To Get Our Economy Back Hold Cheaters, Fraudsters And Exploiters Accountable

The spiral-to-the-bottom and inequality we are suffering is not an inevitable result of globalization, it is what happens when we don’t hold cheaters and exploiters accountable and stop them. This is not just about Wall Street, it is the story of what has happened to our wages and benefits, jobs, factories, companies, industries, economy and democracy in the last 30-or-so years.
Cheaters, Fraudsters and Exploiters
If cheaters and exploiters are not held accountable and fraudsters are not prosecuted, then the advantages this brings them forces honest players out. We’re all waiting to see if there is a deal in the works that lets big banksters off the hook for mortgage fraud and other (uninvestigated) crimes, making their shareholders pay fines for them instead. But that story of the 1%’s fraud and cheating and the consequences to the 99% are not what I am writing about here. This post is about how letting 1%er cheaters, fraudsters and exploiters off the hook has hurt America’s manufacturing and trade.
Apple Can’t Make It Here
Recent news stories about Apple hilight how we allowed our thriving, high-paying manufacturing sector to erode, with the result that our middle class is in decline. Apple used to proudly make their computers in the United States, but now everything is made in Asia. The NY Times’ Charles Duhigg and Keith Bradsher, in How the U.S. Lost Out on iPhone Work describe how China’s massive government subsidies and exploitation of workers mean “Those jobs aren’t coming back.”
The Entire Supply Chain Is Over There
China has done what it needs to do to bring factories, which bring supply chains, which bring industries. The NYT story describes what it means to have an entire supply chain located where the factories are,

When an Apple team visited, the Chinese plant’s owners were already constructing a new wing. “This is in case you give us the contract,” the manager said, according to a former Apple executive. The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day.
The Chinese plant got the job.
“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”

Subsidies are often a violation of trade rules. Even so, as the article says, “The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory.” So, of course, “the Chinese plant got the job.” Meanwhile, our own country has resisted having an “industrial policy” to keep our industries and foster new ones. This is finally changing, but good efforts like “Buy American” and President Obama’s green energy policies are fought tooth-and-nail.
Exploited Workers
Another key part of China’s advantage is the ability to exploit workers and get away with it — which lets Apple get away with it, too. And when Apple sees violations, it doesn’t stop them.

One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.
A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.
“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”

Later in the story,

The first truckloads of cut glass arrived at Foxconn City in the dead of night, according to the former Apple executive. That’s when managers woke thousands of workers, who crawled into their uniforms — white and black shirts for men, red for women — and quickly lined up to assemble, by hand, the phones.
… The company disputed some details of the former Apple executive’s account, and wrote that a midnight shift, such as the one described, was impossible “because we have strict regulations regarding the working hours of our employees based on their designated shifts, and every employee has computerized timecards that would bar them from working at any facility at a time outside of their approved shift.” The company said that all shifts began at either 7 a.m. or 7 p.m., and that employees receive at least 12 hours’ notice of any schedule changes.
Foxconn employees, in interviews, have challenged those assertions.

Apple Audits Its Suppliers, Finds Many Violations
Earlier this month Apple released a report describing the practices of its suppliers. NY Times: Apple Lists Its Suppliers for 1st Time,

Apple said audits revealed that 93 supplier facilities had records indicating that over half of workers exceeded a 60-hour weekly working limit. Apple said 108 facilities did not pay proper overtime as required by law. In 15 facilities, Apple found foreign contract workers who had paid excessive recruitment fees to labor agencies.
And though Apple said it mandated changes at those suppliers, and some showed improvements, in aggregate, many types of lapses remained at general levels that have persisted for years.

William K Black, writing in Apple’s Foreign Suppliers Demonstrate Widespread Scamming and Horrific Abuse of Employees at AlterNet, looked at Apple’s report. Black writes that the audit of suppliers, “shows that anti-employee control fraud is the norm.”
Black says that two things stand out in the report,

First, Apple rarely terminates suppliers for defrauding their employees – even when the frauds endanger the lives and health of the workers and the community – and even where Apple knows that the supplier repeatedly lies to Apple about these fraudulent and lethal practices. Second, it appears unlikely in the extreme that Apple makes criminal referrals on its suppliers even when they commit anti-employee control frauds as a routine practice, even when the frauds endanger the worker’s and the public’s health, and even when the supplier repeatedly lies to Apple about the frauds. Apple’s report, therefore, understates substantially the actual incidence of fraud by the 156 suppliers (accounting for 97% of its payments to suppliers).

As Black wrote, “Apple knows that the supplier repeatedly lies to Apple about these fraudulent and lethal practices” and “…it appears unlikely in the extreme that Apple makes criminal referrals on its suppliers” Apple doesn’t stop these violations. They get too much of a competitive advantage out of it.
This Is Fraud
When you buy a product you assume that it is on the shelf at the cost you are asked to pay because laws and regulations were followed and standards were met. So you buy the one that has the right quality at the right price. But what if a product has a low cost as the result of cheating, exploitation and violations of environmental, labor and trade laws? What if there is a lie at the root of the transaction you are engaged in?
China’s massive investment in capturing entire industries — a violation of trade laws — means that many of the components of the high-tech manufacturing supply chain have migrated out of the US to that country. And China’s non-democracy political system means that workers have few, if any rights, and often the rights they have are not enforced. Black says American companies taking advantage of this are engaging in “a form of control fraud (fraud in which the head of a company subverts it for personal gain).”

Anti-employee control frauds most commonly fall into four broad, but not mutually exclusive, categories – illegal work conditions due to violation of safety rules, violation of child labor laws, failure to pay employees’ wages and benefits, and frauds based on goods and loans provided by the employer to the employee that lock the employee into quasi-slavery.

Allowing Fraud Drives Legitimate Businesses Out Of Existence
The key point Black makes is that allowing cheating, fraud and exploitation to continue brings them advantages that drive legitimate businesses out,

George Akerlof, in his famous article on markets for “lemons” (largely describing anti-customer control fraud), explained the perverse “Gresham’s” dynamic in 1970: “[D]ishonest dealings tend to drive honest dealings out of the market. The cost of dishonesty, therefore, lies not only in the amount by which the purchaser is cheated; the cost also must include the loss incurred from driving legitimate business out of existence.”

A Criminogenic Environment
Specifically, what this means to companies that try to compete with companies like Apple,

Anti-employee control fraud creates real economic profits for the firm and can massively increase the controlling officers’ wealth. Honest firm normally cannot compete with anti-employee control frauds, so bad ethics drives good ethics out of the markets. Companies like Apple and its counterparts create this criminogenic environment by selecting least-cost – criminal – suppliers who offer components at prices that honest firms cannot match. Effectively, they hang out a sign – only the fraudulent need apply to be suppliers

When we let companies get away with building products in places that violate trade rules, allow environmental degradation, exploit workers, cut corners on safety, use cheap components and ingredients, these companies get cost advantages that force honest companies out of business. This is the story of our economy. This is why our middle class is engaged in a race to the bottom.
Should Companies Like This Exist In The US?
Robwert Cruickshank puts two and two together, in a must-read post, Thinking Differently About Apple and 21st Century Society. He writes,

In the last year or two, it’s become increasingly clear that the way Apple makes its products is deeply flawed. Working conditions at the factory which makes most of their products – Foxconn in Shenzhen, China – are so appalling that workers engaged in a rash of suicides in 2010 to ameliorate their own suffering. Earlier this year workers threatened mass suicide over pay and working conditions. And of course, there’s the fact that Apple makes these products overseas rather than in the United States, where unemployment remains at some of the highest levels we’ve seen since the Great Depression.

Cruickshank asks if companies with this attitude should be allowed to continue to do business? He writes that Apple has,

…a narrow focus on their products and their profits, and disdain wider concerns for the good of society. When an unnamed Apple executive was asked about their role in addressing America’s economic problems, their response was revealing:

They say Apple’s success has benefited the economy by empowering entrepreneurs and creating jobs at companies like cellular providers and businesses shipping Apple products. And, ultimately, they say curing unemployment is not their job.
“We sell iPhones in over a hundred countries,” a current Apple executive said. “We don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.”

That quote is perhaps the best encapsulation of the pathologies of the modern American corporation. In fact, Apple does have an obligation to solve America’s problems. Everyone who lives in this country has that obligation. And corporations have that obligation too. If they don’t want to help make things better, then they shouldn’t exist.

Then he gets to the wider point,

The notion that companies exist only to generate profit or build a specific few set of products is corrosive. Those profits and products serve the rest of society. And as a part of that society, companies and their executives exist to make that society a better place. If they are engaged in a set of practices that make society worse off, then those actions are indefensible and need to be changed.
For the last 30 years, American businesses have been devoted to a single-minded pursuit of maximizing short-term profits. Unsurprisingly, this has had profound ripple effects throughout the rest of society. The economy became focused on those profits, and so with it followed politics, culture, and our values as a civilization.
By now it should be clear to everybody that while this works well for the small elite that has hoarded all these profits – the so-called “1%” – it has utterly failed to provide a happy and fulfilled life for everyone else.

