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.

[nopardons]

Oh yooooooooooooooooo hoooooooooooooooo......................

In the early 1950s, there was a gigantic ILLEGAL ALIEN influx, from MEXICO, which was so bad, that Hollywood made a movie about it!

By 1991, our steel production was at a low level and we were importing lots of it.

The manufacturing sector, in America, has been going down, for many decades...beginning, *gasp*, in the late 1940s! I guess you don't know anything much about the shoe business. Go read up on shoe factories in New England; look at the mills too, whilst you're at it! New England was the real RUST BELT, manufacturingwise, in the '50s and '60s!

We were in a recession, in 1991; we aren't in one now.

[simon says what]

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.

C'mon Todd, you know credit is serviced by income. What happens when your income can no longer service your debt ? What percentage of GDP does the debt level need to reach before we can no longer service the debt ? Do you think our assets will be worth as much if we are forced to sell to pay off debt ?

[nopardons]

Taxes were NOT lower, in the 1950s! JFK, Ronald Reagan, and President George W. Bush lowered them.

Yes, many families lived on one salary back then; however, they lived on less, bought less, and did not have as much accumulated wealth as they do now. Lots of families COULD live on one salary today...they just are unwilling to do so.

[nopardons]

Oh, you could still live the way you did as a child; you just aren't willing to do so.

[Mase]

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.

That would be correct. I guess that's why the article also talks about income and total compensation. Americans get only about two-thirds of their total income from wages and salaries. Employers are picking up more and more of the cost of benefits which my linked articles make clear. Did you miss Greenspan's statement that real per capita income has increased at an average annual rate of 2% over the past century?

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.

That information is truly irrelevant when you consider that our net worth has increased by $30 trillion since 1980, which is more than the previous 200 years combined. Now, tell me again why the household debt ratio today is bad. LOL

I am seriously floored that a response like this comes from a magazine like Forbes.

Actually, it comes from David Malpass. He's the chief economist for Bear Stearns. Again, how can this level of debt you wring your hands about be bad when household net worth has more than doubled in the past 11 years?

Our credit market debt as a percentage of GDP is higher than it has ever been in our history

So are our household assets ($62 trillion). I guess that's why our household net worth is also at an all time high of $51 trillion. You can try and find a bogeyman in all this but he only exists in your imagination.

[Toddsterpatriot]

C'mon Todd, you know credit is serviced by income.

That's one way.

What happens when your income can no longer service your debt ?

Hopefully my assets will be large enough to service the debt.

What percentage of GDP does the debt level need to reach before we can no longer service the debt ?

Are we having a hard time servicing our debt? Is it twice as hard to service as it was 20 years ago, when that POS chart said debt was only 150% of GDP? My God, looking at that chart, debt has always been more than 100% of GDP!!! How can we service a debt larger than our income? LOL!

What did you think of this passage:

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).

Do you think our assets will be worth as much if we are forced to sell to pay off debt ?

Maybe.

[simon says what]

That information is truly irrelevant when you consider that our net worth has increased by $30 trillion since 1980, which is more than the previous 200 years combined. Now, tell me again why the household debt ratio today is bad. LOL

So it is not just irrelevant but truly irrelevant... hmmmm. Ok, why is it truly irrelevant that a greater percentage of our income is going to service are household debt ? Assets do not service debt. Income services debt.

[expat_panama]

...the new Fed chief was telling congress about it yesterday saying that foreigners are buying T-bills in record quantities....   ...decision-makers in the Fed, such as Bernanke, are indirectly bribed off.... 

OK, we'll assume Ben's been bribed to say nothing but all that good news you quoted-- but I can't assume that the Treasury Dept. is lying too without first running out for more tinfoil.   

What I said in post 929 about how "we're borrowing money from the Chinese at 4% and putting it into CD's earning 5%" is true, but there's more to it.  

One thing is that we're also earning 10% investing in factories that create more jobs.  Ben's report also pointed out that the "increase in real GDP in 2005 was sufficient to add 2 million new jobs, on net, to employers’ payrolls."  

