The Driving Force Behind America’s Drift Toward Socialism

December 10, 2020

One clear message that emerged from the election as the Democratic Party suffered significant losses in the House – and even Democrats agree with the conclusion – is that Americans overwhelmingly loathe the notion of socialism taking root here. Though the number of true socialists amongst the Democrats is small, Republicans’ constant labeling of the whole party as such was effective. Americans want nothing to do with socialism.

However, there has been a slow drift toward socialism over the decades as one social safety net program after another has been added. The Covid-19 pandemic has dramatically accelerated the trend with stimulus checks provided to all, unemployment bonus checks that make it signifcantly more lucrative to remain unemployed, eviction moratoriums and others. Socialists are now emboldened to demand more, things like universal minimum incomes provided by government, universal healthcare, college debt forgiveness and free college tuition among many other things.

Ask anyone about the cause of the drift toward socialism and most will blame the Democratic Party, home to a few hard-core socialists like “The Squad” in the House and many more progressives and liberals who don’t quite merit the socialist label. However, most people would be shocked to learn that Republicans and conservatives in general are just as culpable for the drift toward socialism, for both parties alike have fostered a policy that increasingly makes Americans dependent on the government nanny-state. I’m talking about the “free trade” policy that both parties have happily and eagerly embraced to the delight of their corporate benefactors.

America’s embrace of free trade, which began in the wake of World War II, has transformed us from the world’s richest economy and preeminent industrial power into the world’s skid row bum. How? Here’s how it works. Every dollar spent on an imported product is a dollar taken out of the economy. If not offset by a dollar spent on an American-made product by someone in a foreign country, then it’s a dollar lost from our economy forever, leaving us a dollar poorer and with one dollar’s worth of a manufacturing job gone.

The only way to make the economy whole again is for the government to put a dollar back into the economy. The only way it can do that is by selling a bond. To whom? To that foreign country where you spent that dollar on one of their goods. How does the dollar get put back into the economy? Through a government program: funding unemployment, welfare, health care for those who can’t afford it, etc. In essence, every dollar’s worth of our trade deficit is an investment by an American consumer in socialism.

Every dollar of our trade deficit further divides our society into the “have” and “have-not” classes as the erosion of the manufacturing sector of our economy worsens, driving people who once earned high wages and benefits into the unemployment line, where they have no hope of returning to the quality of life they once enjoyed. It’s only natural that this “have not” class of society would turn to socialism to make them whole again.

It doesn’t seem like a big deal until you understand the enormity of the problem. Last week, the Commerce Department released the trade data for the month of October. Our trade deficit for just that month was $63 billion. But that’s not the worst of it. That figure includes a surplus in “services,” much of which is nothing more than paperwork transactions. The real concern is goods – manufactured goods, to be precise – since that’s where the jobs are and that’s where a deficit does real damage to the economy. The deficit in manufactured goods in October was $81.3 billion, just shy of the record set only two months earlier. Annualized, that’s a deficit of $976 billion. And it’s rapidly getting worse. Here’s a chart of the data: https://petemurphy.files.wordpress.com/2020/12/manfd-goods-balance-of-trade.pdf.

Think about that. Almost a trillion dollars per year must be injected back into the economy by the government in the form of socialist programs. The United States has been running an ever-growing trade deficit for forty-four consecutive years, since our last trade surplus in 1976.

If America wants to avoid becoming a socialist country, it’s imperative that Americans wake up to the fact that it’s our enormous trade deficit that’s pushing us fast and hard in that direction. As long as the U.S. pursues “free trade,” the worse matters will get. History has shown that only the use of tariffs can assure that a balance of trade is maintained.


China Falls Short of “Phase 1” Goals Again in October

December 8, 2020

China signed the “Phase 1” trade deal with the U.S. in January, in return for the U.S. postponing a second round of tariffs on the remaining half of all Chinese exports to the U.S. China committed to meeting specific targets for imports of four classes of American goods for 2020 and 2021: manufactured goods, energy goods, agricultural goods and total goods.

The data for October was released on Friday and, once again, China has fallen far short of meeting its commitments. With only two months left in 2020, China is behind its commitment for manufactured goods by 30%. It’s behind in energy products by 64%. It’s behind in agriculture goods by 41%, and is behind in total goods by 35%. Here’s the year-to-date data: https://petemurphy.files.wordpress.com/2020/12/phase-1-china-trade-deal-2020-ytd.pdf.

Though China once again fell far short of its goal, it’s worth noting that they did increase their imports slightly. Most notably, for the 2nd month in a row, they exceeded the monthly goal for agriculture imports, making up a little lost ground toward meeting its 2020 commitment for that category of goods. Ten months into 2020, they are now 2 for 40 in terms of meeting its commitments (10 months times 4 categories of goods).

It’s also worth noting that China’s imports of American goods in October set a record of $14.7 billion, beating the old record of $13.6 billion set in December of 2017. However, that’s little cause for celebration because the goods trade deficit with China actually worsened to $30.1 billion, thanks to the 7th consecutive monthly increase in imports from China, which rose to $44.8 billion. The net result of the “Phase 1” deal is that our trade deficit with China has actually worsened in 2020.

Trump made the same mistake with the “Phase 1” deal that Obama made when he vowed to double U.S. exports to reduce our trade deficit. He focused on exports while ignoring imports. It’s impossible for the U.S. to export its way out of a trade deficit with a badly overpopulated nation with a bloated labor force that is dependent on manufacturing for export. When Trump’s focus was on the use of tariffs to reduce imports from China, we made significant progress in cutting our deficit. When he took additional tariffs off the table with the signing of the “Phase 1” deal, that progress was reversed.

It’s time to kill this dumb deal and levy more tariffs on China. If Trump won’t do it in his waning days, then Biden has an opportunity to show that he stands with American manufacturing and American workers. But he won’t.