McCain’s Acceptance Speech: A Recipe for Disaster

I watched much of the coverage of the RNC with great interest, anxious to hear more details about McCain’s plan for the economy. What I heard Thursday night I found very disturbing. I hoped to hear details of a plan that would take us in a new direction. Instead, he served up a recipe for disaster – an intensification of the policies of the past three decades – policies that have driven our nation to the very brink of bankruptcy and complete economic collapse. His plan is the very antithesis of the policies I’ve called for in Five Short Blasts.

The worst element of his plan is his call to “open new markets.” I suppose that has an appeal to the uninformed. It sounds like a plan to increase exports. That would be fine if that’s how it worked. What was unsaid is that the only way to open new markets is open our market further as well. This is exactly the blind trade approach that has resulted in a cumulative trade deficit of $9 trillion since 1975, growing at an annual rate of three quarters of a trillion dollars. It’s an expansion of the policy of trading away our healthy market while getting access to stunted markets in return, if we get access at all. It has often been said that doing more of the same while expecting different results is the very definition of insanity.

And, as if to underscore his lack of even a basic understanding of our trade picture, while promising to “drill, drill, drill,” he repeated once again the erroneous claim that arose from the T. Boone Pickens TV ad. “$700 billion per year is sent overseas to people who don’t like us very much,” implying that that’s how much we spend on foreign oil in the Middle East and other places like Venezuela. I thought my head would explode when I heard that lie proclaimed once again, but this time so forcefully in front of a national audience. Perhaps if Joe Lieberman were standing next to him, he could have whispered in his ear and corrected him. “Psssst. John! That’s not right. $700 billion is our total trade deficit. Only about a third of that is spent on foreign oil, and only a fraction of that goes to the Middle East.” (For the benefit of those unaware, the T. Boone Pickens ad never claimed that we spend $700 billion per year on foreign oil. Pickens said that “We send $700 billion per year to foreign countries.” By plopping our trade deficit figure into an ad for breaking our dependence on foreign oil, he bolstered his case without technically making an exaggeration. Watch the ad again. You’ll see that I’m right.)

As I’ve said before, this calls into question whether McCain lacks the intellectual curiosity that one needs to make informed decisions. The man has admitted to being computer-illiterate. He doesn’t even use E-mail. Shouldn’t anyone being considered for president show at least enough curiosity about what has become a critical element of our economy to be able to handle the basics, like E-mail? If he had, in about five minutes he could have Googled “trade deficit,” gone straight to the U.S. Census Bureau site (the agency that tracks trade data), and learned the basics about our trade deficit. He would then have known that we only spend about $250-300 billion on foreign oil, and that Canada is our biggest foreign supplier.

But I’ve digressed. So what is McCain’s plan for dealing with job losses? Retraining. I wanted to scream loud enough for him to hear all the way in Minneapolis, “retrain to do what? Where are these mythical jobs that are going unfilled because we’re all too uneducated to perform them?” He never answers that. It seems that the plan is to successively move our excess labor supply from the segment of the economy where it’s the worst to other segments, one after the other, destroying the wage structure in each as we go. By creating the illusion of progress in one area, maybe we won’t notice the deterioration in another. That seems to be the plan. Also, by proposing that the federal government make up a person’s shortfall in wages in their new job vs. the job they just lost, at least during the “retraining” process, he seemed to making a tacit admission that wages will, in general, continue to decline under his plan.

But no, there will be new jobs, he says, in the mythical new “green economy,” not to be confused with the “new economy” of the ’90s, based on the internet, that was going to be our job salvation. This one will be based on building new, renewable energy sources. Somehow politicians have been sold the idea that the equipment used to generate renewable energy can only be made domestically. Wasn’t that the same promise of “high tech?” Weren’t we promised that computers and cell phones would be made in America, while the rest of the world would make the simple, boring things like cars and appliances? And, even if true, wouldn’t the gain in jobs in making renewable energy sources be offset by a loss of jobs in the old energy technology? How does this gain us anything?

At this point, McCain took a swipe at Obama’s plan. “While I’m creating these new jobs, my opponent’s plan is to bring back those old jobs.” “Those old jobs.” He rolled out the words with a Bush-esque smirk on his face. Anyone who works in manufacturing should have been insulted by this statement. This demonstrates how little regard he has for the people who have surrendered their jobs to the Global Trade Welfare State (globalization) that was established by our goofball trade policies.

Finally, I was horrified at his proposal to double the tax deduction for children. If you want to lower taxes, why not reduce the base rate so that everyone can benefit? It’s clear that pro-population growth economists, interested in stimulating another baby boom, had a hand in crafting this proposal.

