The US economy under Donald Trump is like a ticking time bomb, ready to explode at any moment. While Trump may boast about his achievements, the reality is far more complex and concerning. The American triumphalism on display at the World Economic Forum in Davos was a stark reminder of the country's current economic situation. But beneath the surface, there are signs of a two-speed economy that could easily blow up. The US economy is increasingly vulnerable, with wealth and income inequalities on the rise since the 1980s. This is not a new phenomenon, but the current state of affairs is alarming. The top 1% of Americans now account for 31% of household wealth, while the bottom 50% only have 2.5%. This growing inequality is further exacerbated by the reliance on high earners for domestic consumption, which is the biggest element of US GDP. The bottom 80% has gone from nearly half of all consumption to little more than 35%. The US economy is dangerously dependent on a small group of high spenders, making it vulnerable to social and political disharmony, as well as any significant setback in the stock markets. The AI revolution is also widening wealth inequalities, with the gains going overwhelmingly to its promoters and financial enablers rather than the common man. The US public finances are also in a catastrophic state, with the national debt swelling from around 100% of GDP today to 156% in 30 years' time if nothing is done. Americans cannot forever rely on the goodwill of foreign investors to keep funding these deficits, especially if Trump engages in financial repression. While some believe that AI will bring an era of abundance, the journey to the promised land is unlikely to be smooth or swift. The US economy is running hot, but many Americans don't feel the resulting boom in their own pockets. It's time for the US to address its economic issues before it's too late.
