Five Reasons To Be Bullish On the United States
Five Reasons To Be Bullish On the United States
Our political system is a mess, voters are divided, and the federal debt is soaring. But the US still has enormous advantages over the rest of the world.
Several years ago, when the sex scandals were rocking the Catholic Church, I talked to a local parish priest about the decline in the church’s credibility. He listened patiently. He didn’t argue about the scandal or the church’s other problems. Instead, he said, “Remember, the church is not Rome.”
The United States faces a panoply of challenges. Those challenges are undeniable now that the silly season is here. The Democratic National Convention starts today in Chicago and we are certain to hear lots of soaring rhetoric about the future of America between now and Thursday. But I’ve yet to hear the presidential candidates talk about the country’s biggest problems, including the national debt.
Nevertheless, I am bullish on the United States. I’m no Dr. Pangloss. I see the problems. I see them when I travel in rural America. I see them here in Austin. And, of course, I see the macro trends. Among the most worrisome challenges now facing the US is the class divide. As author and demographer Joel Kotkin noted earlier this year, things are:
Excellent for private jet-flying tech oligarchs and tenured Ivy League professors. But the gap between the upper classes and everyone else continues to grow. No surprise then that only 36% of voters in a new Wall Street Journal/NORC survey said the American dream still holds true, substantially fewer than the 53% who said so in 2012 and 48% in 2016 in similar surveys.”
The class divide isn’t just about the vanishing American dream, it’s about longevity. A Brookings study released last year found that college-educated Americans live, on average, 8.5 years longer than those without a college degree.
There’s a massive and worrisome urban-rural divide. I spend a lot of time in rural America. Since January, I’ve had speaking engagements in Tyler, Texas; Mt. Vernon, Ohio; Springfield, Illinois; Jamestown, New York; and just last week, in Eldorado, Texas. In many of those places, I saw similar signs of decay: shrinking numbers of people, empty storefronts, Main Streets decimated by Walmart, crumbling buildings, and aging populations.
In addition, the US has a soaring federal debt ($35.1 trillion and counting), an epidemic of drug overdoses that killed more than 107,000 people last year, crumbling infrastructure, and increasing political polarization. Add in the precipitous decline in credible journalism at legacy media outlets like the New York Times, CNN, Washington Post, NPR, and many others, and the situation looks pretty damn grim.
So yes, problems abound. But to paraphrase my priest friend from decades ago, remember: the US isn’t Washington, DC. Yes, we get a ton of reporting about the octogenarians who control Congress. And yes, we endure intense media coverage of what’s happening at the White House and Supreme Court. Those institutions matter. But they aren’t the US, either.
I have been bullish on the US for a long time. A decade ago, in my fifth book, Smaller Faster Lighter Denser Cheaper: How Innovation Keeps Proving the Catastrophists Wrong, I wrote:
Put simply, America will dominate the Smaller Faster future because it has a long and illustrious history of entrepreneurship and small business. Furthermore, it has the resources — natural, financial, and intellectual — to foster that entrepreneurial talent. The US continues to incubate a spirit of creativity and risk-taking that simply doesn’t exist in most other countries.
Nothing has occurred over the past decade to make me change my mind. Here are five reasons to be bullish on the U.S.
Education. The US has too many underperforming grade schools and high schools, but our higher education system continues to be the best. That system has nurtured the innovation and entrepreneurial ethos that helps make our country the envy of the world. According to the latest rankings in Times Higher Education, 7 of the 10 universities in the world are in the US. In addition, 16 of the top 25, and 22 of the top 50, are in the US.
Demographics. As I explained in Smaller Faster, “The U.S. is the only developed country on the planet that has a large and growing population. That fact will become increasingly important in the decades ahead. Europe, Japan, and China all have low birth rates and rapidly aging populations.” According to the CIA World Factbook, the US is younger than most of its peers. It ranks 69th among the countries in median age. Japan ranks 3rd, with an average age of 49.9.
I used the CIA Factbook data to make the table above, showing how the US compares to peer countries regarding median age. Nicholas Eberstadt, an author and a longtime scholar at the American Enterprise Institute, has frequently written about America’s demographic advantages. Last November, Eberstadt, appeared on The President’s Inbox podcast to discuss demography and world power. He underscored the fact that China is facing a demographic cliff:
The Chinese economy is about to become a machine for taking care of ancient parents and in-laws, and that's going to make for big demands for social welfare benefits for older people. Even if China is nowhere near being a democracy, those pressures are just going to be there. And that will have an effect on the resources that will be available for the dictatorship in its international policymaking.
Eberstadt went on to talk about the US. He said:
The US is the third most populous country in the world. And we have an extraordinarily productive population due to our business climate, our political and legal institutions, and the quality of our legal economic system, to the education of our population, to the relative health of our population. Given those advantages, it's very hard to see how another country is going to surpass the US economically anytime soon.
Geography/Agriculture. The US has terrific geography. Unlike China, Russia, Japan, India, and numerous other countries, we don’t have any enemies at or near our borders. That means we don’t have to fortify them against potential invaders. Yes, the US has increased security along the frontiers with Mexico and Canada. But those security measures are minor compared to the ongoing war between Russia and Ukraine, the constant tensions between China and Taiwan, the ever-present danger of war between Israel and its neighbors, the constant tension between India and Pakistan, and Japan’s concerns about a nuclear North Korea.
In addition to our location, we have some of the world’s most fertile farmland, water with which to farm that land, and an incredible network of inland waterways, including the Port of Catoosa and the Mississippi River system, that allows us to transport vast quantities of farm commodities and other goods at low cost.
