FACTLINE: President's Council of Economic Fiction

TradeAlert.org ^ | Wednesday, November 05, 2003 | Alan Tonelson

[Willie Green]

For education and discussion only. Not for commercial use.

U.S. TRADE TRENDS -- NOT AS THEY ARE, BUT AS CEA WOULD LIKE THEM TO BE

"A top advisor to President George W. Bush...downplayed the significance of the U.S. trade deficit with China, saying China accounts for the same share of the deficit that it did 10 years ago. Gregory Mankiw, chairman of the White House Council of Economic Advisers, [said] that the recent increase in the overall U.S. trade deficit reflects a slump in U.S. exports rather than an increase in imports."
--Dow Jones Newswires, October 30, 2003  

1993 U.S. goods trade deficit with China as share of global deficit: 16.83%

2003 year-to-date U.S. goods trade deficit with China as share of global deficit: 20.03 %

magnitude of Mankiw's error: 19.01%

change in U.S. goods exports, 2002-03 year-to-date: +1.4%

change in U.S. goods imports, 2002-03 year-to-date: +8.2%

(Source: "CEA's Mankiw Downplays US-China Trade Gap, Touts US Econ," by Joseph Rebello, Dow Jones Newswires, October 30, 2003; calculated from Trade Dataweb, U.S. International Trade Commisson, http://dataweb.usitc.gov)

Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).

[Steven W.]

you really should get a life you know ... or just end it. either way I think you'll be much happier ;) ROFLMAO

[Coop]

You know, John Kerry's looking for a spokesman...

[ChadsDad]

Shouldn't this be in Breaking News?

[Fyscat]

Steven !!!! I take it that your still laughing from the bottom falling out on gold. Oh thats right, it hasnt. Hmmm.

[Willie Green]

You know, John Kerry's looking for a spokesman...

Is there a reason you want to empower Kerry with facts?
It won't work, you know. Kerry is a dismal boob also.

[RiflemanSharpe]

ping

[expat_panama]

Yo Willie --how's my good man!

[REQUEST:  please don't include me with the name callers who say you're  a demorat etc.  Not that they're necessarily bad people, it's just that if you care to lob that stuff back, please aim at them and not me.] 

You and I chatted about this China trade deficit, and (correct me if I err) we covered

--->    the expansion of the China deficit in the '90's coincided with record job growth

--->    the record job growth included real wage increases for all strata of society

and (correct me again if I misspeak) your objection was

--->  the shift of labor to the service sector (regardless of the increase in wage)

--->  the idea that the ten percent raise that 80 of workers got was not as good as the 25 percent for the highest fifth.

Do you believe that lowering the China deficit is worth loosing thousands of jobs and slashing everyone's  income?

[RunningJoke]

Of the total paper dollars in circulation roughly 80% are held overseas.

The foreigners cannot redeem these dollars for goods, because America is making less and less that the foreigners want to buy.

Crazy as it might seem, the foreigners are buying American Equities with this surplus. This might account for the high PE ratios.

Source: Financial Reckoning Day

[harpseal]

Ping

On or off let me know

[Willie Green]

Crazy as it might seem, the foreigners are buying American Equities with this surplus.

No, they purchase debt issued by the Treasury to finance the Budget Deficit.
Last I checked, approximately 18% of federal tax revenue is required simply to pay the interest on that debt.

[Willie Green]

You and I chatted about this China trade deficit, and (correct me if I err) we covered

Was that the discussion where I equated your assertions to the absurd claim that major floods are caused by excessive toilet flushing?
Sorry, I'm not in the mood for refuting a torrent of false assumptions and paradigm shifting that reverses the roles of cause and effect.

[expat_panama]

the foreigners are buying American Equities

RunningJoke is right on this one, in fact most of the US current account deficit is from foreigners buying our stocks.  (Economist (Aug. 16 page 10).

[Willie Green]

You mean buying out our domestic industries and shutting 'em down to eliminate competition?

