What the Heck Happened to the USA?

By Chris Kanthan

While the economy seems robust in 2018, there are troubling, systemic problems in the US. Unsustainable debt, shrinking middle class, stagnant wages, possible bubbles in stock market and housing (again!), widening inequality, exploding healthcare cost, deep political division, social anxiety, dwindling global power, perpetual wars etc. are all colossal problems that cannot be swept under the rug with wishful thinking.

Half of all American children live in households that receive welfare -- "means-tested assistance from the government; and the Top 1% of Americans earn 26 times as much as the other 99% combined. These are serious economic issues that affect the future of the country.

The middle class and lower-income Americans enjoyed an astonishing growth in income and wealth from 1945 to 1975. Since then, real wages have been stagnant for the last 40 years. And this phenomenon was not an accident – it was methodically engineered and gradually implemented.

How did we get here and what's the solution? There are distinct narratives on the left and the right, both captives of ideological echo chambers. The answer is more complex and nuanced; and it will make conservatives, liberals and libertarians alike uncomfortable.

Much of this book is in the form of conversations between various characters of distinct political ideologies -- traditional conservative, Trump supporter, mainstream democrat, socialist, libertarian and an independent. There are also hundreds of links to reputable sources and plenty of charts. Concepts of economics are simplified and made easy for anyone to understand.

Staying away from simplistic slogans and emotional attacks, this book presents rational, thoughtful and illuminating discussions of the crisis that America faces now and in the near future. And each discussion and conversation is structured in a way to elucidate both the problems and the solutions.

• Language: English
• Publisher: Chris Kanthan
• Release date: Jul 20, 2018
• ISBN: 9780463356654

Chris Kanthan

Chris Kanthan is the author of three books and numerous articles on various topics. He lives in the San Francisco Bay Area, has traveled to more than 35 countries, and deeply cares about politics, world affairs, finance and food. A sample of his works: * Debunking 10 lies about Syria and Assad http://bit.ly/2LW9ai4 * Military, Deep State and American Innocence http://bit.ly/2vkrF58 * Syrian War for Dummies - http://bit.ly/Syria-Dummies * Syria: The myth of "moderate rebels" - http://bit.ly/2h7g3OP * America is Disneyland - http://bit.ly/2FyeBfF * Understanding America as a System - http://bit.ly/2tCtLPE * America's Crisis - Death of Logic and Objectivity http://bit.ly/Death-Of-Logic * Iran Protests Through the Prism of Geopolitics http://bit.ly/Iran-Protests * The Rising Chinese Dream http://bit.ly/Chinese-Dream * Why the Deep State Hates Putin http://bit.ly/Why-Putin-Hated * 7 Secrets about the World - Revealed through Syrian War: http://bit.ly/2gRf0Co * Pakistan and Afghanistan - Epicenters of Geopolitical Intrigue http://bit.ly/Pakistan-Afghanistan * Red Pill for Russophobes - Part 1: http://bit.ly/2gRjTeW * Red Pill for Russophobes - Part 2: http://bit.ly/2gQIHzZ * Intro to Islam, Salafism & Jihadism - http://bit.ly/Salafism * Manufacturing Dissent - The New Culture War: http://bit.ly/Manufacturing-Dissent * Greece Debt Crisis - What You Are Not Being Told: By The Media http://bit.ly/1KIWstM * Interview about "Deconstructing Monsanto": http://bit.ly/10XQQ3U * How GMO-free Diet Changed My Life: http://bit.ly/17SwKSS * The Default is Fake Food: http://bit.ly/17k1sAS * Let's Crowdfund GMO study http://bit.ly/1n0pjzc * March Against Monsanto http://bit.ly/19RyWoB * About our Fake Economy & Fake Capitalism http://bit.ly/1ucghRJ * GMO Labeling and Prop 37 http://bit.ly/NUkhlS * Understanding the Troubling Trends in America http://bit.ly/1vl7zxm * Elections in Greece http://bit.ly/JhH1ey * The Fed's Giant Ponzi Scheme http://bit.ly/1QP3C4R * Why we shouldn't go to war with Syria http://bit.ly/183Lt8o * Lessons in Economics from Thailand http://bit.ly/1dxVvES * Crisis in Ukraine: In-depth Discussion http://bit.ly/1cS15hz * Zombie Economy, Living Bubble http://bit.ly/1SIwU2q * The Vaccine Conundrum http://bit.ly/1AcGVgI * Angelina Jolie's Mastectomy and Media's Lobotomy http://bit.ly/1ZZqCCN * Marketing for Activists http://bit.ly/12zBFlH * Facebook Valuation http://bit.ly/Jwegf0 * Obama's Debate Performance: http://bit.ly/10dsjIJ

