Plan to Double Exports Just More Trade Policy Blundering

January 31, 2010

It seems I wasn’t the only one who found Obama’s pledge in the State-of-the-Union Address to double exports in five years to be unbelievable.  Check out the above-linked CNBC article. 

Since the Obama administration has not yet clearly articulated a trade policy or even sent several completed trade agreements to Congress, his pledge to double exports in five years was greeted with incredulity, even among Democratic trade policy experts.

Never mind health care, the stimulus plan, Afghanistan, or all of the other issues that have distracted his attention so far.  Obama’s failure to articulate a trade policy or come up with a plan to address the trade deficit is, by far, his biggest failure.  Contrary to his campaign promises, he’s done nothing to correct the imbalance with Mexico that arose from the North American Free Trade Agreement.  Worse, he’s done nothing in response to tariffs that Mexico slapped on American goods the first time he tried to raise the issue.  Nor has he done anything in response to persistent dumping by the Japanese.  Nor has he done anything about China’s refusal to unpeg their currency from the dollar. 

His stimulus plan has failed to revive the economy.  Unemployment isn’t dropping.  With credit rating agencies on the warpath about sovereign debt, another big stimulus isn’t an option.  Reinflating the housing bubble isn’t an option.  He seems to understand that revitalizing manufacturing is the only way to get the economy back on its feet. 

So he’s faced with a choice:  rein in imports so that manufacturing can focus on meeting the needs of domestic consumption, or manufacture products to be consumed by other nations.  The first option is completely within his power and success would be guaranteed, but at the price of angering other exporting nations.  The second option is something over which he has absolutely no control and there is virtually no chance of success, but at least China wouldn’t be P.O.’d at us. 

So what does he choose?  True to form, he’s opted for the appearance of doing something that angers no one, as opposed to real action that requires real leadership.  By setting a goal of doubling exports in five years, he can fall back on the excuse that “we still have two years to go” when the next presidential election rolls around. 

Boosting exports has been our trade policy ever since the signing of the Global Agreement on Tariffs and Trade in 1947.  The idea is to open new markets.  But it’s precisely this plan to open new markets and boost exports that has saddled us with an enormous trade deficit.  How?  Because trade negotiations always involve the U.S., in a gesture of good faith, offering to open up our market first.  So in comes a fresh tide of imports. 

Then, when the exports don’t materialize, we ask, “why aren’t you buying any of our cars?”  The answer:  “because our nation is too crowded for everyone to drive cars.”  “Our commuters rely on mass transit.”  Then we wonder why they don’t buy American-made lawn mowers until we realize that – oh, yeah, we forgot – they’re so crowded that they don’t have lawns.  Then we wonder why they don’t buy American-made applicances until we realize that – oh, yeah, we forgot again – their homes are so tiny there’s barely room for a bed and a toilet. 

Too late.  The trade deal is done and now we’re stuck with an even bigger trade deficit.  The solution?  Move on to the next country, perhaps with an even bigger population, and hope that things turn out differently.  We keep applying the same failed trade model while always expecting different results. 

Since Obama so loudly and publicly proclaimed such a commitment, I’ll hold his feet to the fire.  I’m going to chart our monthly progress on export growth, along with imports and the overall trade deficit, using January 2010 trade results as the starting point (which won’t be released until March).  To meet this goal, exports must rise at a rate of 1.2% per month for the next five years, while any growth in imports must be held to about half that value in order to achieve a balance of trade.  Oh, by the way, I’ll be tracking this in constant dollar terms, not letting him inflate his way toward meeting this goal. 

Anyone care to place a bet on Obama meeting this goal?  I wonder if the president himself would make that bet. 

So stay tuned.  It’ll be fun to watch how this unfolds.


4th Quarter Real Per Capita GDP Jumps 4.6% (Sort of)

January 30, 2010

On Friday the Bureau of Economic Analysis (BEA) announced that real (adjusted for inflation) U.S. GDP (gross domestic product) grew in the fourth quarter by 1.425%, which yields an annualized rate of growth of 5.7%.  Allowing for an annualized population growth rate of 1.0%, that means the real per capita GDP grew at an annualized rate of 4.6%, rising to $42,638 from $42,153 in the 3rd quarter. 

If we factor stimulus spending out of the equation to determine what’s happening with the real, underlying economy, the growth rate is even higher – an annualized rate of 8.6% – thanks to the fact that stimulus spending actually fell in the 4th quarter to $83.8 billion from $113.2 billion in the 3rd quarter. 

