The Democrat’s Agenda Should Be: Fix The Trade Deficit

There is no way around it: There are three issues on people’s minds as we go into the midterm elections: jobs, jobs and jobs.

Since the 2008 financial crash – actually since Reagan was elected – most of the gains from our economy have gone to the 1 percent and many of the jobs have been shipped out of the country. And everyone knows it. What they don’t know is the direct relationship between the two. That relationship is the trade deficit.

The trade deficit is a direct measure of jobs leaving the country. The trade deficit is factories closing. The trade deficit is American dollars going to other countries so people there can spend them. The trade deficit is our standard of living leaking away. And the trade deficit is a major factor driving what remains of the budget deficit.

The trade deficit is our economy’s problem. Democrats need to get on board with that message. It doesn’t hurt that it’s also true.

Democrats Don’t Get That Republican Propaganda Works

Democrats in Washington are surrounded by D.C.’s daily events and don’t get it that the public doesn’t see what they think they see. They are immersed in the news and fighting daily battles and tend to think the public is informed and doing that, too. They tend to put reasons on things the public does that line up with what they experience in D.C.: “The reason voters in district 5 of the county special election in Colorado voted for Kranitz was because the sub-amendment to our section 5 jurisdictional funding retroparticle was blocked in committee on the third markup. Because it was on C-SPAN.”

But the public isn’t seeing it that way. The public is seeing “Democrats have been in charge” since 2008 and the economy is still bad. Period, end of story. (Not 2009, by the way; the election was in 2008 so they think the 2009 $1.4 trillion budget deficit was caused by Obama and the stimulus.)

Democrats Need A Simple And Clear Economic Agenda

If Democrats can’t come up with a counter to the Republican message that the economy is bad because Democrats are “in charge” and spend too much, they are going to lose badly. (P.S.: The answer is not to say “OK, so we’ll spend less.” That’s just feeds the lies and – as we have seen – just makes the economy even worse.)

At The New Republic, Danny Vinik writes in “Hillary Clinton’s Biggest Vulnerability: Her Economic Agenda” that “as we enter the latter half of Barack Obama’s second term, the public increasingly blames him and his party for the weak recovery.”

Vinik explains that there are Democratic proposals that would really help fix the economy, but they are from “left-leaning economists” and “they have little political support.” One proposal is in a paper from (“left-leaning”?) Larry Summers, who argues that we have entered into “secular stagnation” and the “solution to secular stagnation is significant rounds of fiscal stimulus to fill the still-large hole in consumer demand for goods and services, known as aggregate demand.” In other words, more “stimulus” that Republicans will obstruct.

Another proposal is to fix the trade deficit:

A separate paper, from left-leaning economist Dean Baker, argues that the trade deficit is a significant impediment to full employment. U.S. imports exceeded exports by $500 billion in 2013—that is, $500 billion of American demand for goods and services supported jobs overseas. In response, Baker proposes lowering the value of the dollar and cracking down on currency manipulators like China who artificially lower the value of their currency so that their goods and services are cheaper, boosting exports. Yet, trade policy is not an exciting or accessible issue to most voters. A candidate could include it as part of their economic platform, but it cannot form the backbone of it.

Yet another proposal is a change in monetary policy to promote full employment. This brings up a political problem, according to Vinik. The public doesn’t understand monetary policy and has been propagandized to be against further stimulus. (The public thinks “government spending” causes unemployment.)

Vinik writes “Democrats will have to convince voters that much of the Obama agenda is still the right prescription for the economy, despite the weak results over the past five-plus years. That’s not easy.”

What Went Wrong: Filibusters And Austerity

President Obama and Democrats have made significant proposals that would have made a tremendous difference in the economy we experience today, but they also contributed to the mess we are in.

It’s a fact that Senate Republicans filibustered literally everything Democrats offered that might have helped the economy. That’s their strategy and it’s working: Block anything that could help the economy and blame Democrats because they were “in charge” while the economy continued to stagnate.

Here’s the thing: Democrats let them do it. They did not end the filibuster. For whatever reasons – tradition, attempting to remain “bipartisan” and “civil” against uncivil partisan opponents, whatever – the end result was they did not deliver for their constituents, the American people.

The other thing that Democrats let Republicans do to the country was austerity. In fact, most Democrats bought into it, went along with it, pushed it, reinforced it, messaged it and gladly fell into the Republican trap.

So, with an election coming, Democrats haven’t delivered for their constituents – the 99 percent – and the public is not happy with that.

The Problem Is The Trade Deficit, Not The Budget Deficit

Here is a path for Democrats: Talk about the trade deficit.

Our trade deficit is literally a measure of how many jobs we ship out of the country. And our trade deficit is huge. It is humongous. It is enormous. It is larger than any trade deficit in the history of the world, and the parts of it that most affect jobs continues and continues and gets worse and worse. Last year’s trade deficit with China was a record.

