Please ensure Javascript is enabled for purposes of website accessibility
America’s Economy Is Bigger and Better Than Ever
d8a347b41db1ddee634e2d67d08798c102ef09ac
By The New York Times
Published 2 months ago on
October 22, 2024

In this Nov. 2, 2017, photo, a recruiter in the shale gas industry, left, speaks with an attendee of a job fair in Cheswick, Pa. Hiring in the United States jumped in February 2020 as employers added a robust 273,000 jobs, evidence that the economy was in strong shape before the coronavirus began to sweep through the nation. (AP File)

Share

Getting your Trinity Audio player ready...

Few sights have better captured America’s world-beating ingenuity. On October 13th a giant booster rocket built by SpaceX hurtled to the edge of the atmosphere before plunging back to Earth and being neatly caught by the gantry tower from which, only minutes earlier, it had taken off. Thanks to this marvel of engineering, big rockets could become reusable and space exploration cheaper and bolder. Yet, just as the launch was a testimony to American enterprise, so Elon Musk, SpaceX’s founder, captures all that is going wrong with its politics. In his support for Donald Trump, Mr Musk has spread misinformation about voter fraud and hurricane relief and derided his opponents as ill-intentioned idiots.

America, too, continues to rack up a stellar economic performance even as its politics gets more poisonous. As they prepare to go to the polls in fewer than 20 days’ time, Republicans and Democrats have never mistrusted or disagreed with each other more. Against that gloomy backdrop, can America’s breathtaking economy possibly stay aloft?

Over the past three decades America has left the rest of the rich world in the dust. In 1990 it accounted for about two-fifths of the gdp of the g7. Today it makes up half. Output per person is now about 30% higher than in western Europe and Canada, and 60% higher than in Japan—gaps that have roughly doubled since 1990. Mississippi may be America’s poorest state, but its hard-working residents earn, on average, more than Brits, Canadians or Germans. Lately, China too has gone backwards. Having closed in rapidly on America in the years before the pandemic, its nominal gdp has slipped from about three-quarters of America’s in 2021 to two-thirds today.

This record is now in jeopardy. As America has become more partisan, both Kamala Harris and Mr Trump, the two presidential candidates, are focusing on policies that protect their own supporters, rather than expanding the overall economic pie. America is not about to lose its economic dominance. But, sooner or later, rotten politics will start to exact a heavy price, and by then it will be hard to reverse course.

To see why, consider first the factors behind America’s success. As our special report this week sets out, innate advantages play an important role. America is a big country blessed with vast energy resources. The shale-oil revolution has driven perhaps a tenth of its economic growth since the early 2000s. The enormous size of its consumer and capital markets means that a good idea dreamt up in Michigan can make it big across America’s 49 other states.

Yet good policy has been important, too. America has long married light-touch regulation with speedy and generous spending when a crisis hits. Although supersized stimulus during the pandemic fuelled inflation, it has also ensured that America has grown by 10% since 2020, three times the pace of the rest of the g7. By contrast, stingier Germany is mired in recession for a second consecutive year.

This combination of factors has fuelled a powerful virtuous cycle. America’s dynamic private sector draws in immigrants, ideas and investment, begetting more dynamism. It is home not just to the world’s biggest rocket-launch industry, but also its internet giants and best artificial-intelligence startups. Its seven big tech firms are together worth more than the stockmarkets of Britain, Canada, Germany and Japan combined; Amazon alone spends more on research and development than all of British business. Because the dollar is the world’s reserve currency, meanwhile, investors have a keen appetite for American debt. They flock to Treasuries in times of crisis, letting the government dole out vast stimulus packages.

So far, America’s worsening politics have had little visible effect on the economy. Over the past eight years Mr Trump and President Joe Biden have reached for protectionism and interventionism, in the name of helping factory workers, at the expense of the wider economy. Because America’s economic strength has been so broad-based, it has not been overturned; and for many years stimulus has provided an offsetting sugar rush. Yet the economy is not immune from politics. And as the country grows more divided, Ms Harris and Mr Trump are promising ever more damaging policies—Mr Trump especially.

For a start, both candidates would tamper with the market forces that have served America so well, by protecting some companies at the expense of others. They could also limit the government’s scope to swoop to the rescue next time a crisis hits. Both promise tax and spending giveaways—Ms Harris wants to spend more on families; Mr Trump to offer tax relief on everything from car loans to overtime work. Yet neither has a plan to rein in the budget deficit, which is running at around 6% of GDP, a level usually seen only during wartime or recession. Unchecked deficit spending could crowd out private investment and erode faith in American debt as a risk-free asset.

Mr Trump poses the bigger risk to America’s extraordinary economy. He speaks of imposing ruinous tariffs on imports and embarking on huge programmes to deport millions of non-citizens, many of whom have been fully integrated into the labour market for years. He is cavalier about institutions, including the Federal Reserve and the rule of law. Should the independence of either be undermined, America would no longer attract the talent and money it needs to keep pushing relentlessly ahead. Nobody knows if Mr Trump means what he says, but the chance that he does hangs heavily over his candidacy, like Mr Musk’s rocket over the launch pad.

