Middle Class Job Losses Batter Economy

Associated Press | January 2 2006 | Associated Press and Vicki Smith

[ventana]

AP Middle-Class Job Losses Batter Workforce Sunday January 1, 8:53 pm ET By Kathy Barks Hoffman, Associated Press Writer Middle-Class Job Losses Batter Workforce As Companies Slash Payrolls, Send Jobs Overseas

LANSING, Mich. (AP) -- Thirty years ago, Dan Fairbanks looked at the jobs he could get with his college degree and what he could make working the line at General Motors Corp., and decided the GM job looked better.

He still thinks he made the right choice. But with GM planning to end production of the Chevrolet SSR and shut down the Lansing Craft Centre where he works sometime in mid-2006, Fairbanks faces an uncertain future.

"Back when I hired in at General Motors 30 years ago, it seemed like a good, secure job," said Fairbanks, president since June of UAW Local 1618. Since then, "I've seen good times and I've seen bad times. This qualifies as a bad time, in more ways than one."

Many of the country's manufacturing workers are caught in a worldwide economic shift that is forcing companies to slash payrolls or send jobs elsewhere, leaving workers to wonder if their way of life is disappearing.

The trend in the manufacturing sector toward lower pay, fewer benefits and fewer jobs is alarming many of them.

"They end up paying more of their health care and they end up with lousier pensions -- if they keep one at all," says Michigan AFL-CIO President Mark Gaffney. As wages and benefits drop, "it's the working class that's paying the price."

West Virginia steelworkers are all too familiar with the problem. The former Weirton Steel Corp., which 20 years ago had some 13,000 employees, today has just 1,300 union workers left on the job.

The steel mill has changed hands twice in two years, and just last month, Mittal Steel Co. told the Independent Steelworkers Union it would permanently cut the jobs of 800 people who'd been laid off since summer.

Larry Keister, 50, of Weirton, W.Va., has 31 years in the mill that his father and brothers all joined. His son tried, but got laid off quickly.

"I'm too old to go back to school. I've worked there all my life," says Keister, who drives a buggy in the tin mill. "I went there straight out of high school. It's all I know."

Though Keister is safe for now from layoffs, he wonders what will happen to the hundreds of friends and co-workers who will be jobless by the end of January.M

Gary Colflesh, 56, of Bloomingdale, Ohio, said there are few jobs in nearby Ohio or Pennsylvania for workers to move to.

"They're destroying the working class. Why can't people see this?" asked the 38-year veteran. "Anybody who works in manufacturing has no future in this country, unless you want to work for wages they get in China."

Abby Abdo, 52, of Weirton, said workers once believed that if they accepted pay cuts and shunned strikes, they would keep their jobs. Not anymore.

"Once they get what they want, they kick us to the curb," he said. "There's no guarantee anymore. No pensions. No health care. No job security. We have none of those things anymore."

Fairbanks of the Lansing GM plant said the changes are going to force a lot of people to retrench to deal with the new economic reality. For some, it will make it harder to send their children to college or be able to retire when they want. For others, it will mean giving up some of the trappings a comfortable income can bring.

"You're going to see lake property, you're going to see boats, you're going to see motorcycles hit the market," he said. "People get rid of the toys."

Economists agree the outlook is changing for workers who moved from high school to good-paying factory jobs two and three decades ago, or for those seeking that lifestyle now.

"It was possible for people with a high school education to get a job that paid $75,000 to $100,000 and six weeks of paid vacation. Those jobs are disappearing," says Patrick Anderson of Anderson Economic Group in East Lansing, Mich. "The ... low-skill, upper-middle-class way of life is in danger."

General Motors Corp. has announced that it plans to cut 30,000 hourly jobs by 2008. Ford Motor Co. is scheduled to announce plant closings and layoffs in January that could affect at least 15,000 workers in the United States and Mexico, analysts say, and is cutting thousands from its white-collar work force.

GM and Ford have won concessions from the United Auto Workers that will require active and retired workers to pick up more of their health care costs, and DaimlerChrysler AG is seeking similar concessions.

Thomas Klier, senior economist with the Federal Reserve Bank of Chicago, says the transition for manufacturers toward leaner, lower-cost operations has been going on for some time. But the bankruptcy of the nation's largest auto supplier, Delphi Corp., pushed the issue into the headlines.

Its 34,000 hourly U.S. workers could see their pay cut from $27 an hour to less than half of that, although the company is still trying to work out a compromise unions will support. Workers also could have to pay health care deductibles for the first time and lose their dental and vision care coverage.

Delphi worker Michael Balls of Saginaw, Mich., hears the argument that U.S. companies' costs are too high to compete with plants that pay workers less overseas, but he doesn't buy it.

"I think if Delphi wins, they lose," he says. "If I'm making $9 an hour, I'm not making enough to buy vehicles."

Unfortunately for workers like Balls, the old rules no longer apply in the new global economy, says John Austin, a senior fellow with the Washington-based Brookings Institute.

