Here’s how I see the US economy. I’m pulling largely from Mary Meeker’s very nicely done analysis (except the asset base stuff - found that elsewhere) – but I draw pretty much completely different conclusions to Ms. Meeker's (whom I don't know but would enjoy meeting some day).
Federal revenue is $2.3T per year
Federal spending is $3.6T per year
Our government is short $1.3T per year
It’s been short (according to Mary Meeker and the White House) for all but 5 of the last 47 years!!! That means we’ve had a pretty good sample size of both Republican and Democratic governments/presidents. Neither is able to balance the budget.
National debt is about $16T
The US GNP is about $15T/year
The value of the asset base in the US is around $180T
We need to intelligently raise taxes to bring the budget into balance (we’re never going to be able to substantially cut costs and remain a global leader – it’s expensive to be on top – see NY Yankees). We need to find another ~$1.3T/year from our GNP. Let’s get on with life and realize it’s just expensive to run this country in the manner we’d all like it run.
We can probably adjust where the money goes, better use technology to make a more efficient government, and extract more value from our government (see Mayor Bloomberg endorsing President Obama – not because of economics – but because he would like to keep NYC above the ocean – and he thinks President Obama will be a better leader along those lines – that’s the kind of global stuff we need the US President working on…).
We’ll bring the government budget into balance with our GNP.
We’ll have to pay down our existing debt with targeted taxes (hopefully largely one time) on the large US asset base. There’s a LOT of money stuffed in mattresses in the US. Asset owners got a good deal in this country up to this point – it’s time to pay a bit back. We can create some clever taxes on asset transfers, inheritance and other asset-driven transactions to pay down the debt without further hurting people’s income.
There’s a lot of money in this country. We have a huge GNP, we have an enormous asset base. We can manage the national debt, but we need to just get real as to what it costs to be us/US.