US Economy - News, Updates and Discussion

Beijingwalker said:
Relative to the manufacturing global share, if you compare with the distance past, almost all countries grow.

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US manufacturing output per capita is more than twice that of China.

To calculate the manufacturing output per capita for China and the US in 2020, we’ll use the manufacturing output figures and the population data for both countries.

For China:

Manufacturing output in 2020: $3,860.70 billion.

Population in 2020: 1.411 billion.

For the US:

Manufacturing output in 2020: $2,238.53 billion.

Population in 2020: 331.45 million.

Now, we can calculate the manufacturing output per capita using the formula:

Manufacturing Output Per Capita=PopulationTotal Manufacturing Output

For China:

1.411 billion people $3,860.70 billion=$2,736.31

For the US:

0.33145 billion people $2,238.53 billion=$6,750.32

So, the estimated manufacturing output per capita for China in 2020 was about $2,736.31, and for the US, it was about $6,750.32.
 
US can keep raising interest rate, they are going to have a devil to pay.
 
U.S. interest payments on its debt are set to exceed defense spending. Should we be worried?

By Aimee Picchi
Edited By Alain Sherter

March 1, 2024 / 3:40 PM EST / CBS News

Americans are familiar with the impact of higher interest rates, which are making it more expensive to carry credit card debt or buy homes and cars. But the federal government is also getting walloped: Spending on interest on U.S. debt is now the fastest growing part of the budget, and even projected to overtake national spending on defense this year.

Federal spending on interest payments is forecast to hit $870 billion this year — exceeding the $822 billion that the nation will spend on defense in 2024, according to a recent analysis by the Congressional Budget Office. This year's outlay for interest payments represents a 32% increase from last year's $659 billion in interest expense.

To be sure, higher interest rates aren't the only factor raising the cost of servicing the country's debt. Over the last decade, the U.S. has almost doubled its outstanding debt, which surged to $33 trillion last year from $17 trillion in 2014, according to Treasury data.

Why interest payments have soared​

The nation's ballooning debt stems chiefly from tax cuts enacted by former President Donald Trump in 2017, as well as the surge in federal aid to keep the economy afloat during the pandemic (assistance authorized by both Trump and President Joe Biden). On top of that, with the Federal Reserve turning to its most effective anti-inflation tool — higher interest rates — the U.S. is paying more for its growing pile of debt.

That's steering the U.S. into uncharted territory, according to some policy experts. The problem, they say, is that the nation's mounting debt and interest payments could eventually squeeze federal spending, making it harder to fund core programs like Social Security or to invest in initiatives that drive economic growth, such as infrastructure or education.

"Interest is projected this year to be the second-largest federal program — it means your tax dollars are going to interest instead of going to everything else," said Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget, a bipartisan think tank.

He added, "As far as I know, interest has never been larger than the defense budget."

Last year, U.S. interest payments on its debt amounted to 2.4% of GDP, and the CBO projects that will increase to 3.9% by 2034.

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While that might sound dire, it's not quite right to directly compare spending on programs like Social Security or defense to interest payments, noted Bobby Kogan, senior director of federal budget policy at the Center for American Progress.

For one, interest payments are tied to financing for approved spending — in other words, the money reflects lawmakers' earlier decisions to avoid tax hikes or slash key government programs.

"A lot of folks tend to say interest is a waste of money, and that's not true," Kogan told CBS MoneyWatch. "The decision to have interest payments happened because we decided not to do tax increases or spending cuts."

Second, spending more on interest doesn't equate with cuts in programs. "It's not true that if interest is higher it's impossible to spend a dollar more on nutrition assistance," he said. "The idea that this interest is crowding out other government spending isn't mechanically definitively true in any sense."

$37,100 per person​

Another key point to consider is that the nation's fiscal outlook is now in better shape than the CBO had projected it to be a year ago. That's largely due to stronger-than-expected economic growth as the U.S. recovered from the pandemic, according to senior Biden administration officials who spoke with CBS MoneyWatch.

For instance, the government's 2024 budget shortfall will be $63 billion smaller than the CBO projected almost a year ago. Meanwhile, the cumulative federal deficit over the next decade is on track to be $1.4 trillion less than the agency estimated last year, the recent CBO report added.

In the Biden administration's eyes, its efforts to raise taxes on the wealthy and big corporations, as well as recoup billions through IRS audits on the rich, will help boost revenue to fund key programs. Stronger GDP growth is also helping to whittle the deficit, they say.