Here I quote Cruickshank quoting Black, who is looking at Apple’s report of its suppliers, with “overwork and other forms of employment fraud being rampant.”

As William K. Black explains at Alternet, this is a good example of what may be a widespread tolerance for fraud in the global economy:

These frauds take place abroad, but they harm employees at home. Mitt Romney explains that Bain had to slash wages and pensions to save firms located in the U.S. who had to meet competition from foreign anti-employee control frauds. The damage from foreign anti-employee control frauds drives the domestic attack on U.S. manufacturing wages. Bad ethics increasingly drive good ethics out of the markets and manufacturing jobs out of the U.S. and into more fraud-friendly nations.

“These Frauds Take Place Abroad But They Harm Employees At Home”
Once again, for emphasis, “these frauds take place abroad, but they harm employees at home.”
If we want the downward slide to stop we have to decide to hold the cheaters, exploiters and fraudsters accountable for their actions. At home the efforts by the giant corporations to keep the National Labor Relations Board (NLRB) and the Consumer Financial Protection Bureau (CFPB) from doing their jobs, enforcing the rules and holding them accountable further show how this is affecting us all. Abroad we have to demand enforcement of labor and trade rules so companies like Apple can not gain advantages that put more ethical and honest companies out of business. We certainly should not be letting products made there have cost advantages here and stiff tariffs can fix that. Letting companies get away with this makes democracy a competitive disadvantage.
We have to get mad and hold the cheaters, fraudsters and exploiters accountable.
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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Did The President’s Jobs Council Go All Corporate?

President Obama’s Council on Jobs and Competitiveness (“Jobs Council”) issued a report calling for fewer regulations and lower corporate tax rates. This doesn’t have to be a bad idea.
The Report
The Jobs Council report, Road Map to Renewal makes a number of recommendations. Here are the main points – please click through for the details:

  • Prepare the American Workforce to Compete in the Global Economy
  • Foster a Climate that Lets Innovation Thrive
  • Adopt an “All-In” Strategy on Energy
  • Revitalize the American Manufacturing Sector
  • Enhance American Competitiveness through Smart Regulatory Reforms
  • Reform the Outdated Tax System to Enhance American Competitiveness

Council Heavily Weighted Toward 1%
The Jobs Council is heavily, heavily, heavily weighted to tilt toward the 1%. The list of members reads “Chair and CEO” with a smattering of ultra-wealthy finance types thrown in, and then a couple of token union leaders.
The Objections
United Food and Commercial Workers president Joseph Hansen abstained from voting. AFL-CIO President Richard Trumka released a 1635-word dissent. In the dissent Trumka writes, (emphasis added)

I agree with the overall spirit and a number of the specific recommendations in today’s report … I absolutely agree … that the United States is falling behind our international counterparts in investing in modern infrastructure, education, and skills; supporting a vibrant manufacturing sector; developing cost-effective and globally responsible energy practices; and supporting innovation. …
Unfortunately, I believe the report downplays the need for a proactive role for the U.S. government in many of these areas; fails to address the significant additional revenues needed to address the challenges identified on an appropriate scale; and in many cases erroneously identifies the root causes of the underlying structural problems.
… the report addresses regulatory issues as if we were not in the midst of a prolonged economic crisis whose proximate causes clearly included inadequate regulation of business, and in particular financial markets and institutions.
With respect to corporate tax reform, I believe that corporations as a group pay too low a share of taxes to support the kind of infrastructure investment and education/skills upgrades that are so urgently needed at this time… The report places way too much emphasis on statutory tax rates, mentioning only as an aside that the effective rates paid by corporations are much lower, and that overall corporate tax revenues as a percent of GDP are the fourth lowest in the OECD.

Yes, We Can Cut Corporate Taxes … If
Actually, we can cut corporate taxes, increasing our international competitiveness, while We, the People still fund our democracy and get paid back for our investment that enabled the prosperity of the corporations. Here’s how: Cut corporate taxes, but raise taxes on the 1%er owners of the corporations. Stop the nonsense of lower capital gains tax rates, and restore pre-Reagan top tax rates. Also, require corporations to either use their cash or pay it out to shareholders instead of just sitting on it as many do now.
Capital gains are taxes at a lower rate because most of the income of the 1% is from capital gains, and most of the income of the 1% is from capital gains because the tax rate is lower. The “incentive to invest” should be a good investment, period.
What does cutting corporate tax rates accomplish? First, by cutting corporate tax rates the right ways our companies could become more competitive with companies in other countries. This can be an incentive to locate companies here. But we don’t have to just sacrifice this revenue by any means. Instead we can tax it when it becomes personal income. But cutting corporate tax rates without increasing personal income tax rates to make up for it — which happens to be the DC elite consensus as voiced by Simpson-Bowles — is complete folly, nothing more than another scam by the 1% to rob We, the People. It is essential that a cut in corporate tax rates happen at the same time as taxes on the resulting personal income are increased, along with requirements that corporate money is either used inside the company or paid out to shareholders.
Look at this chart, which tells you everything you need to know about the who what when where and why of corporations. Corporate wealth is also personal wealth. When you hear about corporations doing well, think about this chart:
wealth2
Yes, the top 1% also own 50.9% of all stocks, bonds, and mutual fund assets. The top 10% own 90.3%. And it’s most likely only gotten worse since these figures were gathered.
Cut The Right Regulations
When the elite DC consensus calls for cutting regulations, they mean regulations that hamper the 1%’s ability to fleece us even more. But there are regulations that actually do impede competitiveness.
Here is what usually happens in DC. After Congress passes laws the regulatory bodies translate the laws into a regulatory framework. This is where the giant companies and their lobbyists get to work. The work they do is influencing these agencies to write regulations that help them, the 1%er corporations that can afford to swarm the agencies with lobbyists — and that obstruct their competition. So we end up with a situation where small businesses and startups don’t have a chance making it through the regulatory maze. They either have to hire specialized, $1000-an-hour DC law firms to help them out, or give up. This is by 1%er design, not because of “big government.”
So yes, there are regulatory impediments to competition, but I don’t think this form of “cutting regulations” means what the 1%ers on the Jobs Council and the big corporate-elites think it means.
Education
On education, the Jobs Council recommends,

In order to stay competitive in a global age, we must invest in our future by ensuring Americans have the right education and skills to realize their full potential and drive our nation’s economic success. … These measures will create a purposeful educational system that produces work-ready graduates, satisfied employers with access to a talented labor pool, and a vibrant economy poised for growth and success.

Trumka writes,

With respect to the education section of the report, I believe that the Jobs Council’s education recommendations begin and end in the wrong place: focusing on providing businesses with an endless supply of workers — as opposed to supporting, improving and sustaining a strong public education system.

So the report calls on government to reconfigure our education system to provide companies with trained worker-bees, which means companies don’t have to cough up the dough themselves to train their own workers. The report actually goes even further, basically calling for government to replace think-for-yourself education with do-what-we-say job training. There’s a difference. And they ask for this after already asking for tax cuts, too. Sheesh.
The Rest
On energy the 1%ers of course mean “drill, baby, drill.” But the council is correct, we do need to go “all-in” on energy, with massive Green Energy investment, freeing us from the damage Big Oil and King Coal do to our environment, our economy, our politics and our democracy.
On manufacturing the council notes that since 1980 manufacturing has slipped from 20% to only 9% of total employment,. The report calls for adding “three to four percentage points of global value added market share—an ambitious but achievable goal.” They say we should :take share from our global competitors.” There are wonky but great suggestions like “cluster development” and important ideas like going after in promising new manufacturing sectors. The President has formed an Office of Manufacturing Policy that is taking up many of the kinds of recommendations in this report.
In fact, we also need to rewrite our trade agreements so they provide a win-win for the working people here and across our borders, and incentives to manufacture here rather than move jobs, factories, companies and industries out of the country.
And So In Conclusion
Trumka sums things up nicely at the end of his dissent:

Perhaps most profoundly, the report does not ask the critical question: why is our country suffering a manufacturing crisis, complete with massive job loss and a structural trade deficit, when countries with higher overall taxes, higher wages, and more robust health, safety and environmental regulations are enjoying trade surpluses?
The answer lies in the view that we share with so many of our fellow Americans: that our country has become dominated by the interests of the wealthiest 1% at the expense of the remaining 99%. It turns out that a country run in the interests of the wealthiest 1% systematically underinvests in public goods;systematically silences, disempowers, and underinvests in its workers; and in the end is less competitive and creates fewer jobs than a country that focuses on the interests of the 99%.

