November 24th, 2011
11:15 AM ET

Zakaria: U.S. problems are not economic, but political

By Fareed Zakaria, CNN

This time of year, Americans are meant to be thankful. However, no one is feeling particularly grateful because we're in a deep funk. The United States seems to have stopped working. Discussion of dysfunction and decline now dominate the national conversation.

So, I thought I would try to bring a note of optimism to the Thanksgiving table. Every time I turn on the TV, I hear some politician talk about how Europe's woes should be a warning and that America is next. This is a fundamental mistake. The United States is not Greece.

Countries like Greece and even Italy have a deep economic problem. They don't produce enough goods and services that the world wants at attractive prices. It's a competitiveness problem.

Greece also has a long history of borrowing too much and being unable to pay its debts. Over the past 179 years, it has been in default about 50% of the time. Its debts are huge and could not be paid under any plausible scenario. And crucially, because it is part of the euro zone, Greece does not have control over its currency, which means it cannot make its goods cheaper on world markets.

Italy, which is in much better fundamental shape than Greece, would face no short-term crisis if it had kept the lira. It could devalue its currency and make itself more competitive overnight.

The U.S. by contrast, has control over its currency, which is the reserve currency of the world.

Ok, but what about Japan? Isn't America looking a lot like Japan with its lost decade (actually two decades)?

At a recent debate, former U.S. Treasury Secretary Larry Summers pointed out that Japan's collapse in the 1990s was vastly greater than America's. Housing prices there dropped not by a third but by 75%. The stock market fell about the same. The Dow Jones would have to be at 2,600 to hit the equivalent low. And the GDP output gap was not 5% or 6% as it is in America but almost 50%!

Japan has a complex economy with many sclerotic elements and - perhaps crucially - a demographic decline that it could not solve, unless it took in immigrants, which it did not want to do.

The U.S., by contrast, remains one of the world's most competitive economies. It is home to the leading companies in the most advanced industries, houses the largest capital markets and continues to spawn new companies and, indeed, whole new industries. It exports everything from aircraft to entertainment to healthcare products around the world.

Its demographics are strikingly healthy: It will be the only rich country in the world to actually increase its population over the next 30 years - which means more young workers, producers, entrepreneurs and taxpayers.

America's problems are not economic, demographic or technological. They are political. Simple policy measures can change our fate.

If we built out our infrastructure, kept monetary policy pro-growth and reformed our tax code to encourage business investment, we would have growth, a manageable deficit and a bright future.

So be thankful, Americans, that we live in a great country. And call your Congress member to tell him or her to stop stalling and start actually doing something.

For more of my thoughts throughout the week, I invite you to follow me on Facebook and Twitter and to visit the Global Public Square every day. Also, for more of my takes, click here. And be sure to tune in every Sunday at 10a.m. or 1p.m. ET to watch GPS on CNN.

soundoff (332 Responses)
  1. P. O. Carl

    I hear over and over that Christmas shopping will boost the economy. So I went out to do my part. I put $40 of gas in my car and off to the mall I went. I bought a $50 sweater for my wife, and $60 shoes for my son. The gas came from imported oil, the sweater was made in India, and the shoes were made in China. I boosted someones economy, but it wasn't ours. We will go nowhere until everyday consumer goods are made in this country. It is true that we export a lot of things like jet engines and tech products. But you do not by jet engines and new laptops everyday. There is a reason that the CPI doesn't include gasoline and food. It is because they are expensive.

    November 27, 2011 at 5:19 pm |
  2. LiberallLies

    Don't let the Liberal Lies of Obama and of Zakaria decieve you. Don't be naive and gullible by trusting the Con Artist Obama and Zakaria. S&P Downgraded the US because of the US Debt, which means more of the taxpayer's money goes to fund the Debt. CUT GOVERNMENT SPENDING NOW, before we face the same consequences of Greece.