The trade deficit is also a traditional Democratic issue. It is about jobs, blue-collar workers, jobs, factories, jobs, manufacturing, good wages and jobs. It is about seeing “Made in America” in stores again.

Everyone knows where the jobs went and continue to go: out of the country, mostly to China.

Everyone knows that the reason their pay is stagnant of falling is because people are afraid their job will be sent out of the country, too.

Everyone knows that something has been going on with these trade deals that let companies move out of the country to places where people and the environment are exploited and then bring the same goods back to the U.S. and sell them in the same stores for the same prices. OF COURSE that means jobs leave the country!

Ask almost anyone what they think of “NAFTA” – shorthand for all trade deals – and you will discover what is certainly one of the most salient, activating issues in politics today. Democrats, Republicans, Tea Party members, they all get it that jobs are being shipped out of the country (because they are), they all get it is making a few people really, really rich (because it is), and they all get that it is causing the rest of us to feel pain (because that is the result).

Economist tell us that the trade deficit represents “demand” that is leaving our country and is fueling jobs elsewhere. This means that people here are buying stuff – “demand” – but that the stuff they are buying is made somewhere else so we don’t get the benefit of those people all buying stuff. And the fact that there is a “deficit” means that the “somewhere else” is not reciprocating by buying stuff from us. They are not “trading” with us, they are selling to us but not buying from us. They are cheating and playing tricks to drain our country of those jobs and factories that would come back if they were buying the same amount from us as we are buying from them.

If Democrats want a simple jobs plan, this is it: Fix the trade deficit. Explain to people what balanced trade means and demand that trade be balanced. Come up with a clear plan to BALANCE trade and explain how this will bring back the jobs.

Do your part. Ask every candidate for Congress if they understand what the trade deficit is, how bad it is and what their plan is to fix it.

8 Reasons Some CEOs Make 331 Times As Much As Their Employees

I have this up over at AlterNet: 8 Reasons Some CEOs Make 331 Times As Much As Their Employees
We all know income inequality is a major problem, but the reasons for it rarely break into the mainstream media.

Here are some depressing statistics: In 2013, CEOs of S&P 500 companies made 331 times as much as their employees. Your average American worker not in a supervisory role made $35,239, while the average CEO made $11.7 million, according to the AFL-CIO Executive Paywatch website. CEO pay has increased a whopping 937 percent since 1978, according to a new report by the Economic Policy Institute.

So while CEOs are making a killing, more and more people find themselves with stagnant-at-best pay. People laid off from good-paying jobs (the result of rigged trade deals) are forced into jobs at half their former pay and no benefits, if they can find a job at all. Weak wage growth predates the Great Recession. Between 2000 and 2007, the median worker saw wage growth of just 2.6 percent, despite productivity growth of 16.0 percent, while the 20th percentile worker saw wage growth of just 1.0 percent and the 80th percentile worker saw wage growth of just 4.6 percent.

Read the rest at AlterNet.

Will We Let Congress Hand Billion$ More To Big Corporations?

This one is simply outrageous. Corporations currently owe up to $700 billion in unpaid, “deferred” taxes. The country needs the money – partly because these companies owe so much in taxes. Which of the following choices should the country make?

1. Tell the companies to pay up what they owe, bringing us hundreds of billions to use now and tens of billions a year more from now on.

2. Let them off the hook from ever paying most what they owe, if only they please would let us have a little bit of it now.

Who Is The Boss Of Whom?

The choice depends on who you think is supposed to be the boss of whom. If you believe that We the People are in charge of this country, then obviously you’d say these corporations should just pay the taxes they owe. But if the corporations are in charge of us they’ll tell us they aren’t going to pay these taxes unless we give them something.

Not surprisingly, Congress appears to be working toward option ‘2.’ It’s called a “repatriation tax holiday.” They are proposing to tell the companies that moved jobs, factories and profit centers out of the country that it was the right thing to do. Unfortunately that will tell companies that didn’t do these things that they were chumps.

What Is A Tax Holiday?

Here is what’s going on. Giant, multinational U.S. corporations owe our government up to $700 billion in taxes on about $2 trillion in profits they have made (or made it look like they made) outside of the country. But there is a loophole that lets them hold off on paying those taxes owed until they “bring the money home.” So of course, many corporations have been engaged in all kinds of schemes to make it look like they make their money elsewhere – and/or move jobs, factories and profit centers out of the country.

Why is this important right now? In a New York Times “politics” story Tuesday, “Plan to Refill Highway Fund Stokes Conflict in Congress,” this nugget:

[Sen. Harry] Reid and [Sen. Ron] Paul are quietly pressing for a one-time tax “holiday” — a special and lucrative tax deduction — to lure multinational corporations to bring profits home from overseas, producing a sudden windfall.

Instead of telling these corporations that it’s time to pay up, it looks like Congress is preparing to just let them keep much (85 percent) of the money. It’s called a “tax holiday.”

What is the “conflict” the headline talks about? It isn’t a conflict between those who want to hand corporations hundreds of billions of dollars and those who do not want to. The conflict is over how to hand them the money!

