Does "Al Gore Factor" Mean the Party Is Over for the U.S. Economy?

An article in Tuesday's Der Speigel observed that the Nobel Committee awarded Al Gore's this year's Peace Prize to send a signal to U.S. policy makers that global warming means the U.S. economy must begin to live within its means.

But the Gore factor is having its most powerful effect in a sphere beyond partisan politics, penetrating deep into the insecure American middle class. Its way of life -- and this is the real message behind the Nobel Committee's decision -- is no longer sustainable.

(See Der Speigel, The Al Gore Factor) The article raises the point that the U.S. economy is unsustainable both financially and environmentally. The argument is supported by the following facts:

• The budget deficit and looming crisis in Social Security and health care costs have been well documented, and remain a concern for 2010 and beyond.
• The U.S. owes over $8 trillion in debt. It would take over a year and a half of total U.S. production to pay it back.
• The U.S. current account deficit was $856 billion in 2006. The massive foreign holdings of Japan, China and the oil-producing countries means that the U.S. economy is living on borrowed money.

Of course, if our financiers all came calling at once, it would destroy both the U.S. and the global economy. However, these countries are, in fact, slowly diversifying out of U.S. Treasuries, which is putting a damper on U.S. economic growth. The first effect has been this year's decline in the value of the dollar.

What It Means for You

Those of us fortunate enough to have lived in the U.S. economy since World War II have enjoyed an extraordinarily affluent existence, based on cheap oil and a young, innovative workforce. The party has been extended for the last 10 years from cheap loans. But every party has a morning-after clean-up, and the bills have to eventually be paid. However, as I have said before, I believe the slow-down of the U.S. economy will be gradual. (See Not With a Bang, But a Whimper, 8/1/07)

Related Articles

• Al Gore and U.N. Panel Share Nobel Peace Prize for Work on Global Warming
• CBO Warns of the Threat of the Current Account Deficit
• The U.S. Debt, and Why It Is So Large