[expat_panama]

false assumptions and paradigm shifting that reverses the roles of cause and effect

That's just it, there was no cause nor effect, reverse or otherwise. 

First, the expansion of the China deficit in the '90's coincided with record job growth,

the record job growth included real wage increases for all strata of society,

and you said:

Frankly, the only "class warfare" I see portrayed in the graph is the economic warfare perpetrated by the top 20% upon the prosperity of the American Middle Class.
Furthermore, I see nothing wrong with "envy". That's a perfectly normal consequence of natural human motivation to improve their own economic situation. The ONLY time economic envy becomes problematic is when (as you advocate) economic prosperity becomes perceptably disparate and divergent. Motivation for self-improvement becomes frustrated, and socio-economic unrest and upheaval results.

And it still looks like we're better off now than before regardless of the China deficit.

[harpseal]

You know, John Kerry's looking for a spokesman...

Why did you quit to work for Dean?

[Willie Green]

Hey, I remember that graph!
That's the one where you refused to explain why the middle class is performing so poorly compared to most everybody else. Even the bottom fifth is outperforming the Middle Class.
Yep, I like that graph!
It vividly displays how the upper 20% has rigged the system to squash 80% of our population into economic parity.

[Maria S]

Gee whiz I'm glad I have BA and GE!

Reuters
Boeing, GE Sign Deal with China
Wednesday November 12, 5:10 pm ET
By John Crawley

WASHINGTON (Reuters) - Boeing Co. (NYSE:BA - News) and the aircraft engine unit of General Electric Co. (NYSE:GE - News) signed agreements on Wednesday to sell up to $1.7 billion in planes and engines to five Chinese airlines in 2005 and 2006.

U.S. Commerce Secretary Don Evans presided over a ceremony in Washington to mark the deal for 30 Boeing 737s that officials say will help narrow the growing trade gap between the United States and China.

Additionally, China signed a deal to have GE supply jet engines for its regional jet program which is still under development. GE says the agreement could be worth up to $3 billion over 20 years.

The U.S. trade deficit with China is expected to reach a record $120 billion this year, prompting criticism from some U.S. manufacturers, the Bush administration and Congress that the lopsided relationship is hurting American industry and costing jobs.

In Beijing last month, Evans said he received assurances from the Chinese government that it would try to narrow the surplus. And he called Wednesday's agreements a good sign that China wants to build a stronger commercial relationship.

"These multibillion-dollar contracts are a big victory for Boeing and GE," Evans said. They will generate corporate revenue. They will support high tech manufacturers and generate thousands of jobs."

Zhang Guobao, vice minister of China's development and reform commission, said the deals with Boeing and GE were the start of a multi-industry purchasing spree in the United States that will also include agricultural products, autos and auto components.

Despite his country's trade surplus with the United States, he said China was still an enormously fertile ground for U.S. exports. He said the two sides should consider how to expand cooperation.

The agreements represent a win for Boeing in the growing Chinese aviation market after European rival Airbus (XETRA:EAD.DE - News) also signed a 30-plane deal with China in April.

"The Chinese aviation industry is the fastest growing market in the world," Zhang said. "Adding these 737 airplanes to our current fleet of 672 will help Chinese airlines meet their rapidly growing networks and accommodate rising demand from our passengers."

Under the agreements, China's flag carrier, Air China, Shenzhen Airlines and Xiamen Airlines will each buy five planes. Hainan Airlines will buy eight, and Shandong Airlines, seven.

China is Boeing's largest commercial market outside of the United States. Before Wednesday China's last orders were made in 2001.

Chicago-based Boeing has supplied China's fleet with 440 planes as of September 2003. Boeing forecasts that China will needed more than 2,400 new planes worth an estimated $197 billion.

[RunningJoke]

Actually they are heavily invested in the stock market and yes they are buying Treasurys as well. Either way, it is not a good thing.