June 20, 2012
Reviving And Strengthening U.S. Manufacturing
-- by Dave Johnson
Following is the talk I gave to the Take Back the American Dream conference panel, Making It In America: Reviving and Strengthening U.S. Manufacturing.
You have undoubtedly heard the numbers, almost all of them bad.
We have a trade deficit of more than $550 billion dollars a year. This is actually an improvement from before the financial collapse, but only because people’s buying power remains down.
On this chart that first line down is $100 billion. Each line down is another $100 billion. Each year. This is real money that bleeds out of our economy.
If we were engaged in actual “trade” the money would be coming back as fast as it is leaving – that is what the word “trade” means. And that would be a win-win for all trade partners. But it has not worked out that way. Imports stay ahead of exports.
Our manufacturing sector has been bleeding out of our country along with the money.
The lure of low-prices, fueled by currency manipulation and subsidies, combined with the ability to treat workers in ways they cannot be treated here where people have a say, has led businesses to close factories here and open them over there. Eventually entire industries vanish.
This problem of the loss of manufacturing – and its jobs and factories and industries -- has been building for decades but in the Bush years it reached a crescendo. We lost 54,000+ factories, and 1/3 of all of our manufacturing jobs.
Our country has allowed key industries, key supply chains and key national skills to erode or vanish. And along with those we allowed communities and entire regions to decline. And worse than just decline – how many of you have seen Detroit with your own eyes?
We have lost hard-won capacity that will take enormous investment to get back. We lost a large part of our ability to make a living in this world. And now we are feeling the consequences of these losses.
This is because manufacturing is different.
Manufacturing doesn’t exist in isolation; it requires a manufacturing ecosystem, or commons, to properly function. This is where manufacturers, suppliers, designers, innovators, educators and all the other manufacturers, suppliers, designers, innovators and educators all complement each other, creating a synergistic "cluster" effect.
This is why they say that a manufacturing job supports so many other jobs. Manufacturing in particular supports communities surrounding the factories. This is why closing a factory loses so many jobs and effects entire communities. This is why so many of our country’s once-strong manufacturing areas now look the way they do.
I would like to present an overview of the key policies ideas for reviving American manufacturing.
First, of course, is the trade problem. We have to find ways to BALANCE trade.
This starts with CURRENCY. China manipulates its currency, keeping it low so the price of things made there stays a lot lower than the price of things made elsewhere. So out of the gate they start with this competitive advantage.
The administration has been unable to make a formal currency manipulation declaration. The Senate has passed legislation to address currency manipulation but it is stuck in the House, with over 60 Republican co-sponsors who won’t sign a discharge petition, and a Presidential candidate who says he will address the problem on his first day in office – but won’t ask his party to address it today.
Next, a national economic / industrial policy. Other countries see themselves as COUNTRIES, and have national policies. We do not. So we send our companies into the world alone to fight against countries. We need to say that WE as a country will work to put the components in place to secure a share of key industries like green manufacturing so that we can continue to make a living as a country.
We need to fix tax policy to promote manufacturing. We should eliminate tax incentives that encourage U.S. companies to ship jobs overseas and end the system of tax deferral that allows American multinational firms to keep profits offshore.
And finally, Buy American! Trade rules allow us to specify that our tax dollars be used to buy American, and it’s just a no-brainer to strengthen this. If other countries reciprocate, fine – but they don’t!
One last point. To kick-start this effort, we need to invest in rebuilding and modernizing our infrastructure. In the plenary with Paul Krugman he pointed out that this really would be a free lunch. He said that we would not be diverting anyone from other jobs because we have millions of construction workers looking for jobs. We have construction equipment sitting idle. And we can finance the necessary projects at the lowest cost in history. And, of course, all of this work is work that needs to be done eventually, so we should do it right now.
And we should require that all of it be done under Buy American procurement policies!
This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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-- Posted by Dave Johnson at 1:29 PM PST on June 20, 2012.
June 16, 2012
Austerity Logic
-- by Dave Johnson
If debt is bad, why is giving free money to banks so they will lend (put you in debt) better than giving free money to people to pay off debts?