Senator Ron Wyden, Democrat of Oregon, the Finance Committee chairman, and Senator Orrin G. Hatch of Utah, the ranking Republican, want that money to help smooth passage of a broad rewrite of the tax code.

So if Senator Reid is on board for a tax holiday and Senator Wyden is on board for a tax holiday, it looks like the idea of giving this huge amount of cash to these corporations is baked in to the thinking in the Senate. And we’re talking about Democrats here. One side wants (Reid) to give them a tax holiday and get a little bit to use to pay for infrastructure, the other side (Wyden) wants to use it as a bribe to get these giant corporations to let the U.S. government “reform” the tax laws. Both sides are conceding that they’ll accept a tax holiday.

But no one in this discussion is just saying, “Hey, we’d get up to $700 billion and tens of billions every year from now on if we just told these companies to pay the taxes they owe.”

The cost: At Least $95.8 Billion

The idea is to give these companies an 85 percent deduction – the “tax holiday” – on their foreign profits and only taxing 15 percent of the profits. In other words, instead of taxing $2 trillion of profits being held out of the country they’ll only tax $300 billion. If these corporations “bring the money home.”

Bloomberg News looks at the cost of this, in “Repatriation Tax Holiday Would Cost U.S. $95.8 Billion.” The “holiday” would bring in a quick $19.6 billion, but would cost $95.8 billion of tax revenue that would come in anyway over the next decade with no changes – not even making these companies just pay up. (Note: This calculation assumes Congress won’t just tell these companies to just pay their taxes. That would bring in up to $700 billion at the top tax rate of 35 percent and tens of billions a year from now on. Companies can deduct any taxes already paid elsewhere, so “up to” means $700 billion minus taxes paid elsewhere.)

An Engineered “Crisis”

That’s right, after all these years of propaganda about budget deficits and the hostage-taking and the “fiscal cliff” and the “debt ceiling” and the sequester and all the resulting budget cuts in essential services and “austerity” and how this has held back the recovery … it looks like Congress is going to just let companies off from paying hundreds of billions of taxes they already owe. This is not about passing another tax break/subsidy, etc. These are taxes that are due and payable on profits that have already been made but that these companies are keeping outside of the country (and away from their shareholders).

Why would Congress even consider letting these corporations off from paying the taxes they owe? Because of rules about not increasing the deficit Congress “needs” the money. This is a “realpolitik” deal, recognizing that the companies have enough power to keep Congress from just making them pay up what they owe. The thinking is they can appease the corporations with an 85 percent tax holiday to get them to pay at least 15 percent of that they owe.

This is another engineered “crisis” where the country is made to believe that deficits are keeping us from doing things we need to do. We need to fund transportation infrastructure, we can’t borrow the money to invest in things like this that make our economy more efficient, hence the need to “incentivize” the corporations to please bring home some of the money they owe us.

They Did This In 2004 And It Made Things Worse

In 2004 corporations ran the same scam on Congress, except that time they promised to use the money they brought back to “create jobs.” So what happened?

In 2011 the Institute for Policy Studies (IPS) looked at the results of the 2004 tax holiday and found that “their holiday didn’t just fail to create the promised jobs. Their holiday enriched corporations that actually destroyed jobs in the months right after they received their tax windfall.” IPS found that 58 multinationals who used the “American Job Creation Act of 2004″ tax holiday not only immediately laid off tens of thousands, they continued laying off, and laid off close to 600,000 workers between 2004 and now. From the IPS summary of the study,

One government study looking at the first two years after the repatriation windfall found that 12 of the top recipients laid off more than 67,000 American workers. These firms collectively brought back home more than $100 billion …

According to IPS, the companies that gained the most from the tax holiday actually cut jobs, on top of that they used the tax gift money to buy back their own stock, increasing its value, and pay out dividends, both thereby enriching executives and shareholders.

(This is from 2011. Another half a trillion of profits have been shifted offshore since then.)

From the Times story,

In 2004, when Congress approved a similar holiday, lawmakers vowed never to do it again. If it became a habit, they reasoned, companies would keep their profits overseas waiting for the next tax holiday. That, the bipartisan Joint Committee on Taxation explained, is the idea’s “moral hazard problem.”

The 2004 tax holiday only made things worse because companies realized they could get out of paying taxes entirely if they moved profits offshore and held out until the next holiday season. If we do it again, every company will be compelled to move jobs, factories and profit centers out of the country to stay competitive.

They are going to try to sneak this through under the radar. Maybe We the People can stop it if we make enough noise.

—–

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF. Sign up here for the CAF daily summary and/or for the Progress Breakfast.

