America’s economy is locked in a downward spiral toward socialism.

January 12, 2022

Empty store shelves. Runaway inflation. Labor shortages. Auto production way down for lack of chips. The Federal Reserve ready to start jacking up interest rates and start dumping bonds into the market. And have you noticed what’s happening with the trade deficit?

Probably not, so I’ll fill you in. It exploded in September, soaring to $81.4 billion, crushing the previous record of $73.2 billion set the previous month. As announced by the Commerce Department last week, the trade deficit in November was just shy of that September record. But that doesn’t begin to tell the story. The deficit in manufactured goods soared to a new record of $96.3 billion in November, eclipsing the previous record set only two months earlier by a whopping $5 billion.

Look at this chart of the trade deficit in manufactured goods: https://petemurphy.files.wordpress.com/2022/01/manfd-goods-balance-of-trade.pdf. We’ve been told that those empty shelves are due to Covid-related labor shortages at overseas manufacturing plants. In light of the trade data, that’s clearly a lie! If it were true, imports would be declining instead of shattering records. And the trade data is corroborated by the massive backup of container ships waiting to unload at west coast ports.

The fact is that warehouses across the country are stuffed to the rafters with goods, so much so that they can’t keep track of where everything is. Items that you see missing from the shelves are here in abudant supply, but buried so deep in the warehouse by more recent shipments of other things that they can’t even get at it. As a perfect example, the state of Florida recently discovered a stash of a million Covid test kits that had expired, buried so deep amid other stuff that they had completely lost track of them. So they’ll head straight to the landfill.

Our economy is stuck in a downward spiral. Trade deficits suck money out of the economy – money that can only be pumped back in through deficit spending. A trade deficit of $96 billion per month requires federal deficit spending of at least a trillion dollars per year just to keep it from sinking into recession. The only way to pump that much deficit spending into the economy is through social programs – socialism – that only fuels more demand for imported goods, making the trade deficit bigger. More deficit spending, more inflationary pressure and higher interest rates, more disincentive to work for a living. More labor shortages. More socialism.

The U.S. ran its last trade surplus in1975. Thanks to both parties’ embrace of globalism and free trade since the end of World War II, we’ve now had forty-six consecutive years of trade deficits that have transformed America from the richest country the world had ever seen – the world’s preeminent industrial power – into a skid row bum, begging the rest of the world, especially China, to loan us money by buying our debt. The optimism I felt when the Trump administration recognized the problem and began slapping tariffs on Chinese imports is gone.

There’s no hope that Biden will lift a finger to address the trade deficit. Trump left him a perfect tool to tackle it – the “Phase 1” trade deal with China, in which China itself agreed that if they didn’t meet quotas for increasing the purchases of American-made goods, then the U.S. would slap a 25% tariff on the half of Chinese products that weren’t already hit with tariffs. By the end of 2020 they had failed miserably, making a mockery of the deal. Not only did Biden not follow through on the deal, it was many months before he even acknowledged its existence. With only one month of data left to be tabulated for 2021, China’s performance vs. their obligations is even worse. Still the Biden administration won’t act. Not surprising. Biden’s decades of experience in the Senate make him one of globalism’s architects.


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.