Echo and amplify what Trumka said: Perhaps most profoundly, the report does not ask the critical question: why is our country suffering a manufacturing crisis, complete with massive job loss and a structural trade deficit, when countries with higher overall taxes, higher wages, and more robust health, safety and environmental regulations are enjoying trade surpluses?
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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Santorum’s Make It In America Plan Shows Republicans Can Read Polls

One after another, the Republican Presidential candidates have come out with strong statements that appear to show support for making things in America and revitalizing American manufacturing. This is because they can read polls and polls show that Americans overwhelmingly want American manufacturing revitalized, are tired of offshoring, understand the importance of fixing trade deficits and want to see things made here again. Donald Trump gained a lot of traction from the appearance of taking on China. Mitt Romney also talks about how we need to take on China. Rick Santorum has his own “Made In America” plan. But do their actual proposals match up with their rhetoric?
Romney
Mitt Romney has strong words about China. For example, last week Romney visited Competitive Edge, an Iowa company that sells promotional campaign items that you can put your own brand or message on. (“We’ve got items for convention give-a-ways, business gifts, direct mail campaign items, fund raising, political campaigns, special events, company promotions, and more!”) At this campaign stop Romney said,

“I’ll clamp down on China that’s been cheating,” Romney said. “They’ve been stealing our intellectual property, our designs, our patents, our know-how, our brands, they’ve been hacking into our computers. That has got to stop.”
“I will stop it if I’m President of the United States,” Romney said.

However, in spite of Romney’s words, many wonder if he is only saying this to get votes. For example, the website for Competitive Edge, the site of his Iowa appearance, says, “Competitive Edge is a major importer of Specialty Products from Asia and Europe.” According to TPM, the president of Competitive Edge “said he doesn’t think Romney’s being completely serious when it comes to his tough China talk.” He explained,

“I think the rhetoric of a campaign is different than the actual application,” he said. “[Romney] will sit down and he will get the right people in, he will take the advice of maybe a Huntsman who will say, ‘this is how to handle China.’” … When it comes to actually governing, Greenspon said he expects Romney will take a much softer approach to China at the urging of his supporters in the business community.

So much for Romney. As with so many of his campaign positions, surrogates explain behind the scenes that he is just saying what he needs to say to get votes, what he will do if he is elected might or might be completely different, there is no way to know.
Santorum
Rick “not-Romney” Santorum is now the official #2 in the GOP race. Santorum can also read polls, and is offering a “Made In America” plan. The plan begins the way Santorum always begins, “Rick Santorum believes that to have a strong national economy, we must have strong families.”
Much of Santorum’s plan is the usual Big Lobbyist and Wall Street-backed Republican stuff about cutting taxes on the rich and getting rid of any restraints on the wealthy and powerful as “pro-growth” policies. Items 1,2,3,4,5,6,7,8 and 9 are actually all the same item: cut taxes on the rich and their big corporations.
And then Santorum diversifies. Item 13 is get rid of President Obama’s health care reform, with no explanation of how this will help manufacturing. Item 15 includes, “eliminate funding for Planned Parenthood and support adoption” and “eliminate funding for United Nations organizations that undermine America’s interests.” Again, there is no explanation of how these will help manufacturing. These points are apparently included in a manufacturing plan to reassure the Republican base that he is certifiably nuts, to attract Michelle Bachmann voters.
Some of the items appear to be the result of selling advertising space to lobbyists from various industries.

  • The oil industry purchased Item 20: Tap into America’s vast domestic energy resources…
  • The big Telco giants purchased Item 21: Unleash innovation in telecommunications and Internet consumer options by getting government out of the way…
  • Pete Peterson shelled out for Item 22: Reform Social Security and Medicare…
  • The big Wall Street firms that are investing in privatizing education purchased Item 26: Reclaim the role of parents as the decision makers in their children’s education and incentivize the states to promote parental choice…
  • Canadian oil companies that want to sell to China purchased Item 28: Approve the Keystone Pipeline…
  • Wall Street and promoters of “The Big Lie” purchased Item 30: Phase out Fannie Mae and Freddie Mac’s government backed role in mortgages…

The plan is not all bad. Santorum accidentally comes up with a few things that would actually help American manufacturing. Of course, they are mostly just more about cutting taxes, but these cut specific taxes on manufacturers, which might help bring some manufacturing back. These are:

  • Item 10: Eliminate the corporate income tax for manufacturers – from 35% to 0% – which will spur middle income job creation in the United States and will create a job multiplier effect for workers
  • Item 11: Spur innovation in America by increasing the Research & Development Tax Credit from 14% to 20% and make it permanent

Santorum’s Item 32 is important, and I’m singling it out for attention: Strengthen our national security and national defense so that we are not dependent upon our foes or competitors for critical manufacturing, technology, energy and other security needs
So Santorum’s plan has a few good points but only barely matches the promise of its title. In reality it only offers more of the same policies that boost the 1% at the expense of everything else, even harming smaller manufacturers trying to compete with the multi-national giants. The plan even offers a number of items that have ravaged our manufacturing base, pushing even more disastrous “free-trade” agreements. And, the plan has the added bonus of a series of unrelated proposals apparently included only as filler and the necessary proof of insanity to qualify him in a Republican primary.
President Obama’s Office of Manufacturing Policy
As one component of a set of policy initiatives to improve manufacturing President Obama recently set up a new Office of Manufacturing Policy that will have cabinet-level status, reflecting the importance of the manufacturing sector to our economy. The office will coordinate the efforts of different government agencies, such as the Small Business Administration, the Department of Commerce and the Transportation Department.
Congressional Democrats’ Make In In America Plan
In May Democrats in the Congress brought out a “Make In In America” package of specific legislative proposals to revitalize American manufacturing. In Democrats’ Plan Makes Jobs In America I described the plan:

Congressional Democrats yesterday unveiled the Make It In America plan for the 112th congress. This is a set of specific, detailed, targeted bills that clearly create jobs and restore our economic competitiveness, beginning with a national strategy for manufacturing. This is very different from the vague, sloganeering, lobbyist-written plan offered by Senate Republicans.
Yesterday House Democratic Whip Steny Hoyer and Minority Leader Nancy Pelosi unveiled their Make It In America plan “to support job creation today and in the future by encouraging businesses to make products and innovate in the US and sell it to the world through strengthening our infrastructure and supporting investments in key areas like education and energy innovation.”
This Make It In America initiative involves a series of bills that have been introduced for consideration by the 112th Congress. This initiative will create jobs here, grow the economy and reduce the trade deficit, all of which help reduce our budget deficits. Creating jobs and growing the economy reduces deficits by increasing tax revenues and decreasing spending on unemployment benefits, food stamps, etc.

Click through for details of the plan.
A Warning
There is a warning here for President Obama and all other candidates of either party running for office in 2012: the public wants to see plans to bring back American manufacturing. The public understands what the NAFTA-style trade deals have done to our wages, jobs, factories, industries, trade deficit and economy. They hate Wall Street’s quick-buck outsourcing schemes and the trade deals that enabled them, and want American manufacturing revitalized. Supporting Wall Street and trade deals and the quick-buck, offshoring economy harms the country and for that reason is political suicide
The public wants to go into stores and see “Made In America” again.
Frank Sobatka explains:

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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For 2012 Let’s Restore Our “Industrial Commons”

David Brancaccio’s Marketplace story Tuesday, Decline of Kodak offers lessons for U.S. business traced the decline of Kodak and the loss of Rochester, NY’s good, middle-class jobs to Kodak’s failure to tend its “industrial commons.” This is a national problem. For 2012 let’s resolve to restore our industrial commons and bring manufacturing back to the U.S.
Kodak on Marketplace
Listen to Tuesday’s Marketplace story, Decline of Kodak offers lessons for U.S. business.
Click to listen.
Story summary: Kodak didn’t tend its “industrial commons,” the local concentration of expertise in making the things that go into a camera.

You make your money by selling cameras. And you now needed to make components. You needed to make lenses; you needed to make shutters — all kinds of things that the skills for which no longer existed in Rochester.

This is what we have done in our country, too. We have been dismantling our “industrial commons.” By sending manufacturing out of the country we have been taking apart the supply chains and abandoning the expertise and skills and culture that go with it.
Other Warnings
Last year former Intel CEO Andy Grove sounded a warning about this problem. In How to Make an American Job Before It’s Too Late. Grove wrote that we are not just losing jobs to China, we are losing the “chain of experience” that enables new companies and industries to form and to create new jobs and argues for a national economic strategy to preserve our manufacturing and technology base. He lays out a plan: “rebuild our industrial commons,”

The first task is to rebuild our industrial commons. We should develop a system of financial incentives: Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars—fight to win.) Keep that money separate. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations. Such a system would be a daily reminder that while pursuing our company goals, all of us in business have a responsibility to maintain the industrial base on which we depend and the society whose adaptability—and stability—we may have taken for granted.

