Posted on 10/20/2004 2:40:59 PM PDT by Willie Green
For education and discussion only. Not for commercial use.
If you think Pedro Martinez' numbers against the New York Yankees look bad (and they do), they're nothing compared with the government's latest monthly trade figures. Dismal as the Boston Red Sox ace's performance against the Bronx Bombers has been, he looks like a champion next to the trade numbers, which are one important measure of the U.S. economy's performance against the rest of the world.
Not that the trade surplus and deficit figures tell us everything we need to know about America's competitiveness. In particular, they compare apples and oranges – how U.S. products fare in overseas markets versus how foreign products do in U.S. markets. And even studying the trade figures industry by industry can be misleading. By definition, they can't shed light on which U.S. industries depend how heavily on exports and/or face major foreign competitors, and which U.S. industries sell mainly to the humongous U.S. market and/or face little import competition.
Still, according to mainstream economic theory, these trade balance figures say a great deal about the relative strength of America's economy, whether it is waxing or waning, and what its future composition will be. The reason? What a country trades most successfully – where it wracks up its biggest surpluses - eventually becomes what it makes most successfully and prolifically. And what it trades least successfully – where it wracks up its biggest deficits - eventually becomes what it makes least successfully and prolifically. That, in plain English, is what comparative advantage in all its forms is all about.
The deficits also show that the United States is a country that consumes far more than it produces. Although the economic price for this profligacy has appeared minor so far, anyone expecting the situation to last forever and is blasé about its worsening must believe there really are free lunches after all.
The August, 2004 trade figures released Oct. 14 by the Census Bureau show an overall U.S. deficit in goods and services of $54.04 billion, second all-time only to June´s $55.2 billion. This year´s January-August deficit level, as a result, is more than 19 percent larger than last year´s, meaning that the annual deficit figure is on its way to smashing last year´s $421 billion record total.
Even worse, the U.S. deficits keep soaring despite the soft patch recently encountered in domestic growth, and the gradual continued weakening of the dollar. The first is supposed to keep imports down and the second is supposed to buoy exports, but little of these macroeconomic effects are being felt.
Further, the closer one examines the deficit figures, the worse they look. Remember the rule that what a country trades most successfully it will wind up making most successfully? Well, by this logic, the United States doesn´t have much of a long-term future as a manufacturer. August´s manufacturing deficit was the second highest on record, and this year´s cumulative manufacturing deficit so far is more than 21 percent higher than last year´s January to August record total of $307.45 billion.
And don´t think that the problem is concentrated in so-called dinosaur, smokestack industries – which, incidentally, create most of America´s best-paying jobs on average. The $4.5 billion August deficit in advanced technology products set a new record, too.
Of course, many supporters of current U.S. trade policies see no special value in maintaining a world-class domestic manufacturing at all. But the August trade figures should scare them, too. America´s longstanding surplus in tradable services shrank by 19 percent, to $3.2 billion – the lowest surplus since the Census Bureau began tracking this trade in 1992. Since 2001, moreover, the January-August service surplus has declined a stunning 27 percent, to $33.07 billion. Still think that we can export our way out of our enormous national trade deficits and resulting debts by speeding up our shift to a service economy? Please!
Even more worrisome, much evidence indicates that the United States is also seeing its competitive edge erode in information technology and professional services – the supposed industries of the future, for which displaced manufacturing workers are supposed to reeducate and retrain themselves, and which America´s youth should target during their schooling.
The U.S. surplus in the “other private services” category, which captures trends in these sectors, did rise from $31.44 billion in the January-August, 2001 period to $33.15 billion in January-August, 2002. Since then, however, the surplus has fallen by 4.4 percent, including a fractional decrease in August, 2004, to $3.96 billion. In August, 2003, the surplus was $4.08 billion – 2.94 percent higher.
When America began losing older industries such as textile and apparel and steel, free trade cheerleaders predicted that the forces of comparative advantage would push the nation up the technology ladder to automobiles and ships and machine tools and consumer electronics. When these industries began faltering, Americans were told not to worry, for they would be freed up to concentrate on high tech goods like computers and semiconductors and aircraft and advanced telecoms equipment. When many of these industries began migrating en masse to high-income Japan and then low-income countries like China, professional services like law, engineering, and finance, and info-tech services like software writing were then declared the new economic future.