-- Posted by Dave Johnson at 10:08 AM PST on June 16, 2012.
June 14, 2012
Apple And China - From Problem To Solution
-- by Dave Johnson
Last week at Netroots Nation we talked about the problem of Apple (and all the others) manufacturing in China, costing our country jobs and dollars. Next week at the Take Back the American Dream Conference we will talk about what can be done to fix things.
Last week I was on a panel at Netroots Nation, talking about the problem of companies like Apple doing all of their manufacturing in China. We used to think companies moved to China because labor was cheap. Now we know that it has more to do with the ability to force workers to do things that they can't force them to do here. I wrote up my talk in the post Why Can't Apple Make Your iPhone in America?,
The business advantage China offers is not low wages, it is that in China the people do not have a say, and here people have a say.When people have a say they say they want better pay, health care, retirement, vacations, sick pay, protections, worker safety, clean environment and taxes to support the country – things like that – the very things China offers to let our businesses escape from.
So what China offers is that China is “business-friendly.” Because people there do not have a say, so they can’t ask for the things people should have.
... When we opened up our borders to goods from China, and let this treatment of workers and the environment offer advantages to our elites, we made democracy a competitive disadvantage.
Next week at the Take Back the American Dream Conference, among the many topics the conference will cover I will be discussing what we can do to revive American manufacturing. Please come and join the discussion!
The Take Back the American Dream Conference
Join Paul Krugman, Nobel Prize-winning economist and NY Times columnist; Rebuild the Dream’s Van Jones, Rep. Keith Ellison, Sen. Sherrod Brown, Sen. Sheldon Whitehouse, MSNBC’s Alex Wagner and Melissa Harris-Perry, Katrina Vanden Heuvel of the Nation, Sen. Bernie Sanders, Rep. Peter DeFazio, Rep. Chris Murphy, Rep. Barney Frank, and Rep. John Garamendi at the conference.
Click through to learn about and register for the Take Back the American Dream Conference:
The Republicans don't have a job creation plan, they have a job destruction plan: bring back the Bush economy.President Obama has proposed a small jobs plan. But Republicans are blocking even that — and Democrats are not doing enough to attack those who are stopping progress on jobs.
This election should be about who fights for JOBS and who stands for job-killing austerity. To make sure that is the choice, we are coming to Washington and we will do it ourselves.
In this election, we have to send politicians a message: Good Jobs First. Turning now to austerity will only create more misery and more unemployment. The best deficit reduction measure is to put people back to work.
We have to make sure that politicians in both parties get the message. So we are coming to Washington to lay out strategies to do just that.
From June 18 to 20, that’s what Paul Krugman, Van Jones, Chris Hayes, Rep. Jan Schakowsky, Melissa Harris-Perry, Rev. Jesse Jackson, Katrina vanden Heuvel and many more are going to do.
At the Take Back the American Dream conference, we will shatter the false boundaries of the budget debate imposed by the Washington elites. And we’ll forge the grassroots strategy necessary to rally the nation behind a jobs plan as big as the crisis.
We'll hear Paul Krugman discuss practical solutions to “End this Depression Now!” with MSNBC’s Chris Hayes.
And Rep. Jan Schakowsky and the AFL-CIO's Damon Silvers will take on the austerity conservatives are imposing around the world — and they want to impose here after the election.
We'll get a plan for "Fair Share Taxes to Rebuild America" from progressive champion Sen. Sheldon Whitehouse.
We'll learn the "99 Elect" grassroots strategy to "Build Progressive Power" with former Gov. Howard Dean.
We'll put the fundamental choice before America, "Plutocracy or Democracy," with independent Sen. Bernie Sanders and Congressional Progressive Caucus co-chair Rep. Raul Grijalva.
And we will sculpt our own strategy to win the argument, not just the election.
Stand up for the 99%. Come to the Take Back the American Dream conference.
We cannot sit back and expect the crisis to solve itself. Washington is coming down with European austerity fever while the nation screams out for jobs and growth.
