Obama’s Immigration Debacle

http://www.reuters.com/article/2013/11/26/us-usa-immigration-obama-idUSBRE9AO13120131126

Did you see Obama’s speech on immigration yesterday? If not, check out the video included in the above-linked Reuters article. His neatly planned event, complete with a backdrop of young immigrants designed to tug at our heartstrings, suddenly devolved into a disgusting spectacle in which his human props exposed themselves as more worthy of scorn than our sympathy.

In the wake of the Obamacare debacle that left Americans doubting his veracity and his commitment to helping the middle class, and the nuclear deal with Iran that further exposed his weakness in dealing with foreign affairs, he didn’t really need for Americans to find another reason to dislike and mistrust him more, but that’s exactly what he got when his backdrop of immigrants – many here illegally, no doubt – began lecturing him, shouting him down and demanding a halt to deportations of illegals. And he really didn’t need a reason for immigration fence-sitters in Congress to be swayed to the opposition, but that’s exactly what he got.  Then, as if to drive home just how soft he is on illegal immigration, he stopped secret service agents from evicting the unruly illegals and let them stay, trying to reason with them.

His backdrop of immigrants turned on him and exposed themselves to be nothing more than a bunch of squatters acting as though they have some sort of squatters’ rights that supercede our laws. (Reports this morning confirm that the immigrant who led the shouts against the president is, in fact, an illegal attending UC Berkley.)  It left the American people feeling like the victimized neighbors of a house where unruly squatters shout complaints as the sherriff shows up to evict them, only to be met by some bleeding heart ACLU attorney who takes up their side. It was truly a pathetic spectacle.

No doubt, the phone calls and E-mails are pouring into congressmen’s offices this morning to emphasize once again Americans’ opposition to illegal immigration and any attempts by the president to grant them amnesty. That’s the only good that comes out of this debacle.

China to Let Yuan Rise. Don’t Get too Excited.

http://www.reuters.com/article/2013/11/20/us-china-reform-idUSBRE9AJ09Y20131120

As reported this morning by Reuters in the above-linked article, it seems that China wants to allow its currency to rise further and faster in value.  Many have blamed China’s control of its currency – keeping it artificially low – for America’s enormous trade deficit with China.  A weak currency makes imported American products more expensive for Chinese consumers, and the correspondingly stronger dollar makes imports from China cheaper for American consumers, resulting in the large trade deficit, or so economists would have us believe.  So this should be great news for American manufacturers, right?

Not so fast.  I’ll use this news story to make the point once again that currency exchange rates have absolutely nothing to do with trade imbalances.  For every example you give me where a trade imbalance has responded to a change in currency exchange rate as economists would predict, I can give you an example of where exactly the opposite has happened.  Our trade imbalance with China is a perfect example.  In 2005, when China let the yuan begin to rise from its long-fixed rate of 8.6 yuan per dollar, our trade deficit with China was about $200 billion per year.  Today, the yuan has risen by 29% to 6.09 per dollar but, instead of falling, our trade deficit with China has soared to by 60% to $320 billion per year.  Here’s a chart:  China Trade vs Exchange Rate-3.

Economists reply that this is because the yuan is still too cheap.  Hogwash.  Either there is a relationship between exchange rate and trade balance or there isn’t.  If there were, then a change in exchange rate would have some effect – if not reversing the trade imbalance, then at least slowing its growth.  There’s simply no evidence of that here.

No doubt, a stronger yuan will put the squeeze on Chinese companies, cutting into their profits.  But no company faced with such a situation simply throws up its hands and concedes the market to its foreign competition.  It responds by cutting costs and improving efficiencies in order to maintain market share.  Thus, the trade imbalance remains.

The real driver behind our trade imbalance with China is the large discrepancy in population density between the two countries.  With a density four times that of the U.S., China’s per capita consumption is stunted by over-crowding.  When the economies of two nations are combined through free trade, the work of manufacturing is spread evenly across the combined population (jobs naturally flow to where labor is in the greatest state of over-supply), while the disparity in consumption remains.  The result is an inescapable shift in manufacturing to the more densely populated nation.  This is precisely what we’ve witnessed with China – a shift in manufacturing to that nation without a corresponding growth in their consumption.

A study of exchange rates vs. trade imbalances for all nations of the world finds no correlation whatsoever between the two, but yields a strong correlation between population density and trade imbalances.  The lesson to be learned is that free trade between nations grossly disparate in population density, as in the case of trade with China, simply doesn’t work.  A massive trade deficit is inescapable.  We see the exact same situation in trade with other densely populated nations like Japan, Germany, South Korea, Taiwan and a host of others.  The only hope for restoring a sustainable balance of trade is a return to the use of tariffs.  And the only hope of that ever happening is that economists pull their hands out of the sand and begin to ponder the full range of economic implications of population growth.