Book preview

Chapter 1: Everything is Awesome

Is everything awesome in America? Of course, one could retort, We are the wealthiest nation in the world, the stock market is at record highs, housing is booming, inflation is low, and unemployment is the lowest in decades. Yes, everything is pretty close to being awesome!

A lot of people are complacent after a few years of non-stop growth, especially in the stock market and the housing market. We will discuss this in details later, but it suffices to say that these are bubbles. Look at the stock market chart:

The stock market has spiked not because the corporations have increased their sales and revenues tremendously. Look at the price/sales ratio – it’s much larger than during the 2008 crisis and has topped the dot-com bubble:

The main reason behind the meteoric rise is that corporations have been buying back their own shares and thus artificially boosting the price.

Another way to look at the valuation is to look at the ratio of stock market capitalization to GDP. The average long-term value is about 65% and we are at over 150% -- which means that the stock market has to lose more than half its value to reach normalcy. The only time the ratio was higher was during the insane dot-com bubble.

Similarly, the housing market has forgotten all about 2008 and is even setting new records:

If corporations increase their revenues and profits, then it’s okay for the stock prices to go up. If American workers made more money and they had more money in the bank, then a booming real estate makes sense. Else it’s just a debt-fueled, temporary orgy.

Let’s forget these bubbles for now and take a look at the real American economy.

How Bad/Great is the Economy?

When 42 million Americans are on food stamps, 74 million are on Medicaid, and 57% of Americans have less than $1000 in the savings account … you know that there is something wrong.

A lot of the poverty is hidden right in front of our eyes. For example, in Disneyland, the Happiest Place on Earth, about 3 in 4 employees struggle to make their end meet, and 10% are homeless because they can’t pay their rents with the meager salary ($10-$15 an hour).

If you look at the overall nominal GDP, yes, the U.S. is still #1. And even under the GDP per capita, the U.S. is ranked 7th. Not bad. However, such average statistics can be misleading. If I have $999 and you have $1, then on the average, we have $500 each, but that fact is not going to help you buy some coffee at Starbucks.

Half of America is completely broke. The bottom 50% of Americans only have 1% of total wealth. The bottom 25% actually have negative wealth – the average family in that range has a net debt of $13,000.

In 2018, even with the so-called booming economy, credit card debt is at record level, surpassing $1 trillion. Many Americans don’t owe any money on their credit cards, but among those who don’t pay it off, the average balance is whopping $17,000.

On the other hand, if the Forbes 400 move to an island and establish their own country, it will have the 5th largest GDP in the world - ahead of France, UK, India and 185 other countries!

How about the Workers?

So how are the American workers doing? The four most common jobs – accounting for 12 million jobs - in America pay less than $11/hr.

And half of all American workers make under $31,000 per year.

We still have 80 million Americans who are stuck with hourly, part-time and temp jobs. These people make less money and also lack benefits such as healthcare, 401K, sick days and paid vacations.

Young and Old Americans

There was a time when college degrees guaranteed a good life. However, now 200,000+ college graduates are working for minimum wage, while the student loan has skyrocketed in the last decade to $1.4 trillion, crushing 44 million young Americans. No wonder that 40% of people with student loans are delinquent or missing payments.

