Obama Blames “Soft, Uncompetitive” Americans for High Unemployment

http://content.usatoday.com/communities/theoval/post/2011/09/obama-us-had-gotten-a-little-soft/1

With his own party admitting that his meager efforts to restore the economy and create jobs have been a complete failure, it seems the time has come for President Obama to look for scapegoats.  So who will it be?  Parasitic trade partners?  Nah, that would just make the cocktail parties at the G20 meetings a bit awkward.  Greedy CEOs of global corporations?  Nah.  Why piss off your biggest donors? 

Instead, he’s decided to blame American workers for being “soft” and “uncompetitive.”   As detailed in the above-linked report about an interview with an Orlando television station:

“…   the United States “had gotten a little soft” in the years before he took office, and needs to regain its “competitive edge” in the global economy.”

What a crock.  Americans are still, by far, the most productive workers on the planet.  Many are working 12 hour days, 6 or 7 days a week (with all that overtime off-the-clock, by the way).  And, when they’re not at work, they sleep with their cell phones next to their pillows, at the boss’ beck and call 24/7.  Most are afraid to take vacation that they’ve earned or to call in sick when, by all rights, they should be in a hospital. 

How is that Americans are blamed for losing their competitive edge when workers in France and most of Europe, where we have trade deficits that, on a per capita basis, are even bigger than China’s, are coddled with 35-hour work weeks and take far more vaction than Americans?  Why isn’t their low productivity a problem for them?  Why can’t our president ask himself the same question? 

Now that he has Americans feeling bad about themselves, let’s buck them up with a vision of their savior, Obama, riding to the rescue:

“… making sure that we’re revamping our education system, making sure we’ve got world class infrastructure, investing in basic science and research and technology, making sure that we are moving manufacturing back to the United States, and that we are being tough with our trading partners — making sure that they’re not taking advantage of us … there are a lot of things we can do …”

Wait a minute.  Isn’t this the same crap we heard three years ago before the election?  “Being tough with our trading partners.”  Oh, you mean like your first visit to Mexico to talk about NAFTA, when they slapped us with tariffs and sent you home with your tail between your legs?  Have you done anything in response to that yet, other than to capitulate and let Mexican trucks cross the border?  And exactly what have you done to “make sure that we’re moving manufacturing back to the United States,” aside from saying the words?   Yeah, there’s a lot of things you could do.  When do you plan to start?

Perhaps realizing that he may have just insulted voters, he closes with this :

We still have the best universities, the best scientists, and best workers in the world.  We still have the most dynamic economic system in the world.  So we just need to bring all those things together.

That’s not what you said at the beginning.  You said we’re “soft” and have lost our “competitive edge.”  It seems that the only place we’ve gotten soft in the last two decades is between the ears of our politicians and the only thing we’ve lost is leadership and the ability to correctly diagnose our problems.

Obama is rapidly moving beyond being merely a disappointment.  This guy is really beginning to annoy me.

“I want to see Koreans driving Fords, Chevys and Chryslers!”

This one remark by President Obama merits some quick comment.  He made this statement after pressing once again for implementation of his trade agreement with South Korea, the one that gives Koreans unlimited access to the American market while limiting American exports to 75,000 cars per year.  Perhaps understanding that such a stance would go over like a lead balloon with Americans who understand what our trade agreements have done to us, he made the statement to try to make us think that things will somehow be different this time around. 

There’s just one problem, Mr. President.  You won’t see Koreans driving Fords, Chevys and Chryslers because they don’t drive cars, at least not nearly as many as Americans, per capita.  Koreans walk or ride bicycles.  It’s way too damned crowded for anything else.  At 1,257 people per square mile, South Korea is the third most densely populated nation on earth (of any size, not counting tiny city-states).  Only Bangladesh and the Occupied Palestinian Territory are more densely populated.  South Korea is 15 times more densely populated than America.  Just imagine what traffic would be like in your city if it had 15 times as many people and they all tried to crowd onto the freeway at once during rush hour.  That’s why Koreans don’t drive cars. 

What they do have is lots of labor capacity – 48 million people.  So let’s do some math.  Let’s assume that the per capita consumption of cars by Koreans is half that of Americans.  That’s being generous.  It’s probably worse.  America, a nation of 312 million people, usually consumes about 15 million cars per year.  That means that Korea would consume about 1.15 million vehicles per year.  (48 million people divided by 312 million, times 0.5 times 15 million.)  When the nations are combined through free trade, that gives us a total market of 16.15 million vehicles.  If the work of manufacturing these vehicles is spread evenly across the combined labor force, then America now gets to manufacture only 14 million vehicles.  (312 million people divided by 360 million people, times 16.15 million cars.)  Korea, on the other hand, now gets to manufacture 2.15 million vehicles, almost twice as many as before. 

