I’d say this sums it all up:
I had a conversation over the weekend about the Trans-Pacific Partnership (TPP). She’s for it, because “more trade is always good.”
TPP covers a whole lot more than what we would think of as “trade.” Regardless, let’s look here at the idea that expanding trade is always good.
Trade Is Good
Trade is good. We all at the very least trade our time for our pay. We might make or grow or draw or write something that we sell (trade) for money. Trade is basic.
But how we trade always makes a difference. If we trade our time and get paid too little, is that a good thing because it was a “trade”? Obviously the way trade gets done – the rules/policies that are in place – makes all the difference. So the question to consider is whether our current international trade policies as applied under our current economic order a good thing or a bad thing for We the People of the United States.
“Increasing cross-border trade” sounds like a worthy goal. But if you close a factory in the U.S., move the machines and jobs to a low-wage country, then bring the goods back here to sell in the same stores, you have just “increased cross-border trade.” How should we look at this?
The people now making the goods are paid much less, the investors who own the factory are pocketing much more. Sounds bad, unless you’re one of those owners.
Economists will tell you this is good because fewer of the resources of your economy are being expended to obtain whatever that factory was producing. Those resources can now be applied elsewhere by the investors, toward more productive investment. Sounds good.
Theoretically those American workers will now be freed up to do more productive work, potentially at a better pay rate. Sounds good.
But the way our current economic order works, those resources (the difference between what the American workers were paid and the lower costs of making the stuff somewhere else) are more often applied to the offshore tax-haven accounts of the elite investors than toward “more productive” investments. Sounds bad.
And the way our current system is working, without this new investment those workers remain unemployed, competing with the rest of the people in the workforce, which drives down everyone’s wages except for a few at the top. The reality is that if people laid off due to trade find new jobs, it is at a lower rate of pay. Sounds bad.
Economic theory confronts the reality of America’s current economic order and falls short. The elites use rigged “trade” deals to knock down labor costs. Instead of applying the gains toward investment in our economic future and higher wages for America’s workforce, they apply it to their bank accounts.
The idea of comparative advantage says that countries (regions, etc.) should do what they are good at and trade with others for the things the others do better. Some countries are good at growing bananas and they can trade them for things they can’t grow or make.
But what counts as a comparative advantage?
A few years ago The New York Times took a look at the shift of manufacturing (and associated jobs) from the U.S. to China, in the report “How the U.S. Lost Out on iPhone Work.” The report is known for the Steve Jobs quote, talking to President Obama, saying, “Those jobs aren’t coming back.”
The reason Jobs said those jobs are not coming back was that in China the workers sleep in dormitories, 12 to a room, and can be rousted out of bed at any hour to complete “rush” jobs. They can be made to stand all day, work with dangerous chemicals, are paid very little, cannot organize unions, cannot even vote for a government that would make their lives better.
In other words, China offers a “comparative advantage.” That advantage is that they are not a democracy, workers have no rights and no voice. China is very “business-friendly.” So why would a company like Apple use American workers when they can use workers kept in these conditions?
Our democracy is a comparative disadvantage in world trade. Sounds bad.
Again economic theory confronts the reality of America’s current economic order and falls short. America had factories, China offered low-wage workers and the opportunity to freely pollute. Elites moved the factories to China. Elites use “trade” to attack democracy, turning government of, by and for We the People into a comparative disadvantage in world markets.
Click to see a video of Ian Fletcher talking at, of all places, the Heritage Foundation about his book, “Free Trade Doesn’t Work.” At 21:06 to 25:47 minutes he takes a very good look at the idea of comparative advantage in the real world. In sum:
1) Absence of externalities is not a competitive advantage. The pollution is still there, the workers are still exploited.
2) Capital mobility means you are allocating your capital outside of your own economy.
3) Comparative statistics look at a snapshot, a fixed point in time. If China doesn’t already have a factory making X it is not comparative advantage to go open one there. It is not the best move today if the other country is not already producing the thing for less.
Economies Of Scale
When trade is “opened up” across a border it doesn’t mean that new customers suddenly appear, anxious to buy goods and services produced by America’s small businesses. It’s not like there were no producers and suppliers on the other side of that trade border. The goods and services of an economy were likely already being supplied by someone.