If the young people are suffering, the retired senior citizens are no better off. Thanks to the near-zero interest-rate policy of the Federal reserve Bank over the last 8+ years, many people are deprived of meaningful interest from their life savings. Now more than 1 in 5 retired Americans are forced to work.

Inflation & Cost of Living

Adding pain to all of this is the rising cost of living. Health care insurance, prescription drugs, rents, college tuitions have all been rising briskly every year. Even the famous Big Mac Index has gone up by 5% every year since 2008. Starting in the 1980’s, the federal government has been fudging the math every few years to make the inflation look smaller. That’s why the government can tell you that the inflation today is less than 2%. Call it the Common Core Inflation. According to the way we used to measure inflation until 1980, the real inflation rate is 10%.

Big Picture of the Economy

In a nutshell, you can safely say that 0.1% of Americans are swimming in money, 1% are wealthy, 9% are comfortable, and another 15% are truly middle class. The next 25% think they are middle class, but they are not. The rest - 50% - are just financially screwed. At the very bottom, we also have too many homeless people for such a wealthy nation.

America’s Worsening Health

Okay, lot of Americans are not doing financially so well. How about America’s physical and mental health? With all the science and technology, are we at least happier and healthier?

First of all, thanks to the opioid crisis, life expectancy in the US actually declined two years in a row (2015 and 2016). The US is now ranked 31st in the world for life expectancy.

But … we are #1 in healthcare spending!

USA will spend $3.6 trillion or 18% of our GDP on healthcare in 2018 (which amounts to $11,000 per every man, woman and child). In 1960, healthcare cost only 5% of the US economy. Even now, many rich European countries spend only half as much as the US. Alas, we spend the most, but don’t have much to show for. Many chronic diseases are on the rise and Americans are definitely worse off today than they were 20 or 30 years ago.

And it’s not just because of an aging population, since the health of children and adults under 50 are also worsening, as shown below.

Obesity and diabetes have exploded over the last 25 years. It’s not as if people have started eating a lot or they have become lazier. Consider this:

Since 1990, obesity rate in America has tripled! Today, close to 70% of Americans are overweight or obese. Even 20% of adolescents and pre-teens and, heck, 13% of preschoolers are now struggling with obesity. The pictures below what happened in 25 years.

What other diseases and disorders have worsened? Here is how things have gotten worse in the last 25 years:

Rate ofDiabetes?Almost tripled!(And children are now getting Type 2 diabetes)

Rate ofFood allergies? Gone up big time! Hospitalization of children due to food allergies?Tripled! (Ask your grandma if, in her youth, she ever heard of someone get violently sick over food).

Rate ofIrritable Bowel Diseases? Quintupled!! (3% in 1980to15% now)

Rate ofAsthmain children?Doubled!

Rate ofKidney Stones?Doubledoverall andquadrupledamong women!

Rate ofThyroid related diseases? Skyrocketing! A Thyroid medicine (Synthroid) is the#2 Rx drugnow (by sales).

HighCholesterol? About 100 million Americans have a level of 200 or above! Number of people on cholesterol medication hasquintupled!

Autism?10 fold increase!(not all of it is because of new diagnosis)

Childhood Cancer? It’s now the#1 disease that kills children

Opioidprescription, addiction and death rates? The crisis is just mind-blowing.More than 1 in 3 Americansuse prescription painkillers now –in fact, Americansconsume 80% of global opioids. 2 million Americans are addicted and more than60,000 diedfrom opioid overdose in 2017.

Use ofpsychiatric drugs? Went from1 in 50thirty years ago to1 in 6now.

The list goes on and on. We are so sick that, according to Mayo Clinic, 70% of Americans are on prescription drugs and 20% of Americans are on five or more (!) prescription drugs.

In 2017, Americans spent $475 billion on prescription drugs. Even after adjusting for inflation and population, this is more than twice as much as we spent in 1990 per person.

All these changes are very abnormal for any society and certainly not sustainable.

