Twenty Things All Americans Should Know About the Economy

 

Takeaway

  • The U.S. has lost 5 million manufacturing jobs in the last decade
  • Income inequality has increased significantly in the past 30 years
  • Disability benefits make up about 20 percent of Social Security spending

At the recent 2014 Economic Forecast event in Dallas, Sandy Leeds, a distinguished senior lecturer in finance at McCombs, said Americans need to start paying attention to the true causes of the country’s slowed economic growth. He outlined the 20 most important things he thinks everyone should know about the present and future realities of the U.S. economy.

  1. Weak final sales are the best indication of GDP growth (excluding inventory adjustments).
  2. It’s very unusual to see such weak growth after a recession. In a typical recovery, GDP grows at a rate of 5 to 7 percent as companies begin rehiring people. But the current recovery is much slower, which is why unemployment remains high.
  3. It’s not unusual to see weak GDP growth after a financial crisis, when banks are lending less and individuals deleverage.
  4. A better way to judge the sustainability of a recovery is to look at GDP growth minus the budget deficit.
  5. People are dropping out of the labor market – and not just the retiring baby boomers.
  6. If our workforce participation rate hadn’t changed, the unemployment rate would be 4 percent higher.
  7. The U.S. has lost 5 million manufacturing jobs in the last decade.
  8. Deflation fears continue to scare the Federal Reserve. Expect low rates for a long time. 
  9. Our federal debt is now 100 percent of GDP.
  10. It’s misleading to ignore the debt to our trust funds – unless you don’t mind ignoring the promises that the government has made to you.
  11. On average, our tax revenue equals 18 percent of GDP. This includes payroll taxes and income taxes. 
  12. The math is simple: High debt will slow our growth.
  13. We have huge, unfunded liabilities.
  14. If we look more than 75 years into the future, our unfunded liabilities will grow even larger. 
  15. Approximately one in 20 American workers is disabled.
  16. Disability benefits account for approximately 20 percent of Social Security spending.
  17. Disability is the new unemployment insurance.
  18. Student debt is growing much faster than income.
  19. For-profit schools are the real cancer. 
  20. Income inequality has increased significantly in the past 30 years. 

Read recaps of the Houston economic forecast event here, and the Austin session here.

 

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Faculty in this Article

Sandy Leeds

Distinguished Senior Lecturer, Department of Finance McCombs School of Business, The University of Texas at Austin

Sandy Leeds, CFA is a Distinguished Senior Lecturer at The University of Texas at Austin. He teaches graduate level classes in the MBA program and...

About The Author

Gayle Hight

Special Projects Marketing Manager, aka Texas Enterprise's "The Connector", McCombs School of Business

With a BS and MBA degrees from UT Austin, and on McCombs' staff for the past 18 years, Gayle knows UT. She is staff writer and special events...

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