Acme Widget, based in the American town of Plainville, is not suddenly going to get orders from small towns all across the new trading partner Tradonia. Tradonia already has suppliers of widgets. Those suppliers will just as easily come sell their widgets in Plainville.
Economists will say that “opening up” trade across a border increases competition, which benefits consumers. But this is not how it actually works. What has really opened up is a larger playing field with more opportunities for big companies on both sides of trade borders to dominate a larger market than the one they had been dominating, with a resulting decrease in aggregate employment.
In our current economic order big companies have advantages because of their size, and unfortunately rules are made based on which companies are ready to shell out the cash to influence how the rules for competition and domination of industries are made. Larger companies dominate and remove smaller competitors. One or two of these companies will get most of the business in both countries and become very large; the others will be gone. Due to economies of scale the overall widget manufacturing employment will decrease. The new monopolies and near-monopolies will then have the ability to charge what they want.
Once again economic theory confronts the reality of America’s current economic order and falls short. Opening up trade borders is more likely to bring further consolidation of giant companies, not more competition.
These are just a few examples of the problems of academic trade and economic theory confronted with the realities of what actually happens in actual countries.
Another economic theory says that trade will balance as a result of currency adjustments. Supposedly when a country is running a surplus its currency rate will increase and things made in those countries will cost more, so purchases will shift back to the country that had a deficit. But in the real world, the United State competes with real countries that don’t play this way. Our country has an enormous, humongous trade deficit and has run continual trade deficits every single year since the late 1970s when “free markets” and “free trade” ideology came to dominate. This is because we follow an economic theory ideology, and other countries look at reality and adjust. So they win.
Reality trumps economic theories and ideologies – Every. Single. Time.
Here comes the next big one. Now that the corporations have fast-track trade authority in the bag, they are trying to push a huge, huge tax giveaway through Congress. We have to get the word out so this doesn’t just sneak through. We can’t let them continue to rig the system against us like this.
Up To $770 Billion Is Owed On $2.2 Trillion In Corporate Profits Stashed In Tax Havens
You might have heard about all that money the giant corporations have been stashing in tax havens so they can dodge paying their taxes. You might not have heard how much they owe us. Corporations have somewhere around $2.2 billion of “offshore” profits stashed in tax havens. They owe up to 35 percent in taxes on that money. That’s right; they owe up to $770 billion that We the People could have right now for our roads, schools, health care, scientific research, space exploration, to forgive student debt … we could have free college tuition, expand Social Security, high-speed rail across the country…. Instead, we’re told we can’t have these things because there are “budget deficits.”
And on top of that, at least another $50 billion per year of tax money is kept from us because of this scam.
Congress could just tell these corporations to pay up, and We the People would have up to $770 billion to use to make our lives better, and another $50 billion or more each year.
See if you can guess what Congress is getting ready to do instead?
Right now the giant, multinational corporations owe up to $770 billion in taxes on the $2.2 trillion they are holding outside the country in tax-haven mailbox subsidiaries. Right now. They have the cash in the bank (in tax-haven countries) and could write checks tomorrow if Congress told them to. Again, this is taxes they already owe but haven’t paid. Think of the things our country could do with that money.
But instead …
Congress is proposing to give these companies a tax holiday and let them off from paying the taxes they already owe on that money. There is all kinds of complicated language being used to mask what is happening, but it’s really simple: Some members of Congress are proposing letting them off from the taxes they already owe on “offshore” profits, and then letting them off from paying taxes on future profits made “outside the country” from now on.
For example, the Charles Schumer-Rob Portman bill in the Senate will tax this money (on which 35 percent is already owed), “at a rate significantly lower than the statutory corporate rate.” And then it will cut tax rates on future “offshore” profits forever.
Quick question: For years these companies have been moving jobs, production and profit centers out of the country to take advantage of this tax dodge. If they are rewarded for this with this huge tax cut, how many more companies will move jobs, production and profit centers out of the country from now on? Bonus question: Will there be any jobs, production or profit centers left inside the U.S. if Congress lets companies off the hook from taxes on profits made from moving jobs, production and profits centers out of the country?