Republican lawmakers, the Biden officials argue, could make the nation's debt and interest payment situation worse by extending Trump-era tax cuts that would add $3.5 trillion to the deficit through 2033. Currently, many of the provisions in the 2017 Tax Cuts and Jobs Act, which largely benefited wealthier Americans and corporations, will expire at the end of 2025, although some GOP lawmakers want to renew the cuts.

As it is, the federal government over the next decade is projected to spend a total of $12.4 trillion on interest — the highest amount of interest in any historical 10-year period, according to the Peter G. Peterson Foundation, a think tank that's focused on reducing the federal debt. That's the equivalent of about $37,100 per person, it said.

In 2023, the U.S. spent more on interest than on Medicaid, the health care program for low-income Americans, the foundation added. It is urging lawmakers to create a bipartisan fiscal commission that would create plans for lowering debt, among other issues.

How the Fed figures into all this​

Experts say the nation's growing debt and interest payments could play a role in the 2024 presidential election. Republicans have sought to blame the Biden administration for excessive pandemic spending that they contend caused drover up inflation. Economists blame the surge in price on a range of factors, including supply-chain snarls, labor shortages, geopolitical factors such as Russia's war on Ukraine, and spending programs under both the Trump and Biden administrations.

The resulting interest-rate hikes by the Fed have been painful for families and small businesses, while also adding to the nation's interest burden, Republican members of the House Ways & Means Committee argue. "Rising interest rates, and the associated cost of servicing federal debt, are a direct result of President Biden and Democrats' inflationary spending spree," the GOP lawmakers said in a December statement.

Like American consumers, the U.S. could see some relief when the Fed begins cutting rates, which it is expected to do later this year. But the nation could still be trapped in a cycle of escalating interest payments as the U.S. is on track to take on more debt, Goldwein warned.

"More debt leads to more interest, and that leads to more debt," he said.

The CBO estimates that debt and interest payments will continue to grow over the next 10 years, with federal spending expected to jump 64% to $10 trillion, compared with $6.1 trillion in 2023. Much of that increase is due to mandatory spending programs, including Social Security and Medicare, whose costs are surging due to the aging U.S. population.

In Goldwein's view, tackling the nation's growing debt pile will require lawmakers on both sides of the aisle to focus on both raising revenue through higher taxes and cutting spending.

"It's not realistic to deal with it on only one side," he said.
 

The cost of interest on U.S. debt is soaring​

Feb 8, 2024 -Economy
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The U.S. government's debt is on track to rise to $54 trillion over the next decade, according to the Congressional Budget Office.
The big picture: Raw numbers don't tell you much about whether a given level of debt is burdensome or not. The rubber-meets-road test of sustainability is how much of the nation's resources go to service that debt every year — and the news is gloomy.

Why it matters: The U.S. government is on track to face debt service costs that, starting in 2026, will be a modern record as a share of the economy — and they are forecast to rise from there, pinching other national priorities.

  • The government already spends more money servicing the national debt than it does on Medicaid, and the number is on track to surpass defense spending soon.
By the numbers: Debt service costs were 1.2% of GDP as recently as the mid-2010s and 1.8% in 2019 just before the pandemic. But the combination of higher interest rates and the swell of debt for pandemic relief spending has pushed that much higher.

  • Debt service amounted to 2.4% of the economy last year, CBO said, and is poised to rise to 3.1% this year and 3.9% in 2034.
  • In contrast, the previous record net interest cost for the U.S. government in CBO data that goes back to 1962 was 3.2%, reached in 1991.
  • In dollar terms, net interest is set to cross the $1 trillion per year mark in 2026 and $1.6 trillion in a decade.
What they're saying: "You can think of the increase in net interest payments as two-thirds resulting from higher rates and one-third as a result of the amount of debt," CBO director Philip Swagel told reporters Wednesday.

Of note: Those projections are premised on the Fed's policy interest rate moving downward over the coming years, settling below 3% late in this decade (they're currently near 5.5%).


Flashback: The last time the government's interest costs were anything near this level as a share of the economy, in the late 1980s and early 1990s, deficit reduction became a central political issue and bipartisan cause.

