The End of the American Century Published in China

The End of the American Century will appear this month in China, published by the Shanghai Lexicographical Publishing House, and translated by Professor Ni Lexiong and Sun Yunfeng of the Shanghai University of Political Science and Law.

The US Economy Will Shrink (A Lot), and It Should

The U.S. economic stimulus plan passed by Congress aims to regenerate economic growth, spending and consumption. But it is almost certainly bound to fail, and not for the reasons given by partisans on both sides of the Congressional aisle. In spite of the stimulus, the economy will continue to contract. This is inevitable; it is necessary; and it is even desirable. The main task of the government should be protecting those who are displaced and impoverished during this contraction and retrenchment.

The U.S. economy must contract because it is way too large, in numerous respects. It is too large given the U.S. levels of production and exports. It is built largely on consumption and debt, not output. And it is too large for the rest of the world, even given the size and wealth of the country.

The U.S. economy is big—about 28% of global GDP. But the U.S. accounts for only about 8% of global exports; 16% of manufacturing value-added output, and 5% of the world’s population.

The main contributor to the outsized US GDP is consumption, where the U.S. is indeed the world’s leader. Consumption accounts for about 72% of US GDP, which is a record for any large economy in modern history. As we are now learning, this consumption has been built on a mountain of consumer and household debt, which now totals some $13 trillion—approximately the size of the entire U.S. economy. This is unsustainable.

Furthermore, much of U.S. debt is owed to other countries. About half of the federal debt and a quarter of corporate bond debt is held by foreigners. As former Senator Hillary Clinton pointed out in 2007, "16% of our entire economy is being loaned to us by the Central Banks of other nations."

These huge levels of consumption are a drain on the planet, its resources and its people. The U.S. has only 1 in 20 of the globe’s people, but we consume a quarter of the world’s fossil fuels; 29% of “materials” (including minerals, metals and synthetics); 19% of forestry products; and 14% of its water. The U.S. is also the world’s biggest contributor to environmental pollution, greenhouse gas emissions (a quarter of the world’s total) and global warming. At 5% of the globe, we leave a huge carbon footprint.

In the 1970s Yale historian Paul Kennedy, writing in The Rise and Fall of the Great Powers, suggested that eventually the U.S. would have to decline to its “natural” share of the world’s wealth and power, which he estimated should be in the 16-18% range, rather than the 30-40% held by the U.S. at that time. This would indicate a cutting of the U.S. economy by half.. But so would many of the economic indicators I mention above. Consumption, debt, and borrowing all need to be reduced by about that amount, as should petroleum and energy use.

Given the hugely bloated size of the U.S. economy, and of U.S. consumption, and of consumer and government debt, it is hard to see how the economic stimulus package will make much of a dent in things. The economy is bound to decline, and needs to.

This contraction has already begun. The country’s GDP shrunk last quarter at an annualized rate of 3.8 %. If this continues, it will be the largest yearly decline in the US economy since 1946. But a much larger decline will be necessary to bring the economy back to a more natural, balanced and sustainable level. The contraction of GDP is likely to continue for several years, at the very least. This would be unprecedented for the postwar period, when only once (1974-75) did the economy contract two years in a row.

Such a decline could be on a scale of that of the 1930s. The main problem then, as now, will be the reduction in employment, and the consequent growth in poverty. It is hopeless throwing good money after bad in an effort to revive growth, consumption and debt. Instead, the federal and state governments should focus on alleviating the suffering that this contraction will entail, by increasing funds for unemployment compensation, Medicaid, welfare, job retraining and education.

Many people will suffer in this transition, and they should be helped. For most people, though, this economic retrenchment will simply mean belt-tightening. Our standard of living will decline, in ways most of us have not experienced before. But we are still a highly developed wealthy country, and will remain so. Once the U.S. economy has stabilized at a more natural size, it will grow again. And this time, it can happen in a way that is not so destructive of the planet, other peoples, and our souls.

Forthcoming Presentations on "The End of the American Century"

Over the next several weeks, I will be giving several public presentations related to themes of my book The End of the American Century.

