The Golden Goose, and Historic Boo Boos
There is only one golden goose, free people practicing free
enterprise engaged in making products.
And the American golden goose is severely wounded, with
business activity at 51.8% for June, 1991. Not only is the U.S.
economy now a four-cylinder engine, but that engine is misfiring,
with only two cylinders working.
Two thousand years ago the Christians, and the Communists
now, tried "from each according to their ability, to each accord-
ing to their need." Human nature being what it is, it didn't work
for either group.
Later, the New Deal/Great Society programs modified the
phrase to "from each according to their ability to pay, to each
according to their need". This is hardly working much better,
as the entitlement programs sap the earnings and purchasing power
of those working.
The problem with America today is that we have free people
practicing free enterprise engaged solely in providing services,
and have lost our manufacturing base to “free” trade.
Opportunity Knocks
The Bush (Vannevar) Symposium, held in Washington, DC, March
18, 1991 concluded that a revival of manufacturing here is essen-
tial to the future of American science and technology.
Federal and state programs are spending about $50 million a
year to assist manufacturers improve their efficiency and techno-
logy. Isn't that great!
Other nations, particularly Japan Inc., give extensive
support to encourage technological advances.
What our nation really needs is an industrial policy to
produce an expanding, full employment economy based on a strong
manufacturing foundation to produce the necessary golden eggs.
Today, “Americans are more united on whether the government
should do more to protect jobs from foreign competition: 87%
agree.” (AP survey published Feb. 6, 1993)
A dud duck
Services are certainly an important part of the economy, but
it is manufacturing that generates 2-3 service jobs, not vice
versa. All the booming economies of the 90's are manufacturing
countries: Germany, the Asian tigers. "Service" countries like
Britain and the United States are withering on the vine.
When you factor in the government-run post office, military,
state-owned businesses like transportation, power, research,
etc.; millions of government employees, the medical industry;
the "golden goose" private sector become very small indeed,
particularly if you remove the non-productive retail sector.
The P- words
The P- word "protectionism" may be anathema to the free-
trading, laissez-faire capitalists, but the P- word "prosperity"
for the United States demands protection of our wage levels and
standard of living from competition from virtual slave,
subsistence labor countries. All else is P- "poppycock"!
Equalization is practiced in many aspects of our lives.
The anti-trust Sherman Act of 1890 was an early attempt to equalize
business competition in the domestic United States.
The Federal Communications Commission attempts to equalize
competition in television and radio markets.
In horse racing, weights are inserted into the saddles to equalize the
weight each horse will carry.
We would be horrified if a football game were arranged between the
Princeton Midgets (10 year olds) and the Dallas Cowboys in the Super
Bowl, even though they both play by the same rules.
Why does the establishment think it is normal for the United States and
Bangladesh to compete without restraint, particularly when both play by
different rules.
Actually, the P- word "protectionism" is very much in evid-
ence in our trading laws and practices. We protect and subsidize
the sugar, grain, peanut and rice growers, the dairy farmers; we
protect the automobile, semi-conductor, research, steel, and
textile industries, as well as air, rail, marine, and public
transportation, medicine; and have quotas on many other products.
We protect the dollar. We regulate the gross quantity of
money. We regulate interest rates.
Other countries also practice protectionism: Japan, China,
Korea, India, Taiwan, the European Community and the east Europ-
ean countries.
What we are really trying to prove with this hybrid
protectionist-free trade policy has not been explained. Are we
really trying to bring the abject 88 million Mexicans, one billion
Indians, one billion Chinese, and other millions of Asian and
South American workers up to minimal U.S. standards of living in
food, housing, and medical care?
Actually, we are doing virtually nothing to alleviate the
condition of our own 30-40 million American citizens living below
the poverty line, let alone the starving people of Somalia or
Ethiopia.
Are the national politicians only paying attention to the
best organized lobbies and giving them protection, and letting
the rest disintegrate and disappear to the detriment of American
businesses and workers, the balance of trade deficit, and the federal
budget deficit?
Going down the tubes
The result of exporting the bulk of our manufacturing jobs
overseas since the 60's is obvious; we no longer have the tax
ratables in employers and employees to cover our federal expendi-
tures. We no longer have enough service and retail employers to
employ our population. We are rapidly going bankrupt, at the
rate of $350 billion a year, supporting our needy through
entitlement programs. We are going into debt to foreign
businesses, at the rate of $100 billion a year, to pay for our
imports of stereos, TV, radios, textiles, shoes, cars, etc.,
etc., etc.; items we manufactured for ourselves prior to 1960.
-----------------------------------------------
! Those whom the gods would destroy !
! they first make mad !
-----------------------------------------------
Voodoo economics
The voodoo economic policies of the 80's and 90's are to
reduce the purchasing power of the people, import most of the
manufactured goods people buy, stimulate the economy with
Keynesian $250 billion federal deficits, causing inflation, shill
for free trade, productivity, and against protectionism; and then
sit on our hands.
Gephardt
Rep. Richard Gephardt clearly saw the need and the solution
as he campaigned for the presidency in Iowa in 1988--do what
needs to be done to restore a manufacturing base to the American
economy.