We Gave It Away
Many American manufacturers made a deal with China to lower their manufacturing costs. Here is how it worked: Americans (used to) have a say in how this country was run, and said they want good wages, benefits, job safety, clean air, etc. These are the fruits of democracy, but to some they are an impediment to quick profits. So executives at the big multinational companies wanted a way around the borders of democracy and its demands, and pushed for “trade” deals that would let them move manufacturing to places where people had no say, in order to force American unions to make concessions. They got their deals and packed up our factories, moved them to places like China and then brought the manufactured goods back here to sell.
We lost 50,000 factories to China just in the ‘W’ Bush years, and our trade deficit soared, and now we as a country are paying the price. Making (and growing) things is how a country earns its living. It is how we bring in the income with which to buy things others make and grow. Leo Gerard of the United Steelworkers said it clearly,

“You don’t create real wealth by flipping coupons or hamburgers, you create it by taking real things and turning them into things of value. And those things of value are turned into other things of value and all of a sudden you have a wind turbine with thousands of parts made here. You can’t have a clean economy without good jobs and can’t have good jobs without a clean economy.”

We just gave it away, and justified the loss by saying that better things will replace it. The result has been ever-increasing trade deficits that brought us a huge debt that makes us poorer. Our debt is not because of government spending, it is because we have given away our ability to make a loving!
An Ideology To Justify
In the process the 1%’ers who did this to us developed an ideology around hating America and democracy. To justify outsourcing our jobs and factories they said Americans had grown lazy and wanted handouts. They said that the huge profits reaped by a few from selling off our manufacturing infrastructure meant they were “producers” and that democracy was “statism” and “collectivism” that enabled the “parasites” to “steal” from them. They declared that “taxes are theft” that “punish” the “successful” and the “job creators.” They stopped funding infrastructure and education and law enforcement, denegrating these as “government spending,” and declared that the wealthy few have a “right to rise” and saying the rest of us are “imbeciles.”
They moved our “industrial commons” out of the country, closing the factories and thereby dismantling the supply chains and the “chain of experience” that enable us to innovate and compete. They let China capture the lead in emerging green manufacturing technologies that will bring millions of jobs and trillions of dollars. They even let China extort proprietary technologies, in exchange for short-term profits.
They rode the tiger and now the tiger is coming back to bite us.
Riding The Tiger
Richard Eskow reminded me of an old Chinese saying, “He who rides the tiger cannot dismount.” American manufacturers rode the Chinese tiger to short-term profits, and now they cannot dismount. They “partnered” with China to get around the borders of democracy and the good wages and benefits democracy demands. But now the tiger wants more. The tiger wants to eat them up.
Riding the tiger: Forbes: Currency Manipulation is NOT the Biggest Chinese Threat,

China’s hidden threats are a multi-headed info-tech “Hydra,” the parts of which are interrelated:

  • Intellectual property rights violations (or lack of enforcement in China) allowing open theft of proprietary designs, etc.
  • Theft of private-sector technology (which has been going on for years) accelerating Chinese development cycles
  • Growing number of cyber-attacks, accessing highly confidential US government information, costing the US private sector billions of dollars in IT disruption.
  • Growing military/technology stolen secrets (e.g., stealth fighter plane designs, acquisition of downed stealth-helicopter parts from the bin Laden attack, electronic technology & software from US companies in China, etc.)

Riding the tiger: NYT: Chinese Rules Said to Threaten Proprietary Information,

China is expected to issue regulations on Saturday requiring technology companies to disclose proprietary information like data-encryption keys and underlying software code to sell a range of security-related digital technology products to government agencies, American industry officials said on Friday.

Riding the tiger: Fiscal Times: Stealing America: China’s Busy Cyber-Spies,

Economic and industrial spying by China appears to be more pervasive and egregious than ever, costing America billions of dollars each year, according to a new report by a U.S. government agency. And the report raises an important question: If stolen trade and technology secrets help fuel China’s breakneck growth, then is more espionage required to feed the growing beast?

The Chamber of Commerce rides the tiger: WSJ today: China Hackers Hit U.S. Chamber: Attacks Breached Computer System of Business-Lobbying Group; Emails Stolen,

A group of hackers in China breached the computer defenses of America’s top business-lobbying group and gained access to everything stored on its systems, including information about its three million members, according to several people familiar with the matter.
The break-in at the U.S. Chamber of Commerce is one of the boldest known infiltrations in what has become a regular confrontation between U.S. companies and Chinese hackers.

They rode the tiger. But now the tiger wants more. The tiger wants to eat them up.
Let’s Resolve To Rebuild American Manufacturing
Let’s resolve to rebuild American manufacturing, starting in 2012. Manufacturing is the backbone of a prosperous economy. Let’s resolve to bring back good jobs that pay good wages and unpin a middle-class lifestyle. Let’s resolve to balance trade with the rest of the world so we can fight our debt problems. Let’s resolve to start fighting to win the lead in the Green manufacturing revolution.
Don’t let the “free traders” exploit workers in countries where they do not have a say to force concessions from Americans in unions. Don’t let the oil and coal companies create false “scandals” like Solyndra to block government from investing in green alternatives. Don’t let the 1% make democracy a competitive disadvantage — democracy is the only economics that works!
Last week President Obama appointed Commerce Secretary John Bryson and National Economic Council Director Gene Sperling to co-chair a new White House Office of Manufacturing Policy. The new Office of Manufacturing Policy will have cabinet-level status, reflecting the importance of the manufacturing sector to our economy. It will coordinate the efforts of different government agencies, such as the Small Business Administration, the Department of Commerce and the Transportation Department.
This is a positive step if there ever was one. Let’s resolve to develop and execute a national manufacturing strategy. (please click through)
It is time to restore our national “industrial commons.”
Frank Sobatka explains:

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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It’s The Trade Deficit!

A huge part of the reason we can’t get out of this unemployment slump is the trade deficit. We don’t buy American and neither do our “trade partners.” We buy from them, they sell to us — that’s not “trade.” Stimulus means we buy from them. Cutting taxes means the extra cash buys from them. Nothing we try brings jobs here because we don’t buy enough here that’s made here and they don’t either. If we want to fix employment we have to fix trade.
The current unemployment crisis results, at least in large part, from the trade deficit. This has been masked by bubbles like the tech bubble and the housing bubble. Economist Paul Krugman explains, in a blog post, The Return Of Secular Stagnation,

But then the question is, why do we find it so hard to achieve full employment even with saving somewhat low by historical standards. And the answer seems clear: it’s the trade deficit. America in the 70s and 80s could have high savings, not hugely strong investment, but still have full employment because trade deficits weren’t as large compared with the economy as they are now.
And this in turn means that the savings glut possibly making the natural real rate negative is actually originating abroad, not at home.

Krugman is taking issue with the economist argument that we have a problem of too much savings without investment, using a chart showing savings declining. (Note that the inflection point is right as Reagan’s policies start to hit.) He explains how this demonstrates that the problem is really our trade deficit.
Easier to understand: We have to fix trade if we are going to fix the economy.
China has accumulated more than a trillion dollars by selling to us and not buying from us. Think about what would happen to our economy if China used that money to place orders for US-made goods. Factories would be opening up, people would be hired, stores would be humming… When you think about how much good that would do, you are understanding the harm their sell-only trade policy has done. They were supposed to buy from us, too, because that is what trade is. But they didn’t, and here we are.
Now, think about how much good it would do for China’s economy, if our economy was humming from all those orders for our goods! When you think about that, and realize that China is not doing that, you might start to think that this is not an economic game China is playing. If it was about economics, they would use that money to place those orders, to revive our economy, which would mean we would be placing even more orders from them.
But they aren’t. Why is that?
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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Trade Deals Pass Congress — China Currency Bill More Important Than Ever

Congress just passed three more NAFTA-like trade deals, so our country’s trade deficit is going to get even worse. And pressure on working people to accept pay and benefit cuts and longer and harder working hours is going to get even worse. And the rewards to the top 1%, at the expense of the rest of us, are going to get even greater. But we can still win the fight over China’s manipulation of its currency. If we win this it lessens the difference between prices of goods made there and goods made here and can bring some jobs, factories, countries, industries and wealth back to the 99% of our country that doesn’t benefit from these trade deals.
Message Of Trade Deals — Loud And Clear
The message of these trade deals is loud and clear: shut up and accept pay and benefit cuts and longer and harder working hours. And if you don’t like it we will move your job to a country where working people can’t complain. In fact, labor leaders are regularly murdered in Columbia, one of the countries that Congress just approved a trade deal with. If approving a trade deal with a country in which labor leaders are killed for trying to make things better for working people doesn’t send a loud and clear message to working people here, I don’t know what does.
China Currency
China manipulates its currency to keep it “weak” (low) compared to the “strong” dollar. This means that goods made in China cost much less – up to 40% less – than goods made here, even before any wage differentials, exploitation of the environment, trade cheating, special subsidies and other trade violations are taken into account. China does this in order to capture the jobs, factories, companies and industries that make a country strong. We have let them do this for many years, leading to the economic situation we find ourselves in today.
One reason this continues is that big companies can threaten workers here with moving a job or factory there if they don’t go along with big cuts in wages and benefits and working standards — or just move the factory or company to take advantage of the differential. This benefits a wealthy few in the short term, and China in the long term after those wealthy few have sold the rest of out and cashed out for themselves.
This trade situation with China, while greatly enriching the top 1% here (and there), has hurt the rest of us so much, and drained so much wealth from the country, that even some Republicans are willing to support doing something about it. There are 61 Republican cosponsors of the bill to confront China over their currency manipulation!
Wall Street Sides With China
The Club For Growth, a Wall Street front group, has made the China currency bill a “litmus test.” They have said they will oppose any Republicans who vote for it, siding with America against China. From Politico recently, Club for Growth warns GOP on China currency bill,

