Make America Great Again

October 25, 2016

I wonder how many post-baby boom Americans – Gen Xers and millenials – can even relate to Donald Trump’s campaign slogan.  “Make America Great Again?”  What’s not great about it now?  We’re the leader of the free world – the most powerful nation on earth.  We have a high standard of living and every modern convenience you can imagine.  We have cell phones, Facebook, Twitter and YouTube.  We make ten bucks an hour schlepping lattes at Starbucks and have nice little apartments where we can go to watch The Voice and Dancing with the Stars in the evenings.  How much better could it get?

Undoubtedly, the once-great America that Trump remembers – an America that anyone under 50 is too young to have ever known – was the post-World War II America.  It was a land of almost unimaginable industrial might.  By the end of the war, the shipyards on the West Coast were building complete destroyers from the keel up in only two days.  The Willow Run bomber plant in Detroit was cranking out a new B-24 bomber every hour, day and night, seven days a week.  Other plants cranked out trucks and tanks by the thousands.  And massive steel mills all around the country that stretched for miles kept all of these plants supplied.  Neither Germany nor Japan nor any other nation on earth could even come close to matching that kind of industrial output.

When the war ended, industry transitioned back to a peacetime economy.  The factories in Detroit resumed making cars and all of the other thousands of factories around the country resumed making appliances and every other product imaginable.  American products were the envy of the world.  European cars were laughable compared to American cars.  I can remember taking Europeans for a ride in my car and their astonishment at the latest feature – cruise control.  Hell, indoor plumbing and sanitation weren’t even commonplace in Europe back then.  And Asia was downright primitive.

Anyone who was a high school graduate could get a good job at the local mill or assembly plant making enough money to buy a home and a car – as much money as a college graduate, though the college graduate would eventually earn more with experience and advancement.  Not only was the pay good, but health care was often provided for free as a benefit.  Co-pays and deductibles?  Those concepts didn’t exist.  And a good pension was a given.  Companies competed for college graduates.  Each could choose from a half dozen different offers.

The U.S. space program quickly left the Russians in the dust, putting men on the moon while the Russians had barely moved beyond sending monkeys up for a couple of orbits.  America was the world’s bread basket.  Even the Russians were dependent on American grains.  And everything about American culture – our clothing, music, movies and magazines were the envy of the world.

That’s when America was great, in a way that those who didn’t live it can’t even imagine.  But even while all this was going on, the seeds of America’s decline had already been sown.  Weary of two world wars in as many decades, the time had come to address the high rates of unemployment in overpopulated nations like Germany and Japan that had fostered the rise of its fascist leaders.  Eager to put their new, untested theory of free trade to the test, economists convinced world leaders that free trade was the route to global peace and prosperity.  So in 1947 the U.S. signed the Global Agreement on Tariffs and Trade, or “GATT,” beginning the process of dismantling the tariff structure that had helped build America into the world’s preeminent industrial powerhouse.

What could it hurt?  Sharing a little of the wealth seemed a small price to pay to prevent the next war, one that might doom humanity, in light of how the last one just ended with the dawn of atomic weapons.  Besides, the economists convinced us, growth in the world economy would only add to the demand for American products.

It started innocuously enough.  A few Volkswagens from Germany.  Toys and souvenirs and trinkets from Japan.  The words “made in Japan” became synonymous with “cheap junk.”  Then came small Honda motorcycles, soon to be followed by cars of the same brand – cheap, two-cycle, chain-driven death traps that were painted paisley and sold as novelty items.

But that trickle quickly evolved into a tidal wave.  By 1975 our trade surplus had vanished and our national debt, which had been shrinking dramatically since the end of World War II, began to rise again.  In the 1990s, the Clinton administration passed NAFTA, exploding our trade deficit with Mexico and then, as its closing act, granted China “most favored nation” trade status.  We all know how that went.  2016 marks our 40th consecutive year with a trade deficit.  And the $13 trillion growth in our national debt during that period can be blamed entirely on the trade deficit’s cumulative drain on the economy.

Returning to post-war America, we were a nation of 150 million people with a seemingly boundless supply of resources and wide open spaces.  During the morning rush hour, you had to wait through two traffic light changes to clear the intersection instead of one.  President Eisenhower had just commissioned the construction of the interstate highway system.  Freeways were virtually devoid of traffic.

The term “illegal alien” didn’t exist in those days.  There were migrant workers who came to harvest crops that had to be hand-picked and, when the harvest was over, they were gone.  Then, something changed.  They didn’t leave.  We began to notice large groups of Mexicans gathered in parking lots – “day laborers” waiting for pickup trucks to take them to some job site – probably a house under construction – where the contractor was happy to have the “off the books,” tax-free labor.  Now, people who had lost their jobs in the auto industry and needed construction work found themselves displaced yet again.  And our population that once grew by a million people per year began growing at two or three times that pace – even ten times that pace when you include the results of the amnesty programs for illegal aliens.  Now we’re a nation of 325 million.  In spite of that population growth, which economists call a driver of economic growth, good-paying full-time jobs are scarce and household incomes and net worth, for all but the top few percent, are declining.