How can a country deteriorate so much in just 25 years when the economy is supposedly booming and we are supposedly making great strides in science, medicine and technology? Such horrific declines in health occur in nations only during times of war or extreme economic catastrophes.

Government is Broke

If American workers are struggling, the government is even worse. In 1980, the debt to GDP was 30%; today it’s 106%. There was a justifiable spike in debt after World War II, but the US prudently paid off the debt for the next 35 years. However, since 1980, all fiscal discipline has been discarded and a debt-fueled economy has been embraced as a way of life.

Although candidate Trump claimed he would pay off the debt in 8 years, his budget proposal in 2018 shows ever increasing debt, even though we have a growing economy with rising real estate and stock market. Imagine what would happen if the interest rates go up or if there’s a recession in the next couple of years.

There is also another massive time bomb – pension funds of state and local governments and the federal social security fund are staring at enormous unfunded liabilities in the near future.

Infrastructure is in Dismal Shape

In the 1950’s, the US spent a lot of money building America’s infrastructure, which led to impressive growth of the economy. However, now we don’t have any money to fix those aging roads, railways and bridges. With 70,000 structurally deficient bridges in America, it’s no wonder that the American Society of Engineers has given a rating of D+ for US infrastructure.

There was a time when the US was known for its skyscrapers, but now China has 12 out of the top 25 tallest buildings (US has 4). In the last four years alone, China built 264 skyscrapers, while the US built just 20. China has 14,000 miles of high speed railways, while the ancient Amtrak gets into accidents.

Freedom and Liberty Being Eroded

Okay, so America is broke and sick. Do we at least enjoy personal liberty and freedom? Well, if you live in America, you know the truth – endless rules and regulations, mass surveillance by NSA that monitors all your electronic communications, militarized police, and censorship by large corporations such as Google/Facebook/Twitter. There are numerous areas in personal and family life where the government has usurped power. Parents can lose their children to the government for ridiculous reasons. The government can mandate vaccination; prevent people from living off-grid; demand that children get business permit for a lemonade stand; confiscate cash from people without any reason and so on. In the land of the free, it’s even hard to enjoy a picnic at a park on the 4th of July!

Perpetual Wars and the Cost of an Empire

With US military bases and special forces in 140 countries around the world, we have the largest Empire in the history of mankind, although the word Empire is never uttered or recognized. The US spends more money on military (cleverly called defense) than almost the rest of the world put together. Yet we never seem to feel safe, and the list of adversaries grow every year. There’s always a bogeyman or a dictator around the world that the US feels compelled to get rid of. Trillions of dollars are wasted on endless wars that leave a trail of destruction and mayhem. After sixteen years and $800 billion spent on the war in (on?) Afghanistan, 40% of the country is under Taliban and opium production is at record level. However, the only solution that the elites can come up with is to do more of the same.

Political and Social Divisiveness:

In a prosperous country with a bright future, people will be united and optimistic. Instead, we have an extremely divided and an anxious country. Political parties are unable to come together and solve problems in a rational manner; and the social divisions are numerous as well – from immigration to religion (Islam) to race relations to sexual/gender issues. Rise of new groups such as Antifa, Black Lives Matter and Alt Right are all symptoms of deep social and political dissatisfaction.

Overall Decline

There’s no question that America has lost much of its economic and military superiority that it once enjoyed. After the fall of the USSR, there seemed to be only hyperpower left. However, fast forward 25 years, a lot has changed.

When GDP is measured by purchasing power, China is now larger than the US, and has been so since 2014.

In 2017, US GDP grew by $0.7 trillion, while China’s GDP grew by double that amount. This is why economists predict that China’s nominal GDP will overtake the US by 2030. China accounts for 35% of global GDP growth, while the US share is only 17%.

In several areas such as mobile payments, e-commerce market share, and green energy, China’s lead over the US is significant. For example, while Tesla produced 100,000 electric cars in 2017, Chinese companies churned out 600,000 electric cars and 200,000 commercial electric vehicles (such as buses and trucks). While Silicon Valley is undoubtedly the leader in hi-tech for now, China is quickly catching up. There are over 150 Chinese unicorns – startups that are worth more than $1 billion.