Although the messenger was overwhelmed at the time, the
message is still true, and needs implementation today.
Roosevelt
Roosevelt and organized labor realized in the 30's that you
have to put purchasing power into the hands of the people in
order to have a robust economy.
The United States is still the largest market for cars,
television, radio and stereo sets, cameras, optical goods,
personal computers, cement, VCR's, clothing, shoes, and sporting
goods, and it is the height of lunacy to transfer the savings of
prior generations overseas to pay for our $100 billion annual
trade deficit when we can stop the hemorrhaging by producing more
of what we consume domestically--two-thirds of our Gross National
Product.
By so doing, we increase dramatically federal income tax
revenues, and reduce government expenses to support the
unemployed, the under-employed, the drop-outs, and those on
welfare, with a concurrent reduction in crime.
The Trade Deficit
Foreign trade deficits have been over $100 billion a year
since `83, or a minimum loss of national wealth of at least $800
billion. Couple this with the $1.9 trillion Reagan added to the
national debt, and the nation is $2.7 trillion poorer.
The $101 billion trade deficit in `90 breaks down as
follows:
Japan $41 billion
Taiwan $11 billion
China $10.4 billion
Hong Kong $ 5 billion
Korea $ 5 billion
Imported oil $30 billion
Canada + $200 million
Mexico + $200 million
European Community + $200 million
For the trade deficits of `80-`90, we owe Japan alone $350
billion.
Obviously, a "one world" economy is not working in our favor;
quite the contrary.
Selective Regulation
We regulate banks, insurance companies, the stock and
commodities markets, utilities, telephone companies, radio and
television, transportation.
We regulate against people's propensity for avarice and
abuse of power.
But heaven forbid that we regulate against the greed of
those seeking the lowest labor costs anywhere in the world
regardless of its impact on the welfare of our nation and its
workers.
A policy vacuum
Seriously, is it the goal of our foreign trade policy to
raise the standard of living of all 5 billion people in the world
to that of middle class Americans? A goal that will take a
thousand years, if ever.
Or is it really our policy to lower the standard of living
in America to that of the Chinese and the Indians in their
thatched huts?
What exactly is our policy and objective, if any?
So far we are not even making a serious effort to see that
mothers and children in the Third World--or vassal countries like
Egypt--get adequate food, let alone life necessities like pure
water and medical care.
Free trade is really a policy to impoverish America.
Free trade is reducing our country to that of a supplier of
raw agricultural products and lumber.
We are adrift on the siren seven seas of international
trade, with nothing to trade with but I.O.U.'s redeemable by the
sale of the nation's assets.
We are living like the poor, rich family in the decaying
mansion, selling the family jewels one by one to eat.
The free trade fuzzy-wuzzies
A small number of prominent economists, such as Jeff Faux of
the Economic Policy Institute, Washington, DC, have developed the
view that free trade may be an outdated notion.
Japan has succeeded tremendously well in world markets, yet
has one of the most restrictive trade policies in the world. In
other words, Japan takes care of its own!
The United States cannot be all things to all people. There
is a limit to idealism, and lines must be drawn to demarcate
what can be afforded, what must be preserved in order not to kill
the golden geese who lay the golden eggs that pay for all the
idealistic programs at home and abroad.
The U.S. should not be the primary market for every country
that wants to develop products for export. Two billion Asians can
develop trade among themselves; one billion Europeans are
developing trade among themselves, 500 million Africans can
develop trade among themselves, 500 million South and Central
Americans can develop trade among themselves.
All the largest countries in the world are basket cases:
China with 100 million unemployed, the USSR with no food on the
shelves, India changing its economic policies to survive, the
U.S.A. with 10 million unemployed, 30-40 million living at the
poverty level, and going deeper into debt every day.
Join the Libertarian Party
Obviously, the Republicans and Democrats are filled with the
fuzzy-wuzzies. If they truly believed in free trade, free
enterprise, laissez-faire capitalism and freedom, they would be
joining the Libertarian Party in droves and removing all quotas
on steel, cars, textiles, sugar, etc.
That no Republicans or Democrats are libertarians shows that
they are committed to a government-managed economy, and so it is
up to them to foster and protect a strong domestic manufacturing
base in the same way that they have fostered and protected a
strong agricultural base.
A prime example of the fuzzy-wuzzies is American criticism
of Japan and Europe for protecting their agricultural base while
America does the same.
The Pope
Pope John Paul II, in his May, 1991 encyclical entitled "The
Hundredth Year", referred to the "exploitation", neglect and
"quasi-servitude" that remains rampant throughout the third
world, as harsh as in the days of the encyclical "Of New Things"
100 years ago which addressed the impoverished conditions of the
industrial working class at the end of the 19th century.
He described some working conditions as "situations in which
the rules of the earliest period of capitalism still flourish in
conditions of `ruthlessness' in no way inferior to the darkest
moments of the first phase of industrialization."
Actually, conditions are not all that much better for the
survivors of America's once mighty industrial working class; most
are unemployed, underemployed, holding 2-3 jobs, or on welfare.