I like John McCain.  He’s a true American hero.  There’s no doubt about the depth of his love for his country.  There’s no doubt that he believes fervently in his plan.  But, unfortunately, his plan represents more of the same – more population growth, bigger trade deficits and more deficit spending to offset the negative effects. This isn’t change. It’s an intensification of the policies that have ravaged our economy for decades. It’s the old “if it isn’t working, do it harder” approach.  McCain’s plan is a recipe for disaster.

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8 Responses to McCain’s Acceptance Speech: A Recipe for Disaster

  1. Robert says:

    Pete,

    I do agree with you that McCain’s proposals don’t offer us much hope but, I might add his choice of Sarah Palin does throw a big question mark into the mix. From what I have seen of Obama and his party’s proposals such as his views on the border fence I see no real commitment in securing the border

    “The key is to consult with local communities, whether it’s on the commercial interests or the environmental stakes of creating any kind of barrier. The Bush administration is not real good at listening. I will reverse that policy. There may be areas where it makes sense to have some fencing. Having border patrolled, surveillance, deploying effective technology, that’s going to be the better approach. ”

    From what I’ve seen of his party’s views on illegal immigration and legal immigration all I can say is that they do not appear to want to make any effort that might cause some special interest group to be offended, in other words they are SPINELESS. Up until two years ago I had been a lifelong Democrat as they were supposed to be standing up for the working class. All I can say is that they have drifted so far off course that I don’t recognize them anymore. Not all Republican’s are the best either and McCain has been terrible, but if you look at the stance of both party’s than you have to come to the conclusion that the only ones willing to make the tough choices are the Republicans and I am hoping that Sarah Palin is willing to rock the boat and make some tough choices. I am hoping she will help John McCain see that our current trade policies are killing us. One thing I can say about John McCain is that he is not afraid to go against the grain.

  2. Robert says:

    Pete,

    Let me add that I am not overly optimistic about either party implementing real change but I am hoping that the next president, Obama or McCain will see that this country needs to change its course.

  3. Pete Murphy says:

    Like I said in response to Clyde on another post, let’s all challenge our candidates on both sides of the aisle on the issues of overpopulation and the trade deficit. Real progress won’t come until both parties are getting fired at with both barrels by their constituents.

    I am no fan of either party and agree that both have a horrible track record.

  4. Pete Murphy says:

    There was one more element of McCain’s speech that concerned me that I omitted from the original post above: his call for smaller government and less regulation. I know that the “less government” mantra resonates with voters, but it’s deregulation of the banking and finance industries that played a big role in the mortgage melt-down and ensuing credit crisis. In some cases, we need more regulation, not less. Regarding “less government,” down-sizing the government while allowing the population to continue growing is irresponsible. The more densely populated a society becomes, the bigger the role that government must play in maintaining order in that society. If we want smaller government, let’s begin with policies designed to stabilize and eventually reduce our population.

  5. Doug says:

    On free trade, I believe America can compete. During the 1970s I recall the gloom and doom in the news as heavy industry waned under increase pressure of trade. The fact is the market repositioned our economy for the new revolution in information technologies. Most of the leading companies in this industry are American and they generate a lot more wealth than older heavy manufacturing businesses. I concede that the market is not perfect but I trust it more than a politician sitting in Washington.
    What economic program has Obama offered?
    On energy Obama was initially against drilling, fuzzy on Nuclear power, and has a supreme confidence in the federal government to architect a new economy powered by “clean” energy sources. This centralized planning will most likely quell any chances for economic recovery.
    On taxes he wants to roll back tax increases that were implemented during the Bush administration. That will increase taxes on any family making over $31,850 by 3%. His income tax plan will adversely impact small businesses. He wants to increase taxes on capital gains. Well the last time I checked a majority of Americans own stock specifically in their retirement accounts.
    It is easy for a politician to be generous with someone else’s money. Hold on to your wallet when they talk about fairness. As for the definition of the rich look at the mess congress has made with the AMT.

  6. Pete Murphy says:

    Doug, thanks for stopping by. I agree with you wholeheartedly – Americans CAN compete! We are the most productive nation on earth and our product quality is as good as the best that anyone else in the world can offer. Americans are the most innovative people on earth. To use your example, it was Americans who introduced the world to the “new revolution in information technologies.” Unfortunately, most of the manufacturing of the products involved in that new technology have already shifted overseas.