September Trade Deficit Another Example of “Zero-Follow-Through Obama”

As reported by the Bureau of Economic Analysis this morning, the trade deficit widened more than expected in September, as imports rose and exports fell.  The trade deficit worsened for the third straight month, rising to $41.8 billion.  Here’s the chart:  Balance of Trade.

The jump in the trade deficit was due entirely to a jump in imports and a decline in exports of manufactured goods.  The trade deficit in manufactured goods worsened to nearly equal the worst level of the Obama administration.  Here’s the chart:  Manf’d Goods Balance of Trade. 

You may recall that in January of 2010, President Obama vowed to double exports within five years.  Exports have now remained flat for 19 months.    In fact, if the president had followed through with this promise, the U.S. would have enjoyed a trade surplus of $8 billion in September instead of a deficit of $41.8 billion – a difference of $50 billion per month.  Here’s the chart:  Obamas Goal to Double Exports.  Most of the shortfall was in the category of manufactured goods:  Manf’d exports vs. goal. 

Obama’s failure to follow through with his promises on trade – first to rewrite NAFTA (never happened) and then to double exports (isn’t happening), is consistent with the lack of follow-through in implementing “Obamacare” and other broken promises like energy and global warming initiatives.  It’s now painfully obvious to all that this guy is “all blow and no go.”  His administration is completely inept. 

It’s just sad.  Most people, including democrats, believe the nation is heading in the wrong direction, just as they’ve believed for many years now.  There was so much hope when Obama was elected.  Now it’s become clear that we’ve been saddled with yet another do-nothing, bench-warming president when it comes to improving life for the American people.  And we can look forward to another wasted three years, during which this administration will accomplish nothing. 

* * * * *

Before leaving the subject of the September trade deficit, it’s worth noting a couple of additional items:

• Our trade deficit with China hit another new record in September – $30.5 billion, beating the previous record set only 2 months earlier.
• Since enactment of Obama’s trade deal with South Korea in March of 2012 – a deal that Obama hailed as a “big win” for American workers – our trade deficit with South Korea has soared.  It’s on pace to finish 2013 at $21 billion, 30% worse than 2012 and a 100% increase since 2010. 

Employment Level Plunges & Unemployment Soars in October by Most Since March, 2009

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

While the headline numbers from today’s October employment report paint a picture of an economy gaining steam – especially the 204,000 jump in jobs, as reported by the establishment survey, the household survey portion of the report is exactly the opposite, with a steep plunge in employment level and what would have been a steep rise in unemployment, were it not for – you guessed it – another 720,000 workers mysteriously vanishing from the labor force.  There has probably never been a monthly employment report in which the establishment survey and household survey have been so completely out-of-sync. 

If the BLS (Bureau of Labor Statistics)  is to be believed, the civilian labor force hasn’t grown by one worker since October of 2008, when the labor force was 154.876 million workers.  Five years later, in spite of the U.S. population growing by 11.5 million people (largely through the importation of foreign workers), the labor force still stands at 154.839 million.  Not a single person added to the population in five years has need of a source of income.  That’s just simply impossible.  It’s an outright lie, something we’re learning that the Obama administration is comfortable with doing.  The following chart is an update of what I call the “detachment from reality index” – the difference between the BLS calculation of unemployment, and a more realistic calculation in which the labor force grows in proportion to growth in the general population:   Detachment from Reality Index. 

In October, the employment level plunged by 735,000 workers to its lowest level since April.  If the BLS hadn’t played games with the size of the labor force and kept it at a fixed percentage of the population, unemployment would have soared by 0.5% to 10.8%, the highest level since August of 2012 and the biggest jump since the depths of the recession in March, 2009.  Here’s a spreadsheet of the data, taken directly from the BLS’s tables:  Unemployment Calculation.

As a result of growth in the population coupled with the drop in employment level, the employment-to-population ratio (or per capita employment), fell by 0.3% to its worst level since August, 2012 and is only 0.5% higher than its worst level of the recession.  Here’s the chart:  Per Capita Employment.

The number of unemployed Americans jumped by 836,000 in October, only half of which can be explained by the government shutdown.  At 17.4 million, the number of unemployed is the worst since August, 2012.  Here’s the chart:  Unemployed Americans.

Just add this picture of “an economy gaining steam” to the long list of other lies emanating from this administration – “if you like your insurance you can keep it,” “Benghazi wasn’t a terrorist attack,” “we’ll double exports in five years,” “I’ll renegotiate NAFTA,” “the trade agreement with South Korea is a big win for American workers,” – and on it goes.  Is it any wonder that Obama’s handling of domestic issues has earned him disapproval ratings that are as bad as those earned by Bush through his bungling of the Iraq war?