The Pope's recommendation is to accept the good qualities of
capitalism, harnessing self-interest and the profit motive, but
also insisting that capitalism needs to be controlled and limited
by other forces in society outside the business world.
He states that the objectives of an economic system should
be "a sufficient wage for the support of the family, social
insurance for old age and unemployment, and adequate protection
for the condition of employment."
In closing, the encyclical says, "The church...recognizes
the positive value of the market and of enterprise, but which at
the same time points out that these need to be oriented toward
the common good."
This is not a business cycle, this is a blood bath
Recession? Depression? Obviously depression!
The purchasing power of the American economy is definitely
depressed, with no relief in sight.
The solution is simple. Protect and rebuild our
manufacturing base in the same manner that Japan, India, China
and everybody else protects its workers from cheaper labor or
more advanced industries.
Originally, "voodoo economics" was used in the 80's to
describe the now discredited "supply-side" economic theory.
Supply side economics promised a rapidly rising tide, but
the only thing that rose was the percentage of income of the
richest Americans vis-a-vis the rest. Earnings of the top 2.5
million equal the earnings of the bottom 100 million.
The Level Playing Field
Now voodoo economics should be used to describe the perva-
sive popular theory that the United States shall be the premier
destination of the manufactured goods of all countries regardless
of whether or not the goods are made by prison slave labor as in
the case of China, by Asians making 30 cents an hour without
benefits, or by Mexicans making 40 cents an hour, and that U.S.
labor is capable of competing on this "even playing field" with
its $4 an hour minimum wage.
Add the burden on American business of 8% social security
taxes, 2% workman's comp insurance, unemployment insurance, 5%
health care premiums, pension programs, environmental protection
laws, heating costs, 5% sick pay, 5% vacation pay, jury duty pay.
Then consider for a moment what a $4 an hour budget buys.
$4 x 40 hours x 52 weeks equals an annual income of $8320.
Deduct minimal 10% federal income tax, 8% social security
payments, state taxes, city taxes, unemployment, disability
taxes, for a minimum total of 20%, or a net spendable income of
$6656. (The poverty line for a single person in `90 was $6,652)
Deduct bare-bones annual minimums of:
Food at $1 a meal, or $1095
Rent of $200 a month $2400
Utilities of $50 a month $ 600
Medical insurance $1000
Transportation to work, $2 a day, or $ 520
Laundry at $3 a week $ 156
Clothes and shoes $ 300
Telephone maybe - $10 a month $ 120
Personal hygiene/household, $1 a week $ 52
$6,243
(Note that all the above necessities are either subsidized or
regulated by government, except personal hygiene/household.)
This leaves $413 a year for discretionary spending for insur-
ance, charitable contributions, a car, entertainment, etc.
$1.13 a day!
Mexico at 40 cents an hour has a labor advantage of 12 to 1
over our minimum; Asia at 30 cents an hour has an advantage of 16
to 1.
With labor costs like these, foreign exporters can "pick a
number" in setting prices to undersell American producers, even
those with the sharpest cost accounting pencils.
It is the height of arrogance--actually stupidity--to contend
that American labor is 12-16 times more efficient than foreign
labor, particularly when both operate the same automated machines
and robots.
And too many American workers are deficient in reading,
writing and arithmetic.
The issue is really "fair" trade, not "free" trade.
The Bottom Line
"They" say that the U.S. is a "bottom line" country, that we
primarily concern ourselves with the bottom line.
The bottom line in the federal budget is that its $1.4
billion is 34% of our current '91 gross national product of $4.1.
"They" (the Wabash College economists) say that when taxa-
tion exceeds 30%, the people can't afford to live. This seems
true: total taxes are 40%, millions of people have filed for
bankruptcy and the country has been in a recession for over a
year without signs of bottoming out.
The bottom line is, in this regard, that Reagan was right
that the U.S. economy cannot afford this level of government
spending.
Our gross Gross National Product
Consumer spending is 67% of our Gross National Product,
military spending is 5.5%, and service industries are claimed to
be 67%.
(Who says figures don't lie?)
National health care costs are over $750 billion, or 18% of
our total current national income.
This leaves manufacturing and everything else at minus 58%
of our Gross National Product.
(Who says figures don’t lie?)
Jobs, Jobs, Jobs
"They" say retrain all the welfare recipients and help them
to get jobs.
Great, what jobs?
IBM and GM ex-workers would love to have these non-existent jobs.
The country has 118 million employed (46% of the total
population), and a 6.7% unemployment rate.
Finally it is dawning on our business pundits that productivity gains in an
industry leads to a permanent loss of jobs in that industry.
The executive vice president of the American Express
Company, in his letter to the Times published July 30, 1991
claims that services "industries such as banking, accounting, se-
curities, telecommunications and transport now account for 78% of
U.S. employment and 67% of the U.S. gross national product."
You might note in passing that all of these named industries
are government regulated.
He also went on to state that they all "continue to face
protectionist walls abroad." When are we going to learn to pro-
tect our own, and climb out of the hole we have dug for
ourselves!
The retail sector boomed during the 80's with malls
mushrooming all over. Now that the people have lost their pur-
chasing power, the retail stores and malls are failing and going
bankrupt.
