The United States is one of the richest countries in the world and depending on the criteria it may even be the richest. But it also has a high unemployment rate, private healthcare, and one of the biggest disparities between rich and poor in the entire first world. It is unique, to say the least, but there are aspects about the US economy that may even surprise those who consider themselves well versed on the modern financial climate.
Credit Card Debt Has Reached a Frightening Milestone
Credit card debt in the United Sates passed $1 trillion for the first time in 2018, a statistic that flatters no one and makes for very concerning reading. This is all a result of credit cards being more accessible than ever, with offers that customers deem too good to turn down.
It is easier to get a credit card in the United States than it is in many other countries worldwide, and the offers on US credit cards are also better than anything you will find in other countries. Take the UK as an example. The economies are similar, we are close allies, and many leading US financial institutions are also dominant in the UK.
However, while US customers are being offered up to 5% cash back on top of low interest rates, customers in the UK will struggle to find anything better than 0.5%. Competition is so fierce in the US and the laws are so relaxed that credit card companies have been given free reign, resulting in this astronomical debt.
This debt rose by nearly $100 billion in 2017 alone, and the average US household has over $8,000 in credit card debt.
Student Loan Debt is Even Higher
If you thought that credit card debt was the biggest form of consumer debt outside of mortgages, then you thought wrong. That honor goes to student loans, another distinctly US problem that is crippling families up and down the country. The vast majority of other first-world countries have some form of free education, and you’ll only pay if you want admission to the biggest private schools. In the US, you pay unless you have a scholarship, and because the costs are so high the only way to pay is to take out large student debts.
To understand how expensive education is in the US, you only need to look at the world’s biggest non-US universities. Oxford, for instance, is one of the best universities in the world and it charges less than $12,000 a year for tuition for UK residents. Harvard, on the other hand, charges nearly $45,000 for US residents, and you’ll pay a similar price in many other major universities.
This is what triggers the student loan debt, because a full term at a major UK university costs the same as a single year at a US one. We’re not alone in having student loans, of course, but US student loans are much more unforgiving than student loans in other countries, which is why they follow people around for years and years.
The Wealth Gap is Growing
We've all heard that the richest few control most of the money in the US, but rarely do we understand the extent at which this applies and the problem is only getting worse. If you take all of the net worth in the United States for 2018 and then divide it equally between all citizens, then each family would have over three-quarters of a million dollars.
In actual fact, more than 50% of the US population has a net worth of just $10,000 to $12,000. That’s around 65 million households struggling to make ends meet while thousands more are hoarding wealth.
Even those who live comfortably are a long way from the wealthiest. In fact, the average middle class family in the United States in 2018 is 1,000x worse-off than the richest 1%. If that’s still not clear, then consider this: the top 1% controls over a third of the money in the United States, while the bottom 40% controls less than 1% of it.
It’s Not the Biggest Economy
If you focus on purchasing power parity, the United States is not the biggest economy in the world. It was the biggest for over 100 years, but a few years ago it was passed by China and then by the European Union.
The good news is that there isn’t a huge difference between these top three and when you focus on nominal GDP the United States is still in the lead (although it’s only slightly ahead of the EU). It’s also a long way ahead of number 4 on the list, which is India, and it’s four times larger than number 5, which is Japan.
The US has also been one of the most consistent over the years, with the GDPs of countries like Japan rising and falling, Soviet Union disappearing altogether (after the union was dissolved) and China only really becoming a force in the last decade. However, it’s worrying times for the world’s biggest superpower as it’s no longer the dominant financial force that it once was.
The Economy is Not the Best it has Been
Donald Trump has made some bold claims about the US economy, going as far as to suggest that it is the best it has ever been. Regardless of what side you’re on, you can’t ignore the figures, and when you take a close look at those you realize that Trump’s statement is not rooted in truth. Not for the most part at least.
The GDP increased at a rate of 2.2% in the first quarter of 2018, which sounds good until you realize that the GDP is always (or rather should always be) growing and that the president promised two to three times that. Unemployment is down and more jobs have been created, but again, the numbers are nothing greater than is to be expected and in terms of jobs created, there were more during Obama’s second term.
The United States economy is growing, there is no doubt about that, but it’s not growing at the pace some predicted or expected.