Expectations for the US economy

[Navigator]

While the US debt is a major concern, there are many other points in my original post that also contribute to my concern that the economy may not grow and the stock market may not rise and my retirement assets may not survive even a 1-2% withdrawal rate.

Are others concerned about the slowing and potentially reversing population growth of the US? The restrictions being place in using natural resources? The culture change from hard work to achieve the American dream to path of least resistance?

I’m also concerned about wars, espionage, IP theft, and more.

For those counting on a 3-5% above inflation return on their portfolio, where do you see that coming from?

I believe you raise a couple of valid points. There is no inmutable law of physics that says long term real stock market returns must be 5 - 6%. Low birth rates and restrictions on immigration do portend lower GDP growth in the future. That is, it will unless innovation drives unprecedented productivity growth. The US debt to GDP ratio seems high to me, but the economists I’ve read don’t seem overly concerned about it. One reason Japan has such high debt to GDP is because they used government debt to cushion the effects of a decline in population. I suspect the US and other countries will do the same.

I am also concerned about wars, espionage and IP theft, but trust trust that my government is taking action to counter these. If not, there is nothing I can do about it anyway.

As for restrictions on natural resources, I don’t see anything that isn’t caused mainly by economic forces. Moreover, the conversion to EVs and renewable energy is one of the factors driving innovation in the economy. As for young people being lazy, I simply do not buy it. Productivity in this country has never been higher and I see no reason this trend will not continue.

 

[ut2sua]

Am I missing something? Is there a silver lining that I’m not seeing and the US will continue its nearly constant growth?

You got everything covered except, just to name a few, the US is the strongest economy in the world (with a much smaller population vs the next strongest economy); The US is the only country with so much $ that we spend nearly 1T dollars on defend budget last year (you think we should sell Alaska to fund 1 year of defend budget. Another way to think is we can buy 1 Alaska per year if we don't fund our military Yes we have poor folks in the US, but that is another discussion). And BTW, we are the only country that can print more dollars and the rest of the world will still value the US dollar. The last point alone is enough for me to invest in the US stock market.

 

[Out-to-Lunch]

And the new generation of workers seems to have a different work ethic that prioritizes low effort and comfort.

Citation?

Innovation and risk taking are being punished through wealth redistribution in the name of “equity”.

Please explain exactly what you mean here.

 

[Markola]

My AA is 36% US equity, 18% international equity, 6% alternatives (mostly US REITs), 40% fixed income. What is your point?

I’m suggesting that investors who disagree with federal land use policy or don’t like American demographics, or our debt levels, or the OP’s various concerns, and who believe growth is constrained because of them, enjoy simple options to invest elsewhere in those countries which they believe are free from those problems.

 

[SecondAttempt]

I am very dismayed by the current political situation which, on both sides, seems to be based on how can I act stupid enough to get elected again and keep my paycheck. But one thing about US history is that politicians seem to wake up and work together in times of real crisis. Fortunately I do not think we are on the brink of a real crisis.

A growing economy is defined as growing GDP. What factors have contributed to the growth of GDP?

GDP growth is population growth plus productivity growth. The current anti-immigration sentiment is harming population growth. A fact, not a political statement. Productivity growth has been gradually declining in the US since the 1950s. Immigration is what has saved us if you look at the numbers.

Our infrastructure has been an advantage, but is old and needs extensive and expensive upgrades.

Yep, we are shooting ourselves in the foot by not funding infrastructure repair. It is a pathetic failure of leaders from both parties for at least 5 decades.

The US has approximately $31 trillion dollars in debt which is about $250,000 per taxpayer.

I'm not paying my share!

 

[ut2sua]

I’m concerned the US economy will not continue on the same trajectory of the last 20, 30, 50 or more years. I’m genuinely concerned that Medicare and Social Security won’t be there for me for the next 30-40 years that I expect to live.

OP, seriously, your concerns are all valid. We should all share these concerns more or less. There is no guarantee in life. Equity may do another dip for 30%, or it may recover before year end (similarly for the other concerns you have brought up). The best one can do is plan for the worst, and hope for the better since no one really knows the answer to the raised questions.

It may help to take a step back and look at the picture from a more distanced view. If the stock market were going up 20% instead of dropping last year, perhaps there would be less concern regarding these same issues (?)
It is human nature that we like to participate (buy) when the market is high and get out (sell) when the market is low. That is the opposite of what one should do if investment growth is the goal. This is why investment is simple, but difficult to do successfully for many. Do what works for you, but I do hope that folks can look away for a year or two and not lock in their loss to allow their investment value to recover. Good luck

 

[Midpack]

 

[marko]

We keep kicking the can down the road but we forget that it's a very, very, very long road.

