If You Want To Reform Something, Reform The Trade Agreements

When you hear anyone from the big multinationals or Wall Street using the word “reform,” watch out! The way they use the word, it means give them more and We, the People get less. They want to “reform” Social Security, “reform” Medicare and “reform” the income tax code. And now they want to “reform” the taxes corporations pay on money made outside the US. It’s like “reforming” an oak tree with an ax.

$420 Billion In Taxes Owed

American corporations are holding a lot of (their shareholders’) cash “outside of the country.” (But not really outside.) HOW much money are we talking about? Approx $1.2 trillion as of last March. This is money these companies have made in international profits, owed to their shareholders or potentially used for investment in US jobs, facilities and equipment. But they won’t bring the money back to the US because they would have to pay taxes if they did. Instead they are holding it “outside of the country” and pushing for “reform” — meaning let them out of their tax bill. If this $1.2 trillion were repatriated and taxed at the full corporate tax rate of 35% this would bring an additional $420 billion to the treasury for We, the People to use to rebuild our infrastructure, etc.

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Trade Deficit – One Root Of Many Problems

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.)
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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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What Will Tea Party Members Do When Their Politicians Betray Them?

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture I am a Fellow with CAF.
Tea Party members hate Wall Street bailouts, trade deals like NAFTA, job outsourcing, giant corporations buying laws, government spending, and elites telling the rest of us what to do. But there is no question that their candidates – many of them wealthy corporatists themselves – are funded by big corporations (even foreign oil companies) and Wall Street. So the question is, once in Congress will they vote with their base or their owners? And when they vote with the people who bought them, what will Tea Party members do about it?
Trade
Tea Party members want to be able to buy things that are “Made In America” in stores again. I have yet to meet a Tea Party supporter who doesn’t absolutely hate NAFTA, WTO and other one-sided “free trade” agreements. They say these treaties “violate our sovereignty.” But Tea Party candidates are funded by groups like the Chamber of Commerce and others who are the drivers of these “free trade” policies that close American factories and send jobs out of the country. This does not bode well for these candidates voting the way Tea Party members expect them to if they are elected.
Outsourcing
Tea Party members are astonished when they learn that the government gives companies tax breaks that encourage companies to send jobs away. But just a month ago a bill to do something about this was filibustered in the Senate by a unanimous Republican caucus. One thing about Tea Party candidates – they’re also unanimously Republicans. Does anyone other than Tea Party members really think the Tea Part candidates are going to go against the now-unanimous Republican support for these outsourcing incentives if elected? Tea Party candidate Scott Brown didn’t after he was elected.
Bailouts
If there is one thing that unites all Tea Party members, it is hatred of the Bush Bank Bailouts (except they think these passed under Obama.) But this is an area where their leaders will almost certainly stand with the banks, because that’s where the money is — their campaign money to be precise. The other day I wrote about In Oregon one Wall Street hedge fund manager is spending up to $1 million (pocket change) on a front group to elect a Tea Party candidate and unseat a Congressman who sponsored a couple of Wall Street reform bills.
Government Spending
Will Tea Party politicians vote to balance the budget? Really? Their members certainly expect them to. But like so many misinformed Americans, Tea Party members think the government spends most of its money on welfare and foreign aid. This is why Tea Party candidates refuse to specify just what spending they will cut to balance the budget. (Also see here, and here, and here, and here, and here, and here, and here, and here, etc.)
So when they get into office will they really cut spending — where the spending really is? There are plenty of reasons to think they won’t. The first and foremost reason is they are funded by people like the Chamber of Commerce who really, really want that spending to keep flowing. This is why Republicans increased government spending and deficits so much the last time they were in charge. In fact, there are reasons to think they’ll incresase spending. For example, they hate health care reform, but if they really vote to repeal it they will increase the deficit, because the reform cuts the projected deficits by at least $138 billion.
But the bloated, huge, vast, overwhelming military budget might be worth a look. We spend more on military than every other country combined. (Total military-related spending actually pretty closely matched the deficit this year.) What do you think the odds are that the Tea Party politicians will cut the military budget?
Foreign Oil
Tea Party members understand that our addiction to foreign oil is harmful. We spend more than $300 billion a year on foreign oil — much of it sent to the Middle East (MUSLIMS!) — and need to find alternative sources of energy. But Koch Oil is the primary organizer, supporter, funder, and everything of the Tea Party, as well as much of the so-called “conservative movement.” But Koch Oil is mostly about oil, not representative government. This is why they directly fund or set up front groups to support climate denial or oppose transit projects, alternative energy, even energy conservation. So don’t expect Tea Party leaders to do anything — anything — that Koch Oil doesn’t want them to do.
What Happens When Tea Party Members Are Betrayed?
It’s pretty clear that the Tea Party members are being set up for a big disappointment. There is little chance that the politicians they are supporting are going to do what the members think they’re going to do once in office. The members might supply the votes, but the big corporations behind so many of the things that the Tea Party members hate are the ones supplying the money and organization. These politicians, once in office, will understand that the big money can go after them just as well is it went for them this time, if they don’t do what they’re told by their big corporate funders. But on the other hand, there will be lucrative lobbying jobs waiting for them if they play along. They are going to disappoint the Tea Party members, no question. What will Tea Party members do then?
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Are Tea Party Members Getting Played?