March 4, Muncie "The Future of America's Power in the World" Co-presenting with Michael Kraig, Senior Fellow at the Stanley Foundation. The Annual Trivers Lecture, sponsored by the Ball State University Department of Political Science. Wednesday, March 4 at 4:00 p.m. in Bracken Library, Room 226.

March 11, Chicago Two presentations at Northeastern Illinois University (Chicago), as part of their conference on "The Past and Future(s) of Revolutions: A Global Exploration" (see program at this link).

Noon. Teaching a Master Class on "The Unraveling Revolution: The Collapse of U.S. Superpower." NEIU Auditorium.

7pm "Systemic Revolutions and the End of the American Century." Presentation on a panel on "New Forms of Revolution" with other presentations by Julie Mertus and Jonathan Schell. NEIU Auditorium.

March 18, Indianapolis. "The End of the American Century" as part of the Distinguished Speaker Series of the Indiana Council on World Affairs. 6:30pm, The Marten House Hotel, Indianapolis.

April 1, Indianapolis. "The U.S. and Rising Powers" Presentation as part of the "Great Decisions" series presented by the Mid-North Shepherd's Center. 11:00 a.m. at the North United Methodist Church, 3808 N. Meridian Street. More information at this link.

More Evidence That Taxes Must Go Up

David Leonhardt, the prescient and hard-headed New York Times economics columnist, states flatly that "your taxes are going up" in his column of Feb. 25. Leonhardt's data and arguments reinforce those I have made in The End of the American Century, in my Op-Ed for the Christian Science Monitor ("This is not the time to cut taxes"); and in other posts here.

Leonhardt argues that if we want the government services that we have come to expect and rely on (like national security, infrastructure, Medicare, education), we need more federal revenues, because at the moment "we are not paying nearly enough taxes to maintain those programs." He sees taxes going up soon, "and the increase will be permanent."



On the upside, Leonhardt argues, there is room for such an increase, and it will probably not hurt economic growth. As he points out, for a half century federal taxes have remained fairly constant relative to the size of the economy--at about 18% of GDP. "But the 18 percent era has to end soon."

In The End of the American Century, I show that US tax rates are low in global comparisons.

"Compared to other wealthy countries, the United States has among the lowest rates of both individual and corporate income taxes, and total tax revenues in the U.S. (as a percentage of GDP) are lower than those in most of the affluent democracies that are members of the OECD [see OECD data here]. Thus, not only is the U.S. spending and consuming more than most countries, but it is not paying for the relatively few benefits that the government provides. This is the crux of the problem of the deficit and the debt."

Leonhardt argues (as I do in my CSM Op-Ed), the "despite all the scary stories you've heard, the evidence that higher taxes necessarily cripple an economy is somewhere between thin and nonexistent." He points out that the fastest postwar economic growth occurred in the 1950s and 1960s, "when the top marginal tax rate was a now-unthinkable 90 percent."

He also points out that it will not be sufficient to simply raise taxes on the very wealthy, as President Obama has proposed. The incomes and wealth of that group have soared in the last decade, as their federal tax rates have declined. So their higher tax rates should be restored.

But, as Leonhardt says, "the problem can't be solved just by taxing the rich." That top 1% pays only about one quarter of federal taxes. So the tax increases will have to spread more widely.

This will be a very difficult task politically. No politician wants to raise taxes. But not to do so will simply pass the problem onto our children, and burden them with an even bigger mountain of debt. We need to start paying for what we get. And especially now, as we launch huge new spending programs for health care, education, infrastructure and banks, we need to shell out for what we are getting.

Indiana Governor Has "No Idea" of Costs of Commercial Flights

Indiana's Governor Mitch Daniels, using a $1000 per hour state aircraft for a trip to Washington, appeared clueless when a reporter asked him if it might be cheaper to fly commercial and stay an extra night in DC.

Last weekend, Daniels was flying to Washington for the annual meeting of the National Governors Association when the plane developed a crack in one of the windows, forcing it to land in Columbus. He flew on from there on a commercial flight.

The state-owned plane, a King Air prop, costs $791 per hour for fuel plus $184 in maintenance costs for each hour of flying. The flight from Indianapolis to Washington takes about two hours.