"We're in a different ball game now," Austin says. "We're going to be shedding a lot of the low-education manufacturing jobs."

Some of those workers are likely to try to move into the growing service sector, Austin says. But he says the transition can be tough, even if the jobs pay as well as the ones they had -- and many don't.

"Pointing out a medical technician job is available if they go back and get a certificate doesn't solve the issue today for those 45-year-olds who are losing their jobs at Delphi," he said.

Dick Posthumus, a partner in an office furniture system manufacturing company in Grand Rapids, Mich., says that "basic, unskilled manufacturing is going to be done in China, India, places like that because we are in a global world, and there's nothing anyone can do about that."

His company, Compatico Inc., buys much of its basic parts from South Korea, Taiwan, Canada and China, where Posthumus has toured plants he says rival modern manufacturing plants in the U.S. But the company still saves its sophisticated parts-making and assembly for its Michigan plant.

"The manufacturing of tomorrow is going to look somewhat different from the manufacturing of yesterday," Posthumus says. "It doesn't mean that we no longer manufacture ... (But) it's going to be a painful adjustment."

Associated Press Writer Vicki Smith in Morgantown, W.Va., contributed to this story.

[Havoc]

I would offer that while your point is valid, your example is specious. People shell out money for gas because they Have to travel to and from work. They resist shelling it out for non-necessities. And that is counted on - that they *must* shell out the money for the essentials. To that extent - playing with the price is a form of extortion in most people's minds.

[durasell]

Hate to say it, but basic universal healthcare at some point in the near future can almost be assumed at this point. The system is crashing under its own weight and it's too dangerous to have un-insured folks with all the nasty bugs running around. It'll probably be a multi-tiered system from very basic gubmint provided to high end, very pricey.

[Havoc]

Don't behave in a treasonous fashion and perhaps you won't be offended by discussions of treason.

[Paul Ross]

I have no intention of minimizing the pain of losing a job or even the value of an entire skill set (earned over many years) to another country on an individual basis. But it is reality, and it is not bad for the country as a whole.

So in effect you admit that you are going to 'minimize the pain' because of your unsupported...and dubious...proposition it isn't bad for the country.

The phoney free traders don't see what's bad for the country. They are oblivious to what is happening, and so much so that it is a clear manifestation of cognitive dissonance. They expressly show appeasement behaviours to China (see below from Alan Tonelson). And they want everyone else equally oblivious.

Will U.S. Policymakers Come to Grips With China Before Its Too Late

By Alan Tonelson
Monday, December 12, 2005


If this were also a holiday time in China, it’s hard to imagine anyone having a happier holiday season than the leaders of China.

Despite a year of non-stop complaints from American leaders about Beijing’s predatory trade policies and especially its currency manipulation, it could not be clearer to China that U.S. policy is at worst – from their perspective –  gridlocked. At best, Washington decision-making still may seem to Beijing completely dominated by the outsourcing multinational businesses that benefit significantly from a trade status quo that is devastating so many domestic U.S. manufacturers and American workers.

The latest sign? A stunningly revealing statement by Frank Vargo, a top official of the outsourcing-dominated National Association of Manufacturers. Responding to charges that NAM has been all talk and no action on the China currency front, Vargo eloquently told The Wall Street Journal Dec. 2 that the accusations are “Nuts” and then added, “You can’t throw away the world trading system.”

In other words, NAM considers a policy of actually doing something to stop the Chinese currency manipulation it keeps whining about as too dangerous to support. Indeed, accepting Chinese mercantilism apparently is the price America must pay to keep the world economy intact.

As a result, the multinationals’ power over the administration is so obvious to Beijing that the Chinese feel free not only to ignore official American protests about currency and trade issues. They also perceive no downside to brushing off American concerns about their military buildup. The Chinese realize that their growing strength is financed indirectly but substantially by the hundreds of billions of dollars they earn from the multinationals’ favored “free” trade policies.

Not surprisingly, the recent visits to China by Treasury Secretary Snow, Defense Secretary Rumsfeld, and the president himself played out like an updated but even more perverted  version of that old Soviet-era joke: America’s leaders pretend to push U.S. interests in Beijing, but the Chinese don’t even pretend to take them seriously.

The evidence of the latter pretense: After a Bush speech in Japan touting democracy’s virtues (and holding up Taiwan as a shining example), the Chinese government reacted by cracking down on dissidents.  Then the Chinese trotted out the old trick of announcing new purchases of Boeing jetliners. The hollowness of that public relations move was underscored last week when Chinese Premier Wen Jiabao traveled to Europe and unveiled a Chinese order for Airbus jets more than five times larger than the Boeing sales.  In between, of course, the Bush Treasury Department in its new semi-annual report absolved China of currency manipulation charges by pointing to the token revaluation Beijing announced in July.

Coming from a culture that places extraordinary value on “face,” China’s leaders received a very powerful message from these White House decisions to turn the other cheek and even justify Chinese behavior after these transparent humiliations.  It’s a message virtually impossible to square with the administration’s stated desire to remain the most influential power in Asia and throughout the world – and one more (not less) likely to produce dangerous Chinese miscalculations and even military confrontation.  