So if you care about solving the jobs crisis, we have a job for you.
The Take Back the American Dream conference is one place this election year where Americans committed to saving our economy and our future will plot and plan to put a Good Jobs First agenda in the center of the 2012 campaign.
This is our chance to develop the strategy and the arguments vital for saving America from the dustbin of austerity.
Don’t miss it. Join us in Washington, and help Take Back the American Dream.
Sincerely,
Robert L. Borosage & Roger Hickey, Co-directors
Campaign for America's FutureRegister today to make victory possible, at the June 18-20 “Take Back the American Dream” conference.
-- Posted by Dave Johnson at 8:04 AM PST on June 14, 2012.
June 13, 2012
Tenth Blog Anniversary Party Coming In July
-- by Dave Johnson
Actually I'll probably just beg for money to help pay the bandwidth bills...
There's an orange PayPal Donate button in the left column. I'm trying to raise $1,000,000 to pay the income tax on what I make doing this.
-- Posted by Dave Johnson at 7:11 AM PST on June 13, 2012.
June 12, 2012
You Can't Have Healthy Businesses Without Strong Government
-- by Dave Johnson
As much as conservatives want to pretend otherwise, you can't have strong, healthy, prospering businesses without a big, strong government. The kinds of businesses that don't want a big, strong government are exactly the kinds of businesses that We, the People don't want.
Government Provides The Soil For Businesses To Thrive
Government creates the "public structures" that support smaller, innovative business. Government defines the playing field for business, right down to defining and regulating the money itself. Government creates the laws that define what business even is, and the police and courts to enforce that law. Government provides the infrastructure that is the soil in which businesses thrive -- or whither and die. Government educates the employees and innovators. Government negotiates the trade agreements that let businesses sell outside our country, and is supposed to protect our businesses from being undercut by those in other countries.
Government keeps larger, ultra-wealthy businesses from dominating, monopolizing and destroying the newer, innovative, disruptive, creative businesses that rise up out of We, the People.
But government can only do those things for us when it is big and strong. And that is why the very people and businesses -- and countries -- that want to dominate, monopolize, cheat, scam and take everything for themselves at the expense of the rest of us don't want our government to be big and strong enough to stop them.
Government Protects
Imagine this, though it might be difficult: some people are greedy and want more for themselves, at the expense of the rest of us. Yes, this is shocking, but true!
Government protects us from those who would take advantage and take too much. Government does this both domestically and internationally. At home it protects us from criminals and exploiters. Government also protects us from physical and economic threats from other countries. As I discussed last week in Why Can't Apple Make Your IPhone In America? we as a country face an updated, economic-attack version of these threats to our national security,
China sees itself as a country, and we no longer do. China competes with us as a country. But our businesses see themselves as GLOBALIZED, not as part of a country.So since we – at least our businesses – no longer see themselves as part of a country we are not responding to this competition. We are not mobilizing to fight back.
In fact, China has essentially recruited our own business leaders to fight against our own government.
Government Keeps The System Going
Our "system" generally works when it is in balance; consumers with jobs and money are customers for our businesses. When customers are coming in the door, companies hire more people to serve them. However, in a system the things that each individual wants to do can be bad if too many of them do those things at the same time.
An example of an unbalanced system: if every driver decided to drive on the same road at the same time no one would be able to move. This is where government is absolutely necessary to regulate the larger system and make sure it maintains balance.
Am economy example: all businesses want to reduce costs, and one way to do this is to cut the number of employees they have, increase the workload of the rest and do what they can to cut their pay and benefits. This is an example of something that each player in a system does that might be "good" for that individual player, but is really bad for the larger system if they all do it. When too many business reduce costs by cutting employees or paying less, the system collapses from lack of demand. Government is needed to keep businesses from laying off too many people or cutting pay. Sometimes government does this by stepping in and hiring people (or just giving them money like unemployment benefits), or buying things, thereby creating demand, causing businesses to hire. (See Actually, "The Rich" Don't "Create Jobs," We Do.)