According to the Indianapolis Star, when he was asked why he didn't fly commercial in the first place, Daniels said there was no commercial flight that would have gotten him to Washington on time. "I would've had to come the night before and buy a hotel room and I don't know what else." When asked whether it still wouldn't have been cheaper to fly commercial, even if it meant another night in a hotel, Daniels said "I have no idea."

This seems a peculiar response from the former director of the national budget, and a man who President Bush referred to as "The Blade" for his acumen at budget cutting. But even then, Daniels was not so good at keeping spending under control. During his tenure as director of the Office of Management and Budget from 2001 to 2003, the federal budget flipped from a $236 billion surplus to a $400 billion deficit.

So I took the liberty of checking up on prices for the gov. The Governors Association was meeting at the J.W. Marriott hotel in DC. A king size bed on a weekend night costs about $200--though almost certainly the governors attending the conference received a reduced convention rate. A commercial roundtrip flight from Indy to DC--non-stop and at least as fast as flying a smaller turboprop--also runs about $200.

So to fly commercial and stay an extra night would have been roughly $400. To fly the 9-seat King Air, without having to "buy a hotel room and I don't know what else" costs about 2k each way, for a total of $4000. Ten times as much, Mr. Governor.

Maybe this is trivial, but Daniels' cavalier dismissal of the question on costs betrays an arrogance and profligacy that is unbecoming of a public servant. Some of our Congressional representatives have grilled the bailout CEOs about their use of corporate jets. Surely our elected representatives should be held to at least the same standards, particularly in this time of deficits, belt-tightening, and sacrifice.



(Scott Adam's 2/25 "Dilbert" strip.

Guns on Campus Would Add to the Mayhem

One of the themes of The End of the American Century is the exaggerated and destructive aspects of "American Exceptionalism"--the tendency for Americans to see themselves as exceptional, different and better than other peoples and countries. This takes extreme form in the combination of individualism and violence in this country, which is manifested in the peculiar (and exceptional!) obsession with individual gun ownership. The prevalence of firearms in the U.S.--almost as many as there are people--contributes to some 30,000 firearm deaths each year, and a homicide rate that is far higher than any other industrialized country.

For people in other countries, the levels of violence and the prevalence of guns in the U.S. invoke both amazement and horror. Global opinion surveys show that the two most common negative characterizations of Americans by foreigners are "greedy" and "violent." They contribute to the growing disillusionment with the U.S. (and with American citizens) in other countries, and to the view of the U.S. as being violent both in its foreign policy and inside its own borders.

In recent years, the National Rifle Association (NRA) has been pushing for the adoption of "conceal carry" laws in the states, and lately has been arguing for laws that would allow more guns on college campuses. They claim to see this as a way to avoid tragedies like those at Virginia Tech where a student killed 32 people in 2007. But few experts believe that arming students could prevent such a tragedy, and that it will simply lead to an increase in campus firearms injuries and deaths.

The NRA-sponsored bill in my state, Indiana, was introduced by a lifelong NRA member who wrote a letter to the Indianapolis Star arguing in support of the bill, Senate Bill 12. Below is my response to his letter, which appeared on the Star's website at the following link.

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Nothing positive to gain from guns on college campuses

Posted: February 13, 2009

In his recent letter to the editor, state Sen. Johnny Nugent contends that "allowing guns will make our campuses safer." He is a sponsor of Senate Bill 12, which would "prohibit a state college or university from regulating in any manner the ownership, possession, carrying, or transportation of firearms or ammunition." Nugent believes that

"the only thing that can stop a bad guy with a gun is a good guy with a gun."

It would seem, though, that the best people to ask about security and safety on campus are the campus safety and police departments. Nugent would find that they overwhelmingly oppose this measure, as would almost all faculty and staff on campuses (as I am). Butler University Public Safety Director is Ben Hunter was formerly an officer with the Indianapolis Police Department. When I asked Hunter his views on this, he wrote "I am against the idea of carrying weapons on campus" and continued as follows:

"As a lifelong supporter of responsible gun ownership, I can attest that educational institutions and employers should be allowed to regulate their buildings and properties. Having students, faculty and staff possibly carrying guns on campus could result in accidental discharges, a false response to a threat and untrained persons that create an operational danger for (police). Proponents of such legislation will often talk about how well trained persons can assist with these threats; the only issue is that their training does not come close to what police officers are required to undertake."