Don’t Let this Sneak Past Us
The corporations and billionaires count on these things sneaking through under cover of complicated language, so we never find out what is happening to us. Later they tell us “we’re broke” and there is no way to “pay for” things like roads, schools, and other needs. They tell us we have “deficits” that could “bankrupt” us, so college tuition has to go up, we have to pay to use toll roads, they have to cut funding for schools, we can’t have high-speed rail, they can’t afford to do scientific research or space exploration or fight global warming or fix up national parks, and so on.
But what is really going on is the game is being rigged. Corporations get huge tax breaks and subsidies, a few billionaires and plutocrats get the cash, and We the People, the 99 percent, have to make up the difference.
We need to get the word out about this. This is the next big one they are trying to slip through before we know what is happening to us.
We have to fight this. We have to make noise. Even if we don’t win this, at least we will know what happened this time. Then, later, when they come back and say there’s no money to do things that make our lives better, we will be able to see through the smokescreen. We will know where the money went, and eventually enough people will understand how the game is being rigged – and stop it.
Congress should tell the giant, multinational corporations that it is time to pay the taxes the already owe on “offshore” profits. They should not reward companies for moving jobs, production and profit centers out of our country.
Republicans have shut down the Export-Import (Ex-Im) Bank as of midnight, July 1. They are touting it as a blow against “corporate welfare” and “crony capitalism.” But who are the real winners here?
It’s certainly not us workers.
Last year the bank helped finance almost $30 billion worth of U.S. exports — things made here, by workers employed here. Germany, Japan, China and many other countries have similar agencies. Now they will be picking up that business. Our trade deficit will increase. Jobs, wages and factories will move elsewhere.
The United States does not have an economic/industrial policy that supports American manufacturing. Meanwhile, other countries support their industries. As a result, the U.S. has an enormous, humongous trade deficit, trading American assets for foreign-made commodities. We lose jobs, factories, companies, and entire industries to countries that understand the long-term benefits to their economies of national investment in key, strategic industries. On the other hand, a few people here get enormously wealthy from selling off our net worth in the short term. So, there’s that.
Our enormous, humongous trade deficit is a measure of how many jobs, factories, companies and industries we are losing to our pro-Wall Street trade policies. A trade deficit drains our economy of wealth, jobs and future economic opportunity.
The Bureau of Economic Analysis reported today that the gross domestic product (GDP) fell at an annual rate of 0.7 percent in the first quarter of 2015. Much of the reason is our trade deficit.
The Bureau of Economic Analysis reported today that the gross domestic product (GDP) fell at an annual rate of 0.7 percent in the first quarter of 2015.
Our enormous, humongous trade deficit is literally draining our economy. The trade deficit is because we import things we used to make here and sell there, but we allowed companies to move the factories and jobs there in order to force wages down here. This makes a few plutocrats vastly wealthy but it is killing jobs, wages, factories and our middle class.
Trade Deficit Subtracted 2 Percent From Growth
The White House issued an analysis by Jason Furman, Chairman of the Council of Economic Advisers, explaining this was because of “harsh winter weather, tepid foreign demand, and consumers saving the windfall from lower oil prices.” The statement largely (and correctly) blamed “net exports.”
From the White House analysis: “A decline in the trade balance was another major contributor, partially reflecting the continued drag on U.S. exports from the slowdown in foreign growth. Indeed, net exports subtracted nearly 2 full percentage points from quarterly GDP growth.”
“Decline in the trade balance,” “tepid foreign demand” and “net exports” are other ways of saying our “trade” policies have caused an enormous, humongous trade deficit that sends away jobs, factories and our ability to maintain a middle class. A negative “net export” balance means we import more than we export, which means we have a trade deficit. We have had a trade deficit every year since the neoliberal “free trade” and “free market” ideology ascended in the late 1970s. But you won’t find the words “import” or “trade deficit” anywhere in the statement.
Now that we know what “net exports” really means, here it is again: “net exports subtracted nearly 2 full percentage points from quarterly GDP growth.” The trade deficit subtracted almost 2 percentage points from the quarter’s growth.