  • In the 1990s, President George H.W. Bush signed a bipartisan deficit reduction deal that, among other things, increased the top income tax rate to 31% from 28%.
  • President Bill Clinton's first budget act in 1993 raised taxes further, pushing the top rate to 39.6%.
  • Deficits fell sharply through the 1990s and flipped into a surplus in 1998.
Yes, but: Politics now are very different than they were in the early 1990s, when both parties had many deal-making moderates in their midst and fiscal deficits were a front-of-mind political issue.

  • It is less clear how today's voters, and the members of Congress who represent them, will react to the surge of debt service costs over the next few years.
 

Why the U.S. Is Spending $870B on Interest Payments in 2024​

 

This solar giant is moving manufacturing back to the US​

Tariffs and IRA tax incentives are starting to reshape global supply chains—but vast challenges lie ahead, explains Shawn Qu, founder of Canadian Solar.

By Zeyi Yangarchive page
April 23, 2024

Whenever you see a solar panel, most parts of it probably come from China. The US invented the technology and once dominated its production, but over the past two decades, government subsidies and low costs in China have led most of the solar manufacturing supply chain to be concentrated there. The country will soon be responsible for over 80% of solar manufacturing capacity around the world.

But the US government is trying to change that. Through high tariffs on imports and hefty domestic tax credits, it is trying to make the cost of manufacturing solar panels in the US competitive enough for companies to want to come back and set up factories. The International Energy Agency has forecast that by 2027, solar-generated energy will be the largest source of power capacity in the world, exceeding both natural gas and coal—making it a market that already attracts over $300 billion in investment every year.

To understand the chances that the US will succeed, MIT Technology Review spoke to Shawn Qu. As the founder and chairman of Canadian Solar, one of the largest and longest-standing solar manufacturing companies in the world, Qu has observed cycle after cycle of changing demand for solar panels over the last 28 years.

After decades of mostly manufacturing in Asia, Canadian Solar is pivoting back to the US because it sees a real chance for a solar industry revival, mostly thanks to the Inflation Reduction Act (IRA) passed in 2022. The incentives provided in the bill are just enough to offset the higher manufacturing costs in the US, Qu says. He believes that US solar manufacturing capacity could grow significantly in two to three years, if the industrial policy turns out to be stable enough to keep bringing companies in.

How tariffs forced manufacturing capacity to move out of China​

There are a few important steps to making a solar panel. First silicon is purified; then the resulting polysilicon is shaped and sliced into wafers. Wafers are treated with techniques like etching and coating to become solar cells, and eventually those cells are connected and assembled into solar modules.

For the past decade, China has dominated almost all of these steps, for a few reasons: low labor costs, ample supply of proficient workers, and easy access to the necessary raw materials. All these factors make made-in-China solar modules extremely price-competitive. By the end of 2024, a US-made solar panel will still cost almost three times as much as one produced in China, according to researchers at BloombergNEF.

The question for the US, then, is how to compete. One tool the government has used since 2012 is tariffs. If a solar module containing cells made in China is imported to the US, it’s subject to as much as a 250% tariff. To avoid those tariffs, many companies, including Canadian Solar, have moved solar cell manufacturing and the downstream supply chain to Southeast Asia. Labor costs and the availability of labor forces are “the number one reason” for that move, Qu says.

When Canadian Solar was founded in 2001, it made all its solar products in China. By early 2023, the company had factories in four countries: China, Thailand, Vietnam, and Canada. (Qu says it used to manufacture in Brazil and Taiwan too, but later scaled back production in response to contracting local demand.)

But that equilibrium is changing again as further tariffs imposed by the US government aim to force supply chains to move out of China. Starting in June 2024, companies importing silicon wafers from China to make cells outside the country will also be subject to tariffs. The most likely solution for solar companies would be to “set up wafer capacity or set up partnerships with wafer makers in Southeast Asia,” says Jenny Chase, the lead solar analyst at BloombergNEF.

Qu says he’s confident the company will meet the new requirements for tariff exemption after June. “They gave the industry about two years to adapt, so I believe most of the companies, at least the tier-one companies, will be able to adapt,” he says.

The IRA, and moving the factories to the US​

While US policies have succeeded in turning Southeast Asia into a solar manufacturing hot spot, not much of the supply chain has actually come back to the US. But that’s slowly changing thanks to the IRA, introduced in 2022. The law will hand out tax credits for companies producing solar modules in the US, as well as those installing the panels.
The credits, Qu says, are enough to make Canadian Solar move some production from Southeast Asia to the US. “According to our modeling, the incentives provided just offset the cost differences—labor and supply chain—between Southeast Asia and the US,” he says.

