Pat Buchanan : America's Hollow Prosperity

WorldNetDaily.com ^ | 02/15/2006 | Patrick Buchanan

[SirLinksalot]

Our hollow prosperity

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Posted: February 15, 2006 1:00 a.m. Eastern

PATRICK BUCHANAN

© 2006 Creators Syndicate Inc.

Now that the U.S. trade deficit for 2005 has come in at $726 billion, the fourth straight all-time record, a question arises.

What constitutes failure for a free-trade policy? Or is there no such thing? Is free trade simply right no matter the results?

Last year, the United States ran a $202 billion trade deficit with China, the largest ever between two nations. We ran all-time record trade deficits with OPEC, the European Union, Japan, Canada and Latin America. The $50 billion deficit with Mexico was the largest since NAFTA passed and also the largest in history.

When NAFTA was up for a vote in 1993, the Clintonites and their GOP fellow-travelers said it would grow our trade surplus, raise Mexico's standard of living and reduce illegal immigration.

None of this happened. Indeed, the opposite occurred. Mexico's standard of living is lower than it was in 1993, the U.S. trade surplus has vanished, and America is being invaded. Mexico is now the primary source of narcotics entering the United States.

Again, when can we say a free-trade policy has failed?

The Bushites point proudly to 4.6 million jobs created since May 2003, a 4.7 percent unemployment rate and low inflation.

Unfortunately, conservative columnist Paul Craig Roberts and analysts Charles McMillion and Ed Rubenstein have taken a close look at the figures and discovered that the foundation of the Bush prosperity rests on rotten timber.

The entire job increase since 2001 has been in the service sector – credit intermediation, health care, social assistance, waiters, waitresses, bartenders, etc. – and state and local government.

But, from January 2001 to January 2006, the United States lost 2.9 million manufacturing jobs, 17 percent of all we had. Over the past five years, we have suffered a net loss in goods-producing jobs.

"The decline in some manufacturing sectors has more in common with a country undergoing saturation bombing than with a super-economy that is 'the envy of the world,'" writes Roberts.

Communications equipment lost 43 percent of its workforce. Semiconductors and electronic components lost 37 percent ... The workforce in computers and electronic products declined 30 percent. Electrical equipment and appliances lost 25 percent of its workforce.

How did this happen? Imports. The U.S. trade deficit in advanced technology jobs in 2005 hit an all-time high.

As for the "knowledge industry" jobs that were going to replace blue-collar jobs, it's not happening. The information sector lost 17 percent of all its jobs over the last five years.

In the same half-decade, the U.S. economy created only 70,000 net new jobs in architecture and engineering, while hundreds of thousands of American engineers remain unemployed.

If we go back to when Clinton left office, one finds that, in five years, the United States has created a net of only 1,054,000 private-sector jobs, while government added 1.1 million. But as many new private sector jobs are not full-time, McMillion reports, "the country ended 2005 with fewer private sector hours worked than it had in January 2001."

This is an economic triumph?

Had the United States not created the 1.4 million new jobs it did in health care since January 2001, we would have nearly half a million fewer private-sector jobs than when Bush first took the oath.

Ed Rubenstein of ESR Research Economic Consultants looks at the wage and employment figures and discovers why, though the Bushites were touting historic progress, 55 percent of the American people in a January poll rated the Bush economy only "fair" or "poor."

Not only was 2005's growth of 2 million jobs a gain of only 1.5 percent, anemic compared to the average 3.5 percent at this stage of other recoveries, the big jobs gains are going to immigrants.

Non-Hispanic whites, over 70 percent of the labor force, saw only a 1 percent employment increase in 2005. Hispanics, half of whom are foreign born, saw a 4.7 percent increase. As Hispanics will work for less in hospitals and hospices, and as waiters and waitresses, they are getting the new jobs.

But are not wages rising? Nope. When inflation is factored in, the Economic Policy Institute reports, "real wages fell by 0.5 percent over the last 12 months after falling 0.7 percent the previous 12 months."

If one looks at labor force participation – what share of the 227 million potential workers in America have jobs – it has fallen since 2002 for whites, blacks and Hispanics alike. Non-Hispanic whites are down to 63.4 percent, but black Americans have fallen to 57.7 percent.

What is going on? Hispanic immigrants are crowding out black Americans in the unskilled, semi-skilled and skilled job market. And millions of our better jobs are being lost to imports and outsourcing.