5 Companies Ripping Off America and the Simple Tax Change That Could Make Them Pay Up

I have this over at AlterNet: 5 Companies Ripping Off America and the Simple Tax Change That Could Make Them Pay Up,

Believe it or not, all four of the statements below are currently being made in Congress and in the hallowed halls of elite opinion:

  • “We’re broke” and we have to cut the budget. – House Speaker John Boehner.
  • America just can’t afford more government spending like hiring teachers or repairing bridges.
  • We have to cut entitlements like Social Security and Medicare or the country will go bankrupt.
  • Corporations and multinational giants don’t have to pay up to $700 billion in overdue taxes.

We’re broke. We have to cut back on all the things government does to make our lives better. Yet let’s let the giant corporations off the hook for hundreds of billions of dollars of taxes they already owe.

Read the rest at AlterNet.

Balancing Trade – Remember The “Buffett Plan”

The enormous, humongous trade deficit is doing incredible damage to our economy. Our country’s elites used to care about that.

In 2003 Warren Buffett wrote a highly-influerntial article, America’s Growing Trade Deficit Is Selling The Nation Out From Under Us. Here’s A Way To Fix The Problem–And We Need To Do It Now. Buffett began, “I’m about to deliver a warning regarding the U.S. trade deficit and also suggest a remedy for the problem.” Then he added, “… our country’s ‘net worth,’ so to speak, is now being transferred abroad at an alarming rate.”

To make his point, Buffett used a hypothetical example of “two isolated, side-by-side islands of equal size, Squanderville and Thriftville.” Thriftville lived off the food they grew, and worked extra time so they could export food. The people in Squanderville stopped working and issued IOUs so they could just buy food from Thriftville, thinking “they can now live their lives free from toil but eat as well as ever.”

Of course, Squanderville couldn’t issue IOUs forever to buy Thriftville’s food. Eventually Thriftville owned all of Squanderville and the people there had to start working 16 hours a day to make up for the work they hadn’t done. And because Thriftville now owned Squanderville, the long hours would continue forever, generation after generation.

Continue reading

Why Would Obama Push A Trade Deal That Would Cut Pay Of 90% Of Workers?

President Obama is in Asia, partly to “reassure” partner countries that the U.S. is a strong ally and partly to push the Trans-Pacific Partnership (TPP). Both are to counter China’s growing influence. While TPP is being sold as a “strategic” countermeasure to China, like other so-called “trade” agreements TPP does not help American workers; it hurts them.

Obama In Asia Pushing TPP

President Obama is in Japan as part of his “pivot to Asia” tour of Pacific countries. He is also visiting South Korea, Malaysia and the Philippines. The trip is meant to demonstrate U.S. diplomatic and economic efforts toward Pacific nations to counterbalance China’s increasing influence in the region. Part of this effort is a big push to get TPP negotiations back on track and completed.

TPP is a massive “trade” treaty between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. “Trade” is in quotes because only five of the treaty’s 29 chapters actually deal with trade. Others set rules on investment, set limits on the ability of governments to regulate corporations, restrict a government’s ability to spend its own tax dollars on goods made in that country (such as “Buy America” procurement policies) and other things well beyond the usual scope of what would be considered a trade agreement. This leads many to claim that the treaty is really about limiting the ability of governments to reign in the giant corporations. (For those not familiar with TPP, read all about it in ourfuture.org’s TPP section.)

Most Workers Likely To Lose

The treaty is being negotiated in secret with lots of corporate involvement and not much involvement by stakeholders like labor, environmental, human rights, consumer and other groups that would be affected. But even though it is secret we know from leaks that TPP as currently negotiated appears to be designed to benefit a few giant corporate interests, while potentially driving the nail into the coffin of America’s middle class.

Since NAFTA our “trade” agreements have gotten a bad reputation with the public. People have come to realize that these “free trade” agreements are causing companies to close American factories and open factories in countries with low wages and that allow companies to pollute. Pitting American workers against low-wage workers has encouraged employers to cut wages and benefits for those who are able to keep their jobs.

A September 2013 study, “Gains from Trade? The Net Effect of the Trans-Pacific Partnership Agreement on U.S. Wages,” by the Center for Economic and Policy Research (CEPR), looked at the effect of past trade agreements and estimated what TPP would do if enacted. The study estimated that the TPP would force wages down (even more) for almost all U.S. workers.

The CEPR study estimated that U.S. economic gains would be only 0.13 percent of gross domestic product by 2025. In exchange for these small gains, according to the study, “… most workers are likely to lose—the exceptions being some of the bottom quarter or so whose earnings are determined by the minimum wage; and those with the highest wages who are more protected from international competition.”

Any workers who don’t lose would not win as a result of the “trade” parts of the treaty. “Rather, many top incomes will rise as a result of TPP expansion of the terms and enforcement of copyrights and patents.” So everybody loses except those who own copyrights and patents.

In “‘Trade’ Deal Would Mean a Pay Cut for 90% of U.S. Workers,” Public Citizen’s Eyes on Trade blog explains just who would lose,

[CEPR's] Rosnick shows that if we assume that trade has contributed just 15% of the recent rise in inequality (a still conservative estimate), then the TPP would mean wage losses for all but the richest 10% of U.S. workers. So if you’re making less than $87,000 per year (the current 90th percentile wage), the TPP would mean a pay cut.

