The Great Recession Eroded the US’s Competitive Advantage

As if the economic news hasn’t been depressing enough,  the Democracy in American blog at the Economist believes the recession may have hurt the US irreparably:

ALTHOUGH America’s fiscal problems are among the worst in the rich world, its policymakers long took comfort that, when it came to demography, its outlook was one of the best. Because Americans have more babies and welcome more immigrants, they had more room to deal with the coming burden of pensions and health care for the elderly.

But the savage recession of 2007-09 and its aftermath have not just deepened America’s fiscal hole; they may have diminished those demographic advantages. America’s fertility rate has been falling since 2007 (see chart), as has net immigration. Compounding this, the share of the population that is active in the labour force has slipped, both because of ageing and because of the recession’s lingering effects.

Which makes it all the more depressing that, after years of seeming to ignore the problem of unemployment, the Federal Reserve has finally decided it is a problem after all.

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