Another example: When a business becomes powerful it uses that power to monopolize, to keep competition from being able to compete. Pretty soon there are just a few large businesses that can charge whatever they want. Without strong government to keep this from happening the system breaks down.
Taxes
Taxes are the payback We, the People receive from our investment in creating the public structures that protect and empower us and enable our business to thrive. Taxes pay for the protections, courts, infrastructure, education and all the rest of the system that creates the prosperity and redistributes that prosperity to all of us, thereby balancing the system.
These diagrams are from Tax Cuts Are Theft, (please click through for more.)
The American Social Contract is supposed to work like this:
A beneficial cycle: We invest in infrastructure and public structures that create the conditions for enterprise to form and prosper. We prepare the ground for business to thrive. When enterprise prospers we share the bounty, with good wages and benefits for the people who work in the businesses and taxes that provide for the general welfare and for reinvestment in the infrastructure and public structures that keep the system going.
We fought hard to develop this system and it worked for us. We, the People fought and built our government to empower and protect us providing social services for the general welfare. We, through our government built up infrastructure and public structures like courts, laws, schools, roads, bridges. That investment creates the conditions that enable commerce to prosper – the bounty of democracy. In return we ask those who benefit most from the enterprise we enabled to share the return on our investment with all of us – through good wages, benefits and taxes.
But the “Reagan Revolution” broke the contract. Since Reagan the system is working like this:
Since the Reagan Revolution with its tax cuts for the rich, its anti-government policies, and its deregulation of the big corporations our democracy is increasingly defunded (and that was the plan), infrastructure is crumbling, our schools are falling behind, factories and supply chains are being dismantled, those still at work are working longer hours for fewer benefits and falling wages, our pensions are gone, wealth and income are increasing concentrating at the very top, our country is declining.
All Of Us Or Just A Few Of Us?
"We, the People" are the first three words of our Constitution. The writers of the Constitution were making a point, and to drive that point home they also made those three words the only words you can see from any distance:
"We, the People" was the point. This country exists for We, the People not for just a few people. We had fought a war to free ourselves from a system that was of, by and for a few wealthy and powerful people who controlled the levers of power, and we said, "Never again!" We designed a new system that was supposed to ensure that all of us prosper instead of a few people at the expense of the rest of us.
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
This Constitution is supposed to be for our benefit -- all of us. The economy is supposed to be for the benefit of all of us. For our general welfare, not for just a few. And to protect us from the wealthy and powerful, government has to be big and strong.
When Government Is Weak
Conservatives, funded by the already-wealthy -- the 1% and their giant corporations -- say we need less government, smaller government, government out of their way. They say they want our government to be small enough that they can "drown it in a bathtub."
Think about what they are saying when they say they want less government: they want less decision-making by We, the People. They want less protection of our general welfare. They want less infrastructure for our smaller businesses to thrive in. They want less enforcement of laws that protect our wages, safety, environment and rules against scamming, scheming, and defrauding us. That is what "less government" means in a country where the government is We, the People..
When government is strong we have more enforcement of a level playing field for all of us, more education for all of us, more security for all of us, more protection of our environment, more infrastructure so our own startup businesses can flourish and compete, more parks, more promotion of the general welfare.
And when government is weak we end up with a very few greedy, ruthless billionaires and their giant corporations controlling the economy, stifling competition, scamming and defrauding us, and consuming the environment and resources for their own short-term profit.
What Government Does For Us And Our Smaller Businesses
Protect:
- Law.
- Police.
- Courts.
- International agreements.
- National Security.
- Regulate and balance business activity.
Enable and empower:
- Education.
- Infrastructure.
- Define and regulate money.
- Redistribute - keep the top from having too much and the rest of us from having too little money, power, etc.
Invent and innovate:
- Public universities.
- Scientific research, esp. basic research for our businesses to apply.
Sustain:
- Protect the environment and resources from those who would use them up for their own profit.
- Fight monopolies so new businesses can innovate and compete.
Help me fill in this list. Leave a comment.
This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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-- Posted by Dave Johnson at 12:43 PM PST on June 12, 2012.