Congress also seems reluctant to buck the outsourcing multinationals. Although numerous members have complained about the currency problem since 2003, passing legislation that could solve the problem remains a long shot. And the odds may be falling. Following the Treasury Department currency report, the main author of the strongest China currency bill, Democratic Senator Charles Schumer of New York, vigorously denounced the administration’s meekness. Then he boldly promised to consider actually seeking a floor vote on his measure – at some point.

Perhaps Schumer is prudently waiting to muster enough support to win the vote – even by a veto-proof margin. Yet his reluctance to pull the trigger after two years of talking about the issue, and presumably lobbying his colleagues, suggests that his leadership skills and influence just aren’t strong enough.

Not that Schumer faces an easy task. A huge obstacle to effective action undoubtedly has been the U.S. economy’s solidly satisfactory performance since the last brief recession. This performance, to be sure, reflects policy smoke and mirrors, not sound fundamentals. But most important for the short-term and for the politics of U.S.-China trade, economic gimmickry has worked. The record post-9-11 stimulus the White House and the Fed have poured into the economy to prop up growth neutralized pocketbook issues during Bush’s reelection campaign, and is still offsetting much of the damage done to U.S.-based manufacturers by predatory Chinese policies. Ironically, this stimulus has been affordable largely because huge purchases of U.S. debt by central banks in China and elsewhere in East Asia have held down interest rates and thus Americans’ borrowing costs.

Still, all of the economic and security problems responsible for the China-related ruckus keep growing worse, not better. And even though the Bush administration now acknowledges these dangers, current U.S. policy keeps worsening them.

On the security side, Rumsfeld has begun warning that China’s vigorous and secretive military modernization raises questions about its intentions – especially since China faces no threats to its own security. More pointedly, the Pentagon’s latest annual report on Chinese military power states that Beijing’s new prowess indicates objectives that range far beyond prevailing in a Taiwan crisis, and that could threaten U.S. interests throughout East Asia.

Yet the administration and even many conservative critics of China’s military policies still haven’t connected the economic and security dots. After all, much of the new wealth funding China’s military development comes from record-setting U.S. net imports of Chinese goods. Thus to a great extent the buildup ultimately is possible because of U.S. trade policies that have ignored currency manipulation and China’s myriad other predatory trade practices. U.S. trade policies have also buoyed China’s earnings by encouraging so many multinationals like the leaders of NAM to supply the U.S. market from factories in China..

Of course, these policies began in earnest during the Clinton years, but under Bush alone, China has amassed $624.5 billion in trade surpluses with the United States. Next year, largely as a result, its foreign exchange reserves will hit $1 trillion.

Just as important, China will keep disregarding American security concerns as long as U.S. controls over militarily relevant technology transfers to China continue weakening. The main reason: heavy lobbying by U.S. multinational companies, which view China as a low-cost, profit-enhancing supplier of advanced as well as labor-intensive products. Consequently, Washington today can’t even monitor the flow of U.S. technology to new U.S.-owned laboratories as well as factories in China.

On the economic front, the Bush administration remains behind the curve as well. It has begun to warn about the economic threats posed not only to the United States but also to the entire world by China’s rapid integration into the global economy. Yet it still views the only actions capable of addressing the problem as verboten.

As Treasury Secretary John Snow stated during his own October visit to China, China’s longstanding strategy of growing mainly by exporting is fueling record U.S. deficits and debts that could produce a dollar crash and a long, deep worldwide downturn.

Yet Snow and other trade cheerleaders still won’t admit the fundamental flaws in U.S.-China trade patterns – which were already obvious when the United States began greatly expanding trade with China in the early 1990s: China’s very low living standards were bound to limit the greatly hyped growth of China’s domestic market for decades. By contrast, China’s was already becoming a major supplier to world markets – thanks partly to Beijing’s decision to make exporting a top priority.

The bottom line: China’s entry into the world economy has generated an immense new source of output whose scale and growth simply dwarf that of its own expanding consumption. On top of the parallel integration into the trading system of many other poor, export-led third world economies, China’s emergence is creating economically unsustainable – and therefore unstable – international economic conditions. Too many producers are relying on too few consumers. Even worse, the new producers increasingly make what the consumers – in the wealthy countries and especially the United States – once turned out.

Yet as discussed in my October 27 column, Snow’s proposed solution to this looming crisis – boosting domestic demand in China – is sure to be ignored because China lacks the domestic wealth to sustain its progress. Moreover, 20 million job-seekers are entering the labor market each year. Therefore, China’s will be hard-pressed to contain – let alone reduce – its towering unemployment by producing much more than its economy can consume and exporting the surplus. That’s why the share of China’s economy represented by consumption keeps shrinking, while the share accounted for by exporting keeps growing. A quarter century of intensifying engagement with global capitalism was supposed to produce exactly the opposite results.

