Why the American economy is losing its edge and becoming increasingly stagnant

The United States economy is experiencing a decline in dynamism, characterized by fewer startups, lower productivity growth, and reduced job mobility. This video examines how these systemic shifts contribute to a less flexible economic environment and what they mean for the future of American living standards.

Since the 1980s, the rate of new business formation has consistently trended downward, while established firms increasingly dominate the market. Rather than investing in innovation, these corporate giants often prioritize cash accumulation and acquisitions. This lack of competition has led to a decline in productivity growth, which has been largely stagnant since 1973. Had productivity maintained its pre-1973 trajectory, median household income would be approximately $30,000 higher today.

The stagnation extends to the federal level, where fiscal flexibility has evaporated. In 1962, about 65% of federal revenue was discretionary, allowing for annual allocation adjustments. By 2022, that figure dropped to less than 10%, with the remainder locked into mandatory spending programs like Social Security, Medicare, Medicaid, and debt obligations. This rigidity leaves the government ill-equipped to address crises, while the broader economic slowdown fuels public discontent.

Source: American Stasis (Episode 3/5)