President Barack Obama has had little time to savor winning a second term in last week’s US elections. Throughout the campaign, he was hammered by Republicans over the US’s high unemployment rate, and now the country faces further challenges associated with the rapidly approaching “fiscal cliff.” Originally part of a compromise that allowed the government to increase its borrowing, the fiscal cliff will result in a massive tax increase and precipitous drop in federal spending in 2013 unless replaced by another budget plan. Many economists worry that if the draconian provisions associated with the fiscal cliff take effect, the US could be pushed into recession.
However, despite lingering concerns over employment and the potential for recession, there are still bright spots for the United States. For example, Credit Suisse’ most recent Global Wealth Report shows the country remains the world’s premier wealth creator. While high-flying economies in Asia may attract more attention, North America remains the region with the highest average wealth. The lion’s share of North American wealth is in the United States, where total wealth rose by more than $1.3 trillion over 2011-2012. By comparison, during the same period China added $560 billion in new wealth despite an economic growth rate roughly four times that of the US.
Given the general unease about retirement expressed by much of the American electorate during the recent presidential and congressional campaigns, accumulated wealth could be an important cushion if politicians in Washington fail to get the fiscal house in order.”[Wealth]… is valued as a source of finance for future consumption,” notes the report, “especially in retirement.” While there is growing concern over federal programs that many retired Americans rely on, such as Medicare, increasing wealth may help mitigate any cuts to these programs. The bank also expects the United States to remain the wealthiest part of the world for the immediate future, with an estimated wealth of $89 trillion by 2017.
Of course, concern about the growing income gap in the United States is also an issue; but when viewed in a global context, wealth in the US remains comparatively evenly distributed. “Compared to wealth distribution in the rest of the world, the US distribution has a high proportion of the population with wealth above USD 100,000,” according to Credit Suisse’s Global Wealth Report. Indeed, as noted by Credit Suisse, wealth in North America averages $100,000 per adult, an amount that can soften future economic shocks that might result from natural disasters, economic slowdown, or even a tumble over the fiscal cliff.
Of course, true wealth is in the eye of the beholder, but the data seems to underscore that despite several years of economic uncertainty, the United States remains a wealth creation dynamo. This could prove important for Americans if they need to muddle through yet another recession.