The Economic Outlook for the United States

Not everyone has a negative outlook going into the future. Daniel Drezner at Foreign Policy (h/t Instapundit) notes that the United States is successfully deleveraging, manufacturing is on the mend, and increased energy security.

However, as Adam Smith once noted, "there is a lot of ruin in a nation."

I have no doubt that the United States will successfully rebound in the long term--just as it did after the Great Depression. My concern is the short term. While households and businesses are shedding debt, the Federal debt is exploding, and many state and local governments are coming under increasing pressure due to public pensions. There are some real limits to how much debt that households can shed given the share of debt wrapped up in student loans (which is exempt from bankruptcy) and stagnating incomes.

An upturn in manufacturing may not lead to new jobs--some jobs are gone permanently. As I've noted before, China is expected to devalue its currency to avoid a slowdown in its economy, which will act to siphon off further manufacturing jobs. And, as ObamaCare comes online, increased taxes and regulatory expenses will leave less money for investment, while making it correspondingly more expensive to start up a new enterprise.

Even energy independence is questionable. The United States may sit on some of the largest reserves in the world, but it doesn't matter if we cannot exploit these resources. For instance, even though the Monterey/Santos oil field has very large reserves, what are the odds that California will allow development? Obama has rejected the Keystone pipeline that would have created jobs and provided a secure North American source of oil. The EPA is forcing the shut down of power plants and a major oil refineries, and the Administration is essentially doing everything it thinks it can get away with in shutting down domestic oil production.

The Obama administration has taken a lot of steps to shut down US production of coal and oil. Obama's EPA is working to clamp down on Canadian oil sand imports and on US production of shale oil. But political peak oil -- and the resulting artificial oil price bubble -- a la Obama will not affect the US' neighbors.

Cuba is diving into the offshore oil drilling game -- hoping to cash in on Obama's ongoing de facto Gulf of Mexico oil moratorium. Cutting corners on safety and environmental protections, Cuba's Venezuelan, Spanish, Norwegian, Brazilian, Indian, and Chinese partners are not particularly concerned about the environmental fallout along the Eastern US coast and fisheries, in the event of a massive spill. Certainly Mr. Obama is not likely to complain very loudly -- even if the environmental damage from a Cuban spill is orders of magnitude larger than from the BP spill. In the event of a Cuban spill, Obama is likely to turn against US oil companies to make it even harder for them to drill in US offshore areas.

(Source).

You may note that a lot of the problems facing the United States are not natural obstacles, but political obstacles. (See, e.g., this op-ed on the elitism underlying environmentalism). Thus, whether the United States overcomes its problems will largely depend on the outcome of the coming election cycle.