According to Patrick’s proprietary model, the United States will experience slow economic growth for the next 3+ decades. Although American economic performance will significantly outpace European growth, the primary problem is the same for both. The population is aging and those older retired citizens put a massive strain on public resources through established entitlement programs. The proportion of productive working citizens is lower than in other countries because the life expectancy allows people to live for years (or even decades) after the traditional retirement age.
The United States will also have some political volatility to contend with. The politics are clearly divided between Republicans and Democrats and the high levels of government debt will necessitate entitlement reform in the years ahead. There’s really no way around it. Trillion dollar annual deficits are not sustainable. So the combination of slow economic growth (and persistently high levels of unemployment) and federal budget reduction will exasperate the differences between political ideologies. Mathematically, the bad situation reaches its peak in 2027 and slowly improves after that. But even after that point, economic growth will be moderate at best.
The biggest difference between America’s situation and that of Europe is that the American population is expected to grow by 29% between 2010 and 2050, and Europe’s is expected to stay roughly stable. When the population grows, there are more people buying food, shelter, clothing and energy and that makes up the lion’s share of gross domestic product (GDP). The fertility rate in the United States is significantly higher than in Europe but that’s not the only reason the population is growing. The United States also has much higher levels of immigration and that’s great news for economic growth. Immigration has become a political issue in the USA but the fact is that immigration is helping the economy grow and that’s good news for all Americans.
In the graphic below, you’ll notice the significant “youth deficit” relative to the rest of the world. You will also notice the high levels of older retired citizens. Notice that the level is higher in 2030 than it is now, or than it will be in 2050. The reason is the Baby Boom generation. After 2027, that generation starts to thin out dramatically. The Untied States also runs a persistent trade deficit. Consumer spending accounts for 72% of GDP and that’s typical for countries with a trade deficit. Thankfully, in the case of the USA, the American dollar remains a reserve currency around the world so that capital surplus balances the trade deficit. The trade imbalance is not America’s primary problem. The biggest issues are the aging population and the mathematical imperative of entitlement reform in the years ahead.
Patrick is an award-winning author and keynote speaker who can speak about demographic trends affecting the United States at conferences and business events in San Francisco, New York, Chicago, Los Angeles, Miami or other American destinations.
DISCLAIMER: Projected results are NOT guaranteed. The forecasts for the United States above were calculated based on projected population data obtained from the World Bank website. The economic forecast used this demographic data along with adjusters for net exports, relative age distribution and per capita income projections. The political volatility forecast used the same demographic data along with adjusters for youth population percentage, projected economic growth and public government debt level. Please see the model methodology for more details.
Patrick Schwerdtfeger maintains a video blog entitled “Strategic Business Insights” and adds new videos on a regular basis. Some of the videos are ‘macro’ covering topics like global business trends and geopolitical dynamics. Others are ‘micro’ covering communication skills and your mental mindset. Access them here:
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