Who Else is Against American Manufacturing?

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
A country’s economic power comes from manufacturing. But while other countries have industrial policies, America has a de-inustrialization policy. We have handed our country’s manufacturing capacity over to other countries, and as a result we have to borrow more and more to be able to buy the things that we used to make. How did this come to be? Who would be against American manufacturing?”
In Who Would Be Against American Manufacturing? I wrote about,

“representatives of foreign interests lobbying in the US for trade policies that benefit companies in other countries at the expense of America’s factories, workers, companies, communities and economic power. It is to be expected that a country will work to increase manufacturing within its borders – even if we don’t – and these firms helping the efforts of other countries are required to register with the Department of Justice as “foreign agents.” I traced an anonymous comment left at my own blog back to one of these …”

Of course other countries have an interest in taking the business away from us to have for themselves.
In Part II, Who Opposes American Manufacturing? II I wrote about Cato Institute, a conservative “ideological” think tank that opposes manufacturing in America. But they receive funding from interests outside of America – the very interests who do the very kind of fighting for trade policies that the Cato Institute opposes for us.

WHY would Cato Institute advocate this? Is it just weird libertarian cult ideology? Perhaps a look at who is paying for this advocacy will provide a clue. While mostly funded by individuals, Cato’s funders include many of the usual right-wing funding suspects: Koch, Scaife, tobacco companies, Exxon and other oil companies, Wall Street… But one sponsor jumped out at me: the Korea International Trade Association. (Honda, Mazda, Mitsubishi, Toyota and Volkswagon are sponsors as well.) Dots connected: Cato is receiving funding from the Korea International Trade Association, and then turning around and advocating that American hand over its manufacturing capacity to other countries!
So I checked, and did not find that Cato Institute registered as a “Registered Foreign Agent.” Why not?”

Beyond explicitly foreign interests and possible foreign-interest-funded lobbying, are there other reasons that Americans would advocate that we just hand over our manufacturing capacity and instead just borrow to get by? There are domestic interests that benefit from America giving up our manufacturing capacity because there are domestic interests that benefit when the rest of us borrow.
Part III – Americans Opposing American Manufacturing
Our beloved-and-bailed-out financial sector has done very well for itself in the decades since we embarked on the great “free market” and “free trade” experiment. Wall Street has greatly increased its share of our economy. While finance expanded the manufacturing sector shrank until just before the crash the financial sector had risen to 40% of all corporate profits.
Kevin Philips wrote in 2008’s post, The Destructive Rise of Big Finance,

Over the last five years, financial services has reached a swollen 20-21% of U.S. GDP — the largest sector of the private economy.
Manufacturing led financial services by 2:1 back in the 1970s, but by 2006 beaten goods production had shrunk to just 12% of GDP.

As Wall Street doubled, manufacturing declined.
Profits incentivize corporate behavior and these giant Wall Street corporations profit from our ever-increasing levels of debt. They profit from the transactions that occur when companies move their operations out of the United States. They profit from convincing communities to privatize infrastructure. They profits when companies externalize costs onto the larger community. They profit from the transaction involved when the country borrows to fund our government and trade deficits.
Wall Street profits from debt. So they have an incentive to encourage debt. Who do you think it was that convinced Americans it is normal and even preferable to carry debt and to use credit cards? Marketing works, and the following is based on marketing we have all been exposed to:

    Making minimum payments on credit card debt? $250 a month.
    Making car payments for five or six years? $400 a month.
    Being in debt for the rest of your life, forever making interest payments and being forced to work at corporate jobs? Priceless!

Phillips again,

During Greenspan’s 1987-2005 tenure, the sum of public and private debt in the United States quadrupled from just over $10 trillion to $43 trillion. Finance became the industry that was not allowed to fail but was permitted to enlarge and metastasize its behavior almost at will.

