One quibble: the US is an enduring wartime economy; it's just that we now dabble in no-win wars, use other people as proxies, build weapons systems that are too expensive to risk, maintain weapons better suited to WWII, are clumsy, inflexible, top-heavy (where's a George Marshall when you need him?). The "spear tip" in the Army and other services is tiny; the logistical "tail" is clogged. As Ukraine has shown (just as Spain showed in the mid 1930s) warfare is different--smaller, more computerized, faster, continually changing the attack/defense computation.
Good work here, Roger. This is important, and scary. The US is facing a myriad of challenges, including the demographic cliff described here, but also a soaring federal debt. Alas, theses issues are getting ZERO attention in the presidential race and virtually no coverage in major media outlets.
MAGA "offers nothing in the way of sensible policy to “foster economic dynamism.”" That isn't true. "Nothing" does not describe Trump's lowering of the capital gains tax and reduction in some regulations. Those were definitely pro-growth and economic dynamism. Alas, Trump's current policies look much inferior to what he offered (and did) last time.
One last comment, and I'll shut up. My mom's side of the family are all in Appalachia. When we came back from Okinawa in 1965, we lived in Garrett Cty, Md for several months before living in NC, SC, and OH. We drove every summer to spend a week with her family in Garrett Cty and Cumberland Md. And, coming from different directions over the years I saw a lot of that part of the country. It was teaming with successful small cities, usually supported by a large manufacturer or two. They also generated immense pollution. Before too long they mostly all closed down. Many reasons. Energy crisis. Needed Environmental Laws. A lot of these jobs went to Germany and Japan that had newer cleaner more efficient infrastructure (thanks to our heavy bombers in WWII....). China was the final straw years later. These communities never recovered. And now have the same pathologies as big inner city neighborhoods. Drugs. Lost basic job skills. Fatherlessness. I've seen it in my mom's family. It's heart-breaking. My late uncle was a college graduate engineer for Hercules Powder in Cumberland. I don't think any of his grandchildren that still live in the area have a college degree.
I'll admit up front I'm not going to read the whole report. I will restate a point Walter Kirn (Matt Taibbi co-host of their weekly podcast) said. He lives in MT. He said that the data that show that Western (but not West Coast) states get more Federal dollars than the other States is distorted by the fact that the Federal Govt owns most of the land, and has to spend money taking care of it; and that many major interstates run through these sparsely populated areas and the Feds have to spend money maintaining them; and these expenditures distort things. Is there a chance this dynamic is somehow incorporated in the stats in the report?
Here in canada the Liberals seem to be following the prescriptions of something called the Century Initiative; increase our population to 100 mil by 2100, which involves large amounts of illegals, seems to be the same thing USA democrats are following too?
The idea is no border, let everyone in who wants to come with little or no controls, and I guess just hope it all works out?
Verdict is in, not working very well.
As we have no real plans to reduce co2 emissions, for those who think that is a problem, our emissions will only go up
Is it coincidence that as the transfers have increased, so has the political acrimony in the United States? EIG starts their study in 1970, a time when, politically, we were not as divisive as we are now. Sure, the Vietnam War had folks riled up, but generally Congress was far more effective then than it is now. The 70s saw the Clean Air Act, the Clean Water Act, NEPA, NHPA, and important civil rights legislation. Congress was more willing to negotiate good legislation for the country. Today, Congress can only pass (narrowly) legislation that benefits the party (IRA, for example).
I fear this report will merely add to the pile of literature acting as a doorstop so long as our leaders choose to believe in climate as a catastrophe and not as an opportunity.
In rural areas, the cost of living is significantly lower than in urban areas. So the same amount of per capita government transfer will show to be more significant in rural areas. I would argue that urban areas are far more dependent on government transfers because of the higher cost of living.
The maps of Government Transfers and 2020 Presidential Voting have many interpretations.
These maps also:
1. Point to where the aging population lives.
2. Separate America by City and Rural
3. Show where agriculture and manufacturing takes place (as opposed to the Service Economy).
4. In large degree are maps of the divide in moral values
It is a mistake made often, to use graphical views of statistics (measurements, numbers, etc) to make political points offering a pre-packaged "meaning of it all" -- when the meaning offered is just one of many opinions.
