Posted on 10/01/2006 3:30:13 AM PDT by NapkinUser
In July, our trade deficit hit yet another all-time record, $68 billion, an annual rate of $816 billion. Imports surged to $188 billion for the month, as our dependency on foreigners for the vital necessities of our national life ever deepens.
China's trade surplus with us was $19.6 billion for July alone, moving toward an all-time record of $235 billion for 2006 -- the largest trade deficit one country has ever run with another. Our deficit with Mexico is running at an annual rate of $60 billion. With Canada, it is $70 billion. So much for NAFTA. With the European Union, it is running at $160 billion.
America as the most self-sufficient republic in history is history. For decades, U.S. factories have been closing. Three million manufacturing jobs have disappeared since Bush arrived. Ford and GM are fighting for their lives.
Bushites boast of all the new jobs created, but Business Week tells the inconvenient truth: "Since 2001, 1.7 million new jobs have been created in the health care sector. ... Meanwhile, the number of private sector jobs outside of health care is no higher than it was five years ago."
"Perhaps most surprising," writes BW, "information technology, the great electronic promise of the 1990s, has turned into one of the biggest job-growth disappointments of all time. ... (B)usinesses at the core of the information economy -- software, semiconductors, telecom and the whole gamut of Web companies -- have lost more than 1.1 million jobs in the past five years. Those business employ fewer Americans than they did in 1998, when the Internet economy kicked into high gear."
Where did the high-tech go? China. Beijing's No. 1 export to the United States in 2005, $50 billion worth, was computers and electronics.
If Americans are the most efficient workers on earth and work longer hours than almost any other advanced nation, why are we getting our clocks cleaned? Answer: While American workers are world-class, our elites are mentally challenged. So rhapsodic are they about the Global Economy they have forgotten their own country. Europeans, Japanese, Canadians and Chinese sell us so much more than they buy from us, because they have rigged the rules of world trade.
While the United States has a corporate income tax, our trade rivals use a value-added tax. At each level of production, a tax is imposed on the value added to the product. Under the rules of global trade, nations may rebate VAT levies on exports, and impose the equivalent of a VAT on imports.
Assume a VAT that adds up to 15 percent of the cost of a new car in Japan. If Toyota ships 1 million cars to the United States valued at $20,000 each, $20 billion worth of Toyotas, they can claim a rebate of the VAT of $3,000 on each car, or $3 billion -- a powerful incentive to export. But each U.S. car arriving at the Yokohama docks will have 15 percent added to its sticker price to make up for Japan's VAT.
This amounts to a foreign subsidy on exports to the United States and a foreign tax on imports from America. Uncle Sam gets hit coming and going. It is as though, after firing a round of 66 in the Masters, Tiger Woods has five strokes added to his score for a 71, and five strokes are subtracted from the scores of his rivals. Even Tiger would bring home few trophies with those kind of ground rules.
The total tax disadvantage to U.S. producers -- of VAT rebates and VAT equivalents imposed on U.S. products -- is estimated at $294 billion.
Exported U.S services face the same double whammy. A VAT equivalent is imposed on them, while the exported services of foreign providers get the VAT rebate. Disadvantage to U.S. services: $85 billion annually.
Why do our politicians not level the playing field for U.S. companies?
First, ignorance of how world trade works. Second, ideology. These robotic free-traders recoil from any suggestion that they aid U.S. producers against unfair foreign tactics as interfering with Adam Smith's "invisible hand," which they equate with the hand of the Almighty.
Third, they are hauling water for transnational companies that want to move production overseas and shed their U.S. workers.
How could we level the playing field? Simple. Impose an "equalizing fee" on imports equal to the rebates. Take the billions raised, and cut taxes on U.S. companies, especially in production. Create a level playing field for U.S. goods and services in foreign markets, and increase the competitiveness of U.S. companies in our own home market by reducing their tax load.
U.S. trade deficits would shrivel overnight. And jobs and factories lately sent abroad would start coming home.
Isn't it time we put America first -- even ahead of China?
Since I have never claimed we no longer manufacture anything, perhaps you should address that question specifically to those who have.
Glancing over at the BEA's numbers (which I put more confidence in than "economagic"'s numbers),
Economagic's numbers are BEA's numbers(among many other government sources as well.) Economagic just gathers BEA,BLS,Census, etc. data into formats suitable for creating graphic output.
The problem lay in determining which numbers actually represent what one is interested in observing.
That's what I was doing when you responded to me.
Actually I was not responding to the issue of whether or not we have manufacturing, but rather attempting to assess the accurate number representing just how much in goods we actually complete and ship in a given year.
