In just five short years, Barack Obama’s transformation of America is bearing tremendous fruit. Record numbers of Americans receiving government assistance, the invasive and oppressive Obamacare, a drastically weakened military, and…this:
The US is on the brink of losing its status as the world’s largest economy, and is likely to slip behind China this year, sooner than widely anticipated, according to the world’s leading statistical agencies.
The US has been the global leader since overtaking the UK in 1872. Most economists previously thought China would pull ahead in 2019.
However, it is not yet time to panic about a Red Takeover quite yet, says James Pethokoukis:
Both economies will have gross domestic products of around $16 trillion when you adjust for “purchasing power parity,” or the much cheaper cost of living in China. Economists previously thought China would pull ahead by 2019, but the glacial US recovery has allowed the gap to narrow more quickly. (All this analysis, of course, depends on the accuracy of Chinese economic statistics.)
Some important context here: on a per person basis, PPP GDP is $51,000 in the US vs. $11,000 in China. Anyway you slice the data, China is still a much poorer nation than America. (More than 30 million Chinese, basically the population of Texas, live in caves.) And at market rates, the US economy is about twice as large as China’s. Also note that within two decades or so, China will have an older population than the United States. The Middle Kingdom has become old before it has become rich. In addition to demographic problems, China is still trying to transition to a sustainable, consumer-driven growth model. So the other team has its problems, too.
Now here is what the FT’s headline, “China poised to pass US as world’s leading economic power this year,” really gets wrong. The US remains the world’s leading economic power due to its technological innovation. Most global innovation surveys put the US at or near the top. For instance, the World Economic Forum ranks the US as the 7th most innovative economy, China the 32nd. Bloomberg puts the US at third, while China did not make the top 30. And which global economy is most critical to expanding the technological frontier, say, Sweden, Bloomberg’s #2 ranked economy with a population of 9.5 million and a $400 billion economy, or the #3 US with its 315 million people and $16 trillion economy. Pound for pound, no nation innovates like America. It’s our deep magic, and a competitive advantage we should be careful not to squander.
Well, I feel better, how about you? Still, I think there is great cause for concern.
The first article article includes a helpful chart showing how big the largest foreign nations are when compared to the U.S. As you can see, in 2005 China was just a smidge over 40% of the U.S. economy, but by 2011 they were well over 80%. How did this happen so quickly?
It’s simple numbers. Unemployment is supposedly 7.6%, but if you take into account the phenomena of underemployment and those who have given up looking for work (the U3 rather than U6 figure), it’s actually closer to 14%. And that’s after the Obama administration modified how the numbers were reported, too!
It should also be noted that the Democrats took control of Congress in 2006, and, when paired with big spender George W. Bush – he was great on certain issues, but spending wasn’t one of them – you can see an abrupt increase in the rise of the U.S. national debt, and an even more profound acceleration when Obama entered office:
It took 230 years to grow to $8 trillion in debt. It took just eight years of the current Democrat leadership to double that number. It’s astounding.
There are fewer people working and being productive now than at any time in the nation’s history – a staggering 91 million, or roughly 30% of the population – with a continuing trend in that direction. The economy has been growing very slowly (if at all) over the past few years. The most recent report, for example, shows a growth of just .1%. A lousy tenth of a percent (for the record, George W. Bush managed a 4-5% growth throughout his entire time in office). That, combined with the unfathomable debt taken on during the same timeframe, and you have a recipe for years of economic malaise that would make Jimmy Carter’s performance look stellar. This was inevitable.
Welcome to Obama’s America. If you like your current country, you can keep it, too. Just keep voting for Democrats and big spending Republicans, and enjoy the roar of the Chinese dragon.