The affluent free-traders, whose wealth resides in stocks in global companies, are enriching themselves at the expense of their fellow citizens and sacrificing the American worker on the altar of the Global Economy.

None dare call it economic treason.

[expat_panama]

Thank you for posting to Toddsterpatriot. You also post from a wide selection of other capitalist freepers at any time on these threads.

[hedgetrimmer]

Thank you for proving my point: you APPROVE of wasting public money, as long as said waste is conducted within the borders of the United States.

You keep fabricating.

[hedgetrimmer]

Meth labs" are just the latest version of an old problem

Riigggghhhhtttt.

[Paul Ross]

Oh, so you're one of those idiots who really believes that nuclear wars are "winnable," and can be fought in a rational and controlled manner.

I haven't any control over what the Red Chinese will do.

Do you?

They are the ones who have rattled the nuclear sabers.

Anyways, a cataclysm might take any number of forms...a good number of them non-nuclear. Preparedness is the only rational response.

You're evidently of the same hopelessly liberal ilk that we Reaganite cold warriors had to fight to get the MX deployed. The Trident deployed (up through the D-5). The B-1B deployed. The B-2 deployed. The Pershing II and Tomahawk GLCM's deployed.

All providing a critical increment to a counterforce targetting ability for the U.S. strategic arsenal. All so as to convincingly fight ...what the leftist U.S. idealogues said wasn't "winnable" and anyone who wanted them deployed was 'an idiot.'

We clearly had the last laugh on those dolts...your side.

And then they went still more 'ballistic' after we pushed for SDI R&D. After all, we had enough megatonnage on our subs already to make the rubble bounce a dozen times across the Soviet Union went the liberal rant. But until we made these deployments, it wasn't a militarily persuasive deterrent ability against the opposing decision-makers. Soviet's whose military...and the reigning autocrats within the Politboro...believed in their Civil Defense and First Strike and war-winning doctrines. The CIA Team B had accurately assessed what their motivations were.

Fortunately, we successfully countered all of those schemes. When the Soviets regime was falling in '91, and they planned to unleash a last gasp attack, cooler heads prevailed, and intercepted those codes in the streets of Moscow.

And the rest is history. Albeit we did do a LOT more than simply neutralize this gap in deterrence...to take down the Communist regime...that had made it all possible. Peter Schweitzer and Constantine Menges make the more complete summations of the entire operation. Some of which still remains classified.

Unfortunately, due to your side....letting an equally perilous version of the same totalitarianism get up to speed...We need to do it all again...before it is too late.

[ex-snook]

Now if Greenspan thought the trade deficit was so good why would he want it stabilized?

=============
Greenspan: Trade Deficit 'Poised to Stabilize' By Paul Blustein Washington Post Staff Writer Friday, February 4, 2005; 4:58 PM

Federal Reserve Board Chairman Alan Greenspan predicted today that the U.S. trade deficit will level off and possibly shrink in months and years to come, in a speech that took a less alarmist view of the trade gap than the Fed chief has offered in the past.

Greenspan cited the decline in the U.S. dollar as the main factor that is "poised to stabilize and over the longer run possibly to decrease" the trade deficit. A cheaper dollar makes U.S. products more competitive against goods produced abroad.

[hedgetrimmer]

As Mr. Greenspan bails out of the Fed before all hell breaks loose.

[Paul Ross]

Aw heck, you mean the Fed Chief who yesterday admitted this?

The household sector was a mainstay of the economic expansion again last year, and household spending is likely to remain an important source of growth in aggregate demand in 2006. The growth in household spending last year was supported by rising employment and moderate increases in wages. Expenditures were buoyed as well by significant gains in household wealth that reflected further increases in home values and in broad equity prices. However, sharply rising bills for gasoline and heating reduced the amount of income available for spending on other consumer goods and services. Residential investment also expanded considerably in 2005, supported by a strong real estate market.... ... Nonetheless, the nominal U.S. trade deficit increased further last year, exacerbated in part by a jump in the value of imported petroleum products ...

Anyways, as previously mentioned, recycling into T-Bills, is still hoarding. It is a continuation of the program that effectually undermines U.S. manufacturing.

It merely is a temporary accounting subsidy...heavily skewed with the primary effects towards financing the federal deficit spending (and do you really want to encourage that?). But as mentioned its more egregious effect is to continue the consumption party, and hence abet further the continuing erosion of outsourcing, masking the hollowing-out process.

