer and Nouriel Roubini (he of the moniker “Dr. Doom”) beg to differ:

But the longer-term future appears much brighter for the U.S. than for either Europe or China. America is still the leader in the kind of cutting-edge technology that expands a nation's long-term economic potential, from renewable energy and medical devices to nanotechnology and cloud computing. Over time, these advantages will yield more robust economic growth.

The U.S. also has a demographic advantage. In Europe, declining birthrates and rising sentiment against immigration point toward a population that will shrink by as much as 100 million people by 2050. In China, thanks in part to its one-child policy, the working population has already begun to contract. By 2030, nearly 250 million Chinese will have passed the age of 65, and providing them with pensions and health care will be very costly.

Despite debate over illegal immigration, the U.S. population will likely rise from 310 million to about 420 million by midcentury. Between 2000 and 2050, according to Mark Schill of Praxis Strategy Group, the U.S. workforce is expected to grow by 37%. China's will shrink by 10%. Europe's will contract by 21%.

Finally, despite the rising exasperation of the American public, the U.S. is significantly more likely than Europe or China to quit kicking the can down the road. Nothing much will change during the election year, but 2013 offers a chance for real fiscal reform.

Next November, Republicans are likely to win both houses of Congress. If a Republican is elected president, the GOP will face enormous public pressure to deliver on its reform promises. Even if President Obama is re-elected, the outlook for a grand bargain is bright. He would be free of the most immediate demands of electoral politics, and like other second-term presidents, he could begin to consider his legacy.

Make no mistake: The challenges that the U.S. faces are formidable, and persistent political gridlock could delay badly needed fiscal and structural reforms. But everything is relative, and the best can to be kicking down the road just now is undoubtedly the one made in America.

Given the current lack of courage and will among America’s political class to tackle the looming fiscal problems facing the country, it might be difficult to accept their judgment about the quality of the can that we keep booting. But in relation to Europe and China, it is still possible to harbor hope that the US may actually be able to get its house in order after all.