In the movie Wall Street, based on actual events and people in the news at the time, the greedy corporate raider Gordon Gecko buys companies, chops them up, steals the workers’ pensions, destroys people’s lives and their communities, etc. and pockets the profits. Gecko claims that because he can profit from doing these things, “the market” wants it done, demands it in fact, and therefore he plays an important economic role of making things more “efficient.”
To Gordon Gecko and market fundamentalists the fact that they can profit from something is proof that it should be done. “The Market” is for them a God that takes responsibility and ethics and morality and humanity out of their hands. “The Market – God – says it must be this way and who are you to question?” (Convenient for them.)
Of course, a large part of why Gordon Gecko could pocket such a profit so fast was because un President Reagan the country had just changed the tax laws. Before Reagan there was a very high top tax rate that prevented people from amassing a vast fortune in a short time (usually at the expense of the rest of us). This tax policy encouraged long-term thinking and planning instead of short-term greed, and encouraged business to maintain interdependency with the larger community and its interests. If it takes ten or twenty years to amass a huge fortune you and your business rely on other businesses and on the community’s infrastructure to be maintained and modernized so it will support your business activities. And you want a thriving, educated community surrounding you
But in a quick-buck scenario you are incentivized to feed off of rather than rely on the greater community. If you can defer infrastructure maintenance and pocket the savings then that is what you will demand. If you can chop up the supply chain and pock the proceeds that is what you will demand. If you can profit from exploiting and abusing skilled workers who would otherwise be needed in coming years, that is what you will demand. and if the community around you deteriorates it doesn’t matter because you’ll be cashing in big soon, and flying away in your private jet to your tax-haven privatized island. It is no coincidence that pensions started being stolen, companies started outsourcing, communities started privatizing, etc. right after top tax rates and regulations were cut.
Wall Street has an interest in helping dismantle manufacturing in America. (pun intended)

Today’s Economy Collapse Post – “Ominous”

Rising gas, food,health care and other prices, falling housing prices and savings rates, stagnant wages and all the rest are taking their toll: Retailers Face an Ominous Holiday Sign – New York Times,

Sales of women’s clothing, a traditional pillar of the holiday shopping season, are unusually weak so far this year, according to a major credit card company, an ominous sign for the retail industry.
From high-end dresses to bargain coats, spending on women’s apparel dropped nearly 6 percent during the first half of the Christmas season, compared with the same period last year, according to MasterCard Advisors, a division of the credit card company.

But all is not yet lost, SOME are doing just fine, thank you,

Spending on luxury items is up 10.8 percent, “which isn’t bad at all,” Mr. McNamara said.

Yes, at the top things are great.
A certain commenter might want to leave a message about heads on pikes, torches and pitchforks right about now…

What The Reagan/Bush Debt Means To You

As I write this, the US national debt is about $9.17 TRILLION dollars. This debt is the amount we have borrowed to pay for our government since the Reagan tax cuts – compounded by the Bush tax cuts. This is because of a choice we made – yes I say WE, because this government is US – to borrow and pay later instead of pay now.
Don’t for a minute think that you do not owe that money. It comes to about $30,000 for each American, including infants. If you are a family of four you now owe about $120,000 thanks to those tax cuts. YOU owe this money, even though the tax cuts have primarily gone to the very rich. You WILL be paying it, one way or another. Don’t think that debt like that just goes away.
PLUS now each year we pay about $433 billion for interest on that debt. That amount, of course, rises every year. So in addition to owing all that money we have to service the debt by paying $433 billion every year. That amount is larger than the current federal deficit – which means if we had not cut those taxes and borrowed all that money in the past we would have $433 billion more each year to spend or save AND we would not owe $9 trillion.
I do not understand how we tolerate this situation. Yes, it happened because we listened to lies, but how many of our candidates are seriously talking about the changes that need to be made to fix this?

The Gross National Debt

Today’s Housing Bubble Post – Foreclosures Double

Ypu’ll be seeing this headline every month for a while, I expect: Foreclosures nearly double from year ago: report,

Cities in California, Florida and Ohio dominated the 25 U.S. metro areas with the highest home foreclosure rates, though rates jumped in most of the top regions during the third quarter, RealtyTrac said on Wednesday.
. . . A broad credit and liquidity crisis during the third quarter exacerbated U.S. housing industry troubles, pushing sales sharply lower and unsold inventory to record highs.
Overall, residential foreclosure filings nearly doubled in the third quarter from a year earlier, RealtyTrac reported earlier this month.