Lots to contemplate here, but what weems to be understated in all this is that economics the Western welfare state systems are based on the assumption that the base of the population pyramid would continue to grow sufficiently such that there would always be more workers to support the retirees above. Where are the Malthusians when you need them? In effect, welfare programs are legal Ponzi Schemes, but the fact that they are legal doesn't mean they won't collapse of their own accord. If populations don't grow, indeed if they shrink, the welfare programs go bust. The US has mitigated this effect by becoming the immigration destination of the world, although our current open border policies do not appear designed to maximize the benefits thereof. Regardless, if you can't make enough babies of your own, import them and yoke them to the economic plow with the rest of us.
But the prescription doesn't change: more economic growth through increased investment, which should lead to greater productivity and economic growth. Increasing the age for benefits eligibility (I'm 74 and still working, same for my wife, but as a courtesy to her I will not reveal her exact age), would help.
And there are trade-offs. Should we be diverting investment to climate mitigation that will have little impact on climate but will increase the cost of energy? Or should we be focussing investment on the lowest cost energy (today that would be fosil fuels) in order to increase productivity and economic growth?
Your thoughts on and analysis of these matters are a beacon of clarity in a fog of confusion, misinfromation and disinformation.
Fascinating read - thank you Roger. I write from the UK with a similar but worse set of problems, a major one being stagnation in labour productivity. The UK government has growth as a mantra, but is like the eunuch who, however much he may approve of motherhood, will not bring it about.
The economy's greatest asset is the enterprise and ingenuity of its people, never better illustrated than by the history of the USA, so governments should look carefully at where obstacles have been placed in their path, and remove them wherever possible. They won't have to look hard. For example, in the UK, so I learned this week, the banking system acts as a brake on small businesses, especially those trading internationally.
Yet lessons from history, which indicate that government attempts to direct an economy are counter-productive at best and calamitous at worst, are seldom heeded.
"Put simply, is a high and rising transfer share bad? The answer is yes, unequivically." In Canada, there's a lot of talk about such concepts as government providing a "basic income" or "guaranteed annual wage", that sort of thing. I guess that would make things much worse.
In the end, the problems will self correct if humans don’t do so. History says they will not. The best thing each individual can do is prepare for the worse case scenario. I assume the rich and elite will not do so out of arrogance. At which point, they will become targets of the stronger and numerous more of the less fortunate. A movie apocalypse we have seen many times. The questions are, how long will take for any correction to start and how much pain will be needed to force the changes? The history of humans doesn’t inspire any confidence that time will be short and not very painful. We avoid pain until it can not be avoided. As a species, we are not a very bright group.
When you layer the costs for the net-zero transition fantasy that wind and solar can replace fossil fuels onto to these challenges in only gets worse. It is time to reassess the mandates to go to zero and accept "good enough" emission reductions that will not knee cap economic development.
I was going to post the same point, thanks. Roger seems unwilling to tackle this subject, which is understandable given his 'cancellation' by the alarmists. However, the astronomical sums of borrowed money that will be squandered in a pointless piece of virtue signalling will leave no room for the necessary investment in productive capacity.
Thanks Roger and Paul ... I discuss net zero all the time. My oft-expressed view (which could of course be far off!) is that the "iron law" of climate policy acts as an effective governor on ineffective government follies in energy policy. Are their inefficiencies and bad policies? Sure, welcome to politics. That said, I don't have much time for apocalyptic economic scenarios based on fears of bad net-zero policies.
Communist/dictator-led nations always collapse due to malinvestment and bad policy choices. To what extent are the climate-only malinvestments and choices material for the US? Apocalyptic or annoying? I don't know.
There seem to be wedges of light coming thru tho. Three Mile Island. MI nuke loan guarantee. Supposedly Churchill said, "The Americans always do the right thing.....after trying everything else.". Maybe that's the case here. For my grandchildrens' sake, I sure hope so.
