If the United States were a stock, America, Inc would have a 44 Trillion Negative Net Worth

Mary Meeker has created quite a buzz with her cover story this week in Bloomberg Businessweek.  It is based on her analysis of the U.S. as if it were a corporation.  Her assessment?

The bottom line on USA Inc.? Cash flow and net worth are negative, profits are rare, and off-balance-sheet liabilities are enormous. The “company” has underinvested in productive capital, education, and technology–the very tools needed to compete in the global marketplace. Lenders have been patient so far, but the sky-high rates on the sovereign debt of Greece, Ireland, and Portugal suggest what might lie ahead for USA Inc. shareholders and our children.

By our rough estimate, USA Inc. has a net worth of negative $44 trillion. That comes to $143,000 per capita. Negative.

You can find their slide deck here.

If we look at the U.S. from a business model, it is not something I would recommend launching in its current state.  Its value proposition lacks focus and does not meet the needs of its target market.  But that doesn’t really matter because it does not have the resources at its disposal to deliver even if the value proposition made any sense.  And its revenue streams?  Half of what it needs to operate.

via America, Inc- Creating Negative Net Worth | MyVenturePad.

Shareholder Alert: The State of the Business Is Not Good

The bottom line on USA Inc.? Cash flow and net worth are negative, profits are rare, and off-balance-sheet liabilities are enormous. The “company” has underinvested in productive capital, education, and technology—the very tools needed to compete in the global marketplace. Lenders have been patient so far, but the sky-high rates on the sovereign debt of Greece, Ireland, and Portugal suggest what might lie ahead for USA Inc. shareholders and our children.

By our rough estimate, USA Inc. has a net worth of negative $44 trillion. That comes to $143,000 per capita. Negative.

To be fair, the net worth calculation leaves out some assets, including, most importantly, the power to tax. Which simply means that the government can improve its own finances by worsening those of its citizen-shareholders.

Medicare and Medicaid are the crushers for USA Inc. Excluding them and one-time charges, the “core business” shows a median net profit margin of 4 percent over the past 15 years. USA Inc.’s core operations were in surplus nine of those years. In the early years of the Republic, the only entitlements were military pensions. The big change came with the 1930s and World War II, when the federal government substantially expanded its role in the economy (in effect, its “business lines”).

Entitlements experienced a surge in the Great Society of the 1960s. Since 1965, the nation’s gross domestic product has increased about 2.7 times over, but entitlement expenses have increased 11.1 times over. What do Americans have to show for it? Evidence suggests that when the government provides, families do less for themselves: There is an 82 percent correlation between rising entitlement spending and falling personal savings rates. With the aging of my baby boom generation, things will get even worse.

Let me share one statistic that shocked me, from the Long-Term Budget Outlook published last year by the nonpartisan Congressional Budget Office. If current trends continue, the CBO says, entitlement spending and net interest payments combined will equal all of federal revenue by 2025, just 14 years from now. (This is based on the CBO’s alternative fiscal scenario, which assumes extension of the Bush tax cuts and other actions, such as a gradual increase in Medicare payment rates to physicians, that are widely expected to occur.) Back in 1999, the crossover point was not supposed to happen until 2060.

via USA Inc.: Red, White, and Very Blue – BusinessWeek.

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