The decision-makers in the Fed, such as Bernanke, are indirectly bribed off. Can't castigate the folks "helping" you out of a jam.

Sort of like the snake's venom to paralyze its victims...to get it to stop struggling and make it easier to swallow.

Meanwhile, the bill for the interest, and perhaps the principal itself soon enough, will come due. And it will be the taxpayers who are on the line for the import binge. It's going to be one nasty hangover for this party.

[dennisw]

http://www.milkeninstitute.org/newsroom/newsroom.taf?cat=press&function=detail&level1=archive&ID=55

Year 2004
Uncle Sam’s Unfunded Liabilities Total $51 Trillion; a 78 Percent Across-the-Board Income Tax Increase Would Be Needed to Balance the Books, Says Economist in Latest Milken Institute Review

**** I will add that this figure does not include unfunded liabilities of states, counties and cities. My wild guess is these total $30-40 trillion

[Toddsterpatriot]

Anyways, as previously mentioned, recycling into T-Bills, is still hoarding.

Hoarding that earns interest. Sounds like investing to me.

[MikeA]

I don't know what this clown is talking about saying the governor hasn't spent a dime "filling potholes." I live in California and have been complaining about the amount of road construction going on. This idiot needs to check the amount of money Arnold has allocated to roads, and what's he's proposing moving forward, to find out how idiotic his comments are, to say nothing about the fact cities and municipalities in most areas of the country are flush with new revenues, but spending beyond their means.

[Mase]

What is the source of your 2.3% figure btw ?

Over those same 30 years, real per capita consumption has increased at an average annual rate of 2.3%.

Pouting Pundits of Pessimism

Despite the problems price indexes have in coping with new and better products, measured real consumption per capita has nonetheless doubled since 1973. Unless the rich could somehow consume unlimited numbers of houses, cars, shirts and steaks, it is difficult to imagine how each American's real consumption could have doubled if real salaries had actually been unchanged.

Unreal Wages

"Moreover, real earnings of the average worker have continued to rise. Over the past century, per capita real income has risen at an average rate of more than 2 percent per year, declining notably only during the Great Depression of the 1930s and immediately following World War II. Incomes trended higher whether we had a trade deficit or a trade surplus and whether international outsourcing was large or small."

"Productivity in the United States has increased generation after generation, creating ever-rising standards of living. This trend has persisted whether our competitive advantage came from the development of more efficient technologies in agriculture, textiles, and steel, or, more recently, from the design and fabrication of microprocessors and the harnessing of the human genome. Our knowledge-based skills in a business environment, supported by a rule of law, have enabled our workforce to create ever-greater value added--irrespective of what goods and services we have chosen to produce at home and what and how much we have chosen to import." "The fact that, over the years, more than 94 percent of the workforce has been employed, on average, indicates that U.S. workers apparently have been sufficiently skilled and motivated to learn the new tasks that enable them to earn, on average, an ever-rising real wage."

Greenspan: FRB Speech

I don't think it is a hard time at all explaining consumption increases have been fueled by credit

Can you prove then that increased credit has driven the growth in consumption over the past 30 years?

The idea that Americans are overspenders and undersavers and addicted to debt is all myth. Household balance sheets have never been more robust. Last year Americans increased their financial assets--checking accounts, money market funds, mutual funds, IRAs, etc.--by an impressive $590 billion. Credit card debt in-creased a paltry 4%

Forbes

Assertion: Credit-market debt is too high. “Total credit market debt as a percentage of GDP rose from around 120% in 1980 to over 300% at present,” according to Marc Faber’s April 20 Gloom, Boom and Doom Report.

Response: It makes sense for debt (and assets) to grow faster than GDP in a flexible, financially innovative economy. Faber’s 300 percent figure includes corporate debt, much of which is cascading (for example, an auto buyer borrows from a financing company which borrows from the credit markets). Other causes of increasing U.S. debt are low interest rates and the increase in home ownership. The issue is not so much the level of debt but whether sufficient capital formation is taking place in a market-based way to maintain growth. I think it is.

NRO

Finally, from post 646:

Despite all of the groans about the over-indebtedness of American households, the new Federal Reserve Board data suggest that the family balance sheet is not highly levered. The ratio of debt to assets is only 18.3%.