There is no dearth of imported cars, TV's, stereos, cameras,
VCR's, clothes, shoes, trucks; just a dearth of purchasing power.
Roosevelt saw this need in the 30's and pumped dollars into the
pockets of the workers.
In the 90's, we take dollars out of the workers' pockets.
Inflation is Good
Why is it that we have inflation, a post World War II
phenomenom? With all the increased productivity, prices should
actually be lower.
The obvious answer is that the continuing astronomical
federal deficits increase the money supply by at least that much.
Taking the current $4.1 trillion economy and the $250 billion
deficit, the deficit is 6%, just about the current rate of
inflation.
So bank savings pay 5% interest, and inflation is 6%, so the
real return is minus 1%.
Not much of an incentive to save.
The deficit forecast for fiscal `91-`92 is $282 billion.
For `92-`93, $348 billion.
In reality, we are borrowing money - and paying interest -
to pay the interest on our debt.
Are we crazy?
Most American household incomes have fallen behind
inflation since 1973--18 years ago. Marriage, homeownership and
children are being postponed into the over-30 age group.
This stagnant personal income means that even jobholders
cannot afford cars and homes. 71% of families under 34 cannot
afford median-priced homes where they live. The average new car
price is equal to 47% of the median annual income of American
families.
The consumer price index increased 55% between 1980 and
1990, while corporate profits increased 103%, i.e. 10% a year.
Already, over half the women in America are working just to
achieve a modicum of a decent standard of living. 80% of working
women say they would quit their jobs if they did not need the
money. 59% of women over 20 are working. Tens of millions of
Americans live below the poverty line. Tens of millions are on
welfare. The unemployment rate stands at 6.7% rather than the
"full employment" rate of 3.5%.
We believe that when the Constitution says to "promote the
general welfare", it did not mean to put the people on welfare.
Has anyone seriously considered that when unemployed people
become employees, consumers and taxpayers that, rather than being
a drain on the economy and government treasuries, the whole
nation benefits.
Back to more taxes – Galbraith/Clinton
All the real needs of the nation are in the public sector:
repairing bridges and highways, expanding airports, providing
housing for the poor.
Our total tax burden is already 40%. We have no money to pay
for more public works.
The nation's needs---a decaying infrastructure, dying cit-
ies, sub-standard housing, under-employed and unemployed peo-
ple---are not going to be paid for by increased taxes on the
surviving employed; they will only be paid for by American work-
ers producing the goods that American consumers buy.
The roaring 80's
With the decline of manufacturing since the 60's, and the
deregulation of the savings and loan banks in the 80`s,
enterprising people have turned their attention to making their
fortunes in real estate and the financial markets.
As Henry George stated, all wealth is eventually traced back
to ownership of the land, and the S & L's were used in all
manners of enterprising, speculative ways to develop land and
real estate. The collapse of this over-heated development boom
triggered the collapse of many imprudent S & L's.
As for the financial markets, clever people discovered that
capital could be raised by the sale of debt "bonds" to purchase
the ownership "stock" of corporations, and thus acquire control
of otherwise perfectly sound, profitable, ongoing businesses.
Of course, the net result has been to severely reduce the
profitability of these "leveraged" businesses, as they now have
to pay the exorbitant interest on the "junk" bonds first out of
their current income, as opposed to previously paying dividends
from their residual net profits.
Gleefully jumping on this financial bonanza bandwagon were
the major commercial banks, the major insurance companies, and
again the S & L's.
Now the results of these financial shenanigans are coming
due. A $500 billion bill to redeem the insured deposits of the
failed savings and loan banks. Chapter 11 bankruptcy for the
failing corporations. No taxable revenues for the federal
government.
A remedy for this farce would be legislation to disallow
proceeds from a "bond" sale to be used to purchase "stock".
This would funnel investment and enterprise into new
businesses and jobs, not re-structuring old businesses and
saddling them with debt, with the interest payments tax deductible on
their profit and loss statements.
A sensible economic policy for the U.S.
1) begin to generate $100 billion federal surplus rather than
$300 billion deficits, and apply to the federal debt of $3.5
trillion. A $100 billion surplus over 35 years would pay off our
national debt, and reduce the incomes-transfer of poor-to-rich
interest payments of $330 billion a year to zero. Senator Pat
Moynihan has made the point that all personal income taxes are
now being used just to pay the interest on the federal debt.
2) reduce inflation to zero
3) set interest rates at the post World War II level of 5%
4) full employment, with an unemployment rate of 3.5%
5) begin to generate foreign trade surpluses rather than $101
billion deficits
Business talks of the low saving rate, of the need for more investment,
more productivity, more jobs.
What are we going to invest in? More retail malls? The
service sector has been laying off workers by the tens of
thousands.
New jobs in what? The obvious answer is staring us in the
face.
Domestic manufacture of the goods we consume.
The bottom, bottom line
It is all very nice to be concerned about the economic
welfare of foreign countries, but after all charity really begins
at home, and the working, unemployed, underemployed people of
America are suffering greatly under the currently popular "free
trade, laissez-faire, robber baron" policies of the government.