June 11, 2012
Current TV
-- by Dave Johnson
I love everything on Current TV lately. Especially Cenk. But Granholm is great, too.
-- Posted by Dave Johnson at 8:48 PM PST on June 11, 2012.
The Economy Is Not A Board Game
-- by Dave Johnson
The elites who make policy, write about it, have dinner parties where they cluck their tongues about it, mostly have good-paying jobs, health care and secure retirements. They are not affected by it. The elite commissions don’t include unemployed people. The Congressional hearings don't hear from regular people. The news shows don't spend a lot of time talking to regular people. The newspapers don't run op-eds written by regular people because the corporate-conservative think tanks don't hire regular people regular people to write them.
So the elites think about what is happening in the economy like it is a video game, a TV show, an academic exercise.
This concept struck me back during the “run up” to the Iraq war when I was talking to a conservative supporter of George Bush. He didn’t even try to claim, as Bush did, that Iraq had attacked us on 9/11 or there were WMD in Iraq. He asked if I had ever played the board game Risk. In Risk, he said, it is good to capture countries and surround the enemy. He Meant Iran. So hundreds of thousands of Iraqi people were killed, we spent what will add up to trillions of dollars, and all of the other terrible consequences of this lie, for what? Because people thought it was a board game?
Unemployment, low wages, union-busting, foreclosures, refusing to prosecute elites for real crimes -- all of these have real consequences for real people and for our country. This is not a board game. The elites should get their heads out of their board-game asses and look at what is happening out here in the real world that exists outside of DC and NY and the high-end malls.
Just drive around the midwest, going from one former manufacturing town to the next. Jeeze, drive around Detroit. We are becoming a third-world country, except where the elites live. The elites would never let that happen where they live, and they move when it starts to happen. But they never fix it -- because it doesn't effect them, and because the rules of the board game say it can't be happening..
Regular people are being affected, and the elites need to get some regular people onto their commissions and into the hearings and onto the boards of the companies and organizations that make a difference to regular people. The economy is broker - the whole system is broken - but not for the elites. Get some input from regular people and you'll know that.
And no, I do not mean regular banker people.
This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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-- Posted by Dave Johnson at 8:25 PM PST on June 11, 2012.
Corporations Aren't The Problem
-- by Dave Johnson
A pro-labor column in a major newspaper? I'd better look out my window and see if pigs are flying down the street. Nope, they're not! Hell hasn't frozen over. And hey, monkeys aren't even coming out of my butt!
In today's NY Times Joe Nocera writes, in Turning Our Backs on Unions,
In the early postwar years, even the Chamber of Commerce believed that “collective bargaining is a part of the democratic process,” as its then-president noted in a statement.But, in the late-1970s, union membership began falling off a cliff, brought on by a variety of factors, including jobs moving offshore and big labor’s unsavory reputation. Government didn’t help either:Ronald Reagan’s firing of the air traffic controllers in 1981 sent an unmistakable signal that companies could run roughshod over federal laws intended to protect unions — which they’ve done ever since.
...“Draw one line on a graph charting the decline in union membership, then superimpose a second line charting the decline in middle-class income share,” writes Noah, “and you will find that the two lines are nearly identical.” Richard Freeman, a Harvard economist, has estimated that the decline of unions explains about 20 percent of the income gap.
Nocera concludes, "...if liberals really want to reverse income inequality, they should think seriously about rejoining labor’s side."
Ok, checking again, are monkeys really not flying out of my butt?
OK, this is for real, and people had best pay attention if we want our economy to recover. We have a consumer economy and when regular people have money in their pockets to spend on things, the economy does better. Why is this so hard to get? So why are all of the solutions to the economic downturn based on, as Atrios writes, "free money for banks" instead of helping regular people?
See Businesses do not create jobs, people do. Also, It's the lack of demand, stupid! and Businesses hire when customers are coming in the door and The rich don't create jobs, we do.
Again, the rich don't create jobs, we do. And companies want customers, not tax cuts. And this means that we need strong unions pushing to get raises and benefits so working people can start walking through the doors of the businesses again, which will make them hire again, to meet that demand.
