Education: Dumb And Dumber

One of the biggest tragedies of this country is our politicians, and many of our citizens, look at education as an expense rather than an investment. We think of long range planning covering an election cycle. Countries like China think out 50 or 100 years.

The most important investment we can make for the future of our families and our country is education. By 2030 China will have graduated 200,000,000 college graduates, which is more than our total work force. At the same time our defense budget is 5 times the size of China and is equal to the next 13 largest defense budget countries in the world.

Isn’t there something wrong with this? Investing in education will not only increase our GDP but will also decrease expenditures we make to help the impoverished and fight crime. DUMB!!

USA Road Map To Year 2030

The United States is under threat of losing its dominant status in the world. We are losing our influence not because of a lack of military power, but rather the relative decline in our economic power. The remainder of the world is catching up and this is particularly true with China and other parts of Asia. The question is what, if anything, can we do about it.

The National Intelligence Agency (NIA) recently published their economic global forecasts for the year 2030.using four different scenarios.

Stalled Engines: A scenario in which the US and Europe turn inward and globalization stalls.

Fusion: A world in which the US and China cooperate, leading to worldwide cooperation on global challenges.

Gini-Out-of-the-Bottle: A world in which economic inequalities dominate.

Non-state World: A scenario in which non-state actors take the lead in solving global challenges.

As shown on the graph to the left, in 2000 the United States share of global Gross Domestic Product (GDP) was just under 25%. The expected share of global GDP for the United States in the year 2030 is in a range of 17% to 19%, depending on which of the above scenarios becomes reality. This is a drop between 24% and 32% in thirty years and the decrease is expected to continue for some time and most likely at an increasing pace.

Per the NIA,

“By 2030 Asia will be well on its way to returning to being the world’s powerhouse, just as it was before 1500.”

The expected countries to rise include China, India and Brazil. The NIC is not expecting much from Russia; however, countries in Sub-Saharan Africa, other parts of Asia and Latin America, especially Brazil, are expected to significantly increase their share of global GDP by the year 2030 as pictured in the graph below.

The Solution

We have no control over the population size of India and China, 1.24 and 1.34 billion respectively. Each country has four times as many people as the United States. For much of the 20th century both countries were in poverty, therefore their countries’ economy was not much of a factor. Now both countries are developing a middle class and thus their Gross National Product is rising rapidly.

Here is what we must do.
Nurture A Strong Economic Relationship With The Following Countries.

The total population of this trading consortium is almost equal to the separate populations of India and China. 

This will not be easy. China and India will not sit ideally by as we nourish these relations. They will be tough competitors. If we pursue these other nations with the attitude they must “follow our lead” and not have much flexibility, we will lose. They may need us; however remember we also need them.

Choosing Europe as a strategic partner was easy; they already are a major partner. Canada and Mexico are neighbors sharing borders with us and for that reason alone it makes sense to have them join the alliance. Canada may be the best friend we have in the world.

Russia is included because our historical cultures are similar and if they are not invited to our party they will be invited by China, They are wrestling with democracy; however they are making progress. It did not take long for Germany to become an ally after World War II

I included Haiti and Cuba for three reasons: 1) They are our neighbors,  2) If we don’t China will and 3) It is time we stop “punishing” the people of Cuba because of the countries leadership and it is the Judeo/Christian thing to do. Both countries are impoverished and yet so close to the United States. We have ignored them for too long.

Reduce Defense Budget

We have the largest defense budget in the world at $711 billion with China having the next largest at $130 billion. Our defense budget is equal to the next 13 largest budgets in the world combined. Our resources are limited and we are in danger of slipping in influence because of economic competition rather than military.

Education is A Key

In a paper published by American Progress titled The Competition That Really Matters they said the following,

“Today, public commitment to early childhood, educational, and technological development in China is accepted as an integral part of a national economic strategy, unlike in the United States. In 2007 China surpassed the United States in the numbers of college graduates focusing on science, math, engineering, and technology fields. Three years later, it became the world’s largest provider of higher education.

By 2030, China will have 200 million college graduates—more than the entire U.S. workforce….”

If we do not allocate more money to education, and learn to spend it wisely,  we will not be able to slow down the world dominance by Asia. This is where World War III is being fought. We cannot let the black girl in inner city Detroit who has the potential to be the next Einstein go to waste; not just for her sake but also ours.

Get Our Fiscal House In Order

Our expected future expenditures are growing faster than future expected revenues and this is not sustainable. In addition our present unemployment rate is above 10% if we include those people who have stopped looking. Both problems can and should be addressed simultaneously. They are not mutually exclusive. If we cannot get our citizens back to work, we will not solve our fiscal problem.
The plan to get our fiscal house in order must include an upfront investment in infrastructure, education and research and development. These three ingredients are a must if we intend to remain competitive. A portion of the reduction in defense spending should go towards these needed investments. At the same time, such investments will help reduce unemployment.
The remainder of the debt reduction plan should happen over a period of ten to fifteen years. It took us a long time to get into this mess and we will not get out overnight. We have the time, as long as we get a plan now!Any additions to future programs must be offset by cutting into existing programs. It should be no longer acceptable to borrow from future generations to increase current expenses of the present generation.

Protect Our Innovations

We are the most innovative country in the world. This did not happen by accident. We spent trillions of dollars on research and development that has advanced society and increased wealth. However, we have allowed other countries, especially China, to steal our inventions with no cost or repercussions. This must stop. Over the last three decades China has benefited by us opening trade with them and allowing them to export goods and services to our citizens. One reason for innovation is to overcome their advantage of having such cheap labor. By allowing them to steal our innovations we have allowed them to neutralize our advantage. This must stop.

