Mary Meeker's Latest 'State of the Internet' from Re/code's CodeCon Conference

By: Greg Caplan (@gdcaplan) and Brian Ficho (@bficho)

In Mary Meeker’s latest State of the Internet, she published a slide showing the US income statement here:

This paints a very clear picture of the incomes and expenses of America. Although it is bad, the current fiscal state of the country is nowhere near as scary as politicians on both sides will make us believe. If a large company was operating at a -24% margin, it would need to sell a great growth or turnaround story to Wall Street. If America were a public company, what could America’s turnaround story be?

The story would probably center around reducing costs in our two largest buckets, Entitlements and Defense and increasing corporate income tax revenues which are at a dismal 10% of total revenues.

Reducing Costs

Mary Meeker also included a breakdown of the expense buckets:

The most obvious place to cut costs is in entitlement. Unemployment benefits will naturally come down as the economy improves, but analysts will probably want some clarity about plans for Social Security, Medicaid and Medicare. Many have thrown around increasing the retirement age which hasn’t gone up in 20 years by pegging it to average lifespan. Another simple plan to remove cost from all three of the buckets is to end benefits to wealthy people.  

While defense is necessary, it has grown more than 2x from 1998 and over 50% from 2003.  There are no clear prescriptions to make for lowering this budget since it is somewhat of a black box, but if we can return to 1998 levels by exiting wars in the middle east, we can reduce 60% of the deficit.  Politicians are making some progress here as the budget has come down over the past few years as the wars wind down, but costly programs such as the Littoral Combat Ship and Joint Strike Fighter, the most expensive weapons program in history, have been plagued with issues and even military leaders are questioning their effectiveness in modern combat.

Whatever the story is, the world seems to be buying it as t-bills are starting to surge, with yields on the 10 year notes touching a low today of 2.4006%.  Sadly, a good sales pitch doesn’t solve a problem.  In the end we don’t have a bottomless treasure chest and the more we spend on entitlement and defense the less we spend on research, infrastructure, and education, which are the only investments that actually pay off and the very things that made America great in the first place.