The bottom, bottom line is that either we change our free
trade policies to fair trade policies to create a truly level
playing field for the benefit of all, or continued global “free” trade
will continue to destroy our country.
--30 -
References
The Bush (Vannevar) Symposium, held in Washington, DC, March 18, 1991
concluded that a revival of manufacturing here is essential to the future
of American science and technology.
--NYT 3/22/91
40% of personal income going to all levels of government
--Milton Friedman 12/14/88 WSJ
80% of women say they would quit their jobs if they did not need the
money. 59% of women over 20 are working.
--NYT 6/18/91
30-40 million Americans live in poverty.
-- NYT 6/12/91
Consumer spending equals two-thirds of total Gross National Product
activity. First quarter of ’91 at $4.12 billion GNP rate. --NYT 6/27/91
Health care costs $600 billion in ’89; or 11.5% of the GNP.
Military spending – 5.5% of GNP. –NYT 3/3/90
One million bankruptcies in ’91. –NYT 6/27/91
For the trade deficits of ‘80-’90, we owe Japan alone $350 billion.
--NYT 4/4/91
Trade deficit with China $10.4 billion in ’90.
--NYT 3/30/91
The deficit forecast for fiscal ‘91-’92 is $282 billion. For ‘92-’93, $348
billion. –NYT 7/16/91
This stagnant personal income means that even jobholders cannot afford
cars and homes. 71% of families under 34 cannot afford median-priced
homes where they live. The average new car price is equal to 47% of the
medial annual income of American families.
-- NYT 6/18/81
The consumer price index increased 55% between 1980 and 1990, while
corporate profits increased 103%, i.e. 7% a year.
--NYT 7/5/91 (Statistical Abstract of the US)
7 million people hold a 2nd job. -–NYT 7/25/91
Interest payments on the federal debt were $240.9 billion in ’89.
-–NYT 7/24/91
S&L bailout estimate $500 billion. -–NYT 7/31/91
Business activity at 51.8%. -–NYT 8/2/91
“Turkish textile quotas” -–NYT 3/29/91
There is only one golden goose, free people practicing free
enterprise engaged in making products.
And the American golden goose is severely wounded, with
business activity at 51.8% for June, 1991. Not only is the U.S.
economy now a four-cylinder engine, but that engine is misfiring,
with only two cylinders working.
Two thousand years ago the Christians, and the Communists
now, tried "from each according to their ability, to each accord-
ing to their need." Human nature being what it is, it didn't work
for either group.
Later, the New Deal/Great Society programs modified the
phrase to "from each according to their ability to pay, to each
according to their need". This is hardly working much better,
as the entitlement programs sap the earnings and purchasing power
of those working.
The problem with America today is that we have free people
practicing free enterprise engaged solely in providing services,
and have lost our manufacturing base to “free” trade.
Opportunity Knocks
The Bush (Vannevar) Symposium, held in Washington, DC, March
18, 1991 concluded that a revival of manufacturing here is essen-
tial to the future of American science and technology.
Federal and state programs are spending about $50 million a
year to assist manufacturers improve their efficiency and techno-
logy. Isn't that great!
Other nations, particularly Japan Inc., give extensive
support to encourage technological advances.
What our nation really needs is an industrial policy to
produce an expanding, full employment economy based on a strong
manufacturing foundation to produce the necessary golden eggs.
Today, “Americans are more united on whether the government
should do more to protect jobs from foreign competition: 87%
agree.” (AP survey published Feb. 6, 1993)
A dud duck
Services are certainly an important part of the economy, but
it is manufacturing that generates 2-3 service jobs, not vice
versa. All the booming economies of the 90's are manufacturing
countries: Germany, the Asian tigers. "Service" countries like
Britain and the United States are withering on the vine.
When you factor in the government-run post office, military,
state-owned businesses like transportation, power, research,
etc.; millions of government employees, the medical industry;
the "golden goose" private sector become very small indeed,
particularly if you remove the non-productive retail sector.
The P- words
The P- word "protectionism" may be anathema to the free-
trading, laissez-faire capitalists, but the P- word "prosperity"
for the United States demands protection of our wage levels and
standard of living from competition from virtual slave,
subsistence labor countries. All else is P- "poppycock"!
Equalization is practiced in many aspects of our lives.
The anti-trust Sherman Act of 1890 was an early attempt to equalize
business competition in the domestic United States.
The Federal Communications Commission attempts to equalize
competition in television and radio markets.
In horse racing, weights are inserted into the saddles to equalize the
weight each horse will carry.
We would be horrified if a football game were arranged between the
Princeton Midgets (10 year olds) and the Dallas Cowboys in the Super
Bowl, even though they both play by the same rules.
Why does the establishment think it is normal for the United States and
Bangladesh to compete without restraint, particularly when both play by
different rules.
Actually, the P- word "protectionism" is very much in evid-
ence in our trading laws and practices. We protect and subsidize
the sugar, grain, peanut and rice growers, the dairy farmers; we
protect the automobile, semi-conductor, research, steel, and
textile industries, as well as air, rail, marine, and public
transportation, medicine; and have quotas on many other products.
We protect the dollar. We regulate the gross quantity of
money. We regulate interest rates.
