USA Inc. is a Company in Trouble
James Pethokoukis' blog at Reuters is terrific. In the past day, he's written three great posts. The first, about how Scott Walker in Wisconsin is shaking the Democratic Party machine to its core, is insightful. The second is entitled, simply, Why a Government Shutdown is Worth It. Enough said.
I'm probably way behind, here. All of you are probably reading his stuff all the time. But the post that really grabbed me was this one, about a new report on the state of the United States economy. Compiled by investment banker and venture capitalist Mary Meeker -- with a foreword by George Schultz, among others -- it looks at the state of our country as if it were one giant company, USA inc. The conclusions aren't too cheery, as you might imagine:
Mary Meeker, the famed technology stock analyst now at venture firm Kleiner Perkins, has produced a ginormous report/PowerPoint presentation that looks at the United States as if it were a corporation. Now there’s little factually in the report that couldn’t be found by perusing the Congressional Budget Office website or the recent report put out by President Barack Obama’s debt commission. And I think her menu of policy recommendations isn’t particularly novel either. I wish, for instance, she had looked at Rep. Paul Ryan’s plan to reform healthcare.
But Meeker and her team sure put together some 400 pages of pretty — and pretty informative — charts.
He's right about the charts. And he's right that the report is ginormous. But it's great weekend reading, if you're looking for some. It looks at USA inc. in a pretty cold, bloodless, green-eyeshade way. It's not a pretty picture.
On the other hand, here's how the report concludes:
Sounds right to me.
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Jul '10
Re: USA Inc. is a Company in Trouble
I'm not worried. I'm sure USA Inc. is considered "too big to fail."
Sep '10
Re: USA Inc. is a Company in Trouble
Thanks, Rob, for posting this. This is another Moment of Clarity.
My first reaction to the pie chart slide was to utter three words, two of which--a gerund and a noun--broke the Ricochet Code of Conduct. The slide on Unfunded Liabilities provoked a similar response.
My second thought was akin to Sy Liebergot's, looking at the aftermath of the Apollo 13 explosion: "That's the end, right there." In these slides we're looking at the end of traditional Tax-and-Spend Liberalism. They're running out of other people's money. The welfare state will probably sputter on for a few more years, but the end looks inevitable.
May '10
Re: USA Inc. is a Company in Trouble
Ugh, pie charts. It looks to me like they scaled the circle size by diameter rather than area, which makes it look misleadingly worse to the unassuming viewer.
Good overall point though. It's kind of jarring that "100% of America's revenue in 2025 will go oto Social Security, Medicare, Medicaid, and Net Interest Expense."
Edit: I take it back, I reproduced the chart on my own and the circles are correctly scaled. It is as bad as it looks!
Edited on Feb 25, 2011 at 4:34pmDec '10
Re: USA Inc. is a Company in Trouble
The time horizon for elected policy makers induces them to spend as much as they can in the present.
Our historic first Islamic apostate president has already argued that the interest on past federal debt does not count in his “balanced budget.”
No politician saves resources for the future.
Too much social security, Medicare, Medicaid, Unemployment Insurance, and Other Entitlements?
Is Malthusianism validated?
Sep '10
Re: USA Inc. is a Company in Trouble
Mark Wilson: Ugh, pie charts. It looks to me like they scaled the circle size by diameter rather than area, which makes it look misleadingly worse....
Edit: I take it back, I reproduced the chart on my own and the circles are correctly scaled. It is as bad as it looks!
Edited on Feb 25 at 04:34 pm
On my screen the ratio of the diameters is somewhere between 1.35 and 1.4, while the expense/revenue ratio is 1.598. That doesn't fit scaling by diameter or area. Weird.
Why is everyone looking at me like that?
Jan '11
Re: USA Inc. is a Company in Trouble
I'm worried because I live in its subsidiary, CanadaCo. We're doing OK because of our petro economy, but if the US catches cold, we historically get pneumonia. The exchange rate has altered quite a bit over the last few years - the historical Canadian dollarette is now looking strong - perhaps more reflective of the devaluing of the US dollar.
May '10
Re: USA Inc. is a Company in Trouble
dogsbody
Mark Wilson: Ugh, pie charts. It looks to me like they scaled the circle size by diameter rather than area, which makes it look misleadingly worse....
Edit: I take it back, I reproduced the chart on my own and the circles are correctly scaled. It is as bad as it looks!
Edited on Feb 25 at 04:34 pm
On my screen the ratio of the diameters is somewhere between 1.35 and 1.4, while the expense/revenue ratio is 1.598. That doesn't fit scaling by diameter or area. Weird.
Why is everyone looking at me like that? · Feb 25 at 4:46pm
You're right. I was just holding up my fingers to compare a Matlab plot against the image. I bet somebody just eyeballed it and scaled them manually. It's basically the right size within 10%.
Sep '10
Re: USA Inc. is a Company in Trouble
Mark Wilson
You're right. I was just holding up my fingers to compare a Matlab plot against the image. I bet somebody just eyeballed it and scaled them manually. It's basically the right size within 10%. · Feb 25 at 5:04pm
Mark, thanks to you and me, this comment thread is now at least 3 dB geekier than the average Ricochet thread. Of course, the night is still young.