The latest trade figures show that these sectors won´t be saviors for the vast majority of America´s workforce, either – leaving two obvious alternatives. Americans´ comparative advantage will be in sales – hawking to each other the wares of other nations. Or maybe we´ll just all go back to the farm. But the only problem with that scenario is that farming is also under intensive attack from foreign competition.
Somebody would have to get a job. Imagine what THAT would do to the economy.
It's certainly helping home "ownership" that the welfare recipients, welfare-to-work recipients, etc can apply $700 a month government housing subsidies toward the mortgage payments. Remember Clinton changed the way Unemployment statistics were done -- counting any part time job at all as though it was full employment --- so you're right about "employment: at or below historical average". Otherwise we could end some of the many welfare programs -- including that new welfare program NAFTA-TAA.
It wasn't me --- it was Bush I who denigrated Reagan's good economic plans. I think trickle-down economics is a good idea --- if prosperity trickles down to Americans, it's very good.
It may have helped you, but it hasn't helped me.
I sure would like to know how. If you're talking about Bush I's tax hike you must consider the times: he was faced with a Democrat Congress and a Democrat Senate that was spending money for votes. Reagan had the same problem. We always talk about the deficit in terms of high or low tax rates and never consider how much we are spending. Isn't there something wrong with that?
I think he means when Bush 41 challenged Reagan for the nomination in 1980?
It's certainly helping home ownership here --- a 20 year old single mother of 2 can buy a home with her government money.
Who came up with the term "voodoo economics"?
Of course, the notion that federal subsidies are driving the housing market is utterly laughable. I'm surprised you persist.
I'd like to see what would happen if all the housing subsidies, food stamps, free government provided health care, WIC, NAFTA-TAA, SSDI, CHIP, Medicaid, TANF, and so on were immediately stopped. How prosperous would America look then? I have a feeling it would look far less prosperous than it did in 1960.
I think they are in some areas.
With regard to NAFTA, Michigan would be worse-off (the opposite of what an earlier post suggested). As for the rest of your shopping list, who knows?
So federal housing subsidies in "some areas" are driving the nation-wide market? LOL
I'd ask you to support your contention, but why bother?
What gets it for me is the fact that car prices have remained constant adjusted for inflation since the 60's. Multiply what a Volkswagen Beetle (2k) cost then by six and you get what an economy coupe costs now. But then a car loan was three years. Now it can be six. How many cars would be sold if we had four years as the maximum for a car loan ?
And then a home mortgage was common for 15 years --- and were amounts that car loans now are. Now most people take home loans for 30 years. The exact same house my father bought in the 50s for $15,000 now sells for over $100,000 --- same house, same wood, same yard --- only then it was a new house, now it's kind of old.
Then what is the point in having them if they aren't being given to prop up the housing market? Wouldn't that be a whole lot of money that could be slashed from government spending?
Yesterday, I responded to your comment that "the prosperity can't trickle down to Americans, it trickles over to China instead." And now you want to discuss public policy?
I don't think there is any evidence that if many of those NAFTA-gone jobs came back into Michigan that it would be worse off --- likely they could drop many people off the welfare rolls if there were some assembly line or factory jobs for them. Funny how when cars were made in the USA with $20 an hour labor, you could find them selling for $3000-$4000 but with $0.50 or less labor costs, they're selling for $30,000 to $40,000.
- The number of Michigan companies exporting increased 65 percent from 1992 to 1998
- More than 86 percent of Michigan 10,482 companies that export are small- and medium-sized businesses
- Total exports from Michigan to NAFTA countries (Mexico and Canada) in 1999 were 74 percent higher than 1993, before NAFTA
Source
And here's something for you and our friend Sam:
| Motor vehicle parts, not including engines | $6,813 |
| Automobiles | $2,999 |
| Motor vehicle engines | $1,773 |
| Trucks | $1,304 |
| Unshaped plastics | $436 |
| Motor vehicle engine parts | $403 |
| Plate, sheet & strip, steel | $300 |
| Air conditioning & refrigeration equipment | $287 |
| Bolts, nuts & screws | $188 |
| Furniture & fixtures | $176 |
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