Where Did Our Country's Wealth Go?

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Many Americans have begun to wonder about what happened to all of our wealth. It is true that the United States still has the largest economy in the world. Our citizens, on average, are some of the wealthiest in the world. At one time, our wealth allowed us to dominate the world in so may areas include militarily, politically, diplomatically, economically, athletically, and culturally.

We probably cannot as confidently make that statement of dominance today. One reason we may not be able to do that is we are much less wealthy, relative to our past, than we have been. Consider the many ways the government and the political class that operates it have allowed our nation’s wealth to leak out of the country over time:

– Probably the biggest drain on our nation’s wealth has been the political class’ inability to develop and implement a coherent and strategic energy policy for the country. Despite the OPEC oi shocks from the 1970s that rocked the country and the economy, in 2011 we still have no energy policy that protects and retains the nation’s wealth.

According to the U.S. Energy Information Administration, in 2010 the United States imported about 4.3 billion barrels of oil and petroleum products from other countries. These imports are needed because the U.S. economy goes through over 7 billion barrels a year. 

The political class has not found a way, or even tried to find a way, to close that gap over the decades, by either diversifying our energy sources away from petroleum or increasing domestic production to close or eliminate that gap of three billion barrels of oil. In fact, the gap has likely gotten larger since the 4.3 billion barrels of imported barrels is about twice what it was in 1980, according to the Federal government.

At $90 a barrel, 4.3 billion barrels a year roughly results in about $386 billion dollars of our wealth leaving our domestic economy annually. These hundreds of billions of dollars end up building the economies of other nations that feed our energy addiction, nations that are not always friendly to our interests or our safety.

– Another major wealth drain is due to the illegal drug market, primarily the Mexican drug cartels. According to a January 26, 2011 research paper developed by the Law and Public Policy group at the Wharton School at the University of  Pennsylvania, the Mexican drug cartels’ revenue from the United States is between $35 and $45 billion a year. The majority of the revenue, according to several other sources, comes from marijuana but also includes amphetamines, cocaine and other illegal drugs.

We have seen Mexicans die by the thousands every year due to drug cartel violence. We have seen the police, judges, and government officials in Mexico corrupted by cartel money. And as a result of our politicians’ forty year failed war on drugs, we have seen hundreds of billions of dollars diverted from this country into foreign gangs, who much like the oil exporting nations above, do not always have our best interests and safety in mind.

– While we have seen trillions of our wealth leak out over time because the political class has not acted and has not developed coherent strategies and plans for energy and drug addiction, the third major wealth drain has been the political class actually acting but acting poorly when it comes to military matters. We have deployed hundreds of thousands of U.S. troops around the world over the past decades, most often in ill-defined and ill-executed wars or in places where there was no need to deploy them.

We have likely spent over a trillion dollars already in Iraq and Afghanistan with no clear, concise, and defined benefit in return. Between Europe, Japan, and South Korea, we have well over 120,000 U.S. troops deployed overseas or no reason at all, at a cost of probably over $50 billion a year. In return, the economy and the American public gets no tangible benefit, another leak of our wealth pool.

– According to the Cato Institute’s government downsizing analysis, the American taxpayer would save over $100 billion a year of the U.S. Department of Education was eliminated. Why should it be eliminated? Consider the following “accomplishments” of the Department:

  • A recent Associated Press article indicated that almost 25% of U.S. armed forces recruits could not fulfill basic language and math skills needed to enter the armed forces.

  • Another recent Associated Press report showed that upwards of 40% of community college freshmen in this country need to take remedial courses in basic subjects before they can begin their college work even though most of them had high school diplomas.

  • A whole host of international student testing initiatives show that U.S. students almost always trail dozens of other countries’ kids when it comes to math, language, and science skills.

  • And the latest bad news, a June 14, 2011 Associated Press report showed that only 13% of U.S. high school seniors have a solid understanding and knowledge of American history.

All of which raises the important question: couldn’t the nation do just as poorly and not spend $100 billion every year to do so badly? Cato has done its investigative analysis and has shown that yes, the country can change and dramatically improve its educational policies and approaches without having a Department of Education, resulting in $100 billion a year in taxpayer savings.

If we add in additional waste that we have documented, waste that exists in Medicare, Medicaid, and Social Security, we easily can see where over $200 billion a year leaks out of the productive area of the economy into the unproductive and often criminal areas of the economy.

So let’s review:

– We allow about $386 billion a year to leak out to foreign oil exporters because the political class has not deployed an effective energy strategy.

– We allow about $40 billion or so a year to leak out to criminal drug gangs in Mexico because the political class has not deployed an effective drug addiction policy.

– We allow about $50 billion a year to leak out of the productive area of our economy because we continue to unnecessarily deploy U.S. troops around the world.

– We allow over $200 billion a year to leak out of the productive area of the economy due to an ill performing Department of Education and waste and fraud in our Federal social services programs.

If we add up these various wealth leaks out of the U.S. economy, we end up with a grand total of leaks worth about $679 billion a year. This figure does not include the more than trillion of dollars we have allowed to leak down the military drain that is Afghanistan and Iraq. It does not include the tax breaks we give U.S. companies to close domestic factories and move production to other countries. It does not include the tens of billions of dollars that illegal immigrants send back home to their countries, dollars that are not retained and spent in this country.

Thus, the $679 billion is probably a conservative estimate of how much our government and the politicians that run it allow these leaks to deplete our world and our economy every year. $679 billion is equivalent to an annual tax break for every American household of about $5,900, at a minimum. We would be much wealthier as a country if every household had at least another $5,900 a year in disposable income to spend as they see fit.

And the good news is that we would be just as safe as a nation, more economically independent, and probably raising smarter kids in the process. The actions to accomplish this wealth retention include focused, national steps that address energy independence, education reform, military consolidation, and the wholesale changing of our political processes so that these processes eventually produce elected officials that know how to fix a leak.

Until we take these steps, our wealth and our economy will die a little bit more each day, death by a thousand cuts. The problem with a thousand cuts is that eventually the leaks stop, not because they have been fixed, but because there is nothing left to leak out.


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