Other countries also practice protectionism: Japan, China,
Korea, India, Taiwan, the European Community and the east Europ-
ean countries.
What we are really trying to prove with this hybrid
protectionist-free trade policy has not been explained. Are we
really trying to bring the abject 88 million Mexicans, one billion
Indians, one billion Chinese, and other millions of Asian and
South American workers up to minimal U.S. standards of living in
food, housing, and medical care?
Actually, we are doing virtually nothing to alleviate the
condition of our own 30-40 million American citizens living below
the poverty line, let alone the starving people of Somalia or
Ethiopia.
Are the national politicians only paying attention to the
best organized lobbies and giving them protection, and letting
the rest disintegrate and disappear to the detriment of American
businesses and workers, the balance of trade deficit, and the federal
budget deficit?
Going down the tubes
The result of exporting the bulk of our manufacturing jobs
overseas since the 60's is obvious; we no longer have the tax
ratables in employers and employees to cover our federal expendi-
tures. We no longer have enough service and retail employers to
employ our population. We are rapidly going bankrupt, at the
rate of $350 billion a year, supporting our needy through
entitlement programs. We are going into debt to foreign
businesses, at the rate of $100 billion a year, to pay for our
imports of stereos, TV, radios, textiles, shoes, cars, etc.,
etc., etc.; items we manufactured for ourselves prior to 1960.
-----------------------------------------------
! Those whom the gods would destroy !
! they first make mad !
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Voodoo economics
The voodoo economic policies of the 80's and 90's are to
reduce the purchasing power of the people, import most of the
manufactured goods people buy, stimulate the economy with
Keynesian $250 billion federal deficits, causing inflation, shill
for free trade, productivity, and against protectionism; and then
sit on our hands.
Gephardt
Rep. Richard Gephardt clearly saw the need and the solution
as he campaigned for the presidency in Iowa in 1988--do what
needs to be done to restore a manufacturing base to the American
economy.
Although the messenger was overwhelmed at the time, the
message is still true, and needs implementation today.
Roosevelt
Roosevelt and organized labor realized in the 30's that you
have to put purchasing power into the hands of the people in
order to have a robust economy.
The United States is still the largest market for cars,
television, radio and stereo sets, cameras, optical goods,
personal computers, cement, VCR's, clothing, shoes, and sporting
goods, and it is the height of lunacy to transfer the savings of
prior generations overseas to pay for our $100 billion annual
trade deficit when we can stop the hemorrhaging by producing more
of what we consume domestically--two-thirds of our Gross National
Product.
By so doing, we increase dramatically federal income tax
revenues, and reduce government expenses to support the
unemployed, the under-employed, the drop-outs, and those on
welfare, with a concurrent reduction in crime.
The Trade Deficit
Foreign trade deficits have been over $100 billion a year
since `83, or a minimum loss of national wealth of at least $800
billion. Couple this with the $1.9 trillion Reagan added to the
national debt, and the nation is $2.7 trillion poorer.
The $101 billion trade deficit in `90 breaks down as
follows:
Japan $41 billion
Taiwan $11 billion
China $10.4 billion
Hong Kong $ 5 billion
Korea $ 5 billion
Imported oil $30 billion
Canada + $200 million
Mexico + $200 million
European Community + $200 million
For the trade deficits of `80-`90, we owe Japan alone $350
billion.
Obviously, a "one world" economy is not working in our favor;
quite the contrary.
Selective Regulation
We regulate banks, insurance companies, the stock and
commodities markets, utilities, telephone companies, radio and
television, transportation.
We regulate against people's propensity for avarice and
abuse of power.
But heaven forbid that we regulate against the greed of
those seeking the lowest labor costs anywhere in the world
regardless of its impact on the welfare of our nation and its
workers.
A policy vacuum
Seriously, is it the goal of our foreign trade policy to
raise the standard of living of all 5 billion people in the world
to that of middle class Americans? A goal that will take a
thousand years, if ever.
Or is it really our policy to lower the standard of living
in America to that of the Chinese and the Indians in their
thatched huts?
What exactly is our policy and objective, if any?
So far we are not even making a serious effort to see that
mothers and children in the Third World--or vassal countries like
Egypt--get adequate food, let alone life necessities like pure
water and medical care.
Free trade is really a policy to impoverish America.
Free trade is reducing our country to that of a supplier of
raw agricultural products and lumber.
We are adrift on the siren seven seas of international
trade, with nothing to trade with but I.O.U.'s redeemable by the
sale of the nation's assets.
We are living like the poor, rich family in the decaying
mansion, selling the family jewels one by one to eat.
The free trade fuzzy-wuzzies
A small number of prominent economists, such as Jeff Faux of
the Economic Policy Institute, Washington, DC, have developed the
view that free trade may be an outdated notion.
Japan has succeeded tremendously well in world markets, yet
has one of the most restrictive trade policies in the world. In
other words, Japan takes care of its own!
The United States cannot be all things to all people. There
is a limit to idealism, and lines must be drawn to demarcate
what can be afforded, what must be preserved in order not to kill
the golden geese who lay the golden eggs that pay for all the
idealistic programs at home and abroad.