The influential Club for Growth is pressuring Republican presidential candidates and lawmakers to oppose bipartisan legislation cracking down on China’s currency policies.
… The Club for Growth has urged lawmakers to vote no on the bill, warning that the vote will be included in the group’s 2011 Congressional Scorecard, used to measure how fiscally conservative they are.

The Wall Street group says we should instead pass tax cuts, deregulate controls over how businesses behave toward the environment, workers, customers and their communities, and get rid of unions so the United States can be more like China, which they say would bring companies back.
What To Do
We need to get the bill voted on in the House of Representatives. Speaker Boehner is siding with China and refusing to let this bill come up for a vote. But there is a “discharge petition” circulating, that can force the bill to the floor for a vote. Click here for a list of 61 Republicans who cosponsored this bill but have not signed the petition to bring it up for a vote. Call these 61 Representatives and tell them you want them to help bring the bill to the House floor for a vote.
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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Here Are Reps To Contact On China Currency Manipulation

We buy a lot from China, and they don’t buy much from us. Some call that “trade.” The result is that our jobs, factories, companies, industries and wealth are moving to China. One very big thing we can do about this right now is to confront China over their currency manipulation and the Senate passed a bill to do just that. The House leadership, under the control of lobbyists siding with China, refuses to allow the bill to come up for a vote. You can contact co-sponsors of the bill and ask them to sign a “discharge petition” that will make that vote happen.
As Steven Capozzola explained yesterday in Why Should Congress Pass China Currency Legislation?,

What few seem to understand is that we are already in a trade war with China. It’s not one that we launched, nor one that we wanted. But China’s undervaluation of its currency, which violates world trade rules, is part of a deliberate, well-coordinated strategy to undercut U.S. manufacturers.
Currency manipulation has helped fuel China’s massive rise as a manufacturing powerhouse. And it’s also helped drive our massive trade deficit with Beijing, which reached a record $273 billion in 2010. This huge trade gap has cost 2.8 million U.S. jobs over the past decade—jobs in every state and congressional district, jobs in manufacturing, jobs in high-tech sectors… It’s a terribly one-sided trade relationship.
How did this happen? China intervenes in the currency market to buy dollars and set its own currency at an artificially low exchange rate. This makes Chinese goods 40% cheaper when entering the U.S. market while making our goods significantly more costly when exported to China.
… This is a bipartisan issue, one that marks a clear chance for Congress to stand up to a very protectionist, predatory campaign. China can purchase dollars, which are freely traded, in order to set its currency peg. But conversely, it is illegal to buy China’s closely held currency.

I wrote yesterday, in Will The U.S. House Side With China On Currency?

If we want to bring jobs and wealth back to the United States for the 99% of us who have been under extreme pressure we’re going to have to do something about trade. The huge trade imbalances — especially with China — are sucking our jobs and factories and companies and industries and money out of the country. The biggest thing that can be done right now is to take action on China’s currency manipulation.
…Speaker of the House Boehner is siding with China and is refusing to allow it to come before the House for a vote. (Reminder to self: do some research into the Citizens United Supreme Court decision enabling foreign money to influence our elections.)
The bill can be forced onto the House floor using a “discharge petition.” You can take action to help get Republicans to sign the discharge petition so it comes to the floor. Click here to contact members of Congress and ask them to sign this discharge petition and end Chinese currency manipulation now.

What You Can Do
There are 61 Republican members of the House of Representatives who co-sponsored legislation to confront China over their currency manipulation: Currency Reform for Fair Trade Act (HR639). Contact them and ask them to sign the “discharge petition.” They are:
Tim Murphy (PA)
Todd Aiken (MO)
Steve Austria (OH)
Lou Barletta (PA)
Brian Bilbray (CA)
Rob Bishop (UT)
Mo Brooks (AL)
Dan Burton (IN)
Shelley Moore Capito (WV)
Howard Coble (NC)
Chip Cravaack (MN)
Rick Crawford (AR)
Charles Dent (PA)
Jo Ann Emerson (MO)
Michael Fitzpatrick (PA)
Randy Forbes (VA)
Jeff Fortenberry (NE)
Jim Gerlach (PA)
Chris Gibson (NY)
Sam Graves (MO)
Morgan Griffith (VA)
Gregg Harper (MS)
Duncan Hunter (CA)
Bill Johnson (OH)
Tim Johnson (IL)
Walter Jones (NC)
Mike Kelly (PA)
Blaine Luetkemeyer (MO)
Steven LaTourette (OH)
Frank LoBiondo (NJ)
Donald Manzullo (IL)
Tom Marino (PA)
Thaddeus McCotter (MI)
Patrick McHenry (NC)
David McKinley (WV)
Patrick Meehan (PA)
Candice Miller (MI)
Sue Myrick (NC)
Tom Petri (WI)
Joe Pitts (PA)
Todd Platts (PA)
Jim Renacci (OH)
Scott Rigell (VA)
Dana Rohrabacher (CA)
Harold Rogers (KY)
Mike Rogers (AL)
Mike Rogers (MI)
Dennis Ross (FL)
John Runyan (NJ)
James Sensenbrenner (WI)
John Shimkus (IL)
Bill Shuster (PA)
Marlin Stutzman (IN)
Glenn Thompson (PA)
Michael Turner (OH)
Lynn Westmoreland (GA)
Ed Whitfield (KY)
Joe Wilson (SC)
Rob Wittman (VA)
Frank Wolf (VA)
Don Young (AK)
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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Will The U.S. House Side With China On Currency?

If we want to bring jobs and wealth back to the United States for the 99% of us who have been under extreme pressure we’re going to have to do something about trade. The huge trade imbalances — especially with China — are sucking our jobs and factories and companies and industries and money out of the country. The biggest thing that can be done right now is to take action on China’s currency manipulation. Here are two things you can do today.
The Senate votes today on a bill to push back against China’s (and a few other countries’) currency manipulation, and the bill is expected to pass. The bill also has to pass the House and be signed by the President before it can take effect. CNN explains, in Senate targets China’s currency,

For years, U.S. officials have been pressuring China to allow its renminbi — or yuan — to appreciate more rapidly. Between 2008 and 2010, China had pegged the yuan to the dollar, keeping its value artificially low and Chinese exports comparatively cheap.
Besides hiking tariffs on Chinese goods, the bill also takes aim at the administration, which already has some ability to point out nations that purposefully manipulate their currency but has avoided doing so.
The bill would:
— Force the administration to officially red-flag nations whose currencies are undervalued for long periods with the term “fundamentally misaligned currency.”
— Make it tougher for the Commerce Department to ignore calls to investigate accusations of undervalued currencies.
— Force the administration to give Congress a list of nations with “misaligned” currencies.
And if a nation is accused of having an undervalued currency and makes no effort to rebalance the currency for three months or more, that’s when the tariffs kick in.

Jobs And Wealth
It’s complicated, but by manipulating its currency instead of letting it “float” to world market value, China can sell goods to other countries at a much lower price than they would cost without the manipulation. In effect China puts its own money into the currency markets, which works out the same as subsidizing the products directly so they have a lower price, in order to get the orders. While this might seem like a dumb thing to do the long-term result is that China is buying themselves a very big chunk of the world’s manufacturing business. In the long term this pays off for them in jobs, industries, wealth and power.
And as we now know, the result for us is a big loss of jobs and wealth and factories and companies and industries — in other words, our ability to make a living in the world.
The House
Even as the bill likely passes the Senate today, Speaker of the House Boehner is siding with China and is refusing to allow it to come before the House for a vote. (Reminder to self: do some research into the Citizens United Supreme Court decision enabling foreign money to influence our elections.)
The bill can be forced onto the House floor using a “discharge petition.” You can take action to help get Republicans to sign the discharge petition so it comes to the floor. Click here to contact members of Congress and ask them to sign this discharge petition and end Chinese currency manipulation now.

