Ignore the Obituaries, U.S. Reign Will Endure

Over the medium term at least Hassett is probably correct but more and more problems are facing the U.S. The horrendous piling up of debt is one issue. The response is to pile on more debt and increase military spending. U.S. consumers too are addicted to debt beyond their means. Unlike the government however consumers for the most part are having to face up to their situation losing homes and cars and facing bankruptcy.
While the U.S. retains huge supremacy militarily this might still does not give the U.S. easy control of global events. The dollar is falling and countries such as China and India have larger populations and much stronger growth rates than the U.S. In the longer term there could be bitter battles over access to and control over natural resources needed to fuel national economies.

Ignore the Obituaries, U.S. Reign Will Endure Kevin HassettFeb. 4 (Bloomberg) -- The negative employment report on Feb. 1 was another sign the U.S. economy is on the ropes. Increasingly, this downswing is being portrayed as more than just a cyclical phenomenon. The U.S. used to be the envy of the world, the story goes, and soon it will be just another nation.The question no longer seems to be whether the U.S. will recede into the pack, but rather, who is to blame. The New York Times recently explored that question with a provocative cover piece in its Sunday magazine by Parag Khanna, entitled ``Waving Goodbye to Hegemony.''But has the U.S.'s position in the world really changed?In terms of gross domestic product, the U.S. has been an economic colossus for a long time, and continues to be so.Economist Angus Maddison writes in his book, ``The World Economy: a Millennial Perspective,'' that America's share of world GDP peaked at almost 28 percent in 1951, up from 1.8 percent in 1820, 8.8 percent in 1870 and 18.9 percent in 1913.The U.S. share of world income then declined consistently until 1975, when it accounted for 21 percent of world GDP. It has been roughly the same since. Maddison, who has compiled global national-income data for the world from 1 A.D. to 2001, estimates the U.S. share of world GDP was 21.4 percent in 2001.Since then, growth outside the U.S. has picked up, while the expansion inside the U.S. has slowed. According to the International Monetary Fund, which offers more recent statistics, the U.S. accounted for 21.0 percent of world income in 2001 (which is close enough to Maddison's estimate to allow one to draw on both); it declined to 20.0 percent in 2005.Not Cover MaterialSuch a minor deterioration may just be cyclical, and is hardly magazine-cover material.The U.S. economy continues to be positively awe-inspiring compared with the competition. The value of U.S. imports in 2006 was roughly the same as the entire GDP of France. The U.S. is the world's largest exporter; indeed, if all U.S. exporters banded together and seceded from the country, they would have the eighth-largest GDP in the world.The economy of Brazil is about the size of the economy of Texas. The economy of India is about the size of the economy of America's Plains states. The economy of Venezuela is about the size of the economy of Alabama.The U.S. share of the value of global-equity trading is more than 40 percent. The total value of trading on the New York Stock Exchange in 2006 was greater than all of Europe's combined. While the Sarbanes-Oxley corporate-governance law may have made the U.S. a less-attractive locale for new issues, the NYSE was still the world leader in total new capital raised in 2006.Foreign Capital MagnetThe U.S. is still the place that foreign capital wants to be and is the largest receiver of foreign direct investment. Nine of the top 50 transnational financial corporations are American, including the top two (Citigroup Inc. and General Electric Capital Corp.). Thirteen of the top 50 non-financial transnational corporations are American, including four of the top eight: General Electric, General Motors Corp., Exxon Mobil Corp. and Ford Motor Co.Looking ahead, the U.S. has relatively high immigration and fertility, something that should help it avoid the demographic nightmares awaiting many of its trading partners.Big FootprintMy colleague at the American Enterprise Institute, Nicholas Eberstadt summed up the conventional wisdom on the importance of demographic trends as follows: ``In 2005, Europeans outnumbered Americans in virtually every age group, exceeding Americans by 37 percent among people of prime working age, between 35 and 49 years old. By 2030, however, there will be nearly as many Americans as Western Europeans in the 35-to-49-year-old category and many more Americans under the age of 30.'' With regard to Europe, the footprint of the U.S. will inevitably increase.While China's growth has been impressive lately, a recent study found that it may well be at least 50 years before it catches up to the U.S.The U.S. stands out in another way. Among developed nations, it is by far the most committed to a strong national defense. U.S. national defense spending in 2006 was greater than the combined national incomes of Saudi Arabia, Iran and Qatar.The Stockholm International Peace Research Institute keeps a database of world military spending that goes back to the late 1980s. According to the institute, U.S. defense spending as a share of world defense spending peaked at 44 percent in 1992, and then declined until 2001, when it fell below 39 percent of the world total.Iraq, TerrorSince 2001, however, the U.S. military has grown considerably, largely because of the war in Iraq and the war on terror, and the U.S. constituted 45.7 percent of global defense spending in 2006.Given the relative size of the U.S. armed forces, there is little doubt the U.S. will have to take a leading role going forward in assuring world security.Looking both at the economic and the military facts, one can only conclude that the U.S. is a singular nation, and will likely be so for a long, long time.To contact the writer of this column: Kevin Hassett at khassett@aei.org___________________________________