Besides, if all this consumption were caused by the massive increase in consumer debt like you envision, there is no way our household net worth could have increased from $27.59 trillion in 1994 to more than $51 trillion today.

[BeHoldAPaleHorse]

I haven't any control over what the Red Chinese will do.

But your onanistic fantasies of nuclear victory require you to be able to make the Chinese act as you would wish them to, instead of as they would likely do in reality.

They are the ones who have rattled the nuclear sabers.

Unless you're hiring a lawyer, talk is cheap.

Anyways, a cataclysm might take any number of forms...a good number of them non-nuclear.

Oh, really?

Please explain what non-nuclear cataclysm would actually wipe out that much industrial capacity...

You're evidently of the same hopelessly liberal ilk that we Reaganite cold warriors had to fight to get the MX deployed.

You're partially right; I opposed the planned and deployed MX. I tend to get annoyed (from conservative principles) when the government attempts the following:

• Deploy an extremely expensive weapons system with extremely tenuous justification that, in itself, borders on lying (namely, the alleged mission of the MX);
• Attempt to deploy said extremely expensive weapons system in an area that would not support it (the Great Basin, where all water was previously impounded under "beneficial use," which the Air Force simply ignored);
• When that deal fell through, engage in a "deployment plan of the month" scramble that ended up with deploying the MX into Minuteman silos, thus doing nothing about the problem of ICBM survivability (which, you might recall, was the alleged primary purpose of the MX weapons system to begin with).

I'm one of those really strange people that expects his tax dollars to be spent with a certain degree of careful, circumspect forethought and due diligence, and who also expects his government to tell him the truth about why they want to spend his money. In the end, MX as designed and as deployed was aimed at buying really expensive widgets from politically favored defense contractors instead of actually accomplishing the stated mission. Perhaps lying to the public to enrich a few politically favored defense contractors is some sort of conservative virtue in your world. In reality, it isn't. Perhaps throwing money at a problem is some sort of conservative notion in your world. In reality, it isn't.

All providing a critical increment to a counterforce targetting ability for the U.S. strategic arsenal.

Counterforce makes sense in exactly two scenarios:

1. The "classic counterforce" paradigm where US forces would be employed rationally and with precision--despite the fact that no C2 network possible could meet the conflicting requirements for reliability under attack and data throughput (i.e., the more data that must pass through the network and the longer the network must endure in a usable configuration, the less survivable it is against enemy attack); and
2. First strike against an unready foe.

Like I said, I don't like it when my government lies to me. Perhaps you do. But please do not style your approval and support of governmental dishonesty as any sort of conservatism.

As for the USSR believing they had a war-winning doctrine: kindly note that they did not attempt to employ said doctrine when, by their standards and calculations, the correlation of forces allegedly favored them winning to an allegedly high level of certainty. That in turn shows that the most crucial elements of the Team B analysis was a bunch of crap.

Like I said, warfighting plans become self-deterring once you apply a couple minutes' thought to them. Perhaps that is a strain for some people. We grownups will simply apply that thought for them.

[Final Authority]

You have answered but I think you may have mislabeled the links however. The $800 billion quoted, if you noticed, is in foreign currency reserves, not necessarily USD. Notwithstanding that, no nation or entity that has reserves of currency just hoards it under a mattress but rather it is invested in short term notes or money market funds and in the end the US Treasury borrows that to support our debt. It may have a large reserve of currency now but that is because they can not consume that which the reserves will buy without causing massive internal problems. As China's economy grows that currency reserves will be used to continue to buy more oil on the world market, buy ores, buy logs, and buy the technology they need to continue on the path to growth.

BTW, do you advocate for a protectionist trade policy with China? And, do you realize what would happen if nations did not have currency reserves to finance our national debt? And, if this is true, what would you advocate to redirect our trade and fiscal policies to wean us off of foreign investment and trade deficits?

[nopardons]

Oh good...someone who knows and states the facts! :-)

For some inconceivable ( to me ) reason, the reality of times gone by, appears to have disappeared from some peoples' minds, replaced by memories of things that never were! Worse, for those who weren't alive, the reality of past eras, has been erased and all the know about them, is some fuzzy, distorted, never was fantasy, that I have NO idea from whence it all came.

Compared to the "GOLDEN" 1950s and '60s, even the lowest of the low middle class, now, live pretty close to the way the highest of upper middle class did, back then. Oh heck, in some respects, better!

