China to overtake the US as the world's largest economy; US is in relative economic decline

First, it is inevitable.  China will eventually come closer in terms of GDP percapita with the United States.  When that happens, the US will no longer be the world's largest economy.  It is bound to happen, but it's nothing to fear.  It will make the US stronger. 

What most worries me is what the United States is pursuing in monetary and fiscal policy. Via Reuters:
In the long run, the United States must face up to inevitably being overtaken by China as the world's largest economy. And it may have missed a chance to rein in its largest financial institutions, many of whom remain too big to fail and are getting bigger.

On the one hand, Harvard's Martin Feldstein said he believes the outlook for U.S. economic growth in 2011 is less sanguine than many believe.

First, the boost to growth from government spending will be drying up this year, he said. Renewal of expiring tax cuts is no more than a decision not to raise taxes, and the impact of one-year payroll tax cut is likely modest, he said.

"There's really not much help coming from fiscal policy in the year ahead," he said. Woes from the dire situations of state and local governments may actually be a drag on growth, he said.

Growth got a lift from a lower saving rate in 2010, but that probably will not last this year as households worried about an uncertain future return to paring back debt and socking more away, Feldstein added. Discouraging declines in home values mean there is less to save from, he said.

"People are worried, so there's a strong reason for precautionary saving," he said.

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