    So why do we still have a persistent $500 billion per year trade deficit in manufactured goods? It’s because the global trade war (and make no mistake, it is a war) has nothing to do with “competition.” We lose badly because of the dynamics that take place when a nation like the U.S. attempts to trade freely with grossly overpopulated nations like Japan, Germany, Taiwan, Korea and China. We trade away access to our healthy, high per capita consumption market and all we get in return is access (if we get access at all) to markets badly stunted by overcrowding and low per capita consumption. You’d have to read my book, “Five Short Blasts,” to thoroughly understand but, to put it simply, per capita consumption declines when people are forced to crowd together and conserve space due to overpopulation.

    Doug, this trade deficit is the root cause of the financial crisis in the U.S. Since, 1975, the trade deficit has drained $9 trillion from our economy. This can’t continue. We’ve tried to “compete” our way out of this for decades. We’ve been complaining to our trade “partners” about currency valuations for decades as well. None of it helps because none of it addresses the root cause of our trade deficit, the disparity in per capita consumption between the U.S. and the overpopulated parasites of the world that are feeding on our economy.

  7. Doug says:

    Thank you for your thoughtful comments. I remember the 1970s and the economic uncertainty. At the time everyone believed that the Japanese were going to overtake the United States as the world’s largest economy. It seemed fashionable in the news media to have a tight government industry linkage. We did not follow this course and it proved correct in the 1990s when our economy was growing and the Japanese economy was anemic.

    I too am concerned about the trade deficit and the ability of our country to export goods, however, that concerned has been tempered by my understanding of balance of payments. There are certain economic realities that we cannot escape when it comes to international finance. Our trade deficit has to be offset by investment in the United States. Inequalities in balance of payments have to be corrected by the exchange rate.

    I do not pretend to be an economist but we cannot escape this reality. The trade deficit is only one side of the equation. There have been some that have been alarmist by the number of countries that invest in the United States. This investment activity reflects the confidence other countries have in our economy and the ability to provide a good risk/return. I would rather have their capital working in our country.
    I believe the current financial crisis that we are experiencing is caused by the Fed keeping interest rates too low for too long of a time. We had too much liquidity in the market and that exasperated the housing bubble.

  8. Pete Murphy says:

    Doug, you say that you’re concerned about the trade deficit, but that “we cannot escape this reality.” That’s just not true. This “reality” is of our own making. Through most of our nation’s history, we employed tariffs judiciously to maintain a favorable trade balance. That didn’t mean we were isolationist. No country was more deeply immersed in international commerce than the U.S. But we made sure that it worked for us, not against us.

    But all that changed in 1947 when we signed the Global Agreement on Tariffs and Trade, forerunner of today’s WTO. Now, the WTO (World Trade Organization) employs the same tariff policies that we used to use in favor of other nations, to the detriment of the U.S. (Check the WTO web site. You’ll find that the WTO enforces protectionism for two thirds of its member states.)

    Our trade deficit is not inevitable. It’s a direct result of failing to recognize a fundamental truth about international trade – that overpopulated nations are not capable of offering us access to equivalent markets in exchanged for access to ours. It’s entirely within our power to restore balance to the trade equation by re-implementing tariffs, using a tariff structure that is indexed to population density.

    You mentioned our trade deficit with Japan. It never went away. It’s an even bigger problem today than it was in the ’90s. However, the new deficit with China has dwarfed Japan’s and taken the focus away from them. We still have almost a $100 billion per year deficit with Japan in manufactured goods which, when expressed in per capita terms, is 4-1/2 times larger than our deficit with China. Although Japan is ten times as densely populated as the U.S., it’s still a small country and it was never possible that the size of their economy would overtake that of the U.S. But China can and will. They’re just as large as the U.S. and four times as densely populated.

    Regarding the balance of payments, you are correct that every dollar we send overseas returns to the U.S. They return as any one of three different types of investments: (1) direct investment (like building factories), (2) the purchase of U.S. treasuries, and (3) the purchase of private securities like stocks and corporate bonds. Only number 1 does anything to create jobs in the U.S. and, unfortunately, net direct investment is actually negative. More direct investment flows out of the U.S. than is returned by foreigners. In 2006 it was negative by $65 billion. So jobs are actually being destroyed, not created. The other two forms of investment are nothing more than a transfer of ownership of American assets. This does nothing to create jobs and transfers control of America to its foreign owners. To use a recent example, the purchase of Anheuser-Busch by Inbev, the Beglian company, has done nothing to create jobs in the U.S. On the contrary, A-B employees are now all fearful for their jobs, knowing full well that Inbev sees A-B as just a brand, one that can be supplied from their own breweries. That’s the problem with foreign ownership of American assets. Those assets are now put to work for their benefit, with no regard for the effect on Americans.

    It’s time for all Americans to drop this fatalistic approach to our trade and economic problems. It’s time to get angry and start questioning what can be done to turn this situation around.

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