Hostility and Complacency Undermine Our #1 Asset

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Hostility and complacency are undermining America's greatest strategic asset: its economy. These threats endanger our proper appreciation of our economy's importance. More importantly, they already undercut our economy's performance.

At its most basic, producing wealth requires a country's economy create a surplus - a return in excess of its producers' work. Absent this, a country lacks the resources from which everything else - private revenue and public taxes, private investment and government spending - must come. Inability to do this, and in a manner allowing for its long-term continuation, will see wealth short-lived.

In creating wealth, America's economy has been exemplar, far beyond any other in history.

According to the World Bank, America's 2014 annual gross domestic product was $17.4 trillion. China's was a distant second - $10.4 trillion, roughly 70% lower. Surpassing US GDP would require combining China's, Japan's ($4.6 trillion), and Germany's ($3.9 trillion).

Our economy is so preponderantly great, America can leverage large amounts of the world's wealth too. It attracts enormous investment from abroad and can borrow in virtually unlimited amounts.

In WWII, it armed our allies and fielded our own incomparably equipped and enormous force, allowing America to lead, fight, and win a global war on two fronts. Four decades later, it funded the military buildup that bankrupted and collapsed the Soviet Union.

Yet, America's economy, this unquestionable strategic asset that is every other nation's envy, is increasingly pressed domestically on two fronts. One side treats it with hostility; the other with complacency.

Rather than seeing wealth creation from the capitalist perspective - as resulting from mutually beneficial transactions - hostile viewers see it through a Marxist lens. For them, wealth creation results from an adversarial zero-sum conflict of winners and losers. To them, redistribution, via government intervention, must set matters right.

This redistributive mindset extends internationally too. It saddles wealthy nations, particularly the US, with an obligation to aid poorer ones. The long-running and now-defunct Doha trade negotiations embraced this approach, as does the recent Paris climate accord. Foreign aid is no longer charity, but morality.

Simultaneously, complacency presses the economy from the other side. For generations, America's economy has excelled. How can this not continue? Therefore, the economy can support ever- increasing government burdens of taxing, spending, and regulation, while still leading the world.

Were the hostility and complacency America's economy faces simply misguided viewpoints, they would not be the threats they are. However, they shape perception and perception drives action. The result has facilitated erosion of America's economic place.

During 1981-1985, US GDP stood at $3.2 trillion. Japan, then the world's second largest, was $1.2 trillion - roughly a third of the US's - and it took Japan and the world's third through fifth largest economies (Germany at $0.8 trillion, France at $0.6 trillion, the UK at $0.5 trillion) to surpass it.

By 2020, the World Bank projects the US's advantage to have eroded further. US GDP will be $22.3 trillion and China's will be $17.1 trillion - just 30% less - and China and Japan ($4.7 trillion) together will virtually equal it.

Thirty years ago, it took the world's top four economies to surpass America's; today, three; in five years, two.

America's strategic asset lies not in just having a large economy, but in having a disproportionately large one. That disproportionate advantage is disappearing. Thirty years ago, it was greater and our closest economic competitors were allies. Our adversaries did not even register economically - a fact that led to the USSR's demise. Now, our global economic lead is smaller - especially relative to our largest potential adversary.

Two trends threaten our economy. From the left, wealth -particularly disproportionate wealth - is to be repudiated and rectified. Government taxing, spending, and regulation are the "fixes."

From the middle, our economic success is a "given," an engine able to keep running regardless of its growing governmental load. It is taken for granted, because its production is always there to be taken. So, government spending, taxing, and regulation can increase indefinitely and America's economy will always be able to support it.

America increasingly treats wealth as a curse or a constant. Either way, government intervention results. However when we cavalierly dismiss America's economy, we also endanger what it has yielded. That return extends well beyond economic well-being. Even if we should mistakenly believe growing government intervention has not eroded America's strategic asset, it is impossible to say it has arrested that erosion.

Our economy finds itself trapped between hostility and complacency, as history tries to warn us of the dangers of both.

J.T. Young served in the Treasury Department and the Office of Management and Budget from 2001 to 2004, and as a congressional staff member from 1987 to 2000. 

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