But “everybody losing on wages” is not a bad thing for giant corporations; it’s a good thing. As much as they can squeeze down labor costs, that boosts their bottom line. And they are exactly who is pushing for this treaty.

Enormous, Humongous Trade Deficits

The United States used to try to have balanced trade, often with a surplus. This means we were selling more to the world than we were buying. More money coming in than going our made us comparatively “rich.” But since the free trade agenda that came along in the late 1970s, which was accelerated by the Reagan administration, we have been running continuing trade deficits. Then when we opened up trade with China, the deficit skyrocketed.

Now this trade deficit has reached enormous proportions, more than $700 billion before the recession. (It actually fell last year to $471.5 billion in 2013, from $534.7 billion in 2012.) Our trade deficit with China alone was over $318 billion last year.

In summary: the free-trade legacy so far.

  • Trillions of dollars lost. We have an ongoing trade deficit bleeding money from our economy.
  • Stagnant or falling wages for most of us. Pitting Americans against low-wage workers has forced US wages down.
  • Millions of good-paying jobs lost. Most of these workers are getting paid much less now, if they can find work.
  • Tens of thousands of factories closed, moved out of the country. This costs us our ability to make a living as a country.
  • Entire industries lost. As we lose the factories and supply chains, entire industries disappear.
  • Devastation of entire regions of the country. Nothing has come along to replace manufacturing in much of the country. Go take a look at Detroit, Flint, Cleveland, Lorain, Eria and so many other areas.
  • Massive increase in income and wealth inequality. A few billionaires do great when labor costs decline and profits rise.
  • Destruction of the middle class and maybe even our democracy. Just look around you.

Democracy Or Oligarchy?

The public “gets it” that these trade deals have really, really hurt regular, working Americans and TPP would continue free trade’s devastation of the middle class. There is a revolt going on in both parties in the Congress. House Democratic Leader Rep. Nancy Pelosi and Senate Majority Leader Harry Reid have reaffirmed that they don’t agree with the current process and course of TPP. Tea party conservatives and progressives oppose TPP. Even many American corporations oppose the current TPP!

The public “gets it.” Take a look at the Trade and Manufacturing section of the Populist Majority poll-aggregation website.

  • “95% favor goods manufactured in America.”
  • “73% favor offering companies a tax break for every job they bring from overseas to the US.” But current law gives tax breaks and deferrals for jobs, factories and profit centers shipped out of the country. Republicans are obstructing efforts to change this.
  • 84% of the public “support a concerted plan to make sure that economic, tax, education and trade policies in this country work together to help support manufacturing.” But that would be “government action” and “picking winners and losers” so it is opposed in the Congress.
  • “60% say the US needs to “get tough” with countries like China in order to halt unfair trade practices, including currency manipulation, which will keep undermining our economy.”
  • “65% consider outsourcing, rather than a potential shortage of skilled workers, as the reason for a lack of new manufacturing jobs.”
  • “56% believe trade agreements that allow corporations to sue governments, such as the Trans-Pacific Partnership, should be rejected.”

Democracy would say hold off on TPP. But a few giant, multinational corporations and the billionaires behind them want it. So in our corporate-dominated political system, it’s full speed ahead for TPP.

Trading Our Economy For National Security Fears?

The history of this is that many in government believe that America’s national security interests are served by letting the big corporations cut these trade deals with countries like China and Japan, because security arrangements should have a priority over economic concerns. So they have worked to strengthen South Korea, Japan and even China at the expense of our own economy. This was a Cold War strategy. Now they are using China as a bogeyman to push the TPP, saying we need it to counter China’s influence. Get all of these countries into this agreement and we’ll be stronger than China.

This way of seeing the TPP as a way to strengthen these strategic partners allows those countries to extract concessions in the treaty negotiations that the giant corporations like, but that hurt our own country’s economy. State Department and various National Security interests give this a go-ahead; they say this is good because it will elevate those countries. Meanwhile, our factories close, our own industries suffer.

Of course, even as this argument is used we do nothing about our massive trade deficit with China, we allow them to manipulate their currency and exploit workers.

The reality at this point is that it is now in the security interest of America to rebuild our own middle class, rebuild our infrastructure and competitive position, rebuild our education and research institutions, rebuild our own democracy. Real security comes from having a strong economy and a strong middle class.

We can do trade right. We can elevate the people and economies of other countries without exploiting working people around the world and destroying our own middle class.

Scott Paul of the Alliance for American Manufacturing wrote Thursday that “A Good Trade Deal Is Well Worth the Wait“:

[L]ost in this rush to secure a pact is what the TPP (and every other trade agreement) should actually accomplish: A more balanced U.S. trade account that ultimately benefits the American middle class, which recent reports show could use some help right about now. Unfortunately, America’s track record on trade policy has pushed our trade deficits in the wrong direction and weakened the middle class. And despite the Obama administration bromides that this will be a “21st century trade agreement,” it’s hardly certain that the TPP will be any different, at least when it comes to deterring currency manipulation.