Thus China will never change its dangerous economic or military policies voluntarily. They are simply creating too many economic and political benefits for Beijing. As a result, Washington must recognize that only new unilateral U.S. trade moves can both limit China’s military development peacefully and avert a new global financial crisis.

New tariffs on Chinese imports to offset currency manipulation – as proposed by the  Schumer-Graham bill – would shrink the pool of resources available for China’s armed forces, and in the process, moderate the trade imbalances. Additional tariffs may be needed if, as in the past, China plays bait and switch by increasing other subsidies as it plays ball on currency.

Alternatively, or along with China tariffs, Congress must begin debating the type of economy-wide tariff being pushed by the U.S. Business and Industry Council on Capitol Hill. Similar ideas have been advanced by the likes of mega-investor Warren Buffett and economists from the New York-based Levy Institute. Unless they quickly develop better ways to resolve the mounting trade crisis, legislators will need to get over their irrational prejudices against such trade restrictions.  

Much tighter export controls are needed as well. Going multilateral is the obvious preference, but unilateral sanctions would be highly effective if needed. After all, much non-U.S. high tech investment in China is export-oriented. Without access to the U.S. market, foreign multinationals lose much incentive to place factories and labs in the People’s Republic.

The new strategy would run few risks on the security side. Whatever assistance China is offering in the North Korea talks undoubtedly reflects China’s desire to de-nuclearize a volatile neighbor, not a determination to please America. If economics trumps Korean issues in China’s view, then current U.S. strategy on Korea is bound to fail anyway. Best to learn this ASAP.

Nor is China remotely likely to dump U.S. debt or launch a trade war. Both steps would further reduce access to markets China still desperately needs. Moreover, the Fed has ample reserves of dollars to swamp any Chinese gambit.

Interrupting U.S.-China trade could indeed fatally strain China’s fragile banking system and trigger broader economic and political upheaval. Yet much of the cash flow propping up China’s bankrupt banks and easing pressure for reform comes from U.S.-generated export revenues. Continuing the status quo for fear of rocking the boat amounts to inflating further a Chinese investment and production bubble that increasingly mirrors America’s consumption bubble. The longer they keep inflating, the more damage will result from the inevitable bursting of both bubbles.

Indeed, this is the strongest argument for transforming America’s China policy. So many dangerous excesses have been encouraged for so long that entirely painless remedies are no longer possible. The sooner and more decisively the President acts, the more limited the pain, and the more control America will wield over the adjustment.

A pretty grim holiday message to be sure. But an America that faced up to the need for some short-term sacrifices to strengthen its economic future would be giving a priceless gift to its children.  

---

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).

---

(c)Copyright 2001-2006 AmericanEconomicAlert.org, USBIC

SIDE COMMENT: Tonelson appears to be way too sanguine about what China is or isn't willing to to do to sabotage the U.S., or if it even cares about its "fragile banking system." LOL!

And he is also frankly way too sadly reliant on communist Schumer's leadership on the trade issue. The GOP has fallen so far. He is a democrat, and will only just pander to the issue...never deliver for the nation's security and well-being. The Rats intererst is in preserving problems to run with. Hence, they must be allowed to fester, while promises are endlessly made. "Don't just do something, Stand There!" is their motto...

The only hope is that GWB turns things around. That he truly is smarting from being bitch-slapped in Bejing, and the scales knocked off his eyes. We will see. The appeasement auto-pilot responses so far post-Bejing are not encouraging...

[WilliamofCarmichael]

RE: "Well, from my previous posts, manufacturing output up 40% between 1994 and 2000. With slightly lower manufacturing employment."

Yes, I have seen them and news sources including talk radio. I attempted to address them. One was the hedonic question and the other was "imported productivity."

To wit, I suggested that the manufacturing portion of GDP is inflated -- I provided a quote from an officail of NAM who flatly stated that without it there would have been little or no increase in those years -- and I referenced offshoring as explained by economist Stephen Roach as a possible reason for some of labor's productivity increases in recent years.

(Something that I will never understand, though. Mr. Roach's name invokes strings of epithets here on FR, I can understand disagreement -- but some just scream insults. Go figure.)

RE: "And we still created 2 million net new jobs in the last 12 months."

Now you are in an area where there are studies and impartial numbers.

Studies by Northeastern U., Pew Hispanic Center, and the Center for Immigration Studies all state that "recent" immigrants are taking large numbers of those jobs away from citizens. Yes, the jobs are there and that's very good news! But there's more to being a Nation than "cheap" labor, IMO.

[WilliamofCarmichael]

A follow up on my reply #765

If hedonic inflation of manufacturing in the GDP is a fact, why is it so important? What's the big deal? It sort of makes sense.

Besides, our GDP is streaking upward even without it.

Well, IMO it's a feel good, public opinion ruse adopted in the Clinton years -- focus groups, you know. They like good economic news -- and they would be greatly disturbed by seeing hard figures showing leakage -- the very leakage that the Clinton New Democrat Third Way pukes pushed hard for.