Who's In Charge Here?
We, the People were supposed to be in charge here. The economy was supposed to be for our benefit and we were all supposed to get a slice of that pie we all baked together. But (as always throughout history) wealthy interest were able to dominate, "influence" the lawmakers and enforcers, and grab what they could get for themselves. Our system fell down because it didn't control the ability of a few wealthy people to gain power over the rest of us.
Unions gave regular working people the power to get the share of the pie that democracy promises. Before unions came along to enforce the promise of democracy working people didn't get their share of the prosperity that democracy promised. After unions working people did. Before unions we had 12 (or more)-hour workdays, seven days a week. Before unions we had low pay. Before unions we had no benefits. Before unions we certainly didn't get vacations. Before unions we could be fired for no reason. Before unions a wealthy few were able use their wealth to pay off influence legislators and keep the rules bent in their favor.
Unions organized people into power blocks that forced changes that brought a larger share of the pie to We, the People. Unions are a vital part of the system of democracy because they give regular people the power to confront the wealthy.
Corporations Aren't The problem -- The Rules Are The Problem
One thing Nocera wrote: "Company managements don’t pay workers any more than they have to" -- actually, I would change "don't" to "can't". Companies can't pay workers more than they have to. And they can't provide health insurance and benefits and good working conditions and all the other things we wish they would do.
Here is what a lot of us don't get about corporations: it isn't the corporations that are the problem, it's the playing field that is the problem. If one corporation can get away with paying its workers less, then they all have to. They don't have a choice. When one company finds a competitive advantage the rest of the companies have to respond or risk being driven out of business. They really do not have a choice. One company can't pay better than the others. We, the People have to make them all pay better. It's called making the rules. We are supposed to be making the rules, not them. And when we are not making the rules, the system stops working.
I think this is so important to understand. To change companies we have to change and enforce the rules that companies operate under. It is up to us to tell them what to do, to lay down the playing field, and then they will compete on that field as it is defined, up to the limits of how it is defined. They have to push to those limits, and they will, they all will, it is what they are wired to do. When we fall down on the job a few can game the system and break it and end up with everything for themselves, and this is what is happening.
It isn't just that We, the People come out better when we are the ones making the rules, it's that the system doesn't work at all unless we are the ones making the rules. When (the owners and managers of) companies are making the rules, the ones with the most money are able to make the rules to benefit them and only them Which is exactly what we are experiencing today.
The economy and the system just don't work without strong unions to balance the power of the billionaires and the big corporations they hide behind.
This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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-- Posted by Dave Johnson at 8:23 PM PST on June 11, 2012.
June 4, 2012
Trade Deficit - One Root Of Many Problems
-- by Dave Johnson
You buy things till your wallet is empty. So you raid the savings account to buy more stuff. Then you get a loan, and buy more stuff. Another loan, another, you keep buying stuff... Finally you're selling off the tools you had used to make a living. That's where the country is now because of the huge imbalance in our trade relationships. We buy more from them than they buy from us and we have let this go on and on and on. This is the deficit we should be worried about.
The Root
Pick a national problem, and the odds are that our trade imbalance is aggravating it. Our trade deficits literally suck money out of the country. When looking up the numbers I had to double check, our annual trade deficits are so huge. In the chart below that first line under the dates represents $100 billion. Look at what happened in the late 90s, when we opened the China flodgates. (Click to enlarge):
In the 70's the trade balance dipped below zero because of oil, and the country responded with conservation and the beginning of the search for alternatives -- until Reagan. To make matters worse, Reagan preached "free trade" -- as in use cheap foreign labor to break American unions. (But Reagan also enforced rules against "dumping" and other trade violations.) The real break in our balance of trade clearly begins around the time that NAFTA and the World Trade Organization went into effect, and then went absolutely nuts after China was brought in. Between 2001 and 2009 we lost 1/3 of all of our manufacturing jobs, more than 50,000 factories, and entire industries. We drained trillions of dollars out of our economy.