Policies for growth will require abundant, affordable energy from "all of the above" sources, an invigorated private sector with access to capital at low interest rates, competitive (read low) tax rates, a streamlined permitting process so new projects can be built in months instead of decades, greatly simplified regulatory environment... quite a wish list to pry out of our befuddled ruling class. Notice one thing; we cannot expect the necessary growth from a government obsessed with a hysterical fear of CO2 emissions.
We also need a stable regulatory environment. Few people are willing to make large investments in anything when the rules of the game are likely to change invalidating their investments.
We need to rethink education. Gifted and talented programs are disappearing across the United States in an effort to make education more equal. We need educated high IQ people who can help drive growth in our economy. We need to eliminate the idea of college for all and instead educate and train people in a wide range of fields, including plumbing and electrical work. We need more demanding K-12 schools that focus on reading and math instead of focusing on why Johnny might really be a girl. I think school choice (vouchers, charter schools) could be one of the major tools to help with both of these ideas.
We need to eliminate the significant amount of unnecessary licensing that exists. Why does someone need to go through several years of schooling and take some sort of test to cut hair? Occupational licensing is primarily used as a way to limit supply. I would eliminate most occupational licensing and replace it with certifications. I can do a job without a license, but I could advertise my certifications.
Great comment! Let me just amplify a couple of points…
• Regulatory environment. Stable is good, but without the ideology is better. CA’s unthinking rush to renewables has led to brownouts/blackouts. Further, utilities were effectively not allowed to charge for things like getting woody biomass from around their lines, or sufficiently upgrading their lines. Result - wildfires.
• Education. “Rethink?” Maybe “Unthink.” Again, get the indoctrination back out of the instruction. Teach the kids to think, not recite. And, looking at the demands of the Chicago teachers union, maybe reconsider the whole idea of “public service unions?”
Terrific column--must reading.
One quibble: the US is an enduring wartime economy; it's just that we now dabble in no-win wars, use other people as proxies, build weapons systems that are too expensive to risk, maintain weapons better suited to WWII, are clumsy, inflexible, top-heavy (where's a George Marshall when you need him?). The "spear tip" in the Army and other services is tiny; the logistical "tail" is clogged. As Ukraine has shown (just as Spain showed in the mid 1930s) warfare is different--smaller, more computerized, faster, continually changing the attack/defense computation.
The national security state runs the show.
Good work here, Roger. This is important, and scary. The US is facing a myriad of challenges, including the demographic cliff described here, but also a soaring federal debt. Alas, theses issues are getting ZERO attention in the presidential race and virtually no coverage in major media outlets.
MAGA "offers nothing in the way of sensible policy to “foster economic dynamism.”" That isn't true. "Nothing" does not describe Trump's lowering of the capital gains tax and reduction in some regulations. Those were definitely pro-growth and economic dynamism. Alas, Trump's current policies look much inferior to what he offered (and did) last time.
One last comment, and I'll shut up. My mom's side of the family are all in Appalachia. When we came back from Okinawa in 1965, we lived in Garrett Cty, Md for several months before living in NC, SC, and OH. We drove every summer to spend a week with her family in Garrett Cty and Cumberland Md. And, coming from different directions over the years I saw a lot of that part of the country. It was teaming with successful small cities, usually supported by a large manufacturer or two. They also generated immense pollution. Before too long they mostly all closed down. Many reasons. Energy crisis. Needed Environmental Laws. A lot of these jobs went to Germany and Japan that had newer cleaner more efficient infrastructure (thanks to our heavy bombers in WWII....). China was the final straw years later. These communities never recovered. And now have the same pathologies as big inner city neighborhoods. Drugs. Lost basic job skills. Fatherlessness. I've seen it in my mom's family. It's heart-breaking. My late uncle was a college graduate engineer for Hercules Powder in Cumberland. I don't think any of his grandchildren that still live in the area have a college degree.
