What would you do if you had an analyst reporting comments like the following for a company you were considering investing in?
Cash flow and net worth are negative, profits are rare, and off-balance-sheet liabilities are enormous. The “company” has underinvested in productive capital, education, and technology—the very tools needed to compete in the global marketplace.
Suffice to say, you wouldn’t invest. However, you already have, merely by being a citizen of the US. The “company” is the US economy/government and its financial condition is dreadful. The quote above is from Mary Meeker from a long article she wrote for BusinessWeek.
Readers of this website should not be shocked, but readers of BusinessWeek probably were when they read the quotes that follow. These are not in any particular order, nor are they a comprehensive overview of Ms. Meeker’s article:
… USA Inc. has a net worth of negative $44 trillion. That comes to $143,000 per capita. Negative. [Monty believes it to be substantially larger]
Since 1965, the nation’s gross domestic product has increased about 2.7 times over, but entitlement expenses have increased 11.1 times over. What do Americans have to show for it? Evidence suggests that when the government provides, families do less for themselves …
… the CBO says, entitlement spending and net interest payments combined will equal all of federal revenue by 2025, just 14 years from now. (This is based on the CBO’s alternative fiscal scenario, which assumes extension of the Bush tax cuts and other actions, such as a gradual increase in Medicare payment rates to physicians, that are widely expected to occur.) Back in 1999, the crossover point was not supposed to happen until 2060.
Imagine: no Army, Navy, Air Force, Marine Corps, or Coast Guard, no federal courts or prisons, no National Park Service, no Food & Drug Administration, no embassies, no salaries for Congress. That’s what it would take to balance the budget by 2025 and still pay interest on America’s debts, without either raising revenue or reducing entitlement growth.
From 2000 to 2010, China’s GDP per capita rose 216 percent (based on the yuan’s actual buying power rather than exchange rates). India’s per capita output increased 117 percent; America’s, just 34 percent. Factoid: USA Inc.’s entitlement spending equals India’s entire GDP.
In 2009, American 15-year-olds ranked 17th in science and 25th in math out of 34 OECD nations. (If it’s any consolation, they’re at or near the top in self-confidence.)