HOW many foreclosures?

Stockton’s rate of one foreclosure filing for every 31 households, the highest of the metro areas, was a surge of more than 30 percent from the prior quarter. A total of 7,116 filings on 4,409 properties were reported in the metro area during the quarter.
In Detroit, the foreclosure rate of one filing for every 33 households ranked second and was more than double the number of filings reported in the previous quarter, RealtyTrac said. A total of 25,708 filings on 16,079 properties were reported.

Today’s Housing Bubble Post – What A Bank Run Looks Like

This is filed under Housing Bubble, because this is more fallout from the bubble’s bursting. Here’s the deal: financial institutions loan out money to people (and companies and countries, etc.) who, because of the “credit crunch,” might not be able to pay it back. That means that the financial institutions might not be able to pay back the money THEY owe, including to depositors.
It’s housing bubble burst time – do you know where YOUR money is?
Calculated Risk: Northern Rock Bank Run, with photos:

From Bloomberg: Northern Rock Customers Crowd London Branches, Withdraw Money

Hundreds of Northern Rock Plc customers crowded into branches in London today to pull out their savings after the mortgage-loan provider sought emergency funding from the Bank of England …

A bank run happens when people feel that a bank might be having trouble, and realize they might not be able to get THEIR money out of the bank if they don’t hurry. Everyone knows that a bank (money market, stockbroker, etc.) only keeps so much cash on hand. So they show up to withdraw their money before it is too late. It is a “run” because you have to run down to the bank to get your cash before other people get their cash. Only the first people in line are going to get their money.
In the US bank deposits up to $100,000 are insured by the government, so if the worst happens you will eventually get your money (up to $100,000) — after all the paperwork gets done. So if you feel like running down to the bank, you don’t really need to take out more than you will need to pay you bills for a few months.

Today’s Housing Bubble Post – Big Houses Cost More To Heat And Cool, Bad For Environment

Here is one more problem from the housing bubble – all those big houses they built cost much more to heat and cool than regular houses. As utility costs rise this will compound the monthly-payment problem. Then, on top of that there’s the maintenance costs like eventually re-roofing them, watering the lawns, etc.
And then there is the terrible environmental impact. Very few were built withing walking distance of stores and public transportation so cars are required. How many of the world’s trees were cut down to build them?
And, if the public somehow manages to regain their senses, these house monstrosities – like the huge, pre-oil-embargo land-barge cars of the 1970s – will become even harder to sell.
AlterNet: Environment: Big Houses Are Not Green: America’s McMansion Problem,

The just-popped housing bubble has left behind a couple of million families in danger of losing their homes to foreclosure. It has also spawned a new generation of big, deluxe, under-occupied houses bulked up on low-interest steroids.
The National Association of Home Builders (NAHB) estimates that 42 percent of newly built houses now have more than 2,400 square feet of floorspace, compared with only 10 percent in 1970. In 1970 there were so few three-bathroom houses that they didn’t even to show up in NAHB statistics. By 2005, one out of every four new houses had at least three bathrooms.
…the manufacture and transportation of concrete to build a typical 2,500-square-foot house generates the equivalent of 36 metric tons of carbon dioxide.

Continue reading

Today’s Housing Bubble Post – Foreclosures Set record

New Mortgage Foreclosures Set Record,

The number of homeowners receiving foreclosure notices hit a record high in the spring, driven up by problems with subprime mortgages.
The Mortgage Bankers Association reported Thursday that mortgage-holders starting the foreclosure process in the April-June quarter reached 0.65 percent, marking the third consecutive quarter that this figure has set an all-time high.
The delinquency rate, which tracks the number of people who are behind in their payments but have not yet entered the foreclosure process, was also up sharply during the spring, rising to 5.12 percent of all loans, up nearly three-fourths of a percentage point from the same period a year ago.

And don’t forget, NEXT year is when MOST adjustable mortgages reset upwards, greatly increasing monthly payments. This is just the very tip of what is coming.