The View From Across the Pond: America’s Extraordinary Economy Keeps Defying the Pessimists

The Economist opines both Donald Trump and Joe Biden have ideas that endanger it

Excerpts from The Economist communications and publication

The Economist (a British weekly magazine founded in 1843) described the difficulty of designing a magazine cover that conveys the subject matter of their main story in this week’s edition regarding the condition and prospects of the U.S. economy. They began:

This week’s lead story claims “America’s economy is riding high. The unemployment rate has been below 4% for 25 months in a row. Instead of ending 2023 in recession, as many expected, it kept going—and was nearly 3% bigger than at the end of 2022. Over five years, America’s economy has grown twice as fast as the euro zone’s and ten times as fast as Japan’s.” Britain’s economy has hardly budged.

To communicate their message, they decided to use the image of a bodybuilder. “This image nicely gets at a weakness in the growth story. One big reason the economy has expanded so fast is the pandemic stimulus, worth 26% of GDP, more than double the rich-world average. Yet that dose of steroids cannot be repeated—America will this year spend more on debt interest than on defence. Indeed, protectionism and, under a future President Donald Trump, the mass deportation of illegal immigrants could yet threaten trade and the supply of labour and do real harm to the prospects for growth.”

“Strong demand has been met by growing supply. America has 4% more workers than it did at the end of 2019, thanks in part to rising workforce participation, but mainly owing to higher immigration. The foreign-born population is up by 4.4 (million), a figure which may undercount those who arrived illegally. And the expanding workforce is being put to productive use. America’s flexible labour market has almost certainly made it easier for the economy to adapt fast to a changing world.”

“Other long-standing strengths have made America enviably placed to cope with geopolitical tumult. Its vast internal market encourages innovation and means it depends less on foreign trade than smaller rich economies do. Because the shale boom of the 2010s made America a net energy exporter, it has in aggregate benefited rather than suffered from the high energy prices that hit the wallets of Europeans.”

“At the same time, both Mr Trump and Mr Biden harbour populist and protectionist instincts that will only harm America’s growth potential. The sugar-rush of stimulus helped mask the damaging effects of such policies during each president’s first term. This time, however, the damage will not be disguised.”

So, that’s a glimpse of the view from Britain. To read the full article in The Economist, click on the link below or at the beginning of this piece.

If the link to The Economist cover story on the U.S. economy at the top of the article doesn’t work, THIS ONE may.