The US used to be #1 in manufacturing and #1 in exports in the world. Now, both those titles belong to China. The US is currently saddled with enormous trade deficit. In manufactured goods, the US trade deficit (imports minus exports) was close to $800 billion in 2017. This is an enormous outflow of wealth; and it also presents a national security risk, as we depend on other countries to provide as the basic goods to run our economy. (Below is a chart that shows the total deficit for goods and services from 1960 to 2017):

In terms of military and geopolitical power, the US has shrunk shockingly since the turn of the century. From the Middle East to Africa to Asia, countries are openly defying the US and developing independent regional alliances or global alliances with Russia and China.

In terms of military might, Russia spends a tiny fraction of the US annual budget, but Russia has developed many fighter jets and missile defense systems that are much cheaper and even better the American counterparts. Both Russia and China have developed hypersonic missiles that can evade US missile defense systems.

Finally, there are many countries that are trying to slowly get away from the petrodollar, a system that makes the US dollar powerful and gives the US enormous power to levy sanctions on other countries. China even started its own Yuan-oil futures trading in March 2018. The US dollar will remain the dominant currency for years to come, but it won’t stay unchallenged.

How Did it Happen? What Do We Do Now?

To figure out the solutions to these problems, we need more than slogans and one-liners. Make America Great Again is a good idea, but to do that, we need to go through three steps:

** Understand the details of the current problem

** Figure out how we got here

** Come up with sustainable, long-term and authentic solutions

That’s what this book is about. It’s a combination of articles and discussions among some fictitious characters that represent various political beliefs – liberal, conservative, libertarian and so on.

Chapter 2: Trump is Making America Great Again

Veda: Welcome everyone. Did you all read Chapter 1? What are your thoughts?

Megan: To be honest, it was depressing. But Trump is draining the swamp and he will MAGA!

Ann: Really? What has the con man done so far? Give tax cuts to the rich?

Megan: Millions of Americans have already gotten raises, but you wouldn’t know it since communists don’t work. But Trump has done lot more – he has defeated ISIS; the stock market and the real estate are booming; the economy is doing great with strong GDP; we have the lowest unemployment and highest consumer confidence in decades; jobs are coming back to the US – 2.1 million jobs were added; and the world is respecting us again!

Luiza: Wait a minute! Let’s take one at a time. I will give you that Trump did a good job with ISIS in Syria. As for the rest, forget about the stock market and real estate market. As we read in Chapter 1, it’s a big bubble caused by the Federal Reserve Bank – even Trump repeatedly said so during the campaign. And regarding the unemployment, didn’t Trump use to say during the campaign that the real unemployment was around 40%?

Bert: Yeah, Trump said all the official unemployment numbers were fake. He used the Labor Participation Rate, which was around 63% in 2016. This meant that the unemployment was 37%, according to Trump. Since the election, that number has practically remained the same! See chart below:

Alvin: What is labor participation rate anyways?

Veda: It includes everyone above the age of 16. So students, retired people, married people who don’t want to work etc. are all considered in the statistics. Thus the more appropriate unemployment number would be the U-6 rate, which is still 8.2% in Jan 2018.

Ronald: And I must admit that the GDP numbers were not so great in 2017. Although Trump promised 4% or 5% or even 6% during the campaign, the real GDP grew only 2.3%, which was smaller than the growth during many Obama years. But I blame the Democrats for not cooperating with Trump.

Luiza: I don’t know why Trump is boasting about the jobs added. During the previous four years under Obama, we added more jobs!

Ann: That’s because Trump is a compulsive liar!

Megan: Unlike Obama who armed ISIS and gave billions to Iran and Hezbollah, the terrorist group?

Veda: Okay, let’s stick to facts and a calm discussion. If we go down the partisan path, we can’t have a productive conversation.

Ronald: It’s interesting to note that while 2.1 million jobs were added, the growth in the number of people with jobs is actually smaller.