With that in mind, I say a good trade deal is well worth the wait and effort.

We’ve already seen what’s happened when trade policy is inexpertly wielded as a tool of foreign diplomacy. Consider the debacle of permanent normalized trade relations with China in 2000. In exchange for the promises of a more open Chinese society, a Republican Congress and a Democratic president removed the threat of annual review of tariffs on Chinese imports. This resulted in none of the hoped-for democratic reforms (if anything, China has used its funding stream courtesy of our burgeoning trade imbalance to become more belligerent) and ;massive job loss in the U.S. manufacturing sector.

But while China and Japan couldn’t be more different in terms of domestic governance, they share a remarkable similarity in international economic policy: Both regularly distort their currency exchange rates to push their trading surpluses with the U.S. high and keep them higher. Despite that fact, no U.S. action has been taken against China or Japan for manipulating their currency. And though there is much secrecy around the details of the TPP proposal (of which Japan is a potential party and is, as the world’s third largest national economy, the most important negotiator aside from the U.S.), a rule barring currency manipulation has most certainly not been discussed.

We can do so much better. Our government can negotiate for the American people instead of against them, as they have done. Step back, take a breath, wait … Get the giant corporations out of the front seats of the process and go back and make NAFTA work for us and Mexican working people and farmers. Make trade work for the American people and Chinese working people.

—–

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF. Sign up here for the CAF daily summary

Elites Discover So-Called “Free-Trade” Is Killing Economy, Middle Class

The New York Times editorial board finally gets it right about trade in its Sunday editorial, “This Time, Get Global Trade Right.” Some excerpts:

Many Americans have watched their neighbors lose good-paying jobs as their employers sent their livelihoods to China. Over the last 20 years, the United States has lost nearly five million manufacturing jobs.

People in the Midwest, the “rust belt” and elsewhere noticed this a long time ago as people were laid off, “the plant” closed, the downtowns slowly boarded up and the rest of us felt pressure on wages and working hours. How many towns — entire regions of the country — are like this now? Have you even seen Detroit?

“This page has long argued that removing barriers to trade benefits the economy and consumers, and some of those gains can be used to help the minority of people who lose their jobs because of increased imports,” the editors write. “But those gains have not been as widespread as we hoped, and they have not been adequate to assist those who were harmed.”

So acknowledging that our trade deals have hurt the country, they say maybe we could try to do it right with coming agreements. They write:

If done right, these agreements could improve the ground rules of global trade, as even critics of Nafta like Representative Sander Levin, Democrat of Michigan, have argued. They could reduce abuses like sweatshop labor, currency manipulation and the senseless destruction of forests. They could weaken protectionism against American goods and services in countries like Japan, which have sheltered such industries as agriculture and automobiles.

They write that one problem is that these agreements are negotiated of, by and for the giant corporations:

One of the biggest fears of lawmakers and public interest groups is that only a few insiders know what is in these trade agreements, particularly the Pacific pact.

The Obama administration has revealed so few details about the negotiations, even to members of Congress and their staffs, that it is impossible to fully analyze the Pacific partnership. Negotiators have argued that it’s impossible to conduct trade talks in public because opponents to the deal would try to derail them.

But the administration’s rationale for secrecy seems to apply only to the public. Big corporations are playing an active role in shaping the American position because they are on industry advisory committees to the United States trade representative, Michael Froman. By contrast, public interest groups have seats on only a handful of committees that negotiators do not consult closely.

The current trade-negotiation process is a system designed to rig the game for the giant multinationals against everyone else:

That lopsided influence is dangerous, because companies are using trade agreements to get special benefits that they would find much more difficult to get through the standard legislative process. For example, draft chapters from the Pacific agreement that have been leaked in recent months reveal that most countries involved in the talks, except the United States, do not want the agreement to include enforceable environmental standards. Business interests in the United States, which would benefit from weaker rules by placing their operations in countries with lower protections, have aligned themselves with the position of foreign governments. Another chapter, on intellectual property, is said to contain language favorable to the pharmaceutical industry that could make it harder for poor people in countries like Peru to get generic medicines.

These trade agreements place corporate rights over national sovereignty:

Another big issue is whether these trade agreements will give investors unnecessary power to sue foreign governments over policies they dislike, including health and environmental regulations. Philip Morris, for example, is trying to overturn Australian rules that require cigarette packs to be sold only in plain packaging. If these treaties are written too loosely, big banks could use them to challenge new financial regulations or, perhaps, block European lawmakers from enacting a financial-transaction tax.

And they’re asking, like the rest of us are asking, why in the world won’t they do something about currency?

It’s easy to point the finger at Nafta and other trade agreements for job losses, but there is a far bigger culprit: currency manipulation. A 2012 paper from the Peterson Institute for International Economics found that the American trade deficit has increased by up to $500 billion a year and the country has lost up to five million jobs because China, South Korea, Malaysia and other countries have boosted their exports by suppressing the value of their currency.

What So-Called “Free Trade” Agreements Did To The Economy

A trade deficit means that we buy more from the rest of the world than we sell to it. This means that jobs making and doing things here migrate to there. Before the mid-70s the United States ran generally balanced trade, with a bias toward surplus. Look at this chart to see what happened, beginning in the ’80s, and then … wham.

Now we have an enormous, humongous, ongoing trade deficit that over the years has added up to trillions and trillions of dollars drained from our economy. We have lost millions and millions of jobs as tens of thousands of factories closed. We have lost entire industries. We are losing our entire middle class to the resulting wage stagnation and inequality.

Here is what happened when the trade deficit took off. First, look at this chart of the “decoupling” of wages with productivity. In other words, as productivity goes up, what happens to the share of those gains that go to labor:

In case you don’t see the correlation, this chart shows both the trade deficit and labor’s share of the benefits of our economy:

Most people understand the damage that so-called “free trade” has done to the economy, much of our country and the middle class. Millions of people have outright lost their jobs because of corporate CEOs who conclude, “It’s cheaper to manufacture where they pay 50 cents an hour and let us pollute all we want.”

Many others have felt the resulting job fear: “If I so much as hint that I want a raise or weekends off they’ll move my job to China, too.” Entire regions have lost their economic base as factories and entire industries closed and moved.

But We Globalized And Expanded Trade

The basic pro-free-trade argument is that all trade is good and these agreements increase trade. NAFTA negotiator Carla Hills, defending NAFTA, says, “our trade with Mexico and Canada has soared 400 percent, and our investment is up fivefold.”

Of course, this is like proudly telling people that the Broncos scored 8 points in the 2014 Super Bowl*. (Hint: the Seahawks scored 43 points.)

Yes, trade is up and exports are up, but imports are up even more, which costs us jobs, factories and industries. What happened was NAFTA “expanded” trade against American workers and our economy, costing about a million jobs and increasing our trade deficit 480 percent. And don’t even ask what happened with our China trade. (Hint: our 2013 trade deficit with China was 318.4 billion dollars.)

How Would The N.Y. Times Fix Trade?

The Times editorial says we should “press countries to stop manipulating their currencies” and “the president also needs to make clear to America’s trading partners that they need to adhere to enforceable labor and environmental regulations.”

OK, but why would the giant multinationals participate? The point of the free-trade regime up to now has been to accomplish the opposite: to free the giants from the pesky laws and regulations imposed by governments, especially from labor and environmental regulations. The negotiations have been a rigged game designed to transfer the wealth of entire nations to a few billionaires (including Chinese billionaires) and giant, multinational corporations. It worked.

Meanwhile … In The L.A. Times

Meanwhile in the Los Angeles Times, representatives George Miller (D-Calif.), Rosa DeLauro (D-Conn.) and Louise Slaughter (D-N.Y.) have written an op-ed, “Free trade on steroids: The threat of the Trans-Pacific Partnership,” talk about NAFTA as a “model for additional agreements, and its deeply flawed approach has resulted in the outsourcing of jobs, downward pressure on wages and a meteoric rise in income inequality,” and ask us not to “blindly endorse any more unfair NAFTA-style trade agreements, negotiated behind closed doors, that threaten to sell out American workers, offshore our manufacturing sector and accelerate the downward spiral of wages and benefits.”

In 1993, before NAFTA, the U.S. had a $2.5-billion trade surplus with Mexico and a $29-billion deficit with Canada. By 2012, that had exploded into a combined NAFTA trade deficit of $181 billion. Since NAFTA, more than 845,000 U.S. workers in the manufacturing sector — and this is likely an undercount — have been certified under just one narrow program for trade adjustment assistance. They qualified because they lost their jobs due to increased imports from Canada and Mexico, or the relocation of factories to those nations.

The recent Korea free trade agreement followed the NAFTA model and the results have already proven terrible for American workers:

Obama said it would support “70,000 American jobs from increased goods exports alone.” In reality, U.S. monthly exports to South Korea fell 11% in the pact’s first two years, imports rose and the U.S. trade deficit exploded by 47%. This led to a net loss of tens of thousands of U.S. jobs in this pact’s first two years.

They conclude:

There are many things we can do to enhance our competitiveness with China and in the global economy.

We can invest in our own infrastructure, manufacturing and job training. We can work harder to address issues like currency manipulation, unfair subsidies for state-owned enterprises in other nations and global labor protections. We can enter deals that increase U.S. exports while doing right by our workers and our priorities, and we can address the real foreign policy challenges in Asia with appropriate policies instead of through a commercial agreement that could weaken the United States and its allies.

What we should not do is blindly endorse any more unfair NAFTA-style trade agreements, negotiated behind closed doors, that threaten to sell out American workers, offshore our manufacturing sector and accelerate the downward spiral of wages and benefits.

