A Bankrupt Superpower: The Collapse Of American Power

Intelligence Daily ^ | March 19, 2008 | By Paul Craig Roberts

[Fennie]

The Bush administration forecasts a $410 billion federal budget deficit for this year, an indication that, as the US saving rate is approximately zero, the US is not only dependent on foreigners to finance its wars but also dependent on foreigners to finance part of the US government's domestic expenditures. Foreign borrowing is paying US government salaries--perhaps that of the president himself--or funding the expenditures of the various cabinet departments. Financially, the US is not an independent country.

A troubled currency and financial system and large budget and trade deficits do not present an attractive face to creditors. Yet Washington in its hubris seems to believe that the US can forever rely on the Chinese, Japanese and Saudis to finance America's life beyond its means. Imagine the shock when the day arrives that a US Treasury auction of new debt instruments is not fully subsribed...

[1rudeboy]

Exports equal approx. $1 trillion a year. That is not pocket change. And post #293 (I'll be generous . . . on second thought, I won't) has no merit because it is false.

In fact, it is such an elementary error (spoken with such authority), that it should be taken out back and buried before it begins to stink up the joint.

[american colleen]

The BLS tabulates output by calculating "real value added." Thus, a part manufactured overseas is not "entirely" added to the total.

You've lost all credibility with that statement.

There is absolutely no way at this time, to track production and import values outside of the country. The BLS admits this themselves. We do know however, exactly how to calculate output of American manufacturing but like I said, there is absolutely no way to calculate the entire process before output.

[1rudeboy]

You're going to have to reconcile the above with the follwing before you take a stab at questioning anyone's "credibility:"

. . . even if a company offshores/outsources most of its production process (jobs)to other countries but they still put together the final product here in the USA (they ship back the parts), the Bureau of Labor Statistics counts the entire operation (from start to finish) as manufacturing output.

[american colleen]

What?

Reconcile what??

That's how the measure output --- but you can't believe that because, if that's true, then your beloved GDP figures would be off as well.

The movement of the offshore/outsourced manufacturing process (except for the final output) is way too fluid to have any reliable way to measure it.

Business Week did a very detailed analyis about this exact same thing last year. With citations from BLS members, btw. Maybe you can call them and question their credibility.

[hedgetrimmer]

The biggest benefit from free trade is for the poorest in the world

There, you said it. "free trade" is a wealth redistribution plan. But you forgot to mention that transnational corporations benefit when the poor nations, under the guise of "free trade" give up their nations to the global pillagers. They get extremely low cost and slave labor to develop their products. They get no labor or environmental laws or purity regulations over the products produced there. That's why "free traders" love china-- only one communist dictator to pay graft to, slave labor, pollute without penalty, impure and unsafe products uninspected by anyone-- at the same time charge first world prices for the goods.

[american colleen]

Hey, gotta go and do some stuff, be back later.

[1rudeboy]

Sure. I'll call the editors at BusinessWeek and tell them you didn't understand one of their articles. I'll spell it out for you one last time: the BLS does not count the entire operation in the way you suggest. You are wrong.

And because you are wrong, now you claim the GDP figures are "beloved" and "mine." They are not "mine," they belong to whoever publishes them, according to their methodology. Did I mention your description of their methodology is wrong?

[american colleen]

Here's a couple of interesting and easy to understand articles from Business Week regarding the BLS and GDP numbers and how they are/aren't calculated. The articles are sourced and quote high level employees of both depts. Make of them what you will - but I did not misunderstand them at all - it must be that you haven't read them. If you choose to read them, I wouldn't at all mind a discussion, I am open to facts at all times.

How Those Deceptive Numbers Creep In (BLS)

Phantom GDP and Comparative Advantage

International Political Economy Zone

[1rudeboy]

I took your use of the word "entire" to mean, "entire." Maybe you oversimplified because you were in a hurry. The fact of the matter is the aggregate addition to GDP of those factors you feel should not be added (and neither do I, frankly) does not equal 100% of the total (of the factors). In other words, there are still deductions.

Note that here, Paul Craig Roberts is not discussing the Bush Administration's claims of growth in the past, but rather the assumptions it is making about growth in the future, placing him in the unenviable rhetorical position of deriding an assumption because it is, well, an assumption.

That being said, he does subscribe to the view that GDP and output are overstated (just not here) for the reasons BusinessWeek suggests. He just can't explain himself when someone asks him how much they are overstated . . . which is important, because some economists who have examined his assumptions find no significant impact on the question. In other words, other economists' replies to Roberts' warning about the methodology-problem are basically, "so what? Even if we use your numbers your conclusion is not supported."

[sit-rep]

Talk about characterizations...

[sit-rep]

too late...

[american colleen]

There are still deductions but apparently those deductions are assumptions too - since there is no real way to measure all the components of the manufacturing process when the process is not performed on American soil 100% of the time.

This isn't a slam on the BLS or even the GDP and those who formulate the numbers - it's just that there is no real way to measure productivity in the USA anymore since the advent of the flat world economy. They do the best they can - but I am glad there are those who take the time to point out real problems with the official government numbers.

There is a very large problem with our economy at this time - I work for a very large American company who is slowly (doesn't make the papers) ridding themselves of IT jobs (40k - 130k area, probably 1k people let go eventually) but what they have done is to open an 'arm' in India which will house any R&D and IT that can be done there. So in affect, the company will look like it is hiring more employees, which they are, but those employees are Indians, not Americans. They employ more and more H1-B guys too. This is a huge retail supermarket/wholesaler chain that only sells in America and will not be opening stores outside of here. I don't know how stuff like that is measured.