Close Factories Here And Move Them There = Trade Deficit
We have a trade deficit because we make “trade” deals with countries that sell to us without buying from us and then we don’t do anything to fix it. A lot of this “trade” deficit is because companies here close factories in the U.S. that made goods to sell in our retail outlets and move them to countries with little democracy, resulting in low wages and few pollution regulations. They send the goods back here to sell in the same outlets. Our “trade” deals let them do this with no cost or penalty. The executives and investors then pocket the difference in wages and cost of controlling pollution for themselves. This is why the plutocrat class that now controls our government supports these so-called “trade” deals. (It’s also why these “trade” deals have to be kept secret until Congress preapproves them with Fast Track.)
The Wall Street Journal’s At A Glance blog explains how the trade deficit cut into growth:
Trade was the biggest drag on top-line GDP figures in the opening months of the year. U.S. exports of goods fell by the most since the first quarter of 2009–the midst of the recession–while overall imports climbed. The widening deficit subtracted 1.9 percentage points from economic growth. A stronger dollar has tamped down overseas demand for U.S.-made goods while making foreign products cheaper to import. Meanwhile, congestion at West Coast ports constrained trade earlier in the year.
In “Yes, Trade Deficits Do Indeed Matter for Jobs,” Josh Bivens explains (in economese) at the Economic Policy Institute how the trade deficit is creating jobs, but not here – especially in manufacturing. He blames the trade deficit largely on currency manipulation by our so-called “trading partners”:
Trade deficits occurring when the U.S. economy is stuck below full employment and at the zero lower bound (ZLB) on short-term interest rates are a drag on economic growth and overall employment, period. And this describes the U.S. economy today, so a reduction in the trade deficit in the next couple of years spurred by a reversal of trading partners’ currency management would boost growth and jobs.
[. . .] if the trade deficit was reduced in coming years by ending widespread currency management by our trading partners, the United States would see a pick-up in output and employment growth.
[. . .] Yes, the relationship between trade deficits and jobs can be nuanced, but it’s really not that hard. In today’s U.S. economy, trade deficit reductions engineered by ending currency management would boost U.S. output and employment, and trade deficit reductions will (all else equal) always and everywhere boost manufacturing employment.
This Is The Result Of Intentional Policy Choices
From the recent post, “Enormous, Humongous March Trade Deficit Creating Jobs Elsewhere“:
This didn’t just suddenly happen. Globalization is not some kind of inevitable natural process of history that has caught up with us. This was and is the result of intentional policy choices, designed to force deindustrialization, break unions, drive down wages and benefits and increase inequality as that pay differential is pocketed by a few. This is the result of the “free market, free trade” ideology that rose up in the late 70s. Free trade policy was and is designed to give a few plutocrats and their giant corporations — “the 1 percent” — increased power over governments.
We have a trade deficit (negative “net exports”) because we import more than we export. A lot of this is imports of things that used to be made here by people who used to be paid here. Congress lets this go on because it makes a few plutocrats vastly wealthy – at the expense of the rest of us.
The trade deficit is eating our economy, closing factories, killing jobs, forcing wages down. But the White House isn’t allowed to say that because they want fast track trade authority to pass next week.
Conservatives are supposedly all about markets. Markets should decide, not voters. But when it comes to the law of supply and demand for government debt, they go blind.
Greg Ip in the Wall Street Journal poses this surprising question: “Is Government Debt Too Low?”
The interest rate that rich countries with super-safe debt (in the case of the eurozone, that means Germany but not Spain) pay is astonishingly low: lower than the growth rate of nominal gross domestic product (that is, GDP before subtracting inflation). In the U.S., the Treasury yield has gone from roughly equal to growth in nominal GDP in 2005 to 3 percentage points lower today.
By Mr. [Brad] DeLong’s reckoning, this means those countries are borrowing too little. Bond yields and prices move in opposite directions, so low government bond yields equate to very valuable government bonds. Mr. DeLong asks, “Isn’t the point of the market economy to make things that are valuable?” Since the debt of rich countries is “very cheap to make… shouldn’t we be making more of it?”
Here is the argument. There is a huge demand for U.S. government bonds. There is so much demand that interest rates are exceptionally low. You almost have to pay the government to hold your money.
Remember the “law of supply and demand”? When there is a huge market demand for something, isn’t that supposed to mean that more of that thing should be produced?
Shouldn’t government be supplying more bonds? Saying that the government should be producing more government bonds is another way of saying the government should borrow more. This is what it means when the government “makes” bonds to sell.