That is, sending technology, wealth and production to developing countries. The Davos world as some call it.

Some call 'em traitors those businessmen who rush to get offshore -- Lenin called them useful idiots. What do you think the Third Way is about?

[Paul Ross]

Some call 'em traitors those businessmen who rush to get offshore -- Lenin called them useful idiots. What do you think the Third Way is about?

The Third Way is just another pretext for international socialism. Always was. As for the enablers in the business sector, I tend to think of them as useful idiots, although there are certain malefactors right here on Free Republic who are either on the other side, by virtue of paycheck or nationality...which does tend to call their "U.S." loyalty into question...or they are mentally ill.

We still haven't seen them reply to this:

"Detente" with China Proves Illusory

By William R. Hawkins
Monday, November 21, 2005

President George W. Bush’s trip to China produced no “breakthroughs” – not on trade, nonproliferation, intellectual property protection, or human rights. Indeed, his one day visit to Beijing (November 20) and brief “summit” with Chinese President Hu Jintao was chilly if not downright frosty.  Hopefully, that atmosphere may cause a light bulb to go on in the president’s head, signaling that “engagement” with Beijing is a futile process that leaves the initiative in Chinese hands.

When President Bush came into office in 2001, he was poised to take a harder line towards the rising power of China than his predecessor.  In 1999, just before he left on an Asian tour, President Bill Clinton claimed “perhaps for the first time in history, the world’s leading nations are not engaged in a struggle with each other for security or territory. The world clearly is coming together.”

President Bush knew this was not true and pledged to “do whatever it takes” to defend Taiwan from a Chinese attack.  His wariness towards Beijing was validated when on April 1, 2001 a Chinese interceptor rammed an U.S. Navy EP-3 reconnaissance plane over international waters, forcing it to crash land on Hainan Island – where the Chinese reaped an intelligence bonanza in the form of its high-tech gear.

The September 11 terrorist attacks shifted Washington’s focus to the Middle East. China’s long-time ally Pakistan became a central pivot in the campaign against al-Qaeda, and Beijing used “anti-terrorism” to gain U.S. acceptance for continued oppression of its Moslem population. China also “hosted” the six-party talks meant to deal with the nuclear program of North Korea, part of the “Axis of Evil” along with Iraq and Iran.

The “detente” with Beijing – if there ever really was one – is now growing cold.  Despite repeated diplomatic claims of progress, nothing has changed in North Korea.  Beijing’s vital interest is still protecting the Pyongyang regime in a divided peninsula.  In a rare outburst that was not scripted by the State Department in bland diplomatic boilerplate, Assistant Secretary of State Christopher Hill told students at the Nov. 19 APEC meeting, “I think it's time for the Chinese to take a little more responsibility for cleaning up that mess.”  Hill went on to describe the current impasse: “North Korea is saying, we need you first to recognize us, first give us help, give us a lot of economic help, and then we'll think about getting rid of the weapons. But it's going to be the other way around.”  The problem is that Beijing shares Pyongyang’s approach, wanting outside help to keep the regime in power and secure. China’s insistence on a “diplomatic solution” is code for its opposition to any use of pressure or sanctions against North Korea.

Meanwhile, China has provided diplomatic support for Iran at the United Nations to shield its nuclear program.  It is also increasing economic ties to ward off any sanctions against Tehran.  Beijing has become the principle protector of the remaining Axis of Evil countries to keep them from falling prey to the same fate as Iraq.  Regime preservation rather than regime change is Chinese policy.

Support for continued “engagement” with China continues to come from those parts of the Bush administration that represent international banking and transnational production.  Neither the Treasury nor the Commerce Department put out a statement in the wake of the Bush-Hu summit, for there was nothing for them to say.  There was talk at the summit of “a gradual move towards balanced trade,” but with the U.S. deficit with China only growing wider and set to top $200 billion this year, any such talk is misleading.  The post-summit statement put out by the Chinese Foreign Ministry continued to call for the handling of trade frictions “through dialogue and consultations,” which means no direct American action to change things. A decade of “consultations” have only masked a situation that has grown rapidly worse.

In traditional diplomatic parlance, trade constitutes “low politics” because it deals with petty private interests. Strategic issues that affect the balance of power between nations is the realm of “high politics.”  In the case of China, the “low politics” of special interest groups has too often driven “high politics” off the stage.  However, the continued negative impact of US-China trade on the American economy more than outweighs whatever profits particular firms may be making in China.  And even some elements of the globalized U.S. business community have started to raise their voices against the massive theft of intellectual property by Chinese rivals.  The only mention of this issue in the Chinese Foreign Ministry statement reads, “The measures of the Chinese government in opening markets and protecting intellectual property are very important.”  Yes, they are very important to the Chinese, which is why Beijing will continue to reject American wishes and do nothing.  

On November 11, the Wall Street Journal trotted out for what seems like the millionth time the tired cliche  “encouraging economic integration is key to moving Beijing towards political liberalization” – a meaningless abstraction designed to square the circle between high and low politics.  Instead, it marks another area of frustration.