    November 27, 2011 at 6:18 pm |
  3. Roger_Murdock

    "Why U.S. economy's not like Greeces" Er... there's no one left to bail us out?

    November 27, 2011 at 6:34 pm |
  4. Girish

    What Fareed is saying is America is not Greece therefore America will never meet the fate of Greece. Well Fareed I disagree with your simple minded logic. America is not insulated from the global disasters and there is no reason to believe that if it does what Greece has been doing which is spend, spend and spend without adequate revenues to cover the spending and then borrow borrow and borrow that if we do the same we will have a different outcome. The politicians have become more self serving than ever before and unless the USA steers clear of political influence when managing the fiscal stability of the USA, we will remain on the same trajectory of Greece and Italy and the question will be if not now then when. So Fareed stop telling us that things are hunky dory. Maybe they are for you but as a nation we have very few in power if any that will place national interest over their own or their party's interest. So start thinking critically and strategically or the GPS will become like Tahrir square and desperation will overtake clear and logical thinking.

    November 27, 2011 at 6:46 pm |
  5. LiberallLies

    Isn't this the same Liberal LIES from Barney Frank that said home prices would not go down. So the naiive liberals allowed the low socio economic moochers to buy homes with No Money Down. This is the Naiive Liberal Idealism which caused ALL the FORECLOSURES and the 2008 Market CRASH. Typical LIBERAL FANTASIES, LIES, FRAUD, and WASTE.

    November 27, 2011 at 6:56 pm |
    • you have a few typos

      you mistyped Bush, you spelled in liberals

      its ok, I knew what you meant

      November 27, 2011 at 9:26 pm |
  6. Skeptic

    Well, he didn't have just a note of optimism, he's got a whole song.

    What Zakaria failed to realize is the globalization of everything that can be outsourced. Before China and India joined the World Trade Organization we were doing just fine, but ever since the flood gate opened, we have been draining our jobs. Zakaria failed to point out where sustainable jobs can be created in the United States. We can't just keep on building houses forever. Everything that's not service and not defense related is outsourced. That's our biggest problem. On top of that, individualism is hurting the society even more. Instead of working fewer hours per person so others can find jobs, we are squeezing the remaining workforce to produce as much as before the laid off.

    Our unemployment is not just 9%. We have 9% on the book, but another 9% that's under the radar. Once you do not have a job over one year, you are no longer considered unemployed is not a true measurement of unemployment rate.

    November 27, 2011 at 6:56 pm |
  7. lioncity

    US is safer than Greece in many respects, but Greece does not have to bleed trillions supporting a huge military, or having to spend hundreds of billions supporting unemployable veterans.

    November 27, 2011 at 7:29 pm |
  8. Carla

    I just want to say thank you Fareed! I'm always impressed by your topics, guests and how you ask all the right questions. Thank you for making us think..

    November 27, 2011 at 8:28 pm |
  9. Oldcrow

    Fareed is a stunt double for Martin Bashir. Both are anchor babies stirring the pot. We Americans will figure this out and it starts with UN OPINIONATED journalism, NOT socialist clowns that escaped to come here and lecture idiocy !

    November 27, 2011 at 9:18 pm |
  10. megghegg

    What a load of crap.