If the government borrowed more, it could use the proceeds to maintain and modernize our infrastructure (which has to be done at some point, no?) We could build out a modern energy grid, high-speed rail across the country, double the number of community colleges, expand scientific and health research… And of course doing those things would end up employing millions, and making wages go up.
And if everyone had the job they wanted and wages went up, wouldn’t that boost market demand, which would trigger business investment?
And if we did all of those things – high-speed rail, smart energy grid, modern infrastructure, expanded scientific research, expanded educational opportunity, wouldn’t it mean that our economy was positioned to prosper, and everyone’s lives would be better?
And wouldn’t a revitalized private economy mean that people didn’t need to park their money in government bonds, so the supply wouldn’t have to go up any more to meet demand? And wouldn’t all the tax revenue from that revitalized private economy and full employment pay off those bonds over time?
But no, we can’t maintain, never mind modernize our infrastructure. We can’t expand educational opportunity. We can’t increase scientific and heath research. We can’t do any of those things. Because government spending. We have to cut back, cut back, cut back.
Conservatives say they are about the belief that markets are better than government (and, by implication, better than democracy). But when it comes down to it, they really are about one and only one thing: They hate government and want to strangle it, period – no matter the cost to our economy and our people.
Trade is great. We all trade. A lot of us trade labor for money that buys other things. A farmer trades corn for money that buys other things, and so on. No one is “against trade.”
But is anything called “trade” always good for all involved? Imagine you’re a farmer and you make a deal to trade corn and wheat to get money for a new tractor. So the farmer orders a new tractor, but the “trade partner” never buys any corn or wheat. After a while the “trade partner” shows up with a big bill, saying the farmer owes money for the tractor. And then the farmer finds out that the “trade partner” plans to use the proceeds from the sale of the tractor to grow their own corn.
In modern terms, we would say that the farmer was “running a trade deficit.” How much damage do you think that “trade deficit” is doing to that farmer, and the farmer’s ability to make a living in the future? How long do you think that farmer would let that “trade agreement” continue?
Alongside Friday’s good employment data, there is a brouhaha on the Internets over claims that the government’s employment numbers are a “big lie.” Jim Clifton, Chairman and CEO of the Gallup polling company penned “The Big Lie: 5.6% Unemployment,” claiming that “the media” is “cheer-leading” and the White House is “scor[ing] political points” over phony numbers that the government makes up to make things look better than they are.
In fact, the “top line” unemployment number – now 5.7 percent, representing 9 million people, does not factor in people who have given up looking, 6.8 million part-time workers who want to work full-time, 2.2 million “marginally attached” people, people who are grossly underpaid, etc. But everyone knows that, and the government reports that. The “official” number has a specific definition, the “U-6 “alternative measure of labor under-utilization” reports the more accurate 13.5 percent number. So somewhere between 15 and 20 million Americans count as un- or underemployed. But even that doesn’t count those who have given up. It’s still bad out there, but the government’s figures are not being manipulated.
Intentionally High Unemployment
I want to suggest that this high un- and underemployment is intentional. Here is why. Two things that the government could easily do right now would pretty much get rid of unemployment. But our government is blocked from doing those things by extremely wealthy people, who benefit from the low wages, and a desperate and “cowering” reserve army of unemployed status quo.
First, balancing the trade deficit would by itself bring back more than 5 million jobs. This is based only on the 3.1 million lost to the China trade deficit, 1 million lost to NAFTA and 900,000 lost to the Japan trade deficit. We also have trade deficits with Germany, South Korea, and others.
A way to visualize this is to imagine the effect on our economy of $500 billion of new orders coming in to businesses that make and do things inside the U.S. Then another $500 billion next year and every year after that. Our annual trade deficit is $500 billion. Fixing that means $500 billion of new business here, now, and continuing every year from now on. What you are visualizing is the damage this trade regime has done to us since Wall Street and the right’s “free trade” ideology took over.
Second, we have deferred maintaining our infrastructure since the Reagan era started the cycle of tax cuts and spending cutbacks. To bring the country’s infrastructure up to standards (never mind modernizing) we would need to spend $360 billion each year for 10 years, according to the American Society of Civil Engineers’ Infrastructure Report Card. If you conservatively estimate that each $1 billion spent on infrastructure creates 30,000 jobs, $350 billion translates to 350×30,000 = 10.5 million jobs.