On the first day of his Asian tour, President Bush posed a challenge to the Communist Beijing regime.  He listed Taiwan with Japan and South Korea as examples of progress, saying, “Taiwan has delivered prosperity to its people and created a free and democratic Chinese society.” Mainland China was among those states that he said had not made equivalent progress. “As the people of China grow in prosperity, their demands for political freedom will grow as well,” said the U.S. President, expressing a dream that is seen as a nightmare in Beijing.

A month earlier, Defense Secretary Donald Rumsfeld visited China.  At the Central Party School, he lectured students on the need for a more open society.  Beijing responded with the white paper “The Building of Political Democracy,” which defined its subject as “the Chinese Communist party governing on behalf of the people” in a “democratic dictatorship.”

With no joy on the trade or democratic reform fronts, strategic matters have taken on more importance – as they should. Trade has been a major source of capital and technology for advancing China’s military-industrial complex, while the Communist dictatorship plots how to project its rising strength in the wider world.

This year’s Pentagon report on China stated that Beijing “in the near term appears to be preparing for potential conflict in the Taiwan Strait, [and] some of China’s military planners are surveying the strategic landscape beyond Taiwan.”  Rumsfeld said in Beijing, “A growth in China's power-projection understandably leads other nations to question China's intentions -- and to adjust their behavior in some fashion.”

That adjustment has Washington redeploying forces. The Pentagon is sending more submarines and warplanes to be based on Guam, and will forward deploy an aircraft carrier either to Guam or Hawaii to reduce reaction times to a crisis on the Pacific Rim. Starting in 2004, the Navy has conducted “surge”deployment exercises that have put as many as seven aircraft carriers into the region.

Bill Clinton to the contrary, the struggle between leading nations is still, unfortunately,  very much a part of our world.

---

William R. Hawkins is Senior Fellow for National Security Studies at the U.S. Business and Industry Council.

---

(c)Copyright 2001-2006 AmericanEconomicAlert.org, USBIC

[Paul Ross]

If US jobs are being lost because the chicoms have tariffs on American goods what would the impact of US tariffs on chicom's goods be to Chinese labors? Would there be job losses in China?

(1)The Chinese tariffs are simply a component of their overall predatory trade practice.
The bottom line issues are their government control and setting of the wage structure in their country, which is maintained at world-beating advantage by a number of interlocking and reinforcing methods. No expert denies they are doing this, and Westerners who mistakenly assume there is 'economic freedom' in China are indulging a fraud, intended for Western consumption. Some of the phoney free traders are comfortable with admitting this, and contend that as long as China is willing to subsidize exports, via the artificially-depressed wages, not to mention other State aids, to the U.S., that is swell. They could care less about distortionary impacts on our economy...being under the direct control or influence of an enemy government.

With that predicate proposition made, it is my belief that if we were to take action we can expect the following:

(2) Negligible Chinese Employment impact of U.S. retaliation.
The Chinese partner firms who hire the labor and pay the actual wages to the employees are thinly-veiled fronts for the PLA and Party Princelings. The loss of the U.S. trade would be primarily a loss of technology access. In view of the fact that the export sector would just be reassigned by their Communist overlords to other "State" objectives, it seems unlikely that there would be 'unemployment' albeit it is certainly possible they would get even lower wages...going back to their old state industries. The export sector labor (244 million strong), as of a couple years ago, typically makes 27 cents an hour and the domestic sector got like 15 cents an hour.

[WilliamofCarmichael]

Thank you for the column.

RE: "U.S. Navy EP-3 reconnaissance plane over international waters [was forced] to crash land on Hainan Island – where the Chinese reaped an intelligence bonanza in the form of its high-tech gear."

Those for free tradin' technology, wealth (FDI), and production to Red China would say: "See! We can now buy our high-tech gear a lot cheaper!. It's working! It's working, free trade is good for America!"

RE: "Yes, they [opening markets and protecting intellectual property] are very important to the Chinese, which is why Beijing will continue to reject American wishes and do nothing."

So that's why Lenin called western businessmen useful idiots.

RE: WSJ: "encouraging economic integration is key to moving Beijing towards political liberalization"

"Hey! That's my line!" Senator Dianne Feinstein. "Me too!" Senator Hillary Clinton. "Hey, we said it first." New Democrat Third Way progressives.

[Toddsterpatriot]

Chart's Series Name: Industrial Production: Gross Value of Products: Final products and nonindustrial supplies; SA

[Nowhere Man]

If you go to prison for a felony you get full health coverage. It is one of the paradoxes of modern times that felons receive better helth care than many law abiding citizens.

I remember listening to Michael Reagan around the year 2000 when he told such a story about a man who robbed a bank (IIRC) and then called the cops and say, "here I am, pick me up" so he could get healthcare. I can't remember what he had, it was either something with his heart or cancer.

