The United States of America (USA) is under attack once again, but it is not a foreign enemy, as one might suspect. For example, one might suspect a terrorist group, The Islamic State of Iraq and the Levant (ISIL), attacking this great country. The enemy is within and being attacked domestically, as the U.S.A. is under attack from none other than Donald J. Trump. He is the not-really-so-rich billionaire, as judged by his being ranked at a paltry and measly #405 by Forbes. Trump is running for President of this great land as a Republican and the Trump campaign has adopted the theme: “Make America Great Again.” This begs the question: “When did America lose its greatness.” Hillary Clinton took a shot at Trump during her South Carolina victory speech on Saturday, saying that, “America has never stopped being great.” Clinton got help from the third richest man in the world, according to the latest Forbes survey, legendary investor Warren Buffett. He also takes umbrage with Trump’s assertion about the USA. Marketwatch.com reports on Monday that Buffett published his annual letter to Berkshire Hathaway shareholders, and he “laments doomsaying politicians and also takes aim at fears about chronically slow economic growth.”
Buffett is a Hillary Clinton supporter and adviser, but the points he makes are still valid. While not mentioning Trump by name in his letter, he says that there are those that have given many Americans the incorrect impression that their children won’t live as well as they themselves do. “
“That view is dead wrong: The babies being born in America today are the luckiest crop in history,” Buffett wrote, arguing that the “all-powerful trend” that saw U.S. per capita GDP increase by around six times since 1930 “remains alive and well.” Buffett argues that the worries about 2 percent growth of GDP, in particular, are not a worry at all, but a positive. Buffett argues that while “we would all like to see a higher rate,” such a pace of 2 percent would still deliver “astounding gains.” Quoting from his letter to shareholders:
America’s population is growing about .8% per year (. 5% from births minus deaths and .3% from net migration). Thus 2% of overall growth produces about 1.2% of per capita growth. That may not sound impressive. But in a single generation of, say, 25 years, that rate of growth leads to a gain of 34.4% in real GDP per capita. (Compounding’s effects produce the excess over the percentage that would result by simply multiplying 25 x 1.2%.) In turn, that 34.4% gain will produce a staggering $19,000 increase in real GDP per capita for the next generation. Were that to be distributed equally, the gain would be $76,000 annually for a family of four. Today’s politicians need not shed tears for tomorrow’s children.
Indeed, most of today’s children are doing well. All families in my upper middle-class neighborhood regularly enjoy a living standard better than that achieved by John D. Rockefeller Sr. at the time of my birth. His unparalleled fortune couldn’t buy what we now take for granted, whether the field is—to name just a few—transportation, entertainment, communication or medical services. Rockefeller certainly had power and fame; he could not, however, live as well as my neighbors now do.
Buffett, of course, has long centered his investment thesis on the idea that it never pays to bet against the U.S. economy in the long run, and there is a hint that perhaps Trump doesn’t believe it himself, just using this argument as a way to win the White House. After all, Trump only ranks #405, which might sound awful, but in the context of ranking #405 against almost 300 million Americans, quite a tidy sum indeed.