Tell Congress to stop China’s cheating on currency manipulation, which stands in the way of free and fair trade, job creation, and a higher standard of living for millions of Americans.

Click here to see the actual discharge petition.
The President
In his news conference last week President Obama said that China is manipulating their currency but that he doesn’t want a law that is just “symbolic.” He was not clear about whether he would sign this bill or not, should it pass. He said,

“…China has been very aggressive in gaming the trading system to its advantage and to the disadvantage of other countries, particularly the United States. And I have said that publicly, but I’ve also said it privately to Chinese leaders. And currency manipulation is one example of it. [. . .] My main concern — and I’ve expressed this to Senator Schumer — is whatever tools we put in place, let’s make sure that these are tools that can actually work, that they’re consistent with our international treaties and obligations. I don’t want a situation where we’re just passing laws that are symbolic knowing that they’re probably not going to be upheld by the World Trade Organization, for example, and then suddenly U.S. companies are subject to a whole bunch of sanctions. We’ve got a — I think we’ve got a strong case to make, but we’ve just got to make sure that we do it in a way that’s going to be effective.”

So it is not clear if he intends to sign this legislation. You can sign a petition encouraging him to sign it, should it pass, and take other steps to push China to stop their trade violations. Click the following: WE PETITION THE OBAMA ADMINISTRATION TO: Take Action to Stop China’s Job-Killing Currency Manipulation.
Please take the time to urge members of Congress to sign the discharge petition, and to urge President Obama to sign the bill if&when it passes.
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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So You Want To Talk About Jobs?

Before leaving on vacation President Obama said he is going to talk about creating jobs in September. The latest word is he will give this speech next week. Campaign for America’s Future has put together some ideas for creating jobs. See our series Big Ideas To Get America Working:

The task is not simply to give the economy a stimulus, as if we were giving a charge to a dead car battery. We need to rebuild the engine and modernize the wiring, creating a new strategy for America in the global economy. We asked our writers and contributors to lay out the “big ideas” and framing you can use to push a jobs-first agenda to the forefront of the national debate.

Here is where we are: People need jobs and jobs fix deficits. We have to get people back to work and the American people deserve good-paying jobs, not just any new job at half the old wages. Lots and lots of regular people are not working or have settled for jobs that don’t offer enough hours or just don’t pay enough or provide benefits. And here’s a fact: people who are working are paying taxes, are not collecting unemployment and are less likely to be collecting food stamps, so putting people to work lowers deficits.
Of course people want their President to be reasonable and bipartisan and compromise to get things done, but more than that they want results. Mr.President, if you can’t get results any other way people want you to move the obstructers out of the way. Republicans in the Congress are blocking every effort to boost the economy and create new jobs – especially good-paying jobs. Many think they are doing this to sabotage Democratic chances in the coming elections.
Go Big
So, Mr. President, you have to take this to the public. Go big. Draw contrasts. Give the public a clear choice. You don’t have to propose something that Republicans will pass — because no matter what you propose, they won’t. Instead you have to bring forward proposals that will clearly put lots of Americans to work, so the public can decide what they want to do.
Above all, it is time to be reality-based in the approach. The country is sick of spin and propaganda and putting the best face on things. Reality and good policy are the best politics. Here are some “reality-based” ideas to help get this going.

  • Reality: Millions of Americans are out of work or are working in low-paying jobs and outside of the DC area it is not getting better.
  • Reality: Getting people back to work lowers deficits because they are paying taxes and require fewer government services.
  • Reality: Tariffs on goods made by exploited workers in exploited environments = jobs and good wages here. Our trade agreements have created huge trade deficits that are draining our economy. “Free trade” is a myth that has been used to drive wages down here, not to create trade partners who buy as much from us as they sell to us.
  • Reality: Other countries have national industrial/economic strategies. This means we increasingly send our companies out alone to compete with national systems and they won’t win that fight no matter how big they are.
  • Reality: Other countries use national domestic-content procurement policies, and we need a “Buy American” procurement policy.
  • Reality: For decades all income gains have gone to the top. This is distorting everything in our society and democracy.
  • Reality: Tax cuts for the rich cause deficits. They also incentivize predatory business models by rewarding get-rich-quick schemes over good, long-term, sustainable business strategies.
  • Reality: Climate change is real and it is serious and we have to address it. And addressing climate change means millions of green jobs will be created.

The same old same-old debt and bubble economy won’t work and got us into this mess. Last week in The Jobs Question, Robert Borosage described the problem:

Twenty-five million Americans are in need of full time work. One in four teenagers not in college can’t find a job. Wages aren’t keeping up with prices. Our trade deficit is rising, as more and more good jobs get shipped abroad. It’s projected that a staggering 48 percent of homes with mortgages could be underwater – worth less than the mortgage – by the end of the year.
Moreover, there is no recovery to an old, healthy economy. The old economy didn’t work for most Americans even when it was growing. The cancer was spreading before it metastasized in the financial panic. In the so-called Bush recovery years before the collapse, the few captured all the rewards of growth. The average income of the bottom 90% dropped. That economy was built on debt and bubbles. We were hemorrhaging manufacturing jobs and borrowing $2 billion a day from abroad. And we were in complete denial about global warming and the catastrophic climate changes that have already begun. We can’t recover to that old economy – and we wouldn’t want to.

Summary: The old way didn’t work and led to disaster. Don’t try to bring that back, thinking it will be better this time. We need a new vision, and new strategies.
So let’s get down to business. Here are the ideas presented in our Big Ideas To Get America Working series:
Today’s Big Idea To Get America Working: Fix The Housing Crisis by Liz Ryan Murray.
Today’s Big Idea to Get America Working: Hire the Young to Build Their Own Future by Richard (RJ) Eskow.
Today’s Big Idea To Get America Working: Revive American Manufacturing by Dave Johnson.
Today’s Big Idea To Get America Working: Make Work Pay by Anne Thompson.
Today’s Big Idea To Get America Working: Invest In Public Education by Jeff Bryant.
Big Ideas To Get America Working: Rebuild Our Infrastructure by Dave Johnson.
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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How Free Trade Made Democracy A Disadvantage

This is my presentation from last week’s Netroots Nation panel session: Revitalizing Manufacturing: The Road to Renewed Job Growth. Click through for panel details and other panelists, here for a pdf of slides, including Jared Bernstein’s. See below for video — and be sure to watch Beri Fox!!!
Four Stories
I want to share four quick stories:
1. Democracy
The story of America
We fought a wealthy powerful few who had all the say and didn’t let us have a say, and made a country where We, the People made the decisions and share the benefits.
So because we had a say we built up a country with good schools, good infrastructure, good courts, and we made rules that said workers had to be safe, get a minimum wage… we protect the environment, we give out social security. We take care of each other.
And we used to protect that. We used to put a tariff on goods coming in if they were made by people who didn’t have the ability to speak up and better their condition. It was called the American System. Look it up. We’d let the goods in but we would use a tariff to strengthen our country, our infrastructure, our schools – our democracy.
But that changed. Superman left and we stopped protecting the American Way. We started letting goods in made by people who had no say, so the goods were cheap and they undercut us.
We have made democracy a disadvantage. We made it a disadvantage instead of an advantage.
Make no mistake, people who say they want things more “business friendly” they mean they want America to be less of a democracy, with fewer of the protections we fought to build for ourselves.
2. Trade
Once upon a time some areas made some things well, and other areas made other things well, and they would trade, and both areas could have the things they made AND the things made somewhere else, and everyone benefitted. And both areas increased the customers they had.
And so to most people “trade” means we buy things made somewhere else, and they buy things we make. In what world does “trade” mean closing a factory that is located here, moving it there where they don’t already make something, laying off all the people, and then bringing back here the same things that used to be made here and selling them in the same stores?
And the result is a lot of people have lost jobs, devastating our communities.
And then they tell workers who still have jobs that the same can happen to them, we can just close this factory, so shut up and don’t expect raises or benefits or safety or dignity.
What we see happening when a company moves production out of the country is not trade, it is getting around the borders of the democracy we built, and the things we fought and sacrificed to build.
Letting companies move factories away was giving up our ability to make a living. Sure a few people might get really rich from it, but look around you the rest of us, and our communities, and our economy have been sent sliding down a hill into the sewer.
3. The Deal
There once was a company. The company made a deal with a company in the next county, they make something you don’t, and you make something they don’t. So the deal is you’ll buy things from them if they buy from you. And you start buying from them, but they aren’t buying from you. And this goes on, and they still aren’t buying from you, but you are starting to owe them a lot of money. And they you’re borrowing from them to buy from them, and they still aren’t buying. And then they show up in your county selling the things you already made and sold, buy they used the money they got selling to you to set up to make what you made.
And by the way they say you have to pay them what you owe them.
That is how our deal with China is working out. We bought from them, they didn’t buy form us, and now they have accumulated $1.5 trillion which they were supposed to have been buying American-made goods with.
And they cheated. Or I would say they were smart and watched out for their own interests excessively, and we didn’t at all.
$1.5 trillion! So imagine what would happen if we said we’re going to default on the debt but these bonds are redeemable in the next 3 months for American made good. Can you imagine what $1.5 trillion of orders would do for our economy right now? $1.5 trillion in orders? Factories humming…
Well the picture of what that would do FOR our economy is a way of understanding what that has done TO our economy.
4. The Cost
I like to tell you a story about the cost of our free-trade deals and tax policies.
I took a road trip last fall, through four industrial states, MI, OH, WV, PA to visit some of the Manufacturing Town Hall meetings that Scott’s group put on. [Note – see posts about this tour here.]
They call it the “rust belt” because so many factories are closed and rusting.
From town to town you see downtowns devastated, because the way you make a living is gone and the cheap imported goods at wal mart competing with local businesses. Michael Moore wrote about Flint after the auto plants closed. That kept happening, town after town, year after year, and got worse.
You have to see to first hand. [Note – there are pics in this post.]
But I’ll tell you, we’re even seeing it now in Silicon Valley, seeing downtowns with lots of empty storefronts. Empty office and manufacturing buildings everywhere. That wave that hit the Midwest has reached the tech areas now.
So the moral of the four stories is that We the People have to protect the things we fought for and won. And we have to remember that We, the People have to take care of and watch out for each other because the wealthy and powerful won’t do that for us. And markets aren’t about that, either.
When we relax our eternal vigilance they will come back with a vengeance.
Progressive Solutions