Wow!  The economy’s really on a roll, right?  Well, maybe not.  When you examine the details, things don’t look quite so rosy.  I’ve provided a link above to the BEA report.  Here’s what accounted for the lion’s share of the growth:

The change in real private inventories added 3.39 percentage points to the fourth-quarter change
in real GDP after adding 0.69 percentage point to the third-quarter change.  Private businesses decreased
inventories $33.5 billion in the fourth quarter, following decreases of $139.2 billion in the third quarter
and $160.2 billion in the second.

In other words, in the bizzaro world of government macroeconomy accounting, when inventories decline less than they did in the previous quarter, this actually counts as economic growth!  So of the 5.7% gain in GDP, 3.39% or 59% of the gain is purely an accounting gimmick – smoke and mirrors. 

And it doesn’t stop there.  Since trade data for the month of December hasn’t even come in yet, this first-pass estimate of 4th quarter GDP is based upon assumptions about exports and imports. 

Real exports of goods and services increased 18.1 percent in the fourth quarter, compared with
an increase of 17.8 percent in the third.  Real imports of goods and services increased 10.5 percent,
compared with an increase of 21.3 percent.

I don’t know where they’re getting these figures, but the trade data published by the BEA (see simply doesn’t bear these out.  So far, in the 4th quarter, exports have risen only about 5% from the 3rd quarter and remain below the level of exports in the 4th quarter of 2008.  The story for imports is exactly the same – a rise of about 5% vs. the 3rd quarter.  So the claim of a big rise in exports and a much smaller rise in imports simply doesn’t hold water.  Assumptions about trade made in the 1st-pass estimate of 3rd quarter GDP were also inflated, resulting in the final reading of 3rd quarter GDP being cut to 2.2% from the initial 3.8% estimate. 

The following graph depicts real per capita GDP, with and without stimulus spending, since the first quarter of 2000:

Per Capita GDP

The sharp V-turn in the last quarter, especially with stimulus spending removed, just doesn’t look very plausible, does it?  I’ll update this data when the next estimate of 4th quarter GDP comes out next month.   The revisions never generate nearly the interest as the first-pass estimate, so it won’t surprise me if we learn that this estimate was goosed with some false assumptions to prop up consumer and investor confidence. 

By the way, I’m not the only one who sees a red herring in this report.  Check out some of the quotes from this article below:


“We got to be very cautious about what it implies for the future because it (came) from the inventory cycle… if you take out net exports as well, the actual final spending by U.S. consumers, businesses and government actually grew more slowing in the fourth quarter than the third quarter.

“I’m a bit doubtful that net exports can continue to be a plus because I think we’re going to see a rebound in imports. Also, there’s not a lot more, in terms of the growth effect, to come from inventories.


“A big inventory build added about 3.4 percent and then a swing in net exports added another half of a percent. When you look at domestic demand, final sales to domestic purchasers, it was only 1.7.


“When you strip out inventories, you see real final sales were 2.2 percent. This is not a fantastic number. If you compare this to the ’75 and ’82 recessions, real final sales in the first two quarters after, we averaged 5 percent after ’82 recession, and about 4 percent after the ’75. By comparison, we obviously are looking pretty weak.

Obama Transitions to Caretaker President

January 28, 2010


As evidenced by the State of the Union address last night, Obama has chosen to respond to falling poll numbers and rising anger among the electorate by taking the safe route and morphing into yet another caretaker president.  Aside from waxing eloquent in his opening and closing remarks about the historic challenges we face, he sounded exactly like George Bush and every president preceding him for the past two generations, offering a littany of tax cuts and credits to get the economy moving in the right direction, while closing with vows to reduce the budget deficit. 

“Change we can believe in” is dead.  There were still echoes of the campaign trail when he spoke of eliminating tax breaks for companies who outsource jobs, enforcing trade deals, health care reform, green jobs and an energy policy, but there was no conviction in his voice and everyone watching knew that it was merely nostalgic rhetoric.  The efficacy of the speech was best summed up in one moment when, after speaking at length about fiscal restraint and reining in the budget deficit, he concluded with “but that will have to wait till next year,” deservedly drawing loud guffaws from the Republican side of the room. 