I'll admit up front I'm not going to read the whole report. I will restate a point Walter Kirn (Matt Taibbi co-host of their weekly podcast) said. He lives in MT. He said that the data that show that Western (but not West Coast) states get more Federal dollars than the other States is distorted by the fact that the Federal Govt owns most of the land, and has to spend money taking care of it; and that many major interstates run through these sparsely populated areas and the Feds have to spend money maintaining them; and these expenditures distort things. Is there a chance this dynamic is somehow incorporated in the stats in the report?
Here in canada the Liberals seem to be following the prescriptions of something called the Century Initiative; increase our population to 100 mil by 2100, which involves large amounts of illegals, seems to be the same thing USA democrats are following too?
The idea is no border, let everyone in who wants to come with little or no controls, and I guess just hope it all works out?
Verdict is in, not working very well.
As we have no real plans to reduce co2 emissions, for those who think that is a problem, our emissions will only go up
Great post, sir. Thank you.
Is it coincidence that as the transfers have increased, so has the political acrimony in the United States? EIG starts their study in 1970, a time when, politically, we were not as divisive as we are now. Sure, the Vietnam War had folks riled up, but generally Congress was far more effective then than it is now. The 70s saw the Clean Air Act, the Clean Water Act, NEPA, NHPA, and important civil rights legislation. Congress was more willing to negotiate good legislation for the country. Today, Congress can only pass (narrowly) legislation that benefits the party (IRA, for example).
I fear this report will merely add to the pile of literature acting as a doorstop so long as our leaders choose to believe in climate as a catastrophe and not as an opportunity.
My two cents, adjusted for inflation...
No coincidence. When you forcibly extract large amounts of money and transfer it to others, you create winners and losers and foster resentment.
In rural areas, the cost of living is significantly lower than in urban areas. So the same amount of per capita government transfer will show to be more significant in rural areas. I would argue that urban areas are far more dependent on government transfers because of the higher cost of living.
The maps of Government Transfers and 2020 Presidential Voting have many interpretations.
These maps also:
1. Point to where the aging population lives.
2. Separate America by City and Rural
3. Show where agriculture and manufacturing takes place (as opposed to the Service Economy).
4. In large degree are maps of the divide in moral values
It is a mistake made often, to use graphical views of statistics (measurements, numbers, etc) to make political points offering a pre-packaged "meaning of it all" -- when the meaning offered is just one of many opinions.
If agricultural subsidies were added in as "transfer payments," the maps would align even better.
Dear Professor:
Lots to contemplate here, but what weems to be understated in all this is that economics the Western welfare state systems are based on the assumption that the base of the population pyramid would continue to grow sufficiently such that there would always be more workers to support the retirees above. Where are the Malthusians when you need them? In effect, welfare programs are legal Ponzi Schemes, but the fact that they are legal doesn't mean they won't collapse of their own accord. If populations don't grow, indeed if they shrink, the welfare programs go bust. The US has mitigated this effect by becoming the immigration destination of the world, although our current open border policies do not appear designed to maximize the benefits thereof. Regardless, if you can't make enough babies of your own, import them and yoke them to the economic plow with the rest of us.
But the prescription doesn't change: more economic growth through increased investment, which should lead to greater productivity and economic growth. Increasing the age for benefits eligibility (I'm 74 and still working, same for my wife, but as a courtesy to her I will not reveal her exact age), would help.
And there are trade-offs. Should we be diverting investment to climate mitigation that will have little impact on climate but will increase the cost of energy? Or should we be focussing investment on the lowest cost energy (today that would be fosil fuels) in order to increase productivity and economic growth?
Your thoughts on and analysis of these matters are a beacon of clarity in a fog of confusion, misinfromation and disinformation.
Fascinating read - thank you Roger. I write from the UK with a similar but worse set of problems, a major one being stagnation in labour productivity. The UK government has growth as a mantra, but is like the eunuch who, however much he may approve of motherhood, will not bring it about.
The economy's greatest asset is the enterprise and ingenuity of its people, never better illustrated than by the history of the USA, so governments should look carefully at where obstacles have been placed in their path, and remove them wherever possible. They won't have to look hard. For example, in the UK, so I learned this week, the banking system acts as a brake on small businesses, especially those trading internationally.
