Will America Be a Super Power in 2040, My Review of David Walker's New Book (Part 1)

David’s new book did quite well during the launch week, quickly becoming the 3rd most sold business book in the world.

David Walker is well known for his expertise regarding the fiscal condition of the United States and is perhaps the person who most understands the potential impacts.

Based on David Walker’s current projections for the US in the next 20 years things are not looking good. There is a real question about whether or not the US will still be a world superpower at that point.

What does it mean to be a superpower? Being a superpower comes with four pillars: we are widely respected from an economic perspective, a diplomatic perspective, military power, and cultural influence.

Currently, the US produces 50% of the global GDP but that number will be 18% by 2040 as China and India eclipse the United States’ productive ability.

Workers to retirees will be reduced to a 2:1 ratio by 2040, which speaks to the insolvency of our entitlement programs.

David Walker predicts higher unemployment and economic disparity between the classes. Because capitalism has been under attack for so long the US will have become a welfare state and the private sector will become diminished in a creep toward socialism.

The growth of the economy will have stalled out between 1% and 1.25%, which is not great for American prosperity. This is a big problem for keeping down unemployment and creating prosperity for America.

The debt to GDP ratio will be 170% by 2040, notwithstanding huge tax increases, major reductions in tax spending, and constrained investments. This isn’t reflecting the real debt to GDP ratio when you include unfunded liabilities.

Due to higher debt levels and interest rates, there will be more protests against calls to raise taxes just to pay interest on the debt. If the US defaults on its debt it will precipitate a global depression.

Even the Modern Monetary Theory enthusiasts will be concerned. David Walker is not a follower of MMT and believes that the US will experience hyperinflation, the likes of which hasn't been seen since the 1970s, followed by stagflation.

The global consensus by 2040 will be that China is considered the most powerful country on Earth, as judged by the four pillars mentioned earlier.

The threat of military conflict will increase but the US will be weaker from a conventional military capabilities perspective because most of the money will be going to pay interest on the debt. Our own fiscal responsibility will become our greatest weakness.

Most countries in the world use the US dollar to transact but that will change as the dollar becomes unstable.

The federal government of the US economy will comprise 28% of the economy, and when combined with state and local spending the number will balloon to 40%. This will lead to a misallocation of resources and less private investment. 50% of graduates from public education will lack basic language, math, and technology skills.

Politicians will be calling for higher taxes and more wealth redistribution. This will result in poverty rates in seniors to skyrocket due to changes that will have to be made to Social Security and Medicare.

Many wealthier individuals will leave the US, primarily leaving for Canada. For the first time in history, the quality of life of future generations of Americans may not be better than in the past.

We don’t face an immediate crisis, which is part of the problem. We are headed to a very bad place unless we can make some serious changes to shore up the fiscal conditions of our country.