Most disappointing of all was his comments on trade.  Contrary to his campaign promise to stand firm against any more free trade deals that have devastated our manufacturing sector, he now supports conclusion of the Doha round of World Trade Organization talks, with its agenda of opening another artery in America’s economy upon which more parasitic economies will feed.  And his vow to double exports by opening new markets is nothing more than a retreat into the same dumb trade policy that has amassed a trade deficit of ten trillion dollars while simultaneously dismantling our manufacturing sector over the past three decades.  We’ll “open new markets.”  Right.  That means opening our market first,  in return for  markets so badly stunted by low per capita consumption that an even bigger trade deficit is the only possible outcome.  This part of the speech was a slap in the face to every voter, like me, who put faith in Obama’s promises to reduce the trade deficit and bring manufacturing jobs home.

The practitioners of old-school, 18th century economics have won the day again.  A few more tax breaks here.  Sprinkle in some token cost cuts there.  Pump up the economy with immigration and population growth.  Drill, baby, drill.  “Spin, baby, spin.”  (The unspoken platitude to the green crowd.)  Boost exports.  Pay no mind to those nuisance imports.  Crank up the printing press at the mint.  Don’t rock the boat.  Everything will be fine.  This is our future.  We now have another caretaker to see to it.

Just one problem.  This isn’t the middle of the 20th century.  Those approaches have culminated in economic ruin.  Continue on this path and you can take one of two outcomes to the bank:  far worse unemployment or a $20 trillion national debt in ten years that collapses our economy, perhaps forever.  Obama has chosen the well-worn path and crossed his fingers in the hope that it doesn’t happen on his watch.

Balancing the Budget: Simple, but It Takes Guts

January 27, 2010

In advance of tonight’s state-of-the-union address by President Obama, there’s a lot of talk about the urgent need to rein in the budget deficit, along with speculation about what the president may propose.  Already leaked is a plan to freeze discretionary spending for three years, saving $250 billion over a ten year period, during which the budget deficit is projected to be $6 trillion – nothing more than a token gesture.

Lost in all the proposals is the one measure that would do far more than anything else toward balancing the budget – a return to sensible trade policy that relies on tariffs to restore a balance of trade.  Consider this:  in 2008 we imported $2.1 trillion worth of goods.  If these imports had been subjected to an average tariff of 38.5%, the prevailing rate established by the Fordney-McCumber Tariff Act of 1922, we would have collected an additional $809 billion in federal revenue.  That would eliminate 58% of this year’s budget defiict of $1.4 trillion.  Compare that to Obama’s plan to freeze discretionary spending, a move that would reduce the deficit by only 1.8%.

Of course, imports would certainly fall as a result of the tariffs, reducing the revenue take.  But they’d be offset by a boost in domestic manufacturing, increasing federal revenue from the domestic economy.  And growth in the manufacturing sector would have synergistic effects on the rest of the economy, boosting revenues even further. 

This would entail extricating ourselves from the World Trade Organization or, at the very least, predicating our continued involvement in the WTO on its acceptance of the role of population density in driving global trade imbalances, allowing us to raise tariffs on overpopulated nations without the threat of retaliation. 

That’d take a lot of guts on Obama’s part, a quality that, if it exists, has yet to be revealed.  No doubt, China, Japan and Germany would threaten to dump their vast holdings of U.S. treasuries.  But it’s a hollow threat.  First of all, such a move toward a sensible trade policy would send the dollar soaring, making other nations eager to snap up those bonds and, secondly, with our budget deficit reduced so drastically, the volume of bond auctions would fall precipitously, tipping the supply/demand balance in favor of the U.S. 

It’s no mere coincidence that virtually all of the rise in our national debt over the past three decades closely matches our cumulative trade deficit in that same period of time.  The relationship between the two is more than coincidental, since deficit spending by the federal government has been relied upon heavily to offset the negative consequences of the decline in GDP wrought by our trade imbalance.  You can’t fix the former without addressing the latter.  The economic smoke and mirrors employed by both the left and right for the past three decades to obscure that fact has painted our economy into a corner. 

Is Obama willing to walk over that paint and take us in a new direction?  I doubt it.  More likely, he’ll grab ahold of a sconce on the wall, support himself on one tippy-toe, and lay down some more paint.

Obama’s New Populism: Crumbs for the Peons

January 25, 2010

As reported in the above-linked Reuters article, President Obama is unveiling the next phase in his shift toward populism, designed to blunt his plummeting poll numbers, the defection of independents and a rising tide of anger over his failure to address unemployment. 