So that’s conservatively 15.5 million jobs if we just go back to doing what the country did before the Reagan era. (This gives you a hint at the damage Reagan’s “trickle down” economics, and “free trade” market ideology have done. Look around. The extreme inequality that resulted tells you why it was done.)
Balance trade and fix up our aging infrastructure means at least 15.5 million jobs. (Think about what that would mean for wages, too.)
But That’s Just Catch-Up
But those things are just playing catch-up. It comes close to giving jobs to the unemployed, part-time for economic reasons and “marginally attached” workers. It doesn’t even start to dig into the people who have given up and left the labor market.
We got here by cutting taxes for the rich, gutting government, deferring maintenance, a and letting a few billionaires harvest our public wealth through privatization, etc. We’ll get out of it by fixing the trade deficit, repairing our infrastructure, undoing policy mistakes that have continued since the Reagan era, and ending “trickle down” tax cuts.
How do we take this a step further? The following things would employ tons of people and bring a long-term economic return far above any “cost.”
First, retrofit buildings and homes to be energy-efficient. Start with the basics: plug leaks and drafts, paint roofs white. These simple things could employ tons of people who we call “low skilled.” Take it a step further, and install energy-efficient windows, insulation, modern heating and cooling systems, solar on the roofs, etc. — all made in America, of course — and we will employ millions more. The energy payoff would be enormous, and we would go into the future with a much more efficient economy.
Next, engage in 21st century infrastructure projects like high-speed rail across the country and into Canada and Mexico — just like China is already doing. (See: “New Silk Road.“) We’ll create jobs, and end up with a massively more efficient, competitive economy. Then, modernize our power grid and install wind turbines across the plains states. Again, we end up with a massively more efficient, competitive economy. Requiring American-made supplies boosts the return to our economy.
What about building out national, high-speed, fiber internet? Imagine the innovation that would result.
There is so much we could do to first bring about full employment, and then move our economy into the 21st century. But we are held back by this weird Reagan/Wall Street/conservative ideology that tells us not to believe that We the People deserve a government that spends to make our lives better. That spending boosts us up now, makes our lives better, and more than pays for itself later. But we are kept from dreaming and doing because that return on our investment would go to us, instead of into the pockets of a few billionaires.
Rep. Alan Grayson (D-FL) is trying to get people talking about the trade deficit and the harm it is doing our wages, our jobs and our potential for mutual prosperity. He’s right to do this.
Last week Grayson spoke at a press conference with several other House Democrats and representatives from a broad coalition of organizations, expressing opposition to “Fast Track” Trade Promotion Authority. Fast Track is a weird process whereby Congress essentially approves of trade deals before even reading them. I wrote about this press conference in “House Members, Activist Leaders Form United Front Against Trade Scheme.”
Now Grayson is emailing his short talk out to his list. This is Grayson’s letter, which repeats what he said at the press conference:
Trade is a simple concept. You sell me yours, and I’ll sell you mine.
That’s not what’s happening.
What’s happening is that day after day, month after month, and year after year, Americans are buying goods and services manufactured by foreigners, and those foreigners are not buying goods and services manufactured by Americans. We are creating millions — no — tens of millions of jobs in other countries with our purchasing power, and we are losing tens of millions of jobs in our country, because foreigners are not buying our goods and services.
What are they doing? They’re buying our assets.
So we lose twice. We lose the jobs, and we are driven deeper and deeper into national debt – and, ultimately, national bankruptcy. That is the end game.
This is not free trade; it’s fake trade. We have fake trade.
That’s why before NAFTA was enacted and went into effect, this country never had a trade deficit as much as $140 billion a year, while every single year since then — for 20 years now — we have had a trade deficit of over $140 billion a year.
We have had a[n average annual] trade deficit of half a billion dollars now, for the past 14 years.
Look back all across history. Look all across Planet Earth. You will see that the 14 largest trade deficits in the history of mankind are – all [of them] — the American trade deficits for the last 14 years.
(I cannot rule out the possibility that somewhere on Alpha Centauri there might be a country that has a larger trade deficit. But here on Planet Earth, no.)
