Bill Clinton, in 1992, made famous the campaign slogan, “It’s the economy, stupid!” It wasn’t that he was calling anyone in particular “stupid.” Rather, it was intended to serve as a reminder to himself and his campaign staff that the economy was the critical issue of the day and to not waiver from keeping it front and center. (The economy was mired in a recession at the time.)
So please don’t take offense. I’m not calling my readers “stupid!” The term does apply to our nation’s economic leaders, however. The root cause of our snow-balling economic collapse is right under their noses. And I think they know it. But they can’t bring themselves to admit that the golden calf they’ve created – “globalization,” gilded with unfettered free trade – is nothing more than a false idol. The dream of turning the rest of the world into American-style consumers who, once they became wealthy enough, would begin to buy from us as much or more than we pumped into their economies, never came true. Instead, we have unleashed an enormously bloated global labor force, eager to prey on the American market. They’ve destroyed our domestic industries and drained our bank accounts. Since 1975, the year of our last trade surplus, we’ve amassed a cumulative trade deficit of $9 trillion and shed five million manufacturing jobs.
“Just be patient,” we’re told. “Markets will naturally re-balance themselves.” “Currency valuations will swing our way.” “The trade deficit is a non-issue,” they tell us. “All of those dollars are re-invested in the U.S.”
Yeah, right. “Re-invested.” It’s like playing poker with your neighbor every night and losing, night after night. “Don’t worry,” he says. “My savings account is in the same bank as yours.” Great for the bank, but it doesn’t do a damn thing to help your financial predicament. How long do you think that bank will continue loaning you money to finance your poker addiction?
The globalization cheerleaders stand fast as the economy collapses around them. “It’s not the trade deficit, it’s falling housing prices that are the problem,” they will tell you. And why are housing prices falling? Because Americans’ incomes are falling, thanks to the loss of millions of high-paying manufacturing jobs to the trade deficit. The economists tried to cover up this simple relationship by cutting lending standards, ignoring the fact that these new buyers would soon begin to default. “Things will get better when the housing market stabilizes,” they say.
Here’s how you’ll know when things will really begin to improve: when you visit your local Hyundai dealer and see that the price has suddenly jumped 50%. Looking more closely at the window sticker, near the bottom, you see a line that reads “import duties – $10,000.” So instead, you opt for a much cheaper Chevy, Ford or Chrysler. You pick up a paper on the way home, open to the classifieds, and find it loaded with ads from Chevy, Ford and Chrysler trying to fill the new shifts they’ve just added. That’s when you’ll know that this economy is turning around.
In the meantime, we stand at the brink of total financial collapse. And our economists stand in denial. Every night, we lose another $2 billion to our trading “partners” in the global poker game. We’ll never solve this problem until we look it square in the eye and say “enough is enough.” We can’t continue to fool ourselves. It’s the trade deficit, stupid!