[Nowhere Man]

Hate to say it, but basic universal healthcare at some point in the near future can almost be assumed at this point. The system is crashing under its own weight and it's too dangerous to have un-insured folks with all the nasty bugs running around. It'll probably be a multi-tiered system from very basic gubmint provided to high end, very pricey.

It's inevitable. I talked to one of my fellow roleplaying gamers in Israel and they do have a choice of public or private insurance. I also have a friend in Sweden and I like their healthcare system over there from what he told me. He can get into the doctor right away or almost so, like next day and pays something like a $15 co-pay (of course depending on the exchange rate). The trick is that can we make such a system that works for 6 to 8 million work for 300 million?

[WilliamofCarmichael]

Thanks again.

I do not question the reported increase in manufacturing, I question how was it computed and how accurate is it? Especially during the Clinton years.

Here's a great speech by Mr. Alan Greenspan. It 'splains a lot of what I am trying to say -- but does not question the GDP.

If you have time you may find it interesting and better to read it personally.

http://www.federalreserve.gov/boarddocs/speeches/2001/20010327/default.htm

The quotes below are from the speech that Mr. Alan Greenspan gave at the Fed. I'll leave it up to this former COBOL programmer to explain. (At least, one source said that Greenspan started at the Federal Reserve at the "lowly position of Cobol programmer.")

How to report the performance of an economy:

It was so "evident in a world of steel, fabrics, and grains"

In those days "an average price of hot rolled steel sheet and a corresponding total tonnage was precise enough for most analytic needs."

In those days "the definition of a typical unit of output was reasonably unambiguous, was a meaningful and relatively robust statistic."

Not so now. "These [our economy's] newer technologies and the structure of output they have created have surfaced a set of definitional problems. . ."

Though the earlier days were relatively straight forward, not so today.

"I refer, of course, to the age-old problem of defining what we mean by a unit of output and, by extension, what we mean by price. The dollar value of sales or GDP depends, of course, on the specific accounting rules chosen." [My emphasis]

I.e., "during the last decade or two, an ever-increasing share of GDP has reflected the value of ideas more than material substance or manual labor input."

The effect is to "seriously challenge our measurement systems in an age of the microprocessor, fiber optics, and the laser."

Mr. Greenspan uses an example from medicine,

"These latent problems have emerged in full view in the pricing of medical services. Perhaps the inherent complexity of this undertaking is most clearly revealed by posing the question, what do we mean by a standardized unit of medical output? Is it the procedure, the treatment, or the outcome? What does the fee charged for the bundle of services associated with cataract or arthroscopic surgery represent? How does one value the benefits to the patient of shorter hospital stays, more comfortable recoveries, and better physical outcomes? Clearly, the unadjusted fee for a single medical procedure does not adequately represent its 'price.'" [my emphasis]

My point: The bold above represents the question I've raised about just how accurate is the GDP; i.e., do the accounting rules adequately represent 'price'?

"Indeed, the level of real gross product per hour for medical services embodied in our overall productivity measures declined between 1990 and 1999"

You see, without some sort of adjustment portions of the GDP could appear to be in decline, the way I understand this.

So I guess the solution was to ask what is our modern medicine's value to us right now, today-- a kind of "pleasure" it gives, thus hedonics and quality-adjusted prices.

. (Mr. Greenspan expands the medical example here for clarification of value.)

Then he gets to it, "the measurement of some goods prices presents considerable challenges."

"High-technology goods are a case in point. Academic research in this area dates to the mid-1960s, but its application in the measurement of real output gained prominence with the introduction of hedonic price indexes for computers and peripherals by the Bureau of Economic Analysis in 1985. . .recently, the efforts undertaken by statistical agencies have intensified, spurred by the accelerated pace of technological innovation, which has yielded an ever-expanding range of new products and product variants, as well as by the rising share of these goods in our economic value added."

Next Mr. Greenspan uses semiconductors, computers, and LAN equipment to give specific examples.

"The characteristics of these goods present the range of complexities that one faces in measuring quality-adjusted prices."

"This so-called 'hedonic' technique--now [2001] applied by the BEA to items that account for 18 percent of GDP--is one approach."

My bold answers my question. Yes, hedonics affect the GDP computation. Next question, does it inflate the GDP?

Though some (I included above a quote from an official of NAM) claim that the growth (late 1990s) in manufacturing is due in total or in large part to hedonic price indexing Mr. Greenspan made no mention of it.

So are all those GDP dollars flying around real or imputed?

[Paul Ross]

Nice chart. Shows a 50% gain over your '91-to'05 time frame of 15 years. I.e., from a base of 2,000 it increased by a thousand to 3,000 over the 15 years. Read through the fine print. Fails to adjust for inflation.

Same site notes this about inflation:

Going from aaproximately 110 to 170 ( or a 60 point rise) over the same time frame. This represents an approximate 54% increase in producer price increases. This means that actual production growth was essentially static...indeed, perhaps negative...and increasingly so over the '02 to '05 time frame. 15 years of static result. Not good. So much for phoney free trade.

[Toddsterpatriot]

Next question, does it inflate the GDP?