This second phase, following the initial salvo fired at Wall Street and big banks last week (a good move, in my opinion), is far less impressive.  In fact, it’s downright insulting, attempting to placate angry Americans by tossing them a few crumbs. 

In announcing these intiatives, the president got off on a good foot: 

“Creating good sustainable jobs is the single most important thing that we can do to rebuild the middle class,” Obama said …

But then, among the laundry list of proposed initiatives he announced, not a single measure to stimulate job growth was anywhere to be found.  What we get is a mixed bag of increased child care tax  credits, incentives for savings, new requirements to bolster 401k’s, and some help for those over-burdened with student loans. 

Doubling the child care tax credit?  The biggest reason that people incur child care expenses is because families can no longer make it on one income.  Keep your tax credit.  Bring our manufacturing jobs home!

More requirements for employers to provide 401ks?  Mr. President, have you heard a big outcry about a shortage of 401ks?  It’s employment we need! 

Breaks for graduates burdened with student loans?  They’d much rather be able to land decent jobs and start earning an income! 

This isn’t “fighting for the middle class.”  It’s an elitist approach to playing us for fools.  Frankly, Mr. President, we’re sick of it.  We’re sick of gimmicks; we want real fixes for the economy.   We want to make the things we use.  We want jobs making microchips, cell phones, computers, autos, kitchen appliances, clothing, tools, housewares, machinery, pharmaceuticals – you name it.  We’re sick of your platitudes and fed up with kicking our economic problems down the road, to be dealt with by our children and grandchildren. 

During the election, you promised to fix our trade problems and bring our manufacturing jobs back home.  It’s time to deliver.  It’s time for you to stand up to the parasitic economies that have been feeding on our market and jobs and sucking the life blood from our economy.  If you won’t, we’ll find someone who will.

Supreme Court Ruling Illustrates Need for Constitutional Overhaul

January 22, 2010

As reported in the above-linked Reuters article, the Supreme Court yesterday gave the green light to unlimited spending on election media blitzes by corporations and anyone else with deep enough pockets.  One quote from the article says it best:

“It is a major victory for big oil, Wall Street banks, health insurance companies and the other powerful interests that marshal their power every day in Washington to drown out the voices of everyday Americans,” Obama said.

Never mind Obama’s party affiliation.  He’s right.  This ruling strikes down the concept of “free speech” and makes “speech” a commodity for sale to the highest bidder. 

But let’s back up a little and begin with the first amendment, upon which the court’s ruling is based:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

This amendment was adopted in 1791.  At that time, radio had not yet been invented.  There was no electronic media.  Movable-type printing presses had barely evolved from Gutenberg’s original invention, and were still limited to a rate of about 250 sheets per hour.  The most recent presidential election in 1789 was actually our nation’s first.  It was uncontested and George Washington was elected our first president. 

In short, the writers of the first amendment had absolutely no clue how elections would be contested even then, much less 220 years later.  They envisioned campaign advertising that consisted of flyers posted in the town square, free speech meant the right to stand up on a stump and say whatever you want, and the right to peaceably assemble meant gathering around the guy on the stump to hear what he had to say.  Never in their wildest dreams did they imagine that speech could be commoditized, sold to the highest bidder and pounded into our heads through electronic media blitzes.  They couldn’t envision a future in which money was speech and massive global corporations would be interpreted to be “the people” or even an assemblage of the people. 

In 1791 it was inconceivable that the human population could ever explode to the point where every square foot of land and every resource would be pressed into service to keep our economy going.  The western boundaries of the American continent were scarcely known.  It’d be another twelve years before the Lewis and Clark expedition would explore the Louisiana Purchase.  And, beyond a handful of intellectuals in Europe, the field of economics didn’t even exist.  It’d be another 26 years before the first economic theories regarding foreign trade would be proposed.

Since that time, our constitution has been amended seventeen times, bringing to twenty-eight the total number of amendments.  These subsequent amendments (beyond the original ten in the Bill of Rights, adopted in 1791) have dealt with issues mundane and profound, ranging from pay raises for Congress to the abolition of slavery and the authorization of the federal income tax.  But since 1950, only five amendments have been adopted.  In the last 39 years, there has been only one, limiting congressional pay raises.

