On the surface, yesterday’s release of May trade data sounded like good news. The trade deficit fell for the 2nd consecutive month to $48.6 billion after hitting $52.6 billion in March, preceded by the worst level of the Obama administration in January – $53.0 billion.
Good news? Not so fast. Nearly all of the decline was due to a drop in oil prices. That in itself is good news, but what would make oil more affordable for all of us is if jobs were plentiful and incomes were rising. So what happened in May regarding the more important category of manufactured goods, where the jobs are to be found? There, the news is grim. The deficit in manufactured goods rose to the 2nd worst level of the Obama administration – $41.3 billion. (That’s an annual rate of nearly $500 billion and represents a loss of about 7 million manufacturing jobs.) And, for the 8th consecutive month, manufactured exports lagged the president’s goal (set in January of 2010) of doubling in five years. Here are charts of the balance of trade in manufactured goods and a chart of manufactured imports and exports vs. President Obama’s goal: Manf’d Goods Balance of Trade Manf’d exports vs. goal
Overall exports, including all goods and services, failed to meet the president’s goal for the 10th consecutive month. Here’s the chart: Obamas Goal to Double Exports. And here’s a chart of the total trade deficit since President Obama set that goal, the cornerstone of his economic policy, in January, 2010: Balance of Trade. As you can see, judging by total trade, May was merely a “one-step-forward” month in the “one-step-forward, two-steps-back” decline in manufacturing that has persisted not just for two years, but for decades.
As I predicted, this “plan” to double exports in five years, the cornerstone of President Obama’s economic plan, is already proving to be an abysmal failure. Merely saying that we will double exports in five years was no plan at all. It was wishful thinking. Assembling a team of CEO’s of “American” manufacturing companies to address the issue of exports wasn’t a strategy, it was a show. There is nothing that anyone can do to boost exports, since exports are driven by foreign demand and no one in America has any control over that.
“Nonsense,” you might counter. “There’s a lot we can do to make ourselves more competitive.” True, but there’s nothing you can do to stop foreign competition from working just as hard to remain competitive, as they surely do and will. The end result is no change in our competitive position and no change in foreign demand for American-made products. Imports, on the other hand, are totally within our control, which means that the ability to force a return to domestically manufacturing the products we consume is also totally within our control, if only we choose to exercise that power, through the use of tariffs, quotas and other import controls.
“We can’t do that; international law prohibits it” you might say. Baloney. There is no such thing as “international law.” There are only obligations that go along with the terms of agreements, treaties and international organizations. It is completely within our power to terminate agreements and withdraw from treaties and international organizations (like the World Trade Organization) any time we want. Sure, it would result in some turmoil. But when did Americans vote to cede their rights to international organizations in order to avoid a little turmoil? The point is that there are plenty of actions the president can take to immediately have a major impact on jobs and the economy, even without the consent of Congress, if only he had the intestinal fortitude. He doesn’t. He’s content to paper over our problems with more deficit spending designed to obscure the fact that, thanks to decades of idiotic trade policy, America is in decline and Americans are growing poorer.
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My charts on trade in manufactured goods contain a major revision this month. I discovered that my data was understating the size of the deficit in manufactured goods by the amount of the surplus in services. I had been subtracting from the total trade deficit the balance of trade in food, feeds and beverages and in petroleum products to arrive at a figure for manufactured goods, forgetting that services were included in the total balance of trade. I should have been using the balance of trade for goods alone, a larger deficit than the total deficit because of the surplus in services.
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This post is my first since returning from a 3-week hiatus at my north woods retreat, where internet access is available only by taking a 13-mile drive to town, time that is better spent in my little fishing boat, jigging for walleye and bass. I have a lot of catching up to do, so stay tuned. Here it comes.