The other is that over the past 20 years we've been steadily letting the feds get less of our gdp to spend  --and that dwindling portion we that we are giving them has had a smaller and smaller bite taken out for debt interest.   Dang, I almost forgot-- that's less gdp for gov't spending, less gdp for national debt interest, and a tax cut that brought taxes from 21% down to 17% gdp

Look, if all this number/graph stuff is too much to handle, at least think of the two million Americans this year that are working in factories that we conned a bunch of foreigners into bankrolling.

[simon says what]

C'mon Todd, you know credit is serviced by income.
That's one way.

What happens when your income can no longer service your debt ?
Hopefully my assets will be large enough to service the debt.

So you can either pay the debt off with your income or by selling assets. As long as more people are paying off debt with income, asset prices will hold steady or rise. As soon as more people pay off debt by selling assets, asset prices will drop.

[Toddsterpatriot]

Assets do not service debt. Income services debt.

Assets don't provide income? Maybe you're holding the wrong stocks?

Am I better off with $30,000 in debt and $100,000 in assets or $60,000 in debt and $150,000 in assets?

[Mase]

Ok, why is it truly irrelevant that a greater percentage of our income is going to service are household debt ?

Interest rates are low and people are taking advantage of it. Home ownership is at an all time high. Is that good? Credit card debt only increased by 4% according to the Forbes link. Stephen Moore says our ratio of debt to assets is only 18.3%. Doesn't sound like a lot to me and he's not alarmed so I'm go with his assessment rather than yours.

Assets do not service debt. Income services debt

I own many assets that generate income. Does that count if I use it to pay off my debt?

[Toddsterpatriot]

So you can either pay the debt off with your income or by selling assets.

If I can borrow money at 6% and earn 10% am I better off or worse off? I bought some Altria a few years back at $34.50 a share. The dividend now gives me a 9.27% yield. Should that not count if I have a HELOC at 6%? I'll do that trade all day.

As soon as more people pay off debt by selling assets, asset prices will drop.

Ping me when you get proof that is happening.

[simon says what]

Interest rates are low and people are taking advantage of it.

So if we are using a higher percentage of our incomes right now than in the past to service the debt while interest rates are low, what is going to happen when interest rates rise ?

Home ownership is at an all time high. Is that good?

Is it good that a record number of mortgages to buy these homes are interest only and adjustable rate mortgages ? And if home ownership is at record highs, how much more demand will there be for housing ? If demand drops off, will prices and asset values soon follow ?

I own many assets that generate income. Does that count if I use it to pay off my debt?

Absolutely.

Without a doubt, our economy is moving along. My concern is we have kept it going with debt. We continue to borrow larger and larger sums of money as a nation to keep the party going. I do not agree with most of what Pat says in this article but I do believe we are going to have an economic dislocation sometime in the future because we borrow to pay the bills.

[expat_panama]

...our net worth has increased by $30 trillion since 1980, which is more than the previous 200 years combined. Now, tell me again why the household debt ratio today is bad. LOL..

How about two reasons why. 

One is that you're not looking at all the latest figures on household debt.  It's up from '04 but down since 9/11.   The reason it's up slightly is because we're richer.

The other is that this means we can afford to buy more things.   The household debt has become a lot easier for us richer Americans to handle than before. 

Sure, America bashers can't stop making up lies about our credit scores, but the lenders make a living at this sort of thing and they don't listen to Pat.

Delinquency rates are down. 

[nopardons]

People have ALWAYS wanted to "turn back the clock"! This is nothing new.

Whether is was because times were hard, the culture had changed, illness, the loss of a loved one, deaths, divorce, getting old, things in their own lives are terrible; find any excuse and add to the list.

[nopardons]

People have ALWAYS wanted to "turn back the clock"! This is nothing new.

Whether is was because times were hard, the culture had changed, illness, the loss of a loved one, deaths, divorce, getting old, things in their own lives are terrible; find any excuse and add to the list.

[nopardons]

BRAVO now, you've really nailed it!

[nopardons]

Of course, you may have and express your opinion, but I think you're NUTS!

[jeremiah]

If the money we send them for goods, comes back to us, why is there a deficit, instead of an even trade? Of course the money has to go somewhere, but where?

[nopardons]

That's NOT the "value" that A.Pole meant and you know it. LOL