Born two years after the signing of GATT, at the age of 67, I can honestly say that I have never once seen my country stand up for its citizens and workers.  Oh, there’s been plenty of times when our military has asserted itself, often ill-advisedly, in some foreign conflict.  But I’m talking primarily about trade negotiations, but also other diplomatic negotiations, like deals to keep North Korea in check or, more recently, Iran.  Not one damn time do I remember the U.S. coming away with a deal that was good for American workers.  Can you?  If so, please feel free to refresh my memory.

There’s a very solid reason why free trade and globalization have failed Americans.  It’s the inverse relationship between population density and per capita consumption at work.  Instead of being an engine of economic growth, our population growth has been cancerous and toxic, eating away at per capita consumption.  And by co-mingling our economy with those of grossly overpopulated nations, the effect has been accelerated.  The result is that young Americans face the prospect of being the first generation to fare more poorly than their parents.

By far, the two factors most critical to restoring America to its nearly-forgotten greatness are first a dramatic shift in trade policy away from “free” trade to a focus on balance.  All trade deals must be based on the premise that the U.S. will buy from its trade partners no more than they are willing to buy from us.  Contrast that with today’s trade policy that says, “If you can make it and get it here, we’ll buy it.”

Second, run-away population growth that is fueled almost entirely by equal parts of both legal and illegal immigration must be reined in.  Illegal immigration is the place to start.  But even legal immigration needs to be dramatically curtailed.

Donald Trump is the first candidate in my long memory who has promised to do exactly these two things – to tear up existing trade deals and start over, putting America first, and putting an end to illegal immigration.

I personally don’t much like Donald Trump.  Never have.  It’s a shame that this message has been overshadowed by some of his antics and the things he’s said that have been caught by open mics.  But as someone who attended an all-male high school, followed by an all-male university, followed by three years in the navy, you can believe me when I say I’ve heard worse things spoken more commonly than some would like to believe.  But that’s not an excuse for his behavior.

It’s like this:  imagine that we’re at war, and it’s going badly.  We need to replace the general in charge.  He’s a nice guy, one we’re all proud to serve under and be associated with, but ineffective.  We have two candidates in mind to replace him.  One is similar – a great person but just as ineffective and likely to yield the same results.  The other is a foul SOB, but one who knows how to kick ass and get things done.  Like I said, it’s a war.  Do we want to win or don’t we?  There are times when the latter choice is the right one, and this is one of those times.

In two weeks we have a chance to reverse America’s decline.  We have a chance to put an end to our role as the host in globalization’s host-parasite relationship.  It’s a chance that I began to doubt would ever come.  It may not come again. Let’s stand up for America for a change.

 

 

 

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Globalization Proponents Starting to Sweat

October 11, 2016

http://www.reuters.com/article/us-imf-g-idUSKCN12629J

As illustrated in the above-linked article, advocates of globalization, an experiment embarked upon in the wake of World War II to spread prosperity and avert future wars, are growing desperate to stave off its collapse.  It has indeed spread prosperity to some but a fatal flaw has been exposed.  Instead of turning overpopulated and desperately poor nations into Western-style consumers that would eventually lift the growth rates of economies that they scavenged in the first place, globalization has evolved into more of a host-parasite relationship that has left the “host” economies of Europe (most notably Great Britain, but there are others) and especially the United States, weakened, angry and ready to revolt.  Great Britain already has.  America and others soon will.

Globalization was doomed from the outset thanks the failure of economists to look beyond the resource challenges of overpopulation to consider the economic ramifications of declining per capita consumption and rising unemployment.  Now, a half-century into the experiment, instead of developing into the economic “growth engine” that its architects envisioned, it more resembles a sort of poverty-sharing program where the fortunes of some people have improved somewhat, but only on the backs of the more prosperous who now find themselves unwilling and even unable to sustain it.

Now the world’s ruling elite are calling for a coordinated effort among the host nations and their central banks to boost deficit spending and to keep interest rates near zero, ignoring the risk of eventual economic collapse posed by such reckless policies.

“On Thursday, Bank of England Governor Mark Carney said policymakers now have a better recognition of the need for their actions to ‘more immediately, tangibly and clearly, transparently benefit larger segments of the population.'”

All along, we have been assured by the advocates of globalization that all of us benefit, but those benefits may just be too complicated and ethereal for the rest of us to grasp.  No one, at least not in the host countries, is buying it any longer.  Why didn’t globalization provide more benefits that were “tangible, clear and transparent” from the outset?  Because it can’t.  It’s simply impossible for the host in a host-parasite relationship to experience any benefit.  So now they want to administer a little food and medicine to the hosts by jiggering the system, keeping them alive a little longer.

Reducing poverty in the undeveloped world is a noble goal.  I might even be able to get on board with globalization if, at the same time that the host economies were being scavenged, there were provisions to address the root cause of the poverty – gross overpopulation – that necessitated globalization in the first place.  (Before many of you who haven’t read Five Short Blasts freak out, I’m talking about doing this through economic incentives to encourage people to have smaller families.)  But that’s not what globalization’s advocates want.  They not only want to scavenge host economies, but they want the host nations to take in the overflow population from the rest of the world in order to fuel the revenue growth that the global corporations – who fund the campaigns of the ruling elite – demand.