The United States has time to do what is necessary to retain its economic strength relative to the rest of the world. In order to do it, we must plan now and implement before it is too late. The window of opportunity is closing.

China Stealing Christmas

China stole Christmas past and maybe future with the help of Goldman Sachs and other Wall Street firms and bankers. China from around 1980 on was ready to sell us goods at cheap prices and in the late nineties Goldman, and other corporate culprits, devised a way for the American citizen to pull equity out of their homes, when in fact there was very little equity, to buy goods from China. The gimmick was sub-prime loans.

Now, as a result, we are in a battle with China to maintain our standard of living and our economic position in the world. We not only lost the equity in our homes, but at the same time transferred much of our wealth to Asia by consuming what they produced. The battle is not over; however, we need to make serious adjustments if we are to win.

Per a research study completed by the National Intelligence Council,

“By 2030 Asia will be well on its way to returning to being the world’s powerhouse, just as it was before 1500.”

Presently the Defense budget of the United States is equal to the combined defense budgets of the next 13 countries in the world.

Our defense budget is $711 billion while China’s is $150 billion, a little more than 20% of ours. India’s defense budget is not even among the next 13 countries.

The Next Generation/American Progress report, The Competition that Really Matters, found that by 2030 China will have 200 million college graduates — a number that eclipses the total U.S. workforce — and by 2020 India will be graduating four times as many students from college as the United States.

Another problem is the lack of early childhood education for half of U.S. children and the quality of teachers, the Next Generation/American Progress report said.

“In the United States, high school students who choose to enter undergraduate programs for education have SAT scores on average in the bottom third of all students tested, which stands in sharp contrast to nations with impressive student results,” the report found.

China and India are overtaking the United States in college graduates as summarized by the graph below taken from a study by the Center For American Progress linked above.

Unless we decide to use our defensive weapons for offensive purposes, by 2030 we will no longer be the dominant economic power in the world.
Defense As % of GDP 

Below are two charts, one comparing what the United States spends on Defense as a percent of GDP and the other comparing our federal, state and local Education budgets to GDP. They both hover around 5%.

Given the state of the world, we are more at risk of losing our position in the world as a result of falling behind in education than we are of being defeated militarily.

Federal, State, and local education as % of GDP

Therefore, we should be reducing our defense budget and transferring the funds to education. We can no longer be the military power for the rest of the West. They must start paying more for their defense.

Solving Debt Problem

We are facing a “fiscal cliff” because our politicians, President Obama and Congress, did not solve our debt problem in 2011 and pushed it off until the end of this year. They did this by agreeing to spending cuts that were deemed to be unacceptable by all parties. The logic, or lack thereof, was after the 2012 Presidential election both parties would be forced to reach a compromise in order to avoid such drastic measures. They put a gun to their own head. This is not a way for the government of the largest economy in the world to operate and we should be mad as hell.

Below is a quote from the Congressional Budget Office (CBO) that describes the current budgetary problem facing the country if we do nothing, including not enacting the above mentioned fiscal cliff agreement.

“… the persistence of large budget deficits and rapidly escalating federal debt would hinder national saving and investment, thus reducing GDP and income relative to the levels that would occur with smaller deficits. In the later part of the projection period (2022), the economy would grow more slowly … and interest rates would be higher. Ultimately, the policies… would lead to a level of federal debt that would be unsustainable from both a budgetary and an economic perspective.”

There are two parts of our nations budget that cannot be ignored if we truly expect to get a handle on our fiscal problems; defense and entitlements.

“We currently spend more on defense than the next 13 countries combined. Defense spending accounts for about 20 percent of all federal spending — nearly as much as Social Security, or the combined spending for Medicare and Medicaid. The sheer size of the defense budget — $680 billion in the current fiscal year — suggests that it should be part of any serious effort to address America’s long-term fiscal challenges.”

The defense budget for China, the country with the next largest budget, is a little over 20% of ours. Our nation cannot do everything that it desires. We must ration our resources. Below is a chart showing how our government spends its dollars. We need to decide how to rearrange our priorities.

Our future depends as much on education as it does defense. We need to improve the knowledge level of our citizens or we continue to decline in power and influence. For the defense of our countries position in the world, we need to reduce our budget for defense and transfer much of that reduction to education, research, development and infrastructure. We no longer can be the military of the West.

With limited resources we must collectively decide how much are we willing to help our less fortunate citizens. Further, what demands should we place on those who are less fortunate to help themselves dig out of poverty? Everyone agrees that each individual should provide for themselves whenever possible. The debate is going to center around “whenever possible”.

We cannot agree on a plan to solve these problems by December 31, 2012. Therefore, we should extend the payroll tax extension, eliminate the Bush tax cuts for the top 2%, implement expense cuts that can be agreed on and set a new date to address the bigger problems by March 31, 2013.

Future of NATO

NATO has been acting just the way we have trained them. I agree with Gates, see post of November 29, it is time Europe start paying more for defense. However, within a span of 25-years there were two world wars in Europe and we were happy to demilitarize Europe and Japan. It was part of our strategy to prevent a 3rd war.

Today we cannot afford it and it is handing them an economic competitive advantage not needing to spend on defense.

The tone of Mr. Gates is what is troubling. His speech made it sound like the above strategy occurred against our will and we finally decided enough is enough. In fact, we were the ones that created the plan. Through the years we also allowed our allies to use unfair trade practices against us. We knowingly allowed unfair trade practices to help rebuild the rest of the world. Well, Europe has healed from Wield War !! and communism has been defeated. It is time for a level economic playing field in the world.

Therefore, what Mr. Gates said in his recent speech concerning Europe paying their share of for defense is correct, but let us acknowledge that we were the major architect of the western defense. However, it is time to change.