The antiquity of the provisions of the constitution and its amendments, which provides the basis for supreme court decisions like this most recent one, is distorting our democracy in a way that threatens our survival as a nation.  With yesterday’s ruling, the court has unwittingly tilted power in favor of the faction which benefits by unlimited population growth to the detriment of individual citizens.  The court doesn’t understand the break that occurred in the interests of corporations versus the interests of individual citizens when a critical population density was breached.  Nor do they care.  Their purpose is to interpret rules established by people who lived in a world that no longer exists and blindly apply them to a world our founding fathers couldn’t even imagine.  It’s the constitution and its amendments that are the problem, not the Supreme Court.

Our constitution is in desperate need of overhaul and further amendments.  The two I’ve proposed on this blog, the 28th and 29th amendments, would go a long way toward sustaining our prosperity for generations to come.

Grading Obama’s First Year

January 20, 2010

It’s now been exactly a year since President Obama was sworn in – a good time to grade his performance on the economy so far.  For those new to this site, some context is in order.  I’ll focus solely on the economy because that’s what this site is all about.  I try to keep this site non-partisan.  Although I voted for Obama, I’m an independent.  Both parties have been failing the American people for decades and there is little you could say about either that would offend me. 

Let’s begin with a quick review on what he inherited.  First of all, the financial system was on the brink of total collapse.  The Bush administration and the Federal Reserve (primarily the latter) had already come to the rescue with TARP (troubled asset relief program) but, still, it hung by a thread.  Secondly, two of our three domestic automakers were on the brink of collapse.  Had they gone under, it likely would have wiped out the supplier base and taken the rest of the industry, including the transplants, with it.  Third, housing was in a state of collapse.  Home values were free-falling.  No one was lending.  Finally, unemployment was soaring, with the economy losing 700,000 jobs per month.  In short, we were headed for another depression, one that might have rivaled the first.

So Obama’s task was to restore stability, correct the root cause of the problems that led to such a mess and put the economy back on track to a sustainable prosperity.  How did he do?  Regarding the state of the financial system, although much of the credit for stabilizing it belongs to the Fed, the Treasury Department played a crucial role too.  I’d give Obama an “A” for his efforts on that front.  Once stabilized, though, his opportunity to correct underlying problems was squandered and he deserves a solid “F”.  He had the opportunity to break up the “too big to fail” banks and other organizations like insurance giant AIG, but has done absolutely nothing in that direction.  Supporters may counter that those plans are in the works, but there are no solid plans and the opportunity to “strike while the iron’s hot” has been lost.  Also, the outright fraud that was committed on those who purchased financial instruments from these institutions screams for better regulation yet, again, not a single step has been taken and it’s back to business as usual.

Regarding the salvaging of the domestic auto industry, Obama deserves a solid “A+” for rushing GM and Chrysler through a pre-packaged bankruptcy, allowing them to emerge as leaner entities.  But here again there’s been no follow-through to correct the problems that ailed the industry in the first place – the steady erosion of the market by the onslaught of more and more and more foreign brands being given free access to our auto market without getting access to equivalent markets in return.  He could easily, single-handedly (without the approval of Congress), impose tariffs on imports to shift demand back toward domestic producers.  But he’s done nothing.  Even worse, he’s done nothing in response to blatant dumping by Japanese manufacturers who are in clear violation of WTO (World Trade Organization) rules.  So for his handling of the auto industry crisis post-bankruptcy, he again deserves an “F.”

Regarding his handling of the housing crisis, I’ll give him a “C,” a grade that would be lower except for the $8,000 credit extended to first-time home-buyers, a program that was clearly successful in generating sales and stabilizing the market to some extent.  His other programs, most notably the program to prevent foreclosures, have been abysmal failures.  Want to turn the housing market around?  Get people’s incomes growing again.  That means creating jobs.  Which brings us to the final issue.

For his early attempts to stabilize the economy and prevent unemployment from spiraling out of control, I’ll give him a “B.”  A stimulus package was clearly in order and there’s no doubt that it helped, at least a little.  Contrary to what the anti-Keynes camp has been saying, dumping a truck load of money into the economy, as was done with the $787 billion Recovery Act, is bound to generate some economic activity.  That’s fine while it lasts but, the anti-Keynes folks are right when they say that it’s not really “stimulative.”  There’s no synergistic effect in which the economy then takes off and runs on its own.  Once the punch bowl has been taken away, the party’s over. 