    a. Industrial Policy
    We don’t believe in having the government help. We think the markets will fix everything. But other countries don’t see it that way.
    We are pitting our companies on their own against the national resources of governments. We can live in an ideological dream world and say we shouldn’t, but our competitors in the rest of the world DO.
    b. Protect Democracy
    Tariffs. Call it a democracy tariff. Or a thugocracy tax. Use this to help lift others out of their exploitation. By making democracy a disadvantage we are only encouraging the worst, and encouraging it here, too. “Business friendly” is a code word that means get rid of all the protections We, the People have built for ourselves.
    They can protect the environment, etc, or charge a tariff to bring those goods in.
    c. Renegotiate Trade Deals
    Trade can mean something different. We still have a huge market. We can require goods to either be made by people who are not exploited and who have a say so
    d. Enforce Trade Laws
    China cheats in so many ways, and we all know it. Currency rates. Indigenous innovation . Forcing companies to turn over proprietary IP…

We can do these things. Because of the strong prosperity that democracy brought us others really want to sell into our markets.
And my own favorite:

    e. Top tax rates
    With high top rates it takes time to build a fortune. You have to have long-term plans, sustainable businesses that are surrounded by healthy communities, good schools, good infrastructure.
    Lower rates, you can make a fortune in a few days. Business models changed, became short term, cash in, quick-buck schemes. Harvest infrastructure, close factories, no need for healthy communities, etc.

Video Of The Panel
Scott Paul opens
Jared Bernstein at 6:02
Rep. Jim McGovern at 17:00
Beri Fox at 31:29
Dave Johnson at 48:13
IF the video below doesn’t show up, click to see it here.

Sobotka
As always, Frank Sobotka explains what’s wrong:

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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Businesses Hire When Customers Are Coming In The Door

Another bad jobless claims report… and this time Washington seems to have finally noticed that there are some unemployed people out here in the sticks. But instead of jobs programs the geniuses are proposing … what else? … even more tax cuts. (And after a few hours they’ll go back to complaining about deficits but blame “spending.”) And of course, they are once again trying to “appeal to Republican lawmakers” without getting it that Republican lawmakers are doing everything they can to slow job growth so they can win the next election.
Bloomberg: Payroll-Tax Break Said to Be Discussed by Obama Aides Amid Slowing Economy,

President Barack Obama’s advisers have discussed seeking a temporary cut in the payroll taxes businesses pay on wages as they debate ways to spur hiring amid signs that the recovery is slowing, according to people familiar with the matter.
. . . The talks reflect the political constraints the White House is operating under with the Republican majority in the U.S. House pushing to cut federal spending. A hiring stimulus based on a tax break for employers may appeal to Republican lawmakers, many of whom have called for measures to help businesses.

Companies Only Hire When Customers Are Coming In The Door
Here is something the geniuses haven’t noticed, in all their geniosity: It doesn’t matter how much more money you give to business owners, businesses are not going to hire any more employees until they have a REASON to – and that reason is customers coming in the door.
OK, That was bold and italicized. Maybe if I make it ALL CAPS the geniuses will see it? Let’s see: BUSINESSES ARE NOT GOING TO HIRE ANY MORE EMPLOYEES UNTIL THEY HAVE A REASON TO AND THAT REASON IS CUSTOMERS COMING IN THE DOOR.
Businesses are not going to hire people just to sit around and listen to iPods or read the paper, waiting for a customer.
Terrance Heath, in America’s Unhappy Anniversary: Ten Years Of The Bush Tax Cuts For The Wealthy,

Republicans claim that preserving the Bush tax cuts for the wealthy is in the interest of small businesses, but small business owners are starting to demand a repeal of the Bush tax cuts.

We are fed by our consumers, not by our tax breaks,” says Rick Poore, owner of Designwear, Inc., a screen-printing business based in Lincoln, Neb. “If you drive more people to my business, I will hire more people. It’s as simple as that. If you give me a tax break, I’ll just take the wife to the Bahamas.

Businesses are fed by their customers, not by tax cuts. Tax cuts only feed deficits. Customers coming in the door is what causes businesses to hire. In case you missed that: Customers coming in the door is what causes businesses to hire.
Direct Job Creation Is Needed
Until there are more customers businesses are not going to hire. Why should they? So it is up to us (government: We, the People…) to create some customers. The way to do that is to hire people to do some of the things that it is government’s job to do anyway, but government has been putting off because of so many tax cuts.
Fix the infrastructure: Our infrastructure is crumbling. In Obama Should Call Chamber’s Infrastructure Bluff I linked to an Urban Land Institute report on the country’s infrastructure, showing how we are falling behind countries like Brazil, China and India, and to the American Society of Civil Engineers (ASCE) Infrastructure Report Card, that says a $2.2 trillion investment is needed just to bring the country’s infrastructure back up to current standards.
This infrastructure work has to be done no matter what. The longer we delay it the more our country falls behind. It is millions of jobs that need doing at a time when millions need jobs! (And by the way the government can borrow at nearly zero interest rates right now — one more reason to do it now.)
Green jobs: And then there are the green jobs you should be creating. You should be hiring people to retrofit every home and building in the country to be more energy efficient. This pays for itself because we stop sending so much money to the oil-producing countries, stop putting so much carbon in the air, and our economy becomes more efficient. And put more money into alternative energy, too. I mean, jeeze, geniuses, what part of this is hard to get?
Jobs fix deficits: Hiring people to fix up the infrastructure takes them off the unemployment rolls and off the other assistance programs, lowering government spending on those programs. Having those jobs means they are paying taxes again, raising government revenue. And fixing up the infrastructure makes our businesses more competitive again, growing the economy. It’s a no-brainer which should mean even the DC geniuses can figure it out.
Fix Trade
Because of bad trade deals, much of any revival of our economy just means that we send more money out of the country. The trade deficits, especially with China, are also economy deficits. We are not just sending jobs and money out of the country, we are sending our chances of coming out of this economic slump out of the country as well.
And these trade deals pit exploited, underpaid workers in non- or weak democracies against our workers who had been benefiting from the good wages, workers protections and other non-“business friendly” things that democracy brings along with it.
Our trade deals have made our democracy and the resulting high standard of living into a disadvantage. Who were the geniuses that let that happen?
Restore Long-Term Incentives
Tax cuts have cut the incentive for long-term business models. It used to take time to build a fortune, so businesses had to place themselves within healthy communities with good schools, well-maintained infrastructure and solid, well-funded public structures like the court system. Cutting top tax rates changed business models to make more sense “harvesting” those things in a hurry and moving on to the next community with resources to plunder. Low top tax rates encourage quick-buck schemes.
Propose The Right Thing
Propose the right thing and do it publicly, instead of trying to appease a political ideology bent on destroying government. Doing the right thing is also the right thing politically. If the job situation doesn’t get better you’re going to be thrown out of office. So come one, geniuses, get smart and start hiring people to fix up the infrastructure and make the economy more energy efficient.
10 years of Bush tax cuts is enough! Click here to demand your representative supports the Fairness in Taxation Act so the rich contribute their fair share.
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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Trade Agreements Kill Jobs, Wages, Democracy

