Tuesday, October 01, 2013

Have We Reached Peak Government?

If we are not yet at Peak Debt, we are getting close, and that means we are also getting close to Peak Government.

Have we reached Peak Government? That is, a structural point beyond which government can no longer grow sustainably?

To help answer the question, I've assembled charts of the foundations of growth: population, gross domestic product (GDP), private employment and output per person (i.e. productivity). These have grown 28%, 75%, 28% and 58% respectively. (I have used 1990 as a baseline, as the past 23 years gives us a reasonably accurate clue as to the long-term trendlines of the current economy.)

In other words, if growth depended entirely on population growth, the real (inflation-adjusted) economy would have grown 28% since 1990. Instead, the GDP rose by 75%. This is the result of rising output per person, i.e. an increase in productivity.

U.S. population:

GDP: ( US Real GDP by Year: 1990: $8 trillion, 2013: $14 trillion; the $9 trillion and $15.7 trillion shown on this chart yield the same results)

Private employment:

Output per person:

Since the state (government) depends on the economy to generate its tax revenues, government cannot grow sustainably at a rate that exceeds the expansion of the economy. Thus we expect government to grow at around the same rate as the economy and productivity, i.e. around 60% to 75%.

But Federal government expenditures have risen by 317% and state/local government spending has leaped by 328% since 1990. In other words, government has expanded at roughly four or five times the underlying growth rate of the economy.

State/local government spending:

How can government expand 300+% while the underlying economy that supports it expanded by 75%? Answer: borrowing money, i.e. debt--lots of it. Federal debt has skyrocketed by 600% since 1990.

This is simply part of a vast, unprecedented expansion of debt in both public and private sectors since 1990:

So the question of Peak Government is ultimately a question of Peak Debt: how much money can the government borrow to sustain its current spending? Can public and private debt expand at rates four or five times that of the underlying economy? If so, for how long?

If we are not yet at Peak Debt, we are getting close, and that means we are also getting close to Peak Government. 

The Nearly Free University and The Emerging Economy:

The Revolution in Higher Education

Reconnecting higher education, livelihoods and the economy

With the soaring cost of higher education, has the value a college degree been turned upside down? College tuition and fees are up 1000% since 1980. Half of all recent college graduates are jobless or underemployed, revealing a deep disconnect between higher education and the job market.

It is no surprise everyone is asking: Where is the return on investment? Is the assumption that higher education returns greater prosperity no longer true? And if this is the case, how does this impact you, your children and grandchildren?

go to Kindle edition
We must thoroughly understand the twin revolutions now fundamentally changing our world: The true cost of higher education and an economy that seems to re-shape itself minute to minute.

The Nearly Free University and the Emerging Economy clearly describes the underlying dynamics at work - and, more importantly, lays out a new low-cost model for higher education: how digital technology is enabling a revolution in higher education that dramatically lowers costs while expanding the opportunities for students of all ages.

The Nearly Free University and the Emerging Economy provides clarity and optimism in a period of the greatest change our educational systems and society have seen, and offers everyone the tools needed to prosper in the Emerging Economy.

Read the Foreword, first section and the Table of Contents.

print edition (list $20, now $18)

Kindle edition: list $9.95 

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify. We will cover the five core reasons why things are falling apart:

go to print edition1. Debt and financialization
2. Crony capitalism
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Once we accept responsibility, we become powerful.

Kindle: $9.95       print: $24

Thank you, Andrew H. ($5/month), for your exceptionally generous subscription to this site-- I am greatly honored by your support and readership.

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