Good question. I still haven't found an answer.

[Toddsterpatriot]

This means that actual production growth was essentially static...indeed, perhaps negative...and increasingly so over the '02 to '05 time frame. 15 years of static result. Not good. So much for phoney free trade.

So, for the last 15 years, despite all the trade agreements and all the whining about American production being destroyed, we still produce the same amount of goods?

With about 3.5 million fewer (20% less) workers? What was your point again?

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Data extracted on: January 7, 2006 (9:37:00 AM)

Employment, Hours, and Earnings from the Current Employment Statistics survey (National)

Series Id:     CES3000000001 Seasonally Adjusted Super Sector:  Manufacturing Industry:      Manufacturing NAICS Code:    N/A Data Type:     ALL EMPLOYEES, THOUSANDS
Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	Annual
1990	17796	17896	17870	17845	17796	17774	17704	17647	17610	17574	17428	17395
1991	17329	17214	17141	17093	17069	17042	17016	17025	17011	16997	16960	16916
1992	16839	16831	16805	16830	16834	16825	16822	16782	16762	16750	16758	16768
1993	16790	16806	16795	16771	16766	16742	16742	16741	16768	16778	16800	16815
1994	16853	16862	16896	16932	16962	17011	17027	17082	17114	17144	17187	17218
1995	17259	17264	17263	17278	17260	17250	17218	17241	17246	17215	17207	17230
1996	17206	17229	17192	17204	17221	17226	17222	17255	17253	17268	17276	17285
1997	17298	17316	17339	17351	17362	17387	17387	17451	17466	17513	17555	17587
1998	17621	17627	17637	17636	17624	17607	17421	17564	17558	17512	17466	17449
1999	17426	17394	17368	17342	17333	17294	17319	17288	17281	17275	17283	17277
2000	17285	17285	17302	17299	17276	17297	17325	17287	17232	17215	17204	17181
2001	17101	17030	16936	16801	16658	16511	16386	16240	16123	15972	15827	15710
2002	15584	15514	15441	15391	15336	15298	15259	15179	15128	15058	14993	14911
2003	14854	14780	14726	14615	14555	14494	14410	14373	14348	14328	14315	14297
2004	14283	14281	14291	14323	14347	14344	14341	14366	14352	14344	14337	14334
2005	14307	14321	14315	14300	14301	14276	14270	14260	14244	14257	14265(p)	14283(p)
p : preliminary

 

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[WilliamofCarmichael]

Actually, now I am sort of musing with that question. I am not still looking for an answer personally, I now see that it'd take one of them one-armed economists to answer the question. I do have another concern however.

Besides, it's common and necessary to use some sort index from what I've read. Everybody does it around the world.

Maybe my tinfoil hat is too tight but I swear the thought occurred to me that the Clinton administration could well have cooked the index to jack up manufacturing numbers to cover the leakage of manufacturing to the Chi-coms. I am sure their focus-groups would have gone ballistic when given numbers that indicated a decline.

(I do remember columns back then accusing the Clintons of cooking economic numbers.)

I remember / read enough about "globalization" to understand that the Clintons were / are major proponents -- and it ain't just free trade agreements.

It's technology and wealth transfers to the Chi-coms and other "developing" nations. Here the word treason fits -- even without them transfering our nuke weapons to the Chi-coms.

I might add that "progressives" sixty years ago openly advocated transferring our weapons technology (esp. nukes) to the USSR -- it was too dangerous for the world for the U.S. to be the only nation with nukes, they argued.

Hmmm. What if the Clintons did jack up manufacturing numbers, any future administration trying to correct the problem could well see a "decline" in manufacturing numbers and be in big, big trouble politically.

[Paul Ross]

With about 3.5 million fewer (20% less) workers? What was your point again?

Actually the question is more apt to you. What was your point again? You're the one that implied that we had increased production.

So you are not allowed to shift away from your defeated point. And your defeat is greater than just a static production situation. If the hedonic accounting that miscounts as U.S. production, product that is in fact largely foreign made componentry, then what have you?

Perhaps the real U.S. production is 20% less...

[Paul Ross]

Hmmm. What if the Clintons did jack up manufacturing numbers, any future administration trying to correct the problem could well see a "decline" in manufacturing numbers and be in big, big trouble politically.

Obviously the current administration came to the same conclusion and decided to let sleeping dogs lie. Which further shows how politically inept they are as leaders of the conservative position.

They didn't realize they could have reaped a huge political windfall of debunking the Xlinton economy for what it was...a phony house of cards. It would have unified all Reaganites. It would have put the Rats on the run. The side on the offense always wins.

"Clinton Lied, U.S. Jobs Died" would have been the motto of the last two campaigns. We could have gone back and issued CORRECTED charts for all those jiggered years. So while the Bush numbers wouldn't look good against jiggered numbers, they probably would have looked at least in the ballpark after de-jiggering.

Technically speaking of course! ;-)

[Alas Babylon!]

DIck Posthumus and Michael Balls.

So is this team known as Dick and Balls?