Don’t you see, Mr. President?  Because of the disparity in per capita consumption, driven by the disparity in population density, free trade with Korea is a sure fire loser!  We can’t help but lose production of 1 million vehicles to Korea, which is exactly what has already happened in trade with Korea.  And it’s exactly what has happened in trade in automobiles with Japan and Germany.  It’s unavoidable.  As long as you attempt to trade freely with such overpopulated nations, it’s impossible to “compete” your way out of this situation! 

This is why our economy is failing, Mr. President, because of your unwillingness to consider new ideas and to follow through with your campaign promises to do something about our trade deficit. 

 

July Trade Deficit Falls on Rising Exports & Falling Imports

http://www.bea.gov/newsreleases/international/trade/2011/pdf/trad0711.pdf

The trade report for July, released this morning by the Bureau of Economic Analysis (link provided above), shows that the U.S. trade deficit fell nicely in July to $44.8 billion from $51.6 billion in June.  The trade deficit in the critical category of manufactured goods also fell, but less dramatically, from $23.1 billion in June to $20.4 billion in July.  Exports of manufactured goods rose by $4.9 billion, partially offset by a rise of $2.3 billion in imports.

Still, the trade deficit remains on a downward trajectory as illustrated by the following chart of the trade deficit since Obama made his pledge to reduce the deficit by doubling exports in five years:

Balance of Trade

As shown in the following charts, the U.S. remains on track to meet his goal of doubling exports in five years, but all of the progress made there has been thwarted by an equal rise in imports.  In the category of manufactured products, where the growth in exports needs to be concentrated, results are lagging and are being offset by an equal rise in imports.

Obamas Goal to Double Exports     Manf’d Goods Balance

July’s trade results are a step forward in the one-step-forward-and-two-steps-back trade picture that the U.S. has been locked into for decades.  Obama made the same mistake that his predecessors since Truman have made before him by focusing on exports instead of imports.  Now he is paying the price in falling approval ratings while the rest of us pay the price with rising unemployment and falling incomes. 

Is there any hope for change when a new president takes office in 2013?  More on that later.

Where Does the TEA Party Stand on Trade?

As I was commenting on some editorial the other day, I began to wonder where the TEA Party stands on the issue of foreign trade.  The TEA Party has been extremely effective in driving the debate on debt and government spending.  If the TEA Party ever aspires to become a real force in American politics in general, it has to have a position on every issue, especially one as important to the American economy as trade.

So I visited their web site to learn more.  For starters, here’s how their banner reads:

FISCAL RESPONSIBILITY * LIMITED GOVERNMENT * FREE MARKET

Hmmm.  “Free Market.”  What does that mean?  Searching further on the site, here’s their explanation:

… we support a return to the free market principles on which this nation was founded and oppose government intervention into the operations of private business.

What exactly does this mean?  It sounds like it’s focused more on intervention in the market by the federal government.  But what about intervention by world government, which is exactly what the World Trade Organization does, stripping the U.S. of its right to set trade policy and manipulating international trade in favor of developing nations.  When the TEA Party says “… free market principles on which this nation was founded …,” does it understand that our founding fathers relied heavily on tariffs to protect our fledgling economy and build it into an industrial powerhouse?  Does it realize that “free market principles,” at least as they relate to “free trade,” didn’t even exist in the late 1700s when our nation was founded?  It wasn’t until 1812 that economist Ricardo came up with his “principle of comparative advantage,” laying the foundation for free trade theory.  And it wasn’t until 1947 that we were bamboozled by economists into giving it a try.

So I used their web site’s contact form to submit to them the following question:

I run a blog that’s dedicated to a new economic theory and its ramifications for trade policy.  I’m interested in learning the TEA Party’s stance on U.S. trade policy.  In its banner, the TEA Party champions “Free Markets.”  Does that apply only to government interference in markets or more broadly to international trade in general?  Does the TEA Party support America’s membership in and deference to the World Trade Organization, or does it support America’s right to set trade policy in its own best self-interest?

If the TEA Party supports U.S. membership in the WTO, then I’d like to understand how the TEA Party reconciles that stance with the fact that deficit spending is necessary to offset the negative consequences of a trade deficit?  Also, does the TEA Party believe that it’s possible to balance the federal budget while enduring a continuing trade deficit?