So the stimulus plan had to be followed immediately by other actions to correct the root cause of the erosion of jobs in our economy – a problem that has been simmering for decades, but papered over with sequential bubble economies:  the “dot com” boom of the ’90s and the debt-and-fraud-fueled housing boom of the past decade.  That meant eliminating our trade imbalance.  Both Obama and Fed Chairman Ben Bernanke have said as much.  So too has the International Monetary Fund and World Bank. 

But aside from some jaw-boning of China to boost their domestic consumption and rely less on exports, absolutely nothing has been done.  This in spite of Obama’s oft-repeated promises during the campaign to fix our trade problems.  Perhaps the hope is that a falling dollar will gradually and painlessly take care of the problem.  If that’s their hope, we’ll be waiting forever, just as we’ve been waiting for decades already.

And, adding fuel to the fire, Obama continues to import foreign workers to compete for a shrinking supply of jobs, seemingly oblivious to the simple math involved in dividing jobs by the labor force to come up with an unemployment rate.  I can’t really fault him for not appreciating the effects of my theory and how growing our population is eroding our economy, but he can’t be forgiven for ignoring the obvious when it comes to exacerbating unemployment with a huge influx of foreign workers.  So the “B” I’ve given him for his early efforts at stemming the loss of jobs is followed by another solid “F” for his follow-through.  This has been the biggest disappointment of all with Obama. 

Then there’s the budget deficit.  Again, the stimulus plan was a necessity to prevent a further collapse, but continued reliance on government spending is a road to ruin.  Our national debt, especially when expressed in per capita terms, soars into new record levels with each passing day.  And the sure-to-follow rise in inflation can’t be held at bay forever.  Sadly, it seems that the only ideas that Obama’s administration has for further help for the economy involve more government spending and no real fixes for the structural trade imbalances that drain our bank accounts and sap away our jobs. 

If we average these grades together we come up with a “C” or “C-minus” for the total year’s performance on the economy.  But that score belies the trend.  A strong performance out-of-the-gate soon became side-tracked in a push for health care reform.  The focus on “Job One,” jobs and the economy was completely lost.  Though his grade for the first quarter isn’t too bad, his early test scores are carrying him and, if he doesn’t start doing his homework, he’s cruising for a big “F” when final exams arrive in 2012.

Tragedy in Haiti

January 14, 2010

In the wake of the horrible tragedy in Haiti, as an advocate of overpopulation awareness, I thought a few words were in order.

First of all, no reasonable person, including those of us raising awareness about the dangers of overpopulation, is in any way pleased to see such loss of life, even in a country as badly overpopulated as Haiti.  It’s a catastrophe and we should mourn the loss of every life.  The Haitians are in my prayers.  And I’m happy to see the U.S. leading the recovery effort. 

My whole purpose in writing Five Short Blasts was to promote a slow and steady stabilization and, then, reduction in the U.S. and global populations through a reduction in the birth rate, avoiding an increasing death rate that would otherwise be inevitable.  Natural disasters come and go, but even ones as bad as this one, in which as many as 100,000 people have perished, have virtually no effect on the world’s population.  Within twelve hours, the world’s population was already higher than before the earthquake struck. 

The point I’m trying to make here is that those few people who may celebrate such natural disasters as a cure for overpopulation don’t understand that they make no difference toward population stability in the long run and they give the rest of us a very bad name and do the cause a disservice.  Such people should be ashamed. 

Secondly, there is a point to made here about overpopulation.  I’ve written and spoken of overpopulation’s role in driving unemployment and poverty, and that if something isn’t done to address the problem by reducing the birth rate, poverty will eventually drive our death rate higher.  With a population density of 800 people per square mile, the third highest in the western hemisphere (behind Puerto Rico and El Salvador), Haiti is also one of the most desperately poor countries on earth.  Two thirds of its people have no formal jobs.  Eighty percent live below the poverty line.  Their per capita consumption of everything except food is virtually nil.  While it would be over-reaching to blame all of Haiti’s poverty on its overpopulation – decades (centuries?) of political corruption have been a major contributing factor – it has had an effect. 

Island nations typically thrive on a tourism-based economy.  Consider the Dominican Republic, the other nation which occupies the same island as Haiti.  It’s population density is 40% less and, thanks to vibrant tourism, it’s about six times as wealthy, which isn’t saying much, but it’s a lot better than Haiti.  So why no tourism in Haiti?  Few tourists want to be surrounded by over-crowding and poverty, even when sequestered in private resorts.

