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It's a good question. I certainly don't know the sure answer. On the upside, we are a gigantic economy with a huge GDP, which can take a lot of hits, and keep chugging along for a long time. We also will always attract the best and the brightest in large numbers.
On the downside is all of the things you've mentioned. What is most frightening is that a lot of our problems are hard, or seemingly impossible, to solve. For example, entitlement spending. It is bursting at the seams, it is something like 70% of our budget. The growth of entitlement spending does not seem possible to stop, the most one could hope for is to slow down expansion and growth of it.
But not giving a direct answer is no fun, so here's mine:
I think over time, entitlement spending will grow to be +80% of our budget. The military, even pared down, will always be 10 or 15%. So there is little left, for things like infrastructure, or deficit reduction.
As spending continues to increase, the Govt will need more money. It will try to get it by raising taxes, first on the "rich," then on everyone they can squeeze it from. The highest tax brackets will become confiscatory, i.e., 90%. Corporations will be viewed as free game for confiscatory taxation.
The government will continue to also get money (to give away) by simply printing it. It will eventually take $5 to buy 1 Euro.
But like a struggling corporation, USA, Inc. won't die, but will become an attractive takeover target. Not taken over by guns, but by money. With our weak economy, weak corporations and weak currency, we will be ripe. Foreign interests and governments will take over by taking control first of the largest, most powerful and essential U.S. corporations. It has already begun. How much of Citibank has the Saudis recently bought? And Citi is on its knees, begging for more so that its stock doesn't plummet even more. You read in the WSJ now quotes from the Saudis about the state of Citi, and what should be done. Hey, if we are good boys and listen to Daddy, maybe the Saudis will throw another $20 billion into Citi.
We'll allow foreigners to take control of our critical industries (like the financial industry) because we are nice and don't like to think bad about foreigners. They are good, they are just trying to help us out, right?
Once you have control over our major and critical industries, you of course have control of the cash flow, and therefore of the political system.
The good news is that this is a slow process (although bad things do seem to be happening at an increasingly alarming rate). We will be in a recession this year, and probably part of 09, but we will then pull out. The problem is, while we have ups and downs, the trend line over time is going to be down.
We'll be ok. Our kids, however, will probably live through some major changes in our political and economic system.
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