The U.S. should not be the primary market for every country
that wants to develop products for export. Two billion Asians can
develop trade among themselves; one billion Europeans are
developing trade among themselves, 500 million Africans can
develop trade among themselves, 500 million South and Central
Americans can develop trade among themselves.
All the largest countries in the world are basket cases:
China with 100 million unemployed, the USSR with no food on the
shelves, India changing its economic policies to survive, the
U.S.A. with 10 million unemployed, 30-40 million living at the
poverty level, and going deeper into debt every day.
Join the Libertarian Party
Obviously, the Republicans and Democrats are filled with the
fuzzy-wuzzies. If they truly believed in free trade, free
enterprise, laissez-faire capitalism and freedom, they would be
joining the Libertarian Party in droves and removing all quotas
on steel, cars, textiles, sugar, etc.
That no Republicans or Democrats are libertarians shows that
they are committed to a government-managed economy, and so it is
up to them to foster and protect a strong domestic manufacturing
base in the same way that they have fostered and protected a
strong agricultural base.
A prime example of the fuzzy-wuzzies is American criticism
of Japan and Europe for protecting their agricultural base while
America does the same.
The Pope
Pope John Paul II, in his May, 1991 encyclical entitled "The
Hundredth Year", referred to the "exploitation", neglect and
"quasi-servitude" that remains rampant throughout the third
world, as harsh as in the days of the encyclical "Of New Things"
100 years ago which addressed the impoverished conditions of the
industrial working class at the end of the 19th century.
He described some working conditions as "situations in which
the rules of the earliest period of capitalism still flourish in
conditions of `ruthlessness' in no way inferior to the darkest
moments of the first phase of industrialization."
Actually, conditions are not all that much better for the
survivors of America's once mighty industrial working class; most
are unemployed, underemployed, holding 2-3 jobs, or on welfare.
The Pope's recommendation is to accept the good qualities of
capitalism, harnessing self-interest and the profit motive, but
also insisting that capitalism needs to be controlled and limited
by other forces in society outside the business world.
He states that the objectives of an economic system should
be "a sufficient wage for the support of the family, social
insurance for old age and unemployment, and adequate protection
for the condition of employment."
In closing, the encyclical says, "The church...recognizes
the positive value of the market and of enterprise, but which at
the same time points out that these need to be oriented toward
the common good."
This is not a business cycle, this is a blood bath
Recession? Depression? Obviously depression!
The purchasing power of the American economy is definitely
depressed, with no relief in sight.
The solution is simple. Protect and rebuild our
manufacturing base in the same manner that Japan, India, China
and everybody else protects its workers from cheaper labor or
more advanced industries.
Originally, "voodoo economics" was used in the 80's to
describe the now discredited "supply-side" economic theory.
Supply side economics promised a rapidly rising tide, but
the only thing that rose was the percentage of income of the
richest Americans vis-a-vis the rest. Earnings of the top 2.5
million equal the earnings of the bottom 100 million.
The Level Playing Field
Now voodoo economics should be used to describe the perva-
sive popular theory that the United States shall be the premier
destination of the manufactured goods of all countries regardless
of whether or not the goods are made by prison slave labor as in
the case of China, by Asians making 30 cents an hour without
benefits, or by Mexicans making 40 cents an hour, and that U.S.
labor is capable of competing on this "even playing field" with
its $4 an hour minimum wage.
Add the burden on American business of 8% social security
taxes, 2% workman's comp insurance, unemployment insurance, 5%
health care premiums, pension programs, environmental protection
laws, heating costs, 5% sick pay, 5% vacation pay, jury duty pay.
Then consider for a moment what a $4 an hour budget buys.
$4 x 40 hours x 52 weeks equals an annual income of $8320.
Deduct minimal 10% federal income tax, 8% social security
payments, state taxes, city taxes, unemployment, disability
taxes, for a minimum total of 20%, or a net spendable income of
$6656. (The poverty line for a single person in `90 was $6,652)
Deduct bare-bones annual minimums of:
Food at $1 a meal, or $1095
Rent of $200 a month $2400
Utilities of $50 a month $ 600
Medical insurance $1000
Transportation to work, $2 a day, or $ 520
Laundry at $3 a week $ 156
Clothes and shoes $ 300
Telephone maybe - $10 a month $ 120
Personal hygiene/household, $1 a week $ 52
$6,243
(Note that all the above necessities are either subsidized or
regulated by government, except personal hygiene/household.)
This leaves $413 a year for discretionary spending for insur-
ance, charitable contributions, a car, entertainment, etc.
$1.13 a day!
Mexico at 40 cents an hour has a labor advantage of 12 to 1
over our minimum; Asia at 30 cents an hour has an advantage of 16
to 1.
With labor costs like these, foreign exporters can "pick a
number" in setting prices to undersell American producers, even
those with the sharpest cost accounting pencils.
It is the height of arrogance--actually stupidity--to contend
that American labor is 12-16 times more efficient than foreign
labor, particularly when both operate the same automated machines
and robots.
And too many American workers are deficient in reading,
writing and arithmetic.
The issue is really "fair" trade, not "free" trade.