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture I am a Fellow with CAF.
Are the Main Street Tea Party members getting “played” by Wall Street and big-corporate billionaires? There is a big, big, big difference between what the regular members and the big-money funders expect. If Tea Party candidates get elected will they do what their supporters want, or what their Wall Street and big-corporation funders demand?
What Tea Party Members Want
I just finished a week driving around Michigan, Ohio, Pennsylvania and West Virginia attending and writing about the “Keep It Made In America” Town Hall meetings. At these meetings and on the road I had occasion to talk to self-identified members of “Tea Party” groups. My conversations tell me, and polling confirms, that the regular day-to-day Tea Party supporters want government to stop job outsourcing and help American manufacturers. And even more than that they really don’t like trade agreements like NAFTA. In fact some go so far as to say that NAFTA and the WTO violate our country’s sovereignty. And even more than that they hate Bush’s bailout of Wall Street (but have been told Obama did it).
What Tea Party Funders Want
At the same time I saw and heard ad after ad after ad after ad that backed Tea Party-type candidates, that were paid for by the Chamber of Commerce and other front groups for Wall Street and the big multinational monopolist corporations that live off of “free trade” and have been closing factories and outsourcing jobs. And the Tea Party was originally set up by and is largely funded and maintained by front groups for this same crowd.
Here is just one example of how much the Tea Party is funded by these front groups: In Oregon one Wall Street hedge fund manager is spending up to $1 million (pocket change) on a front group to elect a Tea Party candidate and unseat a Congressman who didn’t do his bidding and sponsored a couple of Wall Street reform bills. Do you think the Main Street Tea Party members in Oregon expect their Tea Party candidate to support or oppose measures that further enrich Wall Street hedge fund managers? I’ll give you three guesses and the answers are Main Street, Main Street and Not Wall Street. Do you think the Tea Party candidate will dare? I’ll give you one guess.
Will Tea Party Members Or Funders Win Out?
So the regular Tea Party people hate NAFTA and “free trade” agreement, Wall Street bailouts, want a stop to job outsourcing and want help for American manufacturing — but the people behind them and funding their ads do not. What will happen if these candidates get into office? Will they stick with their Tea Party supporters from Main Street, or will the be beholden to the big-money behind their campaigns? As Upton Sinclair said, “It is difficult to get a man to understand something, when his salary depends upon his not understanding it!”
This is a very, very serious problem. The “crowd” instincts of regular people are usually pretty good and even in the Tea Parties they understand the damage that “free trade,” Wall Street, big-corporate interests and the rest of the “free enterprise” crowd have done to the country. But the big money is steering them away from the solutions that their collective gut tells them are right.
Serious Consequences
The financial crisis that Obama inherited has not really gone away. The unsustainable trade deficit that has been growing since Reagan is draining our economy. The huge budget deficit that Bush left behind — caused by tax cuts and military spending increases — has not gone away. Global warming has certainly not gone away. All of these problems are still there. We may be headed into a trade war, we need to rebalance the global economy, the rest of the world is jumping on the Green Industrial Revolution and we are not — but we can’t even begin to have a reasonable conversation about it because the entrenched wealthy interests are able to purchase the megaphone, microphone and amplification system that let’s people hear the arguments.
I say yes, the Main Street supporters of the Tea Party are getting played. What I want to know is, what will they do if the Tea Party candidates get elected, and then support “free trade’ and Wall Street and all of that? Will go even further to the right, or will they start to figure it out?
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