[hedgetrimmer]

Bernanke says if the US is going to get out of its economic problems, we'll have to bring manufacturing BACK from China. I wonder how much thats going to cost us?

"I'm not saying a crisis is inevitable or that an orderly adjustment is impossible, but at some point big adjustments will have to be made," he added.

--Paul Volcker, the former Federal Reserve Board chairman

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.

--Fears for dollar persist despite China's move

[hedgetrimmer]

replaced by memories of things that never were!

How would you know?

[simon says what]

Over those same 30 years, real per capita consumption has increased at an average annual rate of 2.3%.

The same article also states real hourly earnings have decreased annually by 0.1% over the past 30 years. It blames tips, bonuses, and benefits not being included in the hourly wage for the drop.

Can you prove then that increased credit has driven the growth in consumption over the past 30 years?

Here is a chart going back to 1980. It shows with the exception of the recession in the early 90's, the household debt ratio has continued to increase. We are paying more and more of our income to service the debt we use to consume.

It makes sense for debt (and assets) to grow faster than GDP in a flexible, financially innovative economy. Faber’s 300 percent figure includes corporate debt, much of which is cascading (for example, an auto buyer borrows from a financing company which borrows from the credit markets). Other causes of increasing U.S. debt are low interest rates and the increase in home ownership. The issue is not so much the level of debt but whether sufficient capital formation is taking place in a market-based way to maintain growth.

Wow, I am seriously floored that a response like this comes from a magazine like Forbes. I mean read it.... it makes sense for debt to grow faster in a flexible and financially innovative economy ? Hell, I'm a flexible and financially flexible household so I guess I should borrow more every year than I make.... I mean after all it only makes sense ?!?!

Here is our total credit market debt as a percentage of GDP going back to 1915. Our credit market debt as a percentage of GDP is higher than it has ever been in our history, but it makes sense because we are financially creative... errr, I mean innovative.

[nopardons]

You take today's trade imbalance and then make claims that that has/will drag down America, but say that you are being "charitable" when saying that my post " was perhaps the most imbalanced view of the '50s and '60s you've ever seen? That has got to be, one of THE most egomanical, conceited, stupid, reposts, ever made on FR!

Far from being "pointless", talking about other factors, is not only germane to the debate, but perfect refutation of your gauze covered memory!

Big deal...so we didn't have a trade deficit back then. What we had, were recessions, massive amounts of strikes ( which most assuredly DID harm our economy far worse than today's trade deficit! ), sideways markets, the Cold War, the Korean War, the early stages of the Viet Nam War, higher inflation rates, higher unemployment figures, and wealth in far fewer hands.

Your claim, that those times were superior to these, is disingenuous, or just ignorant!

Since you obviously either don't remember, or have chosen to ignore the fact that CHEAP goods from Japan flooded the American market after WW II, I suggest that you do some research on the matter. You'll find, that back then, it was Japan, who like China today, WAS, indeed, doing just that.

The late '40s through the early '60s, look "golden", only when compared to the depression and war years. Compare them to later BOOM eras and that "gold" begins to tarnish pretty quickly!

What financed that boom, was the END OF WW II! Men came home, they started families/enlarged the ones they already had, Ike instituted the nation wide systems of highways ( which opened up the country and people began to move ), new innovations came about/were finally brought out, after years of stagnation due to the depression and war, and the unions strong armed companies, into things that we are now all suffering for. But I fail to see just which governmental policies spurred that boom. If anything, the government was, as always, a part of the problems; not as you claim, a part of the "BOOM".

In the late '40s through part of the '60s, China and the USSR were partners, rivals, and closed to the rest of the world. Still, there WERE members of the government and the private sector, that gave away American secrets to them both. That we now trade with each nation, is actually not nearly as "dangerous" as to seem to think it is; though yes, it isn't completely without a worrisome part.

Reality is different from your recollections. Facts REALLY do matter! And, I fear that you are enjoying the bogeyman you've invented, far too much.

[Toddsterpatriot]

Come on Simon, you know that credit market debt chart is a POS. Debt without assets is meaningless.

Despite the scary rise in debt, our household net worth is $51 trillion. That doesn't even include government assets.

[hedgetrimmer]

To the "free traders" a slave who is fed every day, however poorly, is better off than a free man living off his his own initiative.