I just don’t have the energy to worry about these things. I have lived long enough to have a long list of worries that never happened. It seems that the things that affect us most, nobody saw coming.

 

[donheff]

Excessive national debt in a non-wartime economy is a serious problem, as evidenced by Japan's economic stagnation. But IMO our debt is not the biggest drag on long-term investments going forward. As folks have said above, we have assets too. For example, for no rational reason, the Federal Government still owns about half of the land in the western part of the country.

Yes, those are some significant assets. But it makes sense to me that the Federal Government retains ownership. If a good deal can be had by auctioning off some of those assets it should be done carefully, in a manner to get the most return to the country as a whole. We stole the land as a country and should divvy up the value as a country as well. It doesn't seem fair to just give it the Bundy's or turn it over gratis to largely empty states with a handful of people who happen to live in the general vicinity of those assets.

 

[Aerides]

Locked? Are you saying a moderator would prevent discussion? Why?

It’s a legitimate topic of discussion for people planning for or already in retirement.

Since you asked: In general partisan political discussions do not result in a friendly community. Time and again that has proven true here, as such threads easily become unpleasant and unhelpful, and thus closed.

Politics and the economy can of course be discussed without getting partisan, and if that is avoided, the discussion can be healthy.

For any further "why?" on that, please review the community rules found at the bottom of the page.

 

[Aerides]

And the new generation of workers seems to have a different work ethic that prioritizes low effort and comfort.

I would disagree. I think that's a trope that makes for puff piece stories, but every time it comes up here, we all can easily counter with our own examples - Gen Z are our kids, nieces and nephews, and grandkids. Mine are in school and working and have goals and jobs, as do their friends.

What they aren't willing to do is work 60/70 hour weeks for inadequate rewards and no personal life...and neither were we which is why most of us retired early?

 

[ShokWaveRider]

We really do not have any stake in the game, no kids or grandkids to fret about, so we do not. My opinion is that the world including America is on a downward spiral and has been for a while. Some countries are faring out better than others, usually those with high revenue streams, but not all. ~26 countries can seem to balance their budgets or have a surplus, no reason why America cannot too. A simple solution for the US would be to put up taxes and increase revenue to a sensible level to cover our expenses and accommodate the shortfall in 5 years max. But America is too shallow and greedy, we consider the "T" word a sacrilege. We seem to be spoilt and want everything. It is impractical and cannot be sustained.

If we had children and grandchildren, we too would be worried, but we do not and we are not. I am just glad that while the downward spiral has been going on for a while now, we will not be alive to see the fallout.

Sorry about the gloomy opinion, but what other solution other than reducing spending (Too Late) and increasing revenue (Taxes) is there? We need to wake up.

Folks on this site know how to balance budgets, they have been doing it ever since ER was a twinkle in their eyes. The country needs to take a leaf out of our book.

 

[folivier]

It is never too late to reduce spending (government spending).

 

[RunningBum]

If we allow our government to keep increasing the debt we may not live long enough to see the fallout. But what our kids and grandkids? That is what truly concerns me. What will their future be like?

I worry about the state of the economy, but I worry a lot more about the state of the environment we are leaving.

 

[wmc1000]

$32T debt plus $181T unfunded liabilities = $213T+ US liability is the real number that is scary!!!!

https://www.usdebtclock.org/

 

[38Chevy454]

$32T debt plus $181T unfunded liabilities = $213T+ US liability is the real number that is scary!!!!

https://www.usdebtclock.org/

Translation: Gov't has a spending problem.

 

[FLSUnFIRE]

I'll start worrying when we have an emigration crisis! There are millions of people that want to be here so population shrinkage won't be a problem for us for a while and the fact that so many want to be here tells me we are doing something right.

 

[ShokWaveRider]

Translation: Gov't has a spending problem.

AND a revenue problem! Why do folks insist on ignoring the Elephant in the room?

 

[target2019]

While the US debt is a major concern, there are many other points in my original post that also contribute to my concern that the economy may not grow and the stock market may not rise and my retirement assets may not survive even a 1-2% withdrawal rate.

Are others concerned about the slowing and potentially reversing population growth of the US? The restrictions being place in using natural resources? The culture change from hard work to achieve the American dream to path of least resistance?

I’m also concerned about wars, espionage, IP theft, and more.