The Bottom Line
"They" say that the U.S. is a "bottom line" country, that we
primarily concern ourselves with the bottom line.
The bottom line in the federal budget is that its $1.4
billion is 34% of our current '91 gross national product of $4.1.
"They" (the Wabash College economists) say that when taxa-
tion exceeds 30%, the people can't afford to live. This seems
true: total taxes are 40%, millions of people have filed for
bankruptcy and the country has been in a recession for over a
year without signs of bottoming out.
The bottom line is, in this regard, that Reagan was right
that the U.S. economy cannot afford this level of government
spending.
Our gross Gross National Product
Consumer spending is 67% of our Gross National Product,
military spending is 5.5%, and service industries are claimed to
be 67%.
(Who says figures don't lie?)
National health care costs are over $750 billion, or 18% of
our total current national income.
This leaves manufacturing and everything else at minus 58%
of our Gross National Product.
(Who says figures don’t lie?)
Jobs, Jobs, Jobs
"They" say retrain all the welfare recipients and help them
to get jobs.
Great, what jobs?
IBM and GM ex-workers would love to have these non-existent jobs.
The country has 118 million employed (46% of the total
population), and a 6.7% unemployment rate.
Finally it is dawning on our business pundits that productivity gains in an
industry leads to a permanent loss of jobs in that industry.
The executive vice president of the American Express
Company, in his letter to the Times published July 30, 1991
claims that services "industries such as banking, accounting, se-
curities, telecommunications and transport now account for 78% of
U.S. employment and 67% of the U.S. gross national product."
You might note in passing that all of these named industries
are government regulated.
He also went on to state that they all "continue to face
protectionist walls abroad." When are we going to learn to pro-
tect our own, and climb out of the hole we have dug for
ourselves!
The retail sector boomed during the 80's with malls
mushrooming all over. Now that the people have lost their pur-
chasing power, the retail stores and malls are failing and going
bankrupt.
There is no dearth of imported cars, TV's, stereos, cameras,
VCR's, clothes, shoes, trucks; just a dearth of purchasing power.
Roosevelt saw this need in the 30's and pumped dollars into the
pockets of the workers.
In the 90's, we take dollars out of the workers' pockets.
Inflation is Good
Why is it that we have inflation, a post World War II
phenomenom? With all the increased productivity, prices should
actually be lower.
The obvious answer is that the continuing astronomical
federal deficits increase the money supply by at least that much.
Taking the current $4.1 trillion economy and the $250 billion
deficit, the deficit is 6%, just about the current rate of
inflation.
So bank savings pay 5% interest, and inflation is 6%, so the
real return is minus 1%.
Not much of an incentive to save.
The deficit forecast for fiscal `91-`92 is $282 billion.
For `92-`93, $348 billion.
In reality, we are borrowing money - and paying interest -
to pay the interest on our debt.
Are we crazy?
Most American household incomes have fallen behind
inflation since 1973--18 years ago. Marriage, homeownership and
children are being postponed into the over-30 age group.
This stagnant personal income means that even jobholders
cannot afford cars and homes. 71% of families under 34 cannot
afford median-priced homes where they live. The average new car
price is equal to 47% of the median annual income of American
families.
The consumer price index increased 55% between 1980 and
1990, while corporate profits increased 103%, i.e. 10% a year.
Already, over half the women in America are working just to
achieve a modicum of a decent standard of living. 80% of working
women say they would quit their jobs if they did not need the
money. 59% of women over 20 are working. Tens of millions of
Americans live below the poverty line. Tens of millions are on
welfare. The unemployment rate stands at 6.7% rather than the
"full employment" rate of 3.5%.
We believe that when the Constitution says to "promote the
general welfare", it did not mean to put the people on welfare.
Has anyone seriously considered that when unemployed people
become employees, consumers and taxpayers that, rather than being
a drain on the economy and government treasuries, the whole
nation benefits.
Back to more taxes – Galbraith/Clinton
All the real needs of the nation are in the public sector:
repairing bridges and highways, expanding airports, providing
housing for the poor.
Our total tax burden is already 40%. We have no money to pay
for more public works.
The nation's needs---a decaying infrastructure, dying cit-
ies, sub-standard housing, under-employed and unemployed peo-
ple---are not going to be paid for by increased taxes on the
surviving employed; they will only be paid for by American work-
ers producing the goods that American consumers buy.
The roaring 80's
With the decline of manufacturing since the 60's, and the
deregulation of the savings and loan banks in the 80`s,
enterprising people have turned their attention to making their
fortunes in real estate and the financial markets.
As Henry George stated, all wealth is eventually traced back
to ownership of the land, and the S & L's were used in all
manners of enterprising, speculative ways to develop land and
real estate. The collapse of this over-heated development boom
triggered the collapse of many imprudent S & L's.
As for the financial markets, clever people discovered that
capital could be raised by the sale of debt "bonds" to purchase
the ownership "stock" of corporations, and thus acquire control
of otherwise perfectly sound, profitable, ongoing businesses.
Of course, the net result has been to severely reduce the
profitability of these "leveraged" businesses, as they now have
to pay the exorbitant interest on the "junk" bonds first out of
their current income, as opposed to previously paