Our ~2.5% Growing 'Stuck in the Mud' American Economy .... Three Factors That Weigh Most are (1) Weak Government, (2) Excessive Debt and (3) Global Competition

People are not optimistic about the current condition and long term outlook for the U.S. economy as it continues to grow slowly and good jobs remain hard to find.

Unfortunately, there are three solid reasons why that lack of optimism is not misplaced in our aging America, regardless of what the politicians may want us to believe.

1- Government spending and our dependence thereon has grown to be excessive, and a commitment to self reliance is largely missing.

2- Debt levels are out of control, and reckless spending by individuals and households is encouraged by government on such things as student loans and no skin-in-the-game low money down mortgages, both of which are guaranteed by taxpayers.

3- Competition for limited consumer dollars is severe and attributable to today's excessive and unbalanced manufacturing capacity (especially in China), excessive debt levels, slow growth, private sector underemployment, public sector overemployment, and low inflation global economy.

We enjoy buying low cost and high quality imported goods, especially on credit. Yet too many of us fail to realize that American made products must be able to compete effectively with products made in those low cost countries.

The Fed's Confusing Message About Interest Rate Increases offers these facts for our consideration:

"Economists always warn, correctly, not to make too much of any single economic report, but rather to analyze new information in terms of longer-term trends. . . .

 

Incoming data would have to be extraordinarily strong to signal the arrival of a sustainably healthy economy. So far – more than six years into an economic recovery – growth has been too modest and too uneven to repair the harm from the Great Recession.

 

The clearest evidence of deep and uncorrected damage is recent Census data which shows that in 2014, the median American household still had lower income, after inflation, than in 2007, before the recession. Specifically, median income in 2014, $53,657, was 6.5 percent below its level in 2007 and 7.2 percent below its level in 1999. Data on wages this year does not indicate any meaningful improvement in those dismal trends.

 

Even the news on Friday that the economy expanded at a strong annual pace of 3.9 percent in the second quarter does not portend an era of robust growth. A rebound had been expected in the second quarter because the first quarter was so very weak.

 

In addition, recent economic surveys indicate that growth slowed again in the third quarter; that optimism among business leaders is near lows last seen during the financial crisis; and that prices for goods and services are falling, a sign of weak demand. . . .

 

One worrisome sign is that the share of 25 to 34-year-olds with a job – a big factor in home buying – appears to have topped out in recent months.

 

Another bad omen is the recent sluggish pace of manufacturing growth. Even if home sales continue a general upward trend, the upswing is likely only to offset the softness in manufacturing, rather than bolstering growth overall. . . .

 

What’s missing is straight talk about the economy’s entrenched problems, and possible solutions."

 

Summing Up

Here's some straight talk:

1- An aging America has become too dependent on big spending government programs which invariably under-fund, over-promise and under-deliver.

2- An aging America has recklessly spent our way to unsustainable debt levels, both directly as individuals and indirectly through our local, state and federal governments, as well as agencies thereof.

3- As individual consumers we enjoy the low prices offered by low cost and high quality imported products, but we fail to recognize that our domestically based companies must be competitive with those companies and countries who offer these imported products. Cars, TVs, computers, other electronic goods, shoes and clothes are just a few examples that immediately come to mind.
 

It's going to be a long hard slog going forward as too little self reliance, too much government, too much debt and very real global competition will combine to make things even tougher.

 

That's my take.

 

Thanks. Bob.