For those counting on a 3-5% above inflation return on their portfolio, where do you see that coming from?

I'm glancing at your profile to try and understand where your pessimism is rooted. You live in a beautiful state (CO) and retired in 2020 (me too).

I live in the worst state (many say), I'm stage IV, and yet I wake up each day realizing that I've done quite well and continue to enjoy life with my family. Sure I read the doom-and-gloom, but I don't take a bath in it 24x7.

Restrictions in place about natural resources? On the east coast I've lived through oil shortage crisis, global weather shifts, water shortages, and so on. It's always something, right? I guess each individual must make decisions about that, as we've done throughout our lives. I remember water crisis where we should not water lawns. Since then suburbia has been hell-bent on precipitating more future shortages in this area. But I've made individual decisions: no lawn, no chemicals, no watering, no runoff, no illegal labor, no noise pollution, etc.

I know I can't fix the world. It's the eternal dillema, isn't it?


My personal projection for investments is low. I've always been super-pessimistic about that, and I don't lose my mojo over factors (war, espionage, identity theft) that are out of my control.

I have reasonable protection in place for some of that. Even so, my personal identity is out there thanks to the theft of many files from the USG back a few years.

Every major company it seems like has spilled some of my (our) data. Get the wrong password manager and all your stuff is now in the hands of bad guys.

I'm straying now, so I'll leave things alone.

 

[COcheesehead]

I would disagree. I think that's a trope that makes for puff piece stories, but every time it comes up here, we all can easily counter with our own examples - Gen Z are our kids, nieces and nephews, and grandkids. Mine are in school and working and have goals and jobs, as do their friends.

What they aren't willing to do is work 60/70 hour weeks for inadequate rewards and no personal life...and neither were we which is why most of us retired early?

When I owned my business, the 20 something year olds I hired worked very hard. They had energy, desire and vision. Things I slowly ran out of as I aged. I eventually sold my business to a group of three employees, two of which were in their late 20’s.

So maybe it’s us “old” folks who don’t really want to work. LOL. I retired early at 57.

 

[FLSUnFIRE]

AND a revenue problem! Why do folks insist on ignoring the Elephant in the room?

I think everyone here agrees that there is a revenue problem -some think it's too high and some too low and some think it should be taken from this guy instead of that guy..... this thread has been amazingly civil (and not locked!) so lets not discuss those points of disagreement! Seriously, I think most here are really well behaved and the mods are fantastic at nipping things in the bud when needed. Best place on the internet!



I am pretty sure that if revenue equaled outlays tomorrow "they" would increase spending and continue borrowing since we are still a ways from the proverbial stuff hitting the fan. Depending on the they that was in control at the time it would be spent differently but it would be spent and not used to shore up the balance sheet.

 

[John Galt III]

What I notice is that ever since the Eighties I have been hearing people in congress saying that if we don't reduce the national debt, etc, that Armageddon will occur in exactly X years. But the Armageddon never happens. (It happens from other reasons, like massive mortgage fraud resulting in taxpayer bailout ala 2007, of course, lol). The debt continues to climb, no Armageddon. Something doesn't make sense.

 

[DJRR]

Translation: Gov't has a spending problem.

No, US citizens have a spending/revenue problem. When did the "government" become a disembodied 3rd person who does all the bad things while citizens get to live with no civic responsibility or accountability. We the People are the government and things will change when we decide they should. Despite the whining, most people are satisfied and not willing to disrupt their lives to make any changes. Change may eventually be forced upon us, but that day is not today.

I fondly remember my Dad saying how irresponsible my generation was because they promised him that his children would pay off the debt, but we just passed it along like they did

 

[Markola]

^^ Goldbugs, Bitcoiners, Austrian Economics proponents and other Fed skeptics would say the plan is for the debt to be paid down, quietly, without raising taxes or cutting spending by doing it on the backs of savers, through “financial repression”: Print money and use the new inflated money supply and debased dollars to slowly pay off the older treasuries, which were issued back when dollars had a relatively higher purchasing power. Works great for the public sector but invisibly victimizes the private sector without political messiness, including those of us holding dollars or assets denominated in dollars.

https://www.investopedia.com/terms/f/financial-repression.asp

Is financial repression a thing or just a conspiracy? I don’t know but it seems like there is an incentive for it as a workaround of today’s deadlocked policy world as the way to kick the can down the road and keep the debt balloon party going.

 

[GenXguy]

Translation: Gov't has a spending problem.

Yes, and so many poor choices for that spending, at that.