American farmers are among the world’s most productive. The US is self-sufficient in all the essential agricultural commodities. The US is the world’s leading exporter of agriculture commodities, “topping the list for corn, seed cotton and rice. In fact, the U.S. ranked top three for 10 out of 21 of the most common agricultural commodities in the world, with combined production of these commodities totaling nearly 668M tons in 2020.” From eggs and milk to beef and cotton, America’s ability to feed itself gives the US food security and, thanks to overseas demand for our farm products, significant foreign exchange revenues.
Energy is the economy. And thanks to more than 150 years of innovation, coupled with private ownership of mineral rights, the rule of law, and stable capital markets, the US has an energy advantage over nearly every other country on the planet. According to the latest Statistical Review of World Energy, the US ranks:
First in natural gas production;
First in oil production;
First in nuclear energy production;
Second in electricity generation (China is first)
Second in energy consumption (China is first)
In addition, as seen above, the US has a huge price advantage on natural gas. (Hat tip to my friend John Hanekamp, who publishes an excellent weekly Substack on coal and energy markets.) Henry Hub is the primary pricing point for domestic natty. JKM is the marker for LNG delivered into Asia. TTF is the Dutch trading hub used to price European gas.
As seen above, the latest figures from the International Energy Agency show that the US also has cheaper electricity than key competitors.
Of course, the US faces serious threats on the energy front. The Biden Administration is the most anti-hydrocarbon administration in US history. It has taken numerous steps to try to hamstring domestic oil and gas production. Despite those efforts, as Roger Pielke Jr. and David Blackmon noted last week, US oil production continues setting new records.
In addition, as I showed in April in “Natty Nation,” the US is a natural gas superpower. The US now produces more natty than Canada, China, Iran, Norway, and Qatar, combined. In fact, about one-quarter of all the natural gas produced on the planet comes from US wells.
The energy punchline is obvious: while Europe, and many other OECD countries struggle with high-cost energy, the US has a significant price advantage on natural gas and electricity. In the wake of Russia’s invasion of Ukraine, concerns about energy security have largely replaced concerns about decarbonization. The US has energy security. Most of the rest of the world doesn’t.
The Constitution. A few weeks ago, while in Vancouver, I had coffee with a Canadian investor specializing in natural resources. When I asked where he was putting his money, he immediately answered: “The US.” He had many reasons for doing so. “Everyone in the world wants to go to the US. You can select the immigrants you want.” He continued, “You have cheap labor, you’re food independent, water independent, and energy independent.”
While I might quibble with the “energy independent” claim, I had to agree with him. When it comes to the US, I’m an unapologetic homer. I’ve been incredibly fortunate to travel and see a good bit of the world. But I am always relieved to come back home. As I have noted above, the strengths of the US are many, but the key strength is the Constitution.
We are still litigating, and reinventing, and arguing over, that incredible four-page document some 237 years after it was created. We invoke the tenets of the Constitution on an almost-daily basis. Whether it’s the First Amendment, Second Amendment, Fifth Amendment, or the different articles, the Constitution remains the thing that, imperfect though it may be, holds the US together. Where else in the world do people talk about the founding documents of their government on an almost daily basis?
The Constitution assured that the political and economic power in the US was not too concentrated. A friend who works on Capitol Hill observed recently that in the US, “the government is secondary.” Yes, it matters who we elect in November to occupy the White House. But it’s the small businesses, ranchers, farmers, bakers, mechanics, and entrepreneurs who are the bedrock of this country. Yes, government matters, but because of the diffusion of power, our local, county, and state governments usually have the most significant impact on our daily lives. We can complain (and we will) about what’s happening in Washington, but by and large, our local governments, electric coops, water districts, joint-action agencies, and local taxing jurisdictions, still work pretty well.
The British author and philosopher G.K. Chesterton had it right when he declared, “America is the only nation in the world that is founded on a creed.” In 1974, during a House Judiciary Committee hearing on the impeachment of Richard Nixon, Texas Congresswoman Barbara Jordan said, “An hyperbole would not be fictional and would not overstate the solemnness that I feel right now. My faith in the Constitution is whole; it is complete; it is total.” Jordan herself was a reflection of America’s promise. A lawyer, she was the first African American elected to serve in the Texas Senate after Reconstruction and the first Southern African American woman elected to the US House.
Amid the avalanche of hyperbole of the political campaigns, teleprompter speeches, and claims about democracy being at stake, it’s easy to be pessimistic. It takes a bit of work to maintain optimism about the US. I’ll give the last line to another Texan, the late author and political journalist Molly Ivins, who said, “I’m optimistic to the point of idiocy.”
I am, too.
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The decline of the West is a myth. The US and EU remain immensely wealthy and productive. The creative destruction of technology change poses challenge of adapting and growing institutions for all countries embarking on substantial software enabled economy. The political challenge of the nativists and BRICS to the western alliance has prompted a regression of liberalism from its former post WWII principles. Across the West liberalism is congealing a new political formation of protectionism, NGO censorship, escalation of secessionist wars, and munchausen victim worship (including mother nature). As through history the feedback of complex systems limits the damage of human foibles and hopefully the liberal regression can be restrained as much as possible to rhetoric. Security of global trade and communications infrastructure is the foundation of human exit from poverty and it is not feasible to replace US military hegemony, even as China becomes a superpower. Either the hard way or a much harder way, US hegemony and its internal military industrial complex must restructure to provide security affordably, which means leveraging the rising wealth & military capacity in the Rest.
w ahh post