The Doubtful Deals Driving CAFTA

Business Week ^ | August 1, 2005 | Paul Magnusson & Richard S. Dunham

[Man50D]

What's the connection between a $2.5 billion plan to construct a series of dams and locks along the Mississippi River and a trade agreement between the U.S. and six Central American countries? Answer: It's the price the Bush Administration paid for the vote of Senator Christopher Bond (R-Mo.) in favor of the Central American Free Trade Agreement.

In the end, CAFTA passed the Senate 54-45 on June 30 after Bond told the White House he'd be "more comfortable" voting for the trade deal holding a chit for his dams and locks. It headed to the House for what's likely to be a closer -- and more expensive -- vote. With the outcome still in doubt, the capital has become eBay on the Potomac as even some historically pro-trade House Republicans are acting suddenly coy. For legislators, the opportunity is a solid two-fer. "They can go back to their districts and say, 'Look what I got for you,' at the same time they can demonstrate to voters that the President is not a lame duck and Congress isn't paralyzed," says Norman Ornstein, a congressional analyst at the American Enterprise Institute.

[oceanview]

for starters, the ones in the polls who don't seem to see the "boom" you refer to. I'm one of them, my wage is declining, my profession is being shipped offshore, my former co-workers have had to take jobs in a wide range of lower paying fields, or have switched to government employment. go ask the 10,000+ people HP is laying off, there is a pool of "real americans" you can ask their opinion. or the north carolina furniture workers, and the other millions of manufacturing jobs lost to offshoring.

where are these "jobs of the future"? we are creating service jobs, government jobs, health care, food service, education. matriculation rates of students in the sciences and engineering is falling off a cliff - every young person I talk to wants to be a lawyer or a teacher or a real estate agent.

and just wait until a guest worker program is opened up - you will see a massive wage deflation in jobs we do have, when Home Depot and Marriott can line up to legally hire newly minted workers coming across the border.

[hedgetrimmer]

There is not one economic indicator out there that doesn't say these are very good times.

How about the defict?

How about this?

The challenge will come once the price of imports begins to rise. At that point, Americans will have to produce for themselves much more of what they consume, or pay a lot more for the privilege. Ideally, the process would involve America becoming a much bigger producing nation, even stepping up its exports to Asia, while Asia, and especially China, takes up the role of consumer.

That is essentially the view of the Bush administration as outlined by Ben Bernanke, the newly appointed chairman of President George W. Bush's Council of Economic Advisers. "We probably have little choice except to be patient as we work to create" the necessary conditions for a reversal of roles, he said in a recent speech.

The president's own economic advisor says we have to get our manufacturing back or we're toast!

[Mase]

How about the defict?

You mean the shrinking budget deficit or the trade deficit we've had for 30 years?

The challenge will come once the price of imports begins to rise. At that point, Americans will have to produce for themselves much more of what they consume, or pay a lot more for the privilege

Economics 101. He's just stating the obvious.

Ideally, the process would involve America becoming a much bigger producing nation, even stepping up its exports to Asia, while Asia, and especially China, takes up the role of consumer.

Yes, China and Japan need to start consuming. Japan especially has to step up to the plate. Stimulating internal consumption would do wonders for their economy. China is going to have to create a higher per-capita GDP before they become better consumers, and Japan will have to reform it's archaic distribution system along with having someone stand up to their massive trading companies.

"We probably have little choice except to be patient as we work to create" the necessary conditions for a reversal of roles, he said in a recent speech.

Yes, he's right again. I like Bernake. BTW, we produce more and export more now than at any other time in our history. Total household net worth is at it's highest level ever - $49 trillion with only 20% of that coming from home equity.

Unemployment is 5.0% which is less than the 5.7% average over the past 40 years. Manufacturing has expanded for 25 months in a row and our GDP growth makes us the envy of the world. We've created 21 million net new jobs since NAFTA and real wages have consistently risen during the past 10 years.

You third-party advocates really have your work cut out for you.

[Mase]

I'm one of them, my wage is declining, my profession is being shipped offshore, my former co-workers have had to take jobs in a wide range of lower paying fields, or have switched to government employment

I can't speak to your individual situation but from a macro view the economy is humming along and creating wealth and opportunities for all American's.

More American's (70%) own homes now than at any other time in history. Almost 60% are invested in the stock market. Since 1997, American's have cashed in over $3.5 trillion in capital gains which is twice what we earned in the prior 20 years!!

You have to look real hard these days for doom and gloom from a macro viewpoint. I saw a study that proved that we have lost 7 million jobs a month over the past 10 years. We always manage to replace them, and create more, while increasing real wages for all workers.

Looking at employment, we are moving to a service economy and it's a fact that professional services pays more than manufacturing. At the same time, our manufacturing produces more with less labor. That productivity gain is what keeps us competitive.

Can you find bad news in any of these key indicators?

GDP growth
Unemployment
Rising wages
Low interest rates
Tame inflation
Manufacturing expansion
Corporate earnings
Stock Market Appreciation
Export growth
Household net worth
Home ownership
Number of Americans invested in the stock market
Consumer confidence

[oceanview]

you might be able to make a case for professional services versus low tech manufacturing. but what about technology? that the engine that drives any future innovation and the new jobs that come from new industries. its OK for the buggy whip plant to go away, if an auto plant opens to take its place. as we send the semiconductor industry to china and IT to India, what are we replacing it with? are you going to argue that professional services will fill that void too? it won't, an economy based only on services and government, isn't going to serve enough people to sustain the large middle class that is the hallmark of our socio-economic structure.

inreasingly, debt is the new "wealth" for many americans.