Causes
Energy. The trade imbalance started with OPEC and the oil price shocks in 1970s, and oil imports since then. This is a huge problem but the beneficiaries of this trade imbalance fight to keep things the way they are. (By the way, next time you hear someone of FOX running down our country's green energy efforts, knocking the Chevy Volt or denying climate change, think abougt this: Fox's second-largest shareholder is a billionaire Saudi oil prince. Also, FYI, Koch brothers == oil.)
"Asymmetries." One-sided trade relationships are now draining money from our country at a dramatic rate. We are much more open to imports than many of our "trading partners" are. We buy from them, they don't buy from us -- and we just let this continue year after year.
"Strong" dollar policies, combined with currency manipulation by others. A strong dollar is great for Wall Street, but is terrible for manufacturers and producers. When the dollar is "strong" it means that goods made here cost more than goods made elsewhere. The dollar went way up in the early 1980s because of the borrowing following the Reagan tax cuts for the rich and the trade deficit went up along with it. Dollars had to be purchased to buy our bonds, creating a "demand" for them, which increased their "price," contributing significantly to the then-record U.S. trade deficits. Meanwhile, we let countries like China manipulate their currencies to make them "weak," which means goods made there cost must less in world markets.
Trade cheating. Many countries violate trade rules (like manipulating currency), which brings them a competitive advantage in world markets. We don't call them on it for various reasons, largely because powerful interest groups benefit from the cheating. When goods from elsewhere cost less than they should it undermines our own manufacturers and producers, but the lower prices enrich distributors, retailers, and others.
The Trap
Here is the trap of our one-sided trade agreements: these "free-trade" agreements increase exports. The reason this is a trap and a problem is that they increase imports more. So, on the one hand the agreements create and enrich interest groups that push for continuation and expansion of the agreements, while on the other hand they increase trade deficits, which drain our economy.
Example: We opened up trade with China. China lets their imports grow, so we have some appearance of increasing sales to China, but they keep barriers while manipulating currency and subsidizing their companies, and their exports to us grow faster than their imports from us, which increases the imbalance. They can steadily reduce their import barriers and let their currency rise slowly, giving the appearance of moving toward open trade and providing what appear to be incentives to keep the relationship going, but by also increasing their exports they continue to drain us.
The Answer: Balance
We must balance our country's trade. Of course, to do that we must understand ourselves as a country again. Our competitors certainly do.
We're A Country. Deal With It.Here's the important thing to understand, even if you think the idea of "countries" is out of date, and don't think of the United States as a country is important anymore: Others see themselves as countries and they organize their countries to win as countries. And you don't live in those countries. They see us - this geographic region we live in -- as a country, even if we do not, and they plan their efforts accordingly. They attack us as a country and you happen to live in the geographic region called a country that they are attacking. So as they seize the jobs and factories and industries from our country all of us who happen to live within the geographic borders that we refuse to call a country lose out economically, whether we believe we are part of this country or not. This means we have to respond as a country regardless of whether our ideology says we shouldn't. We are under economic attack as a country, so national government still matters as the only force capable of organizing a national response.
Our government must say that the amount coming in must match the amount going out. Period.
(Note, The Causes of the U.S. Trade Deficit, Robert A. Blecker, Ph.D., August 19, 1999 is a good read.)
Join me at the June 18-20 “Take Back the American Dream” conference.
This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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-- Posted by Dave Johnson at 8:04 PM PST on June 04, 2012.
June 3, 2012
Virtually Speaking Tonite With Digby
-- by Dave Johnson
Virtually Speaking Sundays | June 3 | 6pm pacific | 9pm eastern
Dave Johnson, a Fellow with Campaign for America's Future and a Senior Fellow with Renew California blogs at Seeing the Forest Follow @DCJohnson
DIgby writes primarily at Hullabaloo. This week, she is guest blogging at Mother Jones, while Kevin Drum takes a break. Follow @digby56
Listen live & later at BlogTalkRadio -- meaning you can listen live tonite, or later hear the whole show on podcast.
-- Posted by Dave Johnson at 3:51 PM PST on June 03, 2012.