Yet lessons from history, which indicate that government attempts to direct an economy are counter-productive at best and calamitous at worst, are seldom heeded.
"Put simply, is a high and rising transfer share bad? The answer is yes, unequivically." In Canada, there's a lot of talk about such concepts as government providing a "basic income" or "guaranteed annual wage", that sort of thing. I guess that would make things much worse.
In the end, the problems will self correct if humans don’t do so. History says they will not. The best thing each individual can do is prepare for the worse case scenario. I assume the rich and elite will not do so out of arrogance. At which point, they will become targets of the stronger and numerous more of the less fortunate. A movie apocalypse we have seen many times. The questions are, how long will take for any correction to start and how much pain will be needed to force the changes? The history of humans doesn’t inspire any confidence that time will be short and not very painful. We avoid pain until it can not be avoided. As a species, we are not a very bright group.
When you layer the costs for the net-zero transition fantasy that wind and solar can replace fossil fuels onto to these challenges in only gets worse. It is time to reassess the mandates to go to zero and accept "good enough" emission reductions that will not knee cap economic development.
I was going to post the same point, thanks. Roger seems unwilling to tackle this subject, which is understandable given his 'cancellation' by the alarmists. However, the astronomical sums of borrowed money that will be squandered in a pointless piece of virtue signalling will leave no room for the necessary investment in productive capacity.
Thanks Roger and Paul ... I discuss net zero all the time. My oft-expressed view (which could of course be far off!) is that the "iron law" of climate policy acts as an effective governor on ineffective government follies in energy policy. Are their inefficiencies and bad policies? Sure, welcome to politics. That said, I don't have much time for apocalyptic economic scenarios based on fears of bad net-zero policies.
Communist/dictator-led nations always collapse due to malinvestment and bad policy choices. To what extent are the climate-only malinvestments and choices material for the US? Apocalyptic or annoying? I don't know.
There seem to be wedges of light coming thru tho. Three Mile Island. MI nuke loan guarantee. Supposedly Churchill said, "The Americans always do the right thing.....after trying everything else.". Maybe that's the case here. For my grandchildrens' sake, I sure hope so.
What is the "iron law" of climate policy? How does it act as a governor on ineffective government energy policies?
Policies for growth will require abundant, affordable energy from "all of the above" sources, an invigorated private sector with access to capital at low interest rates, competitive (read low) tax rates, a streamlined permitting process so new projects can be built in months instead of decades, greatly simplified regulatory environment... quite a wish list to pry out of our befuddled ruling class. Notice one thing; we cannot expect the necessary growth from a government obsessed with a hysterical fear of CO2 emissions.
We also need a stable regulatory environment. Few people are willing to make large investments in anything when the rules of the game are likely to change invalidating their investments.
We need to rethink education. Gifted and talented programs are disappearing across the United States in an effort to make education more equal. We need educated high IQ people who can help drive growth in our economy. We need to eliminate the idea of college for all and instead educate and train people in a wide range of fields, including plumbing and electrical work. We need more demanding K-12 schools that focus on reading and math instead of focusing on why Johnny might really be a girl. I think school choice (vouchers, charter schools) could be one of the major tools to help with both of these ideas.
We need to eliminate the significant amount of unnecessary licensing that exists. Why does someone need to go through several years of schooling and take some sort of test to cut hair? Occupational licensing is primarily used as a way to limit supply. I would eliminate most occupational licensing and replace it with certifications. I can do a job without a license, but I could advertise my certifications.
Great comment! Let me just amplify a couple of points…
• Regulatory environment. Stable is good, but without the ideology is better. CA’s unthinking rush to renewables has led to brownouts/blackouts. Further, utilities were effectively not allowed to charge for things like getting woody biomass from around their lines, or sufficiently upgrading their lines. Result - wildfires.
• Education. “Rethink?” Maybe “Unthink.” Again, get the indoctrination back out of the instruction. Teach the kids to think, not recite. And, looking at the demands of the Chicago teachers union, maybe reconsider the whole idea of “public service unions?”