Thanks.  I look forward to your reply.

I hope I get a response.  I suspect that the TEA Party hasn’t really given foreign trade much thought.  If they did and if they came to realize that membership in the WTO is “government intervention” in the extreme, and that trade deficits only exacerbate deficit spending, I believe they could become a formidable force in the move to take back our right to manage trade in our own best self-interest.

Morici Blames Economic Woes on Trade Deficit!

http://www.cnbc.com/id/44371467/comid/5#comments_top

I almost fell over when I saw this editorial by economist Dr. Peter Morici.  The following paragraphs say it all:

Jobs creation remains weak, because temporary tax cuts, stimulus spending, large federal deficits, expensive and ineffective business regulations, and increased health care mandates and costs do not address structural problems holding back dynamic growth and jobs creation-the huge trade deficit and dysfunctional energy policies.

… Simply, dollars sent abroad to purchase oil and consumer goods from China, that do not return to purchase U.S. exports, are lost purchasing power. Consequently, the U.S. economy is expanding at less than 1 percent a year instead of the 5 percent pace that is possible after emerging from a deep recession and with such high unemployment.

Without prompt efforts to produce more domestic oil, redress the trade imbalance with China, relax burdensome business regulations, and curb health care mandates and costs, the U.S. economy cannot grow and create enough jobs.

Perhaps this is why the head of the WTO has been wringing his hands over a possible return of “protectionism.”  (See my previous post.)  Is it possible that Morici is expressing in public something that American economists have been, in private, been grousing about for some time now?  Is it possible that change is in the wind?  I doubt it, but you can’t blame me for grasping at reasons for optimism when there are so few to be seen.

August Employment Report in Line with “New Normal” Economy

http://www.bls.gov/news.release/empsit.nr0.htm

The headline numbers from the “establishment survey” portion of the August employment report (link provided above) are downright awful.  No jobs added.  Pay is down.  The work week shrank a little.  But the news from the “household survey” portion of the report isn’t as bleak.  While unemployment held steady at 9.1%, the “employment level” actually grew for the first time in five months by a healthy 331,000 workers.  But, like magic, 366,000 workers from the “mysteriously vanishing labor force” reappeared, so the unemployment rate remained the same.  (If they hadn’t reappeared, the Bureau of Labor Statistics would have been in the uncomfortable postion of explaining how unemployment fell by 0.2% when the economy added no  new jobs.) 

Here’s the calculation, followed by the chart of unemployment:

Unemployment Calculation     Unemployment Chart

Notice on the chart how my calculations of unemployment (U3a and U6a) marched in lockstep with the BLS’s until the recession really took hold and unemployment began to climb.  That’s when the BLS began banking workers in its “mysteriously vanishing labor force” pool, keeping the official unemployment rates (U3 and U6) artificially low. 

What you can see is that the August data falls in line with the “new normal” economy, where something in the range of 9% unemployment is here to stay.  In fact, I’ll predict at this point that unemployment will never improve (with the possible exception of an optimism-fed, brief rebound in the economy following the election of a new president in 2012) until U.S. trade policy is dramatically revised. 

And here are the charts of the parameters I’ve been following: 

Labor Force & Employment Level     Unemployed Americans     Per Capita Employment

As you can see, all of the data is range-bound at the “new normal.”  The problem is that the longer the “new normal” is with us, the more Americans (especially the younger ones) will accept it as “normal” and pressure on political leaders to do anything about it will slowly wane.  It’s just sad. 

* * * * *

The establishment survey breaks down the change (or lack of change) in jobs as follows:

• Health care:  + 30,000
• Computer systems design & services:  + 8,000
• Mining:  + 6,000
• Temporary help:  + 5,000
• Manufacturing:  – 3,000
• Government:  – 17,000

• Information Industry:  – 45,000

• Construction:  unchanged

• Trade, transportation & utilities:  unchanged
• Financial activities:  unchanged
• Leisure & hospitality:  unchanged

An Interview with the Leader of the World Trade Organization

http://www.cnbc.com/id/44352671

Here’s something rich!  Yesterday, the leader of the WTO (World Trade Organization) stated that there’s no way that the world can return to “protectionism.”  (See the above link.)  If only the CNBC reporter who took the interview was well-versed enough to know that the WTO is the world’s biggest practitioner of protectionism, the interview could’ve gotten interesting.  Perhaps it’d have gone something like this:

CNBC:  But Mr. Lamy, doesn’t the WTO actually use protectionist policies to the benefit of undeveloped and developing nations, including China?