Listen, we are in a deep, deep hole, thanks to fake trade. Thanks to fake trade, right now, 1/7th of all the assets in this country — every business, every plot of land, every car – 1/7th of all the assets in the country are now owned by foreigners. And ultimately, if we keep going the way we’re going, they all will be.
That’s why we have the most unequal distribution of income [among all industrial nations] in our country, [and] the most unequal distribution of wealth in our history.
We’re in a deep, deep hole. And there’s a simple rule about holes: When you’re in a hole, stop digging. Stop digging!
So I’m calling upon our leaders. I’m calling upon the American people. Let’s stop digging.
Let’s not only have a trade policy. For once, let’s also have a trade deficit policy.
Let’s deal with the reality that has robbed the American Middle Class now for decades. Let’s address it, and let’s defeat it. That’s what I’m calling [for], right now.
Let’s stop digging deeper. Let’s raise ourselves up, let’s climb out of this hole, and rebuild the American Middle Class. Thank you very much.
Rep. Alan Grayson
Grayson’s email includes this chart showing the history of how our enormous, humongous trade deficit has grown and grown:
This is a big deal, because Grayson reaches a lot of people, and information spreads. So, maybe Grayson’s efforts will help drive awareness of the the trade deficit problem.
What Is The Trade Deficit?
The trade deficit is a direct measure of how much more our country buys from other countries than it sells to other countries. It also directly measures dollars and jobs literally drained from our economy. The trade deficit — contrasted with the budget deficit which we largely owe each other inside the country — really is like a family or business budget and we are spending more than we are taking in. In fact, we have been spending more than we are taking in for a long time.
Last month our trade deficit was $39 billion. That is $39 billion worth of business that went to non-US factories and other providers representing $39 billion worth of jobs and store purchases and the jobs and taxable revenue all of that represents. And that was in just one month.
Meanwhile China reported that their trade surplus has increased by almost 50%. “China 2014 trade surplus rockets to record high”:
China’s trade surplus soared by almost half last year to a record $382 billion, the government announced Tuesday…
Exports increased 6.1 percent to $2.34 trillion in 2014, while imports rose 0.4 percent to $1.96 trillion, the General Administration of Customs said on its website.
That translated into a trade surplus of $382.46 billion, the highest ever and a 47.2 percent increase on 2013.
That trade surplus represents a direct transfer of $382 billion of wealth into China from other countries — largely our own — while our trade deficit represents a direct transfer of wealth out of our own country, mostly to China.
Grayson’s little chart shows how long our trade deficit has been draining jobs, factories, and prosperity from our country. Nothing like this has ever occurred before in human history. If you look at the effect on the country you can trade the years of factories closings and community devastation in much of the country to the lines on this chart. You can trace the “hollowing out’ of America’s middle class by following the lines on this chart.
Budget Deficit Or Trade Deficit — Which Matters More?
You have heard a LOT about the budget deficit over the years. Conservatives and Wall Street have put a lot into making people scared about the budget deficit. This scare machine has been effective and as a result most people don’t even know that the budget deficit is way down from where Bush left it. (“By 73 percent to 21 percent, the public says the federal budget deficit has gotten bigger during the Obama presidency.”)
The reason conservatives and Wall Street are investing so much in budget-deficit propaganda is that if people are fearful about the budget deficit they demand certain policies that are, to say the least, a lot more beneficial to conservatives and Wall Street than to regular, working people. These include allowing cuts to the federal budget (and its oversight of and push-back against the giant corporations) that would be unthinkable without budget deficit fear stampeding the public. (The budget deficit was caused intentionally to force these results.)
However, if people come to understand and worry about the very real trade deficit they will demand policies that are very good for regular, working people as well as for “Main Street” businesses that make or do things in America. Policies that balance trade would increase jobs and wages, general prosperity and tax revenue.
These policies to help balance trade include outlawing currency manipulation which makes foreign-made goods less expensive relative to American-made goods, enforcing existing trade rules and finally renegotiating the trade deals that have caused our massive trade deficits (China, in particular).
Campaign for America’s Future’s 2010 Reagan Revolution Home To Roost series, especially the post Reagan Revolution Home To Roost — In Charts described the beginning of the great decoupling of the American economy from the middle class.
Conservative policies transformed the United States from the largest creditor nation to the largest debtor nation in just a few years, and it has only gotten worse since then.