Jesse Jenkins, an assistant professor in energy and engineering at Princeton University, has come to the same conclusion through his research. He says that the IRA subsidies and tax credits should offset higher costs of manufacturing in the US. “That should drive a significant increase in demand for made-In-America solar modules and subcomponents,” Jenkins says. And the early signs point that way too: since the introduction of the IRA, solar companies have announced plans to build over 40 factories in the US.

In 2023, Canadian Solar announced it would build its first solar module plant in Mesquite, Texas, and a solar cell plant in Jeffersonville, Indiana. The Texas factory started operating in late 2023, while the Indiana one is still in the works.

The remaining challenges​

While the IRA has brought new hope to American solar manufacturing, there are still a few obstacles ahead.

Qu says one big challenge to getting his Texas factory up and running is the lack of experienced workers. “Let’s face the reality: there was almost no silicon-based solar manufacturing in the US, so it takes time to train people,” he says. That’s a process that he expects to take at least six months.

Another challenge to reshoring solar manufacturing is the uncertainty about whether the US will keep heavily subsidizing the clean energy industry, especially if the White House changes hands after the election this year. “The key is stability,” Qu says, “Sometimes politicians are swayed by special-interest groups.”

“Obviously, if you build a factory, then you do want to know that the incentives to support that factory will be there for a while,” says Chase. There are some indications that support for the IRA won’t necessarily be swayed by the elections. For example, jobs created in the solar industry would be concentrated in red states, so even a Republican administration would be motivated to maintain them. But there’s no guarantee that US policies won’t change course.

Source.
 
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The U.S. will triple its chip manufacturing in less than a decade, report says​

The CHIPS Act is poised to give the U.S. the biggest chip manufacturing growth in the world​

By Britney Nguyen

The multi-billion dollar effort to bring chip manufacturing back to the U.S. is projected to boost domestic chipmaking capacity by triple, a new report says.

The U.S. is expected to increase domestic semiconductor manufacturing capacity by 203% by 2032, a decade after the establishment of the CHIPS and Science Act, according to a new report from the Semiconductor Industry Association (SIA) and Boston Consulting Group (BCG). The projected rate of growth is “the largest projected percent increase in the world” over that time, according to the SIA. By comparison, the U.S.’s chip manufacturing capacity only grew 11% between 2012 and 2022, the report said — the smallest growth among major chip-producing regions.

The “Emerging Resilience in the Semiconductor Supply Chain” study projects the U.S.’s share of global advanced logic chip manufacturing capacity will grow to 28% by 2032 from 0% in 2022. The study also projects the U.S. will have 28% of total global capital expenditures between now and 2032, second only to Taiwan, and triple what it would have without the CHIPS Act.

“Effective policies, such as the CHIPS and Science Act, are spurring more investments in the U.S. semiconductor industry,” Rich Templeton, chairman of the board at Texas Instruments and SIA board chair, said in a statement. “These investments will help America grow its share of global semiconductor production and innovation, furthering economic growth and technological competitiveness. Continued and expanded government-industry collaboration will help ensure we build on this momentum and continue our next steps forward.”

The report found the U.S.’s share of global chip manufacturing capacity will grow from 10% in 2022 to 14% by 2032, “marking the first time in decades the U.S. has grown its domestic chip manufacturing footprint relative to the rest of the world.” Without the CHIPS Act, the U.S.’s share would’ve dropped to 8% by 2032, the report said.

However, the report found non-market-based investments, such as those in non-advance logic chips, could potentially put the semiconductor supply chain at risk due to an imbalance between supply and demand.

“The CHIPS and Science Act has put America on course to significantly strengthen domestic semiconductor production and R&D, but more work is needed to finish the job,” John Neuffer, SIA president and chief executive, said in a statement. “We look forward to working with government leaders to advance policies that broaden the STEM talent pipeline, invest in scientific research, promote free trade and access to global markets, and expand and extend critical CHIPS incentives.”

The CHIPS Act has awarded billions to chipmakers building fabs across the U.S., including chip pioneer Intel, the world’s largest chip foundry TSMC, and major South Korean chipmaker Samsung. Source
 

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