Lamy:  No, no.  Those policies are what we refer to at the WTO as “developmentism.”

CNBC:  So “developmentism” works well for these nations?

Lamy:  Oh, very well, indeed!  Just look at how successful it has been in China.  Millions of people have been lifted out of poverty.

CNBC:  But “developmentism” isn’t applied evenly.  What do you call the policies applied to other nations, the U.S. being the prime example?

Lamy:  That’s free trade.  Free trade is a marvelous thing that has been very beneficial for the U.S. in many ways.

CNBC:  In what ways, exactly?

Lamy:  Many ways.  Ways that are difficult to quantify and thus difficult for the average American to comprehend. 

CNBC:  So developmentism works well for some nations while free trade is better for others?

Lamy:  I guess you could put it that way.

CNBC:  So when does “developmentism” stop being the right trade policy for a nation as opposed to free trade?  Have any nations developed yet to the point where they graduate from “developmentism” to free trade?

Lamy:  No.

CNBC:  I’m confused.  If “developmentism” helps a nation develop, then wouldn’t the continued use of “developmentism” by wealthy nations allow them to develop even further? 

Lamy:  No.  The use of “developmentism” by wealthy nations is actually “protectionism.” 

CNBC:  How does that work?  How does “developmentism” morph into “protectionism” when it’s actually the same set of trade practices? 

Lamy:  Oh, look at the time.  I’ve got to run.  I’m late for a dinner with Chinese trade delegates.  We must talk more again some time. 

There are actually a couple of aspects of this article that I found encouraging.  First, that Lamy is jittery enough about the potential for a return of protectionism in the U.S. that he feels it necessary to speak out against it.  Secondly, read the comments by readers.  (My own is amongst them.)  With one exception, readers were unanimous in their criticism of Lamy and the WTO. 

I also found it interesting that, shortly after I posted my comment, the article was yanked from CNBC’s front page and I actually had to do a word search to find it again.  Not that my comment alone was responsible, but the tidal wave of negative comments. 

As I wrote my comment, a thought occurred to me that will be the subject of an upcoming post.

Green Job Maker Succumbs to Imports

http://www.reuters.com/article/2011/08/31/solyndra-idUSN1E77U0ZF20110831

Remember when “green jobs” were going to be the salvation of our economy?  When Obama made this claim, I questioned how such “green jobs” would be immune to the effects of the same idiotic trade policy that sank the rest of our manufacturing sector.  Now comes proof of that.  Yesterday, Solyndra, a solar panel manufacturer, filed for bankruptcy. 

In 2009, Solyndra received a half-billion dollar loan guarantee from the federal government, with Obama using Solyndra as an example of the new “green economy,” one that would create 3,000 jobs.  Only 1,100 workers remained on the payroll when the company filed. 

This morning on Good Morning America came revelations that Solyndra’s loan guarantee may have had more to do with payola than investing in the “green economy.”  It seems that the owner of Solyndra was a huge backer of Obama in the 2008 election. 

“We smelled a rat from the onset,” Representatives Fred Upton of the Energy and Commerce Committee and Cliff Stearns of the Oversight and Investigations Subcommittee said in a joint statement. “In this time of record debt such disregard for taxpayer dollars cannot be tolerated.”

As though Republicans haven’t done the same thing. 

Henry Waxman of the House Committee on Energy and Commerce had this to say:

We should be doing everything possible to ensure the United States does not cede the renewable energy market to China and other countries.

Oh, really Mr. Waxman?  Does that include withdrawing from the World Trade Organization and fixing trade policy that gives away not only the renewable energy market but every other market in the U.S.? 

The “green economy” is only the latest to be cast upon the scrap heap of other “new economy” ideas that were supposed to be our economic salvation.  Remember when “high tech,” including personal computers and cell phones, were to be our salvation?  Even though both were developed in the U.S., is a single one made here any more?  Remember when we were going to become a “service-oriented” economy, as though manufacturing no longer mattered and we could build an economy out of continually emptying our closets to have our clothes dry-cleaned, or grow grass faster and build an economy out of having it mowed?  Remember when housing would be our economic salvation?  Remember when NAFTA (the North American Free Trade Agreement) would somehow magically create jobs while moving factories to Mexico?  Or how about when we could build an economy around infrastructure spending?

It’s been a decades-long, steady stream of BS with the intended purpose of obsuring the truth:  trade deficits don’t work.  You can’t have a viable economy while carving out and giving away its biggest sector – manufacturing.  The American people know it.  What will it take for economists and political leaders to get a clue?