Sep '10
Re: USA Inc. is a Company in Trouble
dogsbody
Mark Wilson
You're right. I was just holding up my fingers to compare a Matlab plot against the image. I bet somebody just eyeballed it and scaled them manually. It's basically the right size within 10%. · Feb 25 at 5:04pm
Mark, thanks to you and me, this comment thread is now at least 3 dB geekier than the average Ricochet thread. Of course, the night is still young. · Feb 25 at 5:16pm
What happened to Mathematica? To say nothing of Maple?
Edited on Feb 25, 2011 at 5:33pmJul '10
Re: USA Inc. is a Company in Trouble
dogsbody
Mark, thanks to you and me, this comment thread is now at least 3 dB geekier than the average Ricochet thread. Of course, the night is still young. · Feb 25 at 5:16pm
That truly cracked Me up! Too funny.
Re: USA Inc. is a Company in Trouble
Mark Wilson: Ugh, pie charts. It looks to me like they scaled the circle size by diameter rather than area, which makes it look misleadingly worse to the unassuming viewer.
Good overall point though. It's kind of jarring that "100% of America's revenue in 2025 will go oto Social Security, Medicare, Medicaid, and Net Interest Expense."
Edit: I take it back, I reproduced the chart on my own and the circles are correctly scaled. It is as bad as it looks! · Feb 25 at 4:20pm
Edited on Feb 25 at 04:34 pm
Damn! I was hoping you were right!
Sep '10
Re: USA Inc. is a Company in Trouble
Pseudodionysius
What happened to Mathematica? To say nothing of Maple? · Feb 25 at 5:29pm
Edited on Feb 25 at 05:33 pm
Pseudod, I like Maple, but usually don't crank it up until I need to do something with exterior differential systems.
Mathematica, on the other hand--ackptfthhh! Barbaric.
Jan '11
Re: USA Inc. is a Company in Trouble
We're not in great shape, but we're not all that bad. We've got interest payments covered 16 times. That's not bad. And when that number goes up and our creditors start to feel the pinch, all we really have to do is cut off grandpa and grandma (it's not like they're doing anything but keeping themselves alive) and we're back! Phoenix out of the ashes, boys and girls.
Sep '10
Re: USA Inc. is a Company in Trouble
Wow! What a labor of love this really cool publication must have been for Ms. Meeker, et.al. It's loaded with so many graphs, drill downs, bullet point sheets, etc.--all just so incredibly informative and mind-boggling.
Hard for me to slog through without becoming somewhat depressed, though...
Aug '10
Re: USA Inc. is a Company in Trouble
I dunno, I just did it in Mathcad, and it only looks about 2dB geekier.
Oct '10
Re: USA Inc. is a Company in Trouble
Still, there is an agenda here. For instance, our attention is drawn to the differences between a recipient in 1957 vs a recipient in 2009:
2009 -- 52 million retired Americans (17% of population) received an average of $11,826 (in 2005 dollars) in Social Security payments
1957 -- 10 million retired Americans (6% of population) received an average of $5,447 (in 2005 dollars) in Social Security payments
What they don’t point out is the 1957 recipient contributed only 3% (both halves) of his first ~$3500 income for 20 years, totalling $2000.
The 2009 recipient contributed over twice as long at 5 times the rate for up to 30 times the income, totaling somewhere between $150,000 to $200,000.
Here are the tables.
This means the class of 1957 received 3 times their total contributions in the first year alone whereas the class of 2009 will get their total contributions back after 15 to 20 years.
Class of 1957 had a life expectancy of 13 years; class of 2009, 16 years.
Aug '10
Re: USA Inc. is a Company in Trouble
What the graphs show me is that we've got a fundamental problem with the very concept of "entitlements". What ever happened to the idea that no legislature could bind a future legislature? If every legislature had to vote affirmatively before spending any money, I don't think there's any danger that they'd veto the entire welfare state in any one particular year, but we wouldn't have this sense that it will take a super-human political effort to get the budget under control.
Oct '10
Re: USA Inc. is a Company in Trouble
Addendum to my previous post (used up the word limit)
We don’t start looking at a problem unless we intend to solve it. There is an oft repeated theme that the boomers life expectancy has gone up and that they haven’t saved for their own retirement. Both are true; the boomer will live three more years than his 1957 counterpart and had his savings opportunities greatly reduced by the 15% SSI tax over his most productive years.
The younger generations are facing the same problems with SSI as the boomers. Medicare is the elephant in the room. The exponential increase in medical costs since 1957 has purchased essentially no improvement whatever. The three year increase in lifespan can be put down to better working conditions, food, water and air.
We need to zero out SSI and put the money in passbook accounts. Zero out employer health insurance, zero out Medicare, get our own insurance and pay our own doctors.
Jan '11
Re: USA Inc. is a Company in Trouble
Rob, as of now, the hyperlink you created for the words "this one" do not appear to be going to the intended blog post. If I'm correct, would you fix that?