    November 28, 2011 at 2:05 am |
  11. Dave

    What huge export economy? We import far more than we export and we do not manufacture close to what we use to in this country! Just look in the stores today and you will find a huge number of goods that say made in China, not assembled in China but made in China. GE is moving more jobs out of the country and they where so desperate to build a jet engine plant in Chine they gave away technology to China! From Computer parts, outdoor furniture, christmas lights, air compressors, tools, knives, dishes ect....... Look at what you are picking up, it most likely says made in China! We are helping to build and upgrade there highways, build up there cities, high speed rail and so on. If you do not think your small purchase doesn't do anything your dead wrong! Times your purchase by hundred thousand or even a million units being exported from China and that is where the damage is done. Plus many do not think about all the jobs that are lost in the US when things are manufactured in China! People do not have those jobs here and they are not spending there paychecks at local businesses. Also when you outsource manufacturing to a country like China who in the past did not have that capability. After a generation or two of making a product they see how it is made and then they copy it and then the american company has to compete with a cheaper made product. And what do so many Americans do? They buy the product that is the cheapest in the store and do not care where it is made! Our government waste anywhere from thousands to billions of dollars all the time from funding shrimp running on a treadmill to cost overruns on the new generation F-22 fighter jet for our military! Our banks make bad loans they know people can not afford to keep up and then after getting bailed out by tax payers money they hold on to that money. Corporate America can never seem to profit enough and they sit on huge sums of cash while laying off workers or cutting workers hours and cry about how tough things are. Do people think we are that far off from going the way of Greece? Look at the lack of huge building projects, the conditions of many of our roads and highways, look at how money is wasted and spent on things that are not important and look at how much money politicians get over paid when the average american worries about paying there rent and heating bills or if they can afford to fix there low dollar car. I am not saying everything needs to be made here but it is clear we need to make more things in the US again and people need to actually buy the goods! Look in your homes and tell me what is the ratio of American made to imported goods?

    November 28, 2011 at 9:53 am |
  12. Lana

    I think the cause of our woes cannot be pinned on one thing. While we export a lot of goods, we're not making them. If we made half as much as what we own, we would have plenty of well-paying jobs. The people with well-paying jobs in turn would have enough money to buy things, pay taxes, and get off of welfare.

    Corporations get huge tax breaks. They also contribute to politicians' campaigns. They have lobbyists. Laws are made in favor of large corporations, not individuals and small businesses.

    I don't think that anyone after Bush could have improved the country. We were just in too deep, and we have been on our way to Hell since the eighties. Even if we did get someone who had ideas on how to get us out of the financial mess, Congress wouldn't have allowed it. They can't seem to agree on anything. I sometimes wonder if they disagree not because it conflicts with what they believe in, but rather the person proposing something is of the opposite political party. At least that's the impression I get.

    November 28, 2011 at 12:41 pm |
  13. ib42

    @ Howard
    Take your blinders off! Look beyond the three+ years Mr. Obama has been the President..look at the 8 years before that. Then spout your hateful, prejudiced opinions, IF you are capable of self honesty.

    November 28, 2011 at 5:11 pm |
  14. DVAT is the way forward

    Bill Clinton put the USA on the right course ...

    What came after destroyed all of the good work that was done! Taxcuts! Evil of USA problems!

    Comeon USA .. wake up and fix the issues at hand instead of playing politics. Its simple math 9-9-9! Not one of you who posted on this blog has came up with anything that can fix the USA problems. Shame on you!

    November 29, 2011 at 7:28 am |
  15. Pallanes


    Let’s all thank our fearless leaders for all that they don’t do.
    Wonder what they’re doing now?
    I’m sure it’s nothing new. And let’s all thank the bankers, yes and wall street as well.
    Yes let’s give them all a great big thanks, for making our lives hell.
    And let’s all give credit where so much credit is due.
    And not forget to thank our congress, for the absolute nothing that they do.
    In the golden days they’d have stormed that castle,
    maybe a few beheadings, yes be rid of their hassle.
    But were not like them, no it’s heaven that we need, they can have all their money.
    Bury themselves in their greed.
    Let’s rid ourselves of all these liars. Don’t need any violence, don’t need any fires.
    Let us finally rid ourselves, of all those who try to rule.
    Seems between the whole lot of them, there is not one who’s not a fool.
    So let’s just thank them all, for all they haven’t done.
    With their services no longer needed, it’s time to end their fun.
    It’s finally time we took control. It’s finally time we played our role.
    Let’s just say goodbye to this crooked regime.
    And say a long awaited hello to our great American dream.


    January 18, 2012 at 4:47 pm |
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