Regardless of how the U.S. presidential election turns out, the pressure to scrap the globalization scheme will only intensify.


Trouble Signs in the Employment / Labor Market Picture

October 8, 2016

The September employment report, released Friday by the Bureau of Labor Statistics, continues a trend that has characterized much of 2016.  Job growth is slowing.  The economy added 156,000 jobs, but that’s the third straight monthly decline and is below the year-to-date average for 2016 (178,000 jobs per month), which is already down from 2015 (229,000 jobs per month).

Economists were at odds over how to interpret this latest report.  Some called it a “goldilocks” report – not too hot and not too cold.  In fact, on the surface, that might seem an apt analysis.  156,000 new jobs should be enough to absorb the growth in the labor force that results from population growth.  Yet, unemployment rose to 5.0% after hitting a low of 4.7% in May.

What’s happening is that what I have referred to in the past as the “mysteriously vanishing labor force” is reappearing.  It’s not a one-month phenomenon, but a trend that’s been building for well over a year now.  To better illustrate what’s happening, I ran some numbers dating back to the onset of the financial crisis that began at the end of 2007.  I tracked the change in the labor force and compared it to what the real growth in the labor force has been, assuming that people still need to find work to support themselves in about the same proportion that we’ve seen historically.  That is, about half of the population.  In other words, if the U.S. population grows by three million per year, it’s safe to assume that about 1.5 million of those people need work to support themselves and their dependents.  That’s been the historical norm.

If the growth in the labor force recorded by the BLS didn’t keep pace with the actual population, or if it actually contracted, then that’s a labor force “backlog” that the economy will eventually have to absorb and put to work at some point.

I then compared this backlog to the “employment level” reported by the BLS from its “household survey” portion of the monthly employment report.  Here’s what I found:

labor-backlog

From 2008 until present, the actual labor force grew pretty consistently each year, along with the growth in the population.  (2011 was lower because of an adjustment to the U.S. population based on the 2010 census.)  However, note the 2nd line – the growth (or contraction) of the labor force reported by the BLS.  Until last year, only one time did the BLS-reported growth exceed the actual growth in the labor force – in 2012.  Each year that it was less, people actually dropped out of the labor force – thus, the “mysteriously vanishing labor force.”  My more cynical side suspects the Obama administration of manipulating this figure to make the unemployment rate lower.  But let’s assume that people actually did drop out, employing an array of tactics to survive financially, at least for some period of time.

The third line is a calculation of the “labor force backlog,” a cumulative tally of how many people have left the labor force.  For example, in 2009 when the BLS reported that the labor force actually contracted by 1.544 million workers, this figure added to the actual growth in the labor force of 1.324 million workers, produced a backlog of 2.868 million workers.  Added to the 2008 figure, the backlog by the end of 2009 was 3.505 million workers.

Line 4 is the change in the employment level reported by the BLS based on the household survey.  Again using 2009 as an example, the BLS reported that the employment level actually fell in 2009 by 5.356 million people.  It was a horrible year.  As a result, the unemployment rate actually soared to 9.9% in 2009 from 7.3% in 2008.  (It was 5.0% in 2007.)

With all that said, here’s the problem I see developing.  In 2015, the growth in the labor force reported by the BLS exceeded the actual labor force growth.  In other words, people in the “labor backlog” rejoined the work force.  And through last month, that has accelerated dramatically.  In only nine months, the labor force has grown by an amount that would usually take almost two years.

Economists say that this trend is the result of an improved labor market.  People see the jobs picture brightening, making the time right to find a good job.  But I believe another factor is at play here.  The tactics used by displaced workers to survive the downturn have run their course.  Those who went back to school for more training and more advanced degrees (including those who scammed the system and used student loans to meet living expenses) are now saddled with all the student debt they can endure.  Those who went back home to live with Mom and Dad may have overstayed their welcome or have put their families in a financial bind.  Others may have exhausted the severance packages they received when they lost their jobs.  People need a source of income to survive.  The idea that people could simply drop out of the labor force without consequences was preposterous.

The labor force backlog reached a record 6.359 million people by the end of 2014.  As of last month, it’s dropped some to 4.9 million workers, but that’s still a huge backlog.  As of last month, workers are pouring back into the labor force at a rate that has exceeded the growth in the employment level, a trend that’s actually accelerating at the very same time that job creation seems to be slowing.  As a result, unemployment has begun to rise again. This trend is likely to begin to put downward pressure on wages and could actually reduce consumer confidence and slow the economy.  And, it should be noted, that much of the job creation we’ve seen in recent months has been in the restaurant and bar industry and in retail – sectors of the economy that are especially sensitive to consumer confidence.  They’re the first places people rein in spending when finances get tight.

All of this spells trouble for the economy in the coming months.