Their poverty played a huge role in the death toll of this earthquake.  It’s estimated that it killed up to 100,000 people.  By comparison, the Loma Prieta earthquake in San Francisco in 1989, a quake of almost exactly the same magnitude – about 7.0 – killed just 63 people.  Why the difference?  Such a poor country, even though it sits within a known seismic zone, simply can’t afford to require quake-hardened building techniques.  Seen in that light, the toll of the Haiti quake can be blamed almost entirely on its state of poverty.  It’s just one small example of how poverty, the greatest killer in the history of humanity, takes its toll.

Somewhere down the line there will be analysis of this tragedy and recommendations for preventing similar ones in Haiti and elsewhere.  No doubt poverty will draw some focus.  But somewhere in the analysis the role of overpopulation in driving that poverty should get some recognition.

November Trade Deficit Worsens Again

January 12, 2010

This morning the U.S. Bureau of Economic Analysis (BEA) released the U.S. International Trade in Goods and Services report for the month of November.  (Link provided above.)

Bad news once again.  The overall trade deficit was worse than expected, rising from $33.2 billion in October to $36.4 billion.  Most of the rise was due to a big jump in imports of goods, both petroleum and non-petroleum goods. 

To make it easier to understand the trend, I’ve decided to begin presenting this data in graphical form.  Although the overall trade deficit is bad for the financial condition of this country, what I and all American workers should watch most closely is trade in non-petroleum goods.  This is where the jobs are.  While a trade deficit in petroleum drains money from our pockets, a trade deficit in non-petroleum goods drains jobs out of our economy as well.  And the most meaningful way to look at this data is to express it as a percentage of real (adjusted for inflation) per capita (adjusted for population growth) GDP (gross domestic product).  Any rise in this figure would indicate a downward pressure on jobs and incomes. 

So here it is:

Trade Deficit Chart

Some observations are in order:

  1. The trade deficit in goods is higher than the overall trade deficit due to a surplus in services.  (Not tracked here.)
  2. In November ’08 the trade deficit began to plunge as the global economic crisis took hold.
  3. The decline in the trade deficit was led by petroleum, as both price and volume declined. 
  4. Petroleum and non-petroleum goods accounted for roughly equal shares of the goods deficit prior to the economic collapse.  Since then, the non-petroleum goods deficit has rebounded more quickly.
  5. The non-petroleum goods deficit continued to decline through June, but since then has rebounded very quickly, by 37%, and in November was the highest since January. 
  6. In November, the goods trade deficit rose to 4.5% of real per capita GDP.  In other words, every man, woman and child in America was 4.5% poorer as a direct result of the goods trade deficit.  With real per capita GDP at $42,176, that’s a loss of almost $1,900 per person.  Of that figure, the deficit in non-petroleum goods accounts for $1,060. 

This is bad news for the Obama administration.  Upon taking office he declared that the old economic paradigm in which other nations exported while the U.S. consumed was dead.  It was unsustainable.  He demanded a change and other nations agreed (with a wink and a nod).  But now we see that the old paradigm is making a comeback, fueled by more U.S. debt.  No surprise, since nothing substantive has been done to change it.  But it can’t go on.  That’s not opinion; it’s fact. 

The question is how long Obama will remain silent and sit on his hands.  How long will he let parisitic economies continue to dig the U.S. economy into a deeper hole and rob us of our manufacturing jobs?  When our trade deficit plunged early in the year he had a golden opportunity to build on that momentum, implementing changes to trade policy that locked in and built upon those gains.  But he blew it. 

When will he deliver the change he promised?  Or will he be content to go down in history as the president who restored the status quo and kicked the can down the road?  Much to my disappointment and to the detriment of us all, he’s beginning to look like the latter.

Party Leader Vows to Slash Immigration

January 11, 2010

But don’t get too excited!  Unfortunately for the U.S., it’s David Cameron, leader of the Tory party in Britain.  (See the above link.)

Britain is the third most densely populated nation on the European continent (well, close to the continent, anyway) – 7.5 times more densely populated than the U.S.  And relative to the size of the U.S., its immigration policy results in a net increase in population each year that’s about the same as the U.S.  And the majority of the British are sick of it.  They’re sick of the demand it places on their social programs.  And the prospect of their population breaching 70 million (the equivalent of the U.S. population reaching 2.7 billion people) has them alarmed. 

It’s refreshing to see the government of a western nation tackling the subject of overpopulation.  Let’s hope that 2.7 billion people isn’t the population it’ll take to enlighten our own leaders.