Mission critical

Growth is not an inalienable right, but a gift to be cherished and nurtured. If the virtuous cycle that propels America’s economy forward goes into reverse, toxic politics would by that point be ingrained. There is no knowing how bad a president’s ideas have to be before things start to fall apart. The turning-point may not come tomorrow, or even in the next four years. But with every mistake that politicians make, it draws another step closer.

By The Economist
Copyright © The Economist Newspaper Limited, 2024
Syndicated through The New York Times Licensing

RELATED TOPICS:

DON'T MISS

Trump Taps Forceful Ally of Hard-Line Immigration Policies to Head Customs and Border Protection

DON'T MISS

I’m One of the Last Doctors in This Hospital in Gaza. I’m Begging the World for Help.

DON'T MISS

Is This the End of Christmas Cards? 5 Creative Ways to Spread Holiday Cheer Without the Mailbox

DON'T MISS

The Best Movies of 2024 as Ranked by AP Film Writers

DON'T MISS

Californians Pay Billions for Power Companies’ Wildfire Prevention Efforts. Are They Cost-Effective?

DON'T MISS

California’s Housing Crisis Has Gotten Worse, Not Better, Over the Last 30 Years

DON'T MISS

No. 10 Boise State Grabs CFP Spot, Beating No. 19 UNLV 21-7 in Mountain West Championship

DON'T MISS

Willy Adames Agrees to $182 Million, 7-Year Deal With the Giants, AP Source Says

DON'T MISS

$197M Winning Lottery Ticket Bought in L.A. Must Be Postmarked Today or Forfeited

DON'T MISS

US Announces Nearly $1 Billion More in Longer-Term Weapons Support for Ukraine

UP NEXT

I’m One of the Last Doctors in This Hospital in Gaza. I’m Begging the World for Help.

UP NEXT

Is This the End of Christmas Cards? 5 Creative Ways to Spread Holiday Cheer Without the Mailbox

UP NEXT

The Best Movies of 2024 as Ranked by AP Film Writers

UP NEXT

California’s Housing Crisis Has Gotten Worse, Not Better, Over the Last 30 Years

UP NEXT

No. 10 Boise State Grabs CFP Spot, Beating No. 19 UNLV 21-7 in Mountain West Championship

UP NEXT

Willy Adames Agrees to $182 Million, 7-Year Deal With the Giants, AP Source Says

UP NEXT

$197M Winning Lottery Ticket Bought in L.A. Must Be Postmarked Today or Forfeited

UP NEXT

US Announces Nearly $1 Billion More in Longer-Term Weapons Support for Ukraine

UP NEXT

Police-Made Crack Cocaine Cases from 1980s Under Review in Florida

UP NEXT

FBI Offers $50,000 Reward in Hunt for UnitedHealthcare CEO’s Killer

The Best Movies of 2024 as Ranked by AP Film Writers

10 hours ago

Californians Pay Billions for Power Companies’ Wildfire Prevention Efforts. Are They Cost-Effective?

11 hours ago

California’s Housing Crisis Has Gotten Worse, Not Better, Over the Last 30 Years

11 hours ago

No. 10 Boise State Grabs CFP Spot, Beating No. 19 UNLV 21-7 in Mountain West Championship

23 hours ago

Willy Adames Agrees to $182 Million, 7-Year Deal With the Giants, AP Source Says

24 hours ago

$197M Winning Lottery Ticket Bought in L.A. Must Be Postmarked Today or Forfeited

1 day ago

US Announces Nearly $1 Billion More in Longer-Term Weapons Support for Ukraine

1 day ago

Police-Made Crack Cocaine Cases from 1980s Under Review in Florida

1 day ago

FBI Offers $50,000 Reward in Hunt for UnitedHealthcare CEO’s Killer

1 day ago

Syrian Insurgents Reach the Capital’s Suburbs. Worried Residents Flee and Stock Up on Supplies

1 day ago

Trump Taps Forceful Ally of Hard-Line Immigration Policies to Head Customs and Border Protection

WASHINGTON — The picture of who will be in charge of executing President-elect Donald Trump’s hard-line immigration and border policie...

8 hours ago

8 hours ago

Trump Taps Forceful Ally of Hard-Line Immigration Policies to Head Customs and Border Protection

9 hours ago

I’m One of the Last Doctors in This Hospital in Gaza. I’m Begging the World for Help.

10 hours ago

Is This the End of Christmas Cards? 5 Creative Ways to Spread Holiday Cheer Without the Mailbox

10 hours ago

The Best Movies of 2024 as Ranked by AP Film Writers

11 hours ago

Californians Pay Billions for Power Companies’ Wildfire Prevention Efforts. Are They Cost-Effective?

11 hours ago

California’s Housing Crisis Has Gotten Worse, Not Better, Over the Last 30 Years

23 hours ago

No. 10 Boise State Grabs CFP Spot, Beating No. 19 UNLV 21-7 in Mountain West Championship

24 hours ago

Willy Adames Agrees to $182 Million, 7-Year Deal With the Giants, AP Source Says

Help continue the work that gets you the news that matters most.

Search

Send this to a friend