No New Trade Agreements, Instead Fix The Ones We Have

Of course, as we reach consensus that we got trade wrong, and realize how these “NAFTA-style” agreements have done so much damage to our economy and middle class, doesn’t this mean it is time to back up and renegotiate NAFTA and others?

*P.S. The 2014 Super Bowl started at 6:30 p.m. on Sunday, February 2, 2014.

—–

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF. Sign up here for the CAF daily summary

No Fast Track To TPP: Fix NAFTA First

The big corporations and the Obama administration are trying to push through a giant new trade treaty that gives corporations even more power, and which will send even more jobs, factories, industries and money out of the country. This is the Trans-Pacific Partnership (TPP) and they are pushing something called “fast track” in Congress to help push it through.

We have to stop this, and we should take the momentum we have generated in our push-back on this to demand Congress and President Obama instead fix NAFTA first. Then fix all of our trade relationships to help working people on all sides of our borders.

TPP, Fast Track And NAFTA

There has been a lot of news about the upcoming TPP trade agreement. The agreement is being negotiated in extreme secrecy in a corporate-dominated process that appears to be leading to an agreement that would give corporations even more power than they already have. Now there is a push to pass a process called fast track through Congress in order to enable the large corporations to strong-arm TPP into law mobilized organizations around the country to sound the alarm.

Continue reading

Are ‘Globalization’s’ Costs Inevitable?

You hear often that we “live in a global world now.” You hear that “globalization” means we have to drop our wages and standards to match those in impoverished, Third-World countries. You hear that the “cost” of controlling pollution makes us uncompetitive in the world. Etc. Etc. Etc. It’s inevitable – a force of nature – so don’t fight it, they say. This is endlessly repeated as if we weren’t in a “global” world when the first camel crossed a border or the first sailing ship crossed a sea. But since that first camel countries have enacted policies to make things better for their people.

Sunday’s New York Times published an op-ed, “The Myth of Industrial Rebound,” by Steven Rattner, one more wealthy Wall Street executive who revolved through the door from being an Obama administration official after he revolved through the door from being a Wall Street executive. In his op-ed Rattner accurately describes many of our economy’s problems but concludes that we should let these things just happen to us because, “In a flattened world, there will always be another China.”

Rattner points out that many of the new manufacturing jobs are low-wage. “This disturbing trend is particularly pronounced in the automobile industry. When Volkswagen opened a plant in Chattanooga … the beginning wage for assembly line workers was $14.50 per hour, about half of what traditional, unionized workers employed by General Motors or Ford received.” Meanwhile, “in Germany, the average autoworker earns $67 per hour. … Volkswagen has moved production from a high-wage country (Germany) to a low-wage country (the United States).”

Rattner is correct that falling wages are slowing economic recovery. “These dispiriting wage trends are a central reason for the slow economic recovery; without sustained income growth, consumers can’t spend.”

Continue reading

Watch: What One-Sided Trade Pacts Are Doing To Our Jobs

I was on “The Nicole Sandler Show” recently talking about the one-sided trade agreements we’ve been tricked into and the damage they do to the economy. It’s also quite entertaining. Seriously, it is. Bad puns, jokes and, of course, Nicole!!

On the show I talk about what the 2012 $540 billion trade deficit means. “Imagine if factories in America got orders for $540 billion of goods… the economy would be booming. … that was just one year of our trade deficit.”

The show was partly based on my recent post, New Fast-Track Bill Means Higher Trade Deficits and Lost Jobs.

And check out RadioOrNot.com.

PS Nicole and I are buddies and I’m on the show once in a while, so I can get away with terrible jokes and puns.
—–

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF. Sign up here for the CAF daily summary

NAFTA At 20: 1 Million Lost Jobs, 580% Increase In Trade Deficit

Public Citizen’s Global Trade Watch has issued a new report, NAFTA at 20: One Million U.S. Jobs Lost, Mass Displacement and Instability in Mexico, Record Income Inequality, Scores of Corporate Attacks on Environmental and Health Laws. The report compares the promises with which NAFTA was sold with the results we can measure 20 years later.

NAFTA was not just a “trade” agreement. Trade agreements focus on cutting tariffs and easing quotas and barriers to goods moving across borders. The report points out that NAFTA was much more, giving corporations special rights, incentivizing offshoring and limiting regulation. As the report puts it,

“NAFTA created new privileges and protections for foreign investors that incentivized the offshoring of investment and jobs by eliminating many of the risks normally associated with moving production to low-wage countries. NAFTA allowed foreign investors to directly challenge before foreign tribunals domestic policies and actions, demanding government compensation for policies that they claimed undermined their expected future profits. NAFTA also contained chapters that required the three countries to limit regulation of services, such as trucking and banking; extend medicine patent monopolies; limit food and product safety standards and border inspection; and waive domestic procurement preferences, such as Buy American.”

Some of the effects of NAFTA that are highlighted in the report include,

Continue reading