I don't side with Buckley and Friedman on China. I agree with them on the foolishness of the Minimum Wage increase. But the political calculus is already such that it will be a done deal to placate the low-wage segment. W is already manuevering to go along so he isn't trumped on it.
The real problem is the Middle Class...and how it is sending its warning shots across the White House bow...this piece by William R. Hawkins pretty well summarizes some salient observations that we need to all take to heart:
Voters Aware that GOP is Losing the Trade War Too
By William R. Hawkins
Tuesday, November 21, 2006
AMERICANS THOUGHT GOP WAS LOSING THE TRADE WAR TOO
I’ve always thought Karl Rove was overrated, and after the Republican debacle November 7, I now have plenty of company. From a long, long drop in approval ratings, to the loss of the GOP majority in both houses of Congress, President George W. Bush has not been well served by his political guru. But Rove may be partially right about why the midterm elections went so badly, even if this realization came too late. “The profile of corruption in the exit polls was bigger than I'd expected,” Rove told TIME magazine. “Abramoff, lobbying, Foley and Haggard [the disgraced evangelical leader] added to the general distaste that people have for all things Washington, and it just reached critical mass.” (No doubt the illegal or potentially illegal activities of Reps. “Duke” Cunningham, Bob Ney, Tom DeLay, Curt Weldon – and Democrat William Jefferson – also played a role.)
With the Republicans controlling the White House and Congress, any distaste for Washington would translate into a distaste for the GOP. But the personal moral failures of Rep. Mark Foley and Rev. Ted Haggard would not in themselves have been enough to turn out the Republican majority. The new scandals hit a nerve already raw from 12 years of watching the GOP leadership move ever further away from working families on Main Street to shack up with multinational corporate lobbyists on K Street and international bankers on Wall Street. The Democratic charge that Washington was dominated by a “culture of corruption” had greater traction given middle-class anxiety.
“Iraq mattered,” Rove says. “But it was more frustration than it was an explicit call for withdrawal.” This conclusion is supported by a post-election Newsweek poll in which 78 percent of respondents said they were concerned (51 percent ‘very concerned”) that the Democrats would be too hasty in seeking a withdrawal of U.S. troops from Iraq. Another 69 percent said they were concerned that the new Congress would keep the administration “from doing what is necessary to combat terrorism.” President Bush on his final campaign swings before the elections stressed these national security issues, but it wasn’t enough. The American people always want to win. And they had larger battlefields in mind – many of which the Republicans had been going out of their way to ignore.
Consider another result from the same Newsweek poll. Sixty-eight percent of those surveyed said they support Democratic efforts to increase the minimum wage. Business groups and classical economists can argue incessantly that raising wages by law will price some workers out of their jobs. It will not calm what is really motivating this opinion. Only a small fraction of Americans work at jobs covered by minimum wage laws, but for most middle-class households, real incomes were lower in 2005 than in the recession year of 2001. They want something to be done to reverse this trend. This is the raw nerve that the minimum wages issue touched. And although allegedly “compassionate conservatives” like the President turn their backs on the working poor, most Americans are unwilling to do the same – perhaps fearing that they too are headed in that direction on the wage and jobs ladder.
At a time when productivity has been rising, there can only be one reason for wages to lag and that’s increased competition from overseas. The global trade war displaces employment into lower paying sectors as American firms fail, or it forces firms to cut costs – including wages and benefits, to meet foreign rivals. There has also been a growing anger at corporations that have moved factories from the United States to foreign lands, or have outsourced services overseas, in order to directly substitute low-wage Third World labor for middle class American employees.
Since 1993, U.S. production has only met half the increase in American demand for durable goods, the other half has come from overseas. So when we hear that Americans are “addicted” to foreign-made goods, that’s false. Americans want quality manufactured goods, but they are just not made here anymore, courtesy of failed trade policies and an unwillingness to tackle unfair foreign trade practices on the part of successive American administrations.
Republicans lost Senate or House seats in 19 states, but were especially hard hit in the Midwest industrial states that had suffered heavy losses to foreign competition. Four house seats were lost in Pennsylvania and three in Indiana, normally a GOP stronghold. Democrat Rep. Sherrod Brown based his Ohio Senate campaign on opposition to current trade policy and won a landslide victory over incumbent Republican Mike DeWine. Democrat Jim Webb, who won in normally Republican Virginia, warned, “In the age of globalization and outsourcing, and with a vast underground labor pool from illegal immigration, the average American worker is seeing a different life and a troubling future.”
In exit polls, half of voters said they felt the state of the national economy was “not so good”or “poor.” The rosy statistics put out by the Bush administration were counterintuitive to the U.S. middle class. The economic spin of the Administration portrayed a reality not being felt in the daily lives of voters.
The most recent trade data show a $64.3 billion deficit in September. A third of that was oil, but most of the rest came from two sources: automotive products and Chinese goods. U.S. manufacturers lost another 39,000 jobs in October according to the U.S. Bureau of Labor Statistics.
Automobiles and auto parts accounted for $10.7 billion of the September trade deficit. It wasn’t until a week after the elections that President George W. Bush met with the CEOs of the three Detroit-based auto companies, and then for only a little more than an hour. He had twice postponed the get-together, as the U.S.-based auto industry, whose supply chain runs throughout the nation’s industrial structure, has suffered one crisis after another. In Michigan, where the economy is reeling from auto industry downsizing, the long wait came to symbolize the Bush administration's indifference to the manufacturing sector. Democratic Senator Debbie Stabenow easily won re-election there.
Bush told the auto execs that he would urge Asian trading partners to “treat us the way we treat you”– a completely meaningless statement indicating that the White House does not take the issue seriously. Asian governments have been pouring support into their industries, especially autos. They are not going to change their winning strategy, and open their markets to a flood of American cars. Nor will they stop manipulating their currency values, a tactic used by Japan and South Korea as well as China.
The September U.S. trade deficit with China was $23.0 billion, with Beijing’s tentacles reaching into a wide variety of manufacturing sectors. The global Chinese trade surplus gives Beijing the means to expand its influence in world affairs, as well as its economic capabilities at home. There is no reason for those who are winning the trade war to change their policies, but there is a desperate need for the United States to rethink its losing strategy.
Unfortunately, while the Democrats come into office voicing concern about the plight of industry and criticizing current policy, they do not have a well-developed alternative model that will meet the challenge. Their immediate focus is to insert provisions into two pending free trade agreements with Peru and Colombia that would restrict duty-free access to the U.S. market for goods made by child labor or by workers who are denied the right to organize unions. Democrats also want stronger environmental standards imposed on foreign factories. But these measures will not be sufficient to offset the wide range of subsidies, import barriers, currency and labor market tactics that foreign governments use to help their industries fight and win the international economic struggle.
Americans always want to fight to win. They turned out the Republicans because despite bold talk, the GOP was not putting enough effort into winning either the military or economic campaigns in which the country is engaged.
William R. Hawkins is Senior Fellow for National Security Studies at the U.S. Business and Industry Council.
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I think Hawkins is dead-on when he concludes that:
"Only a small fraction of Americans work at jobs covered by minimum wage laws, but for most middle-class households, real incomes were lower in 2005 than in the recession year of 2001. They want something to be done to reverse this trend. This is the raw nerve that the minimum wages issue touched. And although allegedly “compassionate conservatives” like the President turn their backs on the working poor, most Americans are unwilling to do the same – perhaps fearing that they too are headed in that direction on the wage and jobs ladder."