College campuses are already much safer than the community in general, with far lower levels of both homicides and suicides. Surely, this is due, in part, to the prohibition of guns by most universities. Probably the biggest consequence of allowing guns on campus would be an increase in the incidence of suicide. Suicide is already the third leading cause of death for Hoosiers of college age, but suicides are much less common on college campuses than off. Since the most common means of death in suicides is a gun, increasing the number of guns on campus will only make suicides more likely.

Before pushing this law onto colleges and universities, our legislators should consult with those who are most familiar with the situation: the public safety departments, mental health professionals, and the deans of student life. I can't imagine that any of them would want to see more guns on campus.

Russian Reflections in a U.S. Mirror

A prominent Russian professor and former KGB analyst,Igor Panarin, predicts that the U.S. will collapse and break into six pieces next year. His forecasts are “all the rage” in Moscow and Panarin has become a media celebrity in Russia. As interesting as his theories are though, and as bad as things are in the U.S., his predictions are way overblown, reflect a shallow understanding of the United States, and actually tell us more about Russia than about the U.S.

In December the Wall Street Journal reported on an interview with Panarin, entitled “As If things Weren’t Bad Enough, Russian Professor Predicts End of U.S.” The Russian sees mass immigration, economic decline and moral degradation in the U.S. leading soon to a civil war and a collapse of the dollar. Soon thereafter, the richer states will withhold funds from the federal government, effectively seceding. The country will break into six pieces, based mostly on ethnicity, and foreign powers will move in to gobble them up. (There is a map of the future Un-United States in the WSJ article).

As with many such apocalyptic scenarios, there are bits of truth in Panarin’s analysis. He points to the problem of U.S. debt, and foreign debt in particular as a “pyramid scheme” that is unsustainable. In an Izvestia interview in November, he predicted the U.S. financial crisis would worsen, that unemployment would grow, and that people would lose their savings. He sees the revival and growth of both Russia and China as major political and economic powers. All this is pretty accurate.

However Panarin’s more extreme predictions about the U.S. seem more like a reflection of what has happened in Russia—-he is “projecting” as psychotherapists like to say. His concern about “moral decay” in the U.S., for example, is hard to fathom given the extremely high levels of alcoholism, divorce, crime and corruption in Russia. And the breakup of the US seems more a reflection of Russia’s own past—the 1991 breakup of the Soviet Union into 15 separate countries. But the parallels are few: each of these 15 “republics” of the USSR were based on entirely different nationalities, or ethnic groups, with little holding them together but the centralizing force of the Communist Party. As contentious and fragmented as the US can sometimes seem, almost all people here still consider themselves, first and foremost, Americans.

What is most interesting about Panarin’s predictions—and their popularity in Russia—is what it says about Russia’s desired place in the world. The country has been through some very rough times over the last two decades, and under Putin has begun to revive and reassert itself. Vladimir Pozner, a prominent Russian tv journalist, says Panarin’s vision “reflects a very pronounced degree of anti-Americanism in Russia,” which, he says, is “much stronger than it was in the Soviet Union.”

In The End of the American Century, I point to Russia as one of America’s potential “New Rivals.” One can not ignore that Russia is the largest country in the world, occupying almost twice the territory of the U.S. Within those borders it contains the world’s most abundant array of natural resources. It is the world’s second largest producer and exporter of petroleum and has, by far, the world’s largest reserves of natural gas. Russia’s economy has been growing at about 7 percent annually. It also has the world’s largest stockpile of nuclear warheads.

Both Russia’s citizens and its leaders want Russia to play a bigger role on the world stage and to be more respected by other countries. Premier Putin has been particularly vocal and critical of U.S. efforts to dominate the globe, referring not so subtly to a “world of one master, one sovereign.” He has said that “the trust in America as the leader of the free world and free economy is blown for ever.” (See The Economist's special report on Russia, "Enigma Variations," for more on this theme).

Russia has its share of problems, as the U.S. does. But it will be a force to reckon with, and the U.S. will have to learn to deal with Russia, as with other countries, as partners or competitors, rather than subordinates or enemies.