Your three trillion measure is the aggregate volume in the manufacturing pipeline being fed from one level of production to another, including final output. Much of it is feed stock accumulated in the chain of production over an indeterminate period's worth of work rather than the shipped output from the end of the manufacturing chain for one year.
It is that amount shipped that is the real output of our manufacturing base representing our capacity to supply demand in the markets.
The second reason may be the main reason. Ideologies destroyed great powers in the past and can destroy in the future.
Because Americans have the highest standard of living and a very strong currency -- which makes us "uncompetitive" by definition.
Anyone who cites difficulties at Ford and GM as a symptom of a "decline in manufacturing" here in the U.S. is a freaking idiot. These companies have been mismanaged by their management and unions for decades -- and as a result they're getting their @sses kicked by "foreign" competitors who have been opening new plants here in the U.S. at a record pace.
Why the hell would we want to give lowly Americans good jobs?
Me too, but even a stopped clock is right twice a day. Pat is right about the insanity of the US tax code. US corporate income taxes are among the highest in the world and the VAT is export neutral, whereas our tax code kneecaps US manufacturers.
Where Buchanan goes wrong here is in wrapping a perfectly good discussion of tax issues in a conspiratoriast rant about how elites and big companies are selling out America. The truth is much simpler: class warfare dems (1) are hostile to business and (2) favor punitive corporate taxation because its impact on consumers is indirect and therefore politically costless.
The solution is tax reform. The route to serious tax reform, however, involves getting 60 votes in the Senate to break an inevitable filibuster, and such considerations would lead Pat back in the direction of Republican orthodoxy. He doesn't want to play in the GOP sandbox anymore so he spins conspiracy theories to explain the inability of the political system to attack the problem.
"What could be done to ameliorate the manufacturing decline"
Depends whether you mean the manufacturing JOBS decline - which is unstoppable, or the value add of materials into goods.
The former is unstoppable, the latter is a problem in specific, heavily unionized industries, but not so much a problem in other areas.
".....produced 2-3 times as much product per per day with roughly 25% of the employees."
And this is the real argument: The JOBS are going away. This is the juggernaut of progress. It falls disproptionately on unionized industry - because they represent the most inefficient segment of manufacturing.
I wonder which, if any, of your two employers was unionized?
....your graph illustrates the issue perfectly. It's jobs, likely union jobs that is the issue, not the manufacturing.
"My question is why has manufacturing failed to grow as quickly as GDP?"
I don't know, but I'm guessing that if you compared ALL manufactured goods consumed by the US whether imported or not, the trend would be similar.
If, over time you make 100 tons of steel with 50% fewer employees and discount the price 25%, you are still contributing the same amount of steel to the economy, but the GDP impact is much less, even though the same steel is being provided to the market.
If you graphed it, you'd see a similar trend. Does it matter if everyone gets the steel they need at a lower price?
It doesn't seem that manufacturing statistics that don't factor in productivity are relevant.
I'm not sure what you mean by this. Do you mean that Japan or CHina's (for example) manufacturing base has also declined as a % of their GDP?
Also, why would it not be the case that other segments of the economy have had a similar cost reduction? Manufacturing has shrunk compared to all of them - even though they've all been changing, manufacturing has consistently changed in a way that makes manufacturing continue to shrink as a ratio of our GDP.
China has enough economic power now to thwart any move the US might make towards protectionism.
Witness the recent Schumer trade bill imposing a 27% tariff - it got killed by the administration in a deal with the Chinese to continue purchasing our Treasury debt.
BTW if that bill had not been killed, and the Chinese repatriated $1 trillion of US bonds, the dollar would have plunged 25-40% after yuan revaluation.
USA, meet Argentina.
BUMP
"why are we getting our clocks cleaned?"
Too bad the author doesn't WANT an Actual Answer to that question, eh?
40 Years of Liberal/Democrat policies have OUT-FORCED our jobs....
"I'm not sure what you mean by this."
What I mean is that productivity gains in the economy, defined as unit output per labor unit input, would act to cause manufacturing as a % of GDP decline if demand did increase in concert with productivity gains.
This would not be an indication of something bad. Further if productivity of an item increased, but demand did not increase, then price for the given item would tend to decrease, further decreasing it's impact on the GDP on a percentage basis.
As a result some might say we have a manufacturing "crisis" by analyzing the GDP graph, when in actuality, demand for a certain item is being met and met more efficiently over time. I would say the net effect of this would be positive, not negative.
Does that make any more sense?
" if demand did increase in concert with productivity gains. "
er...what I meant was:
" if demand did NOT increase in concert with productivity gains. "
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