Our trade agreements have pitted working people in countries that do not protect rights or people against the working people here who fought to win the protections of democracy. The result has been devastating to our communities, our economy and our democracy.
America is (was, anyway) a democracy governed by We, the People. As Monday’s Memorial Day ceremonies remind us Americans fought and sacrificed to build and keep the protections and benefits that democracy offers. Those include good jobs with good wages, worker safety laws, rules preventing companies from polluting, and so many other things that companies complain make us less “business-friendly.” But we got involved in “trade” deals that let countries get around democracy’s protections, pitting employees here against people who have no voice, no power and no money. You can see the results all around us.
Korea, Panama, Columbia … and China
Now we’re looking at new trade agreements with Korea, Panama and Columbia. The President is holding out for assistance for all the workers who will be displaced while Republicans say, “Why bother?” Neither side is holding out for agreements that lift workers on both sides of the border.
But these agreements will hurt American workers and communities by lowering wages and killing jobs. For example, the National Council of Textile Organizations, American Manufacturing Trade Action Coalition, National Textile Association, American Fiber Manufacturers Association, U.S. Industrial Fabrics Institute got together to warn that,

We have analyzed the agreement carefully and come to the unfortunate conclusion that the textile portions of the KORUS agreement are seriously flawed. If passed in its current form, the agreement will open the U.S. market to a massive one-way flow of sensitive textile products from South Korea, as well as illegal Chinese imports, while providing no new export business to our textile manufactures and workers.

And more clearly, there are …uh … labor rights “problems” in Columbia, too: Colombian Labor Rights Lawyer in Critical Condition after Assassination Attempt,

On May 13, 2011, armed men on motorcycles fired five bullets into labor rights lawyer Hernán Darío in the heart of downtown Cali, Colombia. Mr. Darío is the lead attorney in a high-profile case defending the leaders of a group of sugarcane workers who led a labor strike in 2008 from criminal charges. While no one has taken responsibility for this shooting, it is widely believed to be connected with the sugar strike and Mr. Dario’s defense of the sugar workers.
The shooting comes only weeks after the Colombian government agreed to implement a “U.S.-Colombia Labor Action Plan,” a plan to make improvements in labor rights conditions in Colombia, in connection with U.S. Congressional consideration of a Free Trade Agreement (FTA) between the U.S. and Colombia. The shooting underscores the continuing and serious labor rights problems in Colombia. It also calls into question whether there has been real progress on the labor rights situation in Colombia.

Of course, arguments over these are really proxies for our trade relationship with China, which is the real problem because it is the biggest problem. Our trade deficit with China is in the hundreds of billions – meaning they sell to us and don’t buy from us, costing jobs, lowering American wages and increasing our debt. And China not only cheats, they really cheat. This is from Another Reason CEOs Should Rethink Outsourcing and Offshoring,

Fellowes Inc., one of the world’s largest makers of office and personal paper shredders, is witnessing the destruction of its business, as its large Chinese manufacturing plant has been shut down by its joint venture manufacturing partner.
The company’s Chinese joint venture firm has barred 1,600 employees from entering the plant, stolen all of its proprietary manufacturing production equipment and forced the venture into bankruptcy. The contracts Fellowes signed with its Chinese production company meant nothing. For Fellowes, there is no such thing as rule of law in China.
The Itasca, Ill.-based company has lost $168 million worth of business and is no longer able to produce personal shredders for the world market. It has taken its case to Chinese courts, to no avail. It has pleaded with members of Congress and federal agencies, with no results.

Wrong Turn On Trade
“Trade” is when you … uh … trade with others. A country might be able to grow bananas, and need machine tools, so you set up a deal to trade with them. And you both benefit!
But “trade” is not supposed to mean you just let a company just close their factories here because they don’t want to pay reasonable wages or protect worker safety or the environment, or pay taxes to support the communities that provide workers and services and customers. You don’t just let them send those jobs across a border to a “business-friendly” country that will let them pollute at will or treat employees like slaves and then think they can just bring the same products they used to make here back here to sell.
Somewhere along the way we made a wrong turn that has taken down a road toward ruin. Somewhere along the way we made a deal with the devil to let a very few people here get extremely wealthy at the expense of the rest of us.
The Cost To Communities
These trade agreements have had a terrible effect on our manufacturing communities, particularly in the midwest. From last year’s post, Lorain, OH Keep It Made In America Town Hall Meeting,

As you drive from town to town in Michigan and Ohio you see one after another a ring of the “big box” stores and national chain stores around each city. You also see the “brownfields” of rusted-out, closed factories, empty, falling-down buildings. Then you go to the downtown and you see boarded up houses, empty storefronts, deteriorating and deteriorated communities, idle people standing on corners. As you drive into these towns you can just see what is happening in a nutshell.
… Here are some pictures from the inner Lorain area but you see it all around: (click for large)
P1000784P1000802 P1000791P1000795P1000789P1000787

The Cost To Sovereignty
Our trade treaties prevent us from governing our own country with the laws We, the People want to pass, even when we can get them passed around the money of the corporate gatekeepers.
The World Trade Organization (WTO) says says we cannot require Country Of Origin Labeling (COOL)
WTO rules against U.S. COOL program

A World Trade Organization panel has issued a preliminary ruling on the case that Canada and Mexico filed against the U.S. country-of-origin-labeling law, charging that the mandatory rule violates WTO trade standards.
Specifically, the WTO ruling upholds that requirements tied to U.S. mandatory COOL violate provisions of WTO’s agreement on Technical Barriers to Trade or TBT. The WTO panel also ruled that the mandatory COOL requirements to not meet the United States’ stated objective that the labeling law informs and helps U.S. consumers make purchasing decisions regarding the origin of meat, produce and other products covered by the labeling law.

Just over a week ago the WTO ruled that we can’t even make companies tell consumers whether tuna they buy is “dolphin-safe.” David Sirota writes about this in Salon, When “free” trade trumps U.S. law

… so-called free trade agreements (i.e., NAFTA, bilateral NAFTA replicas, the WTO regime, etc.) are free only of protections for human beings — that is, free of provisions that preserve, say, labor rights, human rights and the environment. But those deals’ “hundreds of pages” are chock-full of protectionist provisions for multinational companies — provisions that, for example, allow foreign firms to sue governments for lost profits and empower international panels to unilaterally override a nation’s domestic laws if those laws reduce corporate revenues.

According to Public Citizen’s Eyes On Trade,

For the second time in a week, reports have surfaced about the WTO clobbering a U.S. consumer labeling policy. Last week, the U.S. voluntary dolphin-safe tuna label was deemed a WTO violation. This week, Reuters is reporting that the WTO has ruled that U.S. beef labels are a WTO no-no.
Corporate meatpackers are rejoicing…
. . . Consumers, ranchers, farmers and legislators worked hard to pass the labeling rules after seeing ground beef horror stories in Schlosser’s movie and book Fast Food Nation.
Heck, even free marketeers will be upset with the WTO ruling, since labeling transparency allows the consumer to make the free choice as to what kind of product they want to buy without the government dictating the outcome.
[. . . ] Unlike the U.S. Constitution and legal system, the WTO puts maximization of trade volumes first – ahead of consumer safety or the environment. As if corporations needed any more incentive to destroy local food production.

The Cost To Democracy
People watch these trade agreements take away our jobs and lower our standard of living. The see China cheating, taking everything and know that they can’t buy things in stores that are made in the USA. People clearly see this smashing the middle class and don’t understand why our political leaders don’t step in to defend the country. They don’t understand why government is not addressing these things that are costing jobs, and then see government making even more trade deals when it is obvious that trade with China is costing us jobs.
People understand this is big-company corruption buying politicians and making economic change impossible. They watch the big corporations take over the government, telling the Congress and administration what to do while they are unable to do anything about it. They come to believe the game is rigged. The result of all of this is that many people feel powerless and tune out.
The frustration over this is being channeled into a belief that it is government and democracy that are responsible, and that government spending is why they have no money. This loss of faith is dangerous to our society and our political system.
To Fix The Economy And Budget , Fix Trade
We have to fix our trade relationships if we hope to fix our economy and out budget problems. Ian Fletcher explains, in Why the Budget Is the Wrong Thing to Fight About,

So… what is the solution? What do we have to fix?
The number one thing is trade. Free trade collapsed a very long time ago. What we have today is not free trade at all, it’s ruthlessly manipulated trade — manipulated by America’s big trading partners, starting with China but including many others. And we’re doing nothing to stop them.
America’s titanic ($497 billion last year) trade deficit is ripping the guts out of industry after industry, but we have no answer. And you can’t gut industry after industry and expect not to reduce your GDP.
If we didn’t have this horrendous trade deficit, we simply wouldn’t be fighting many of these budget battles. Why? because we’d have a larger GDP, so tax revenues would be higher. Spending on public benefits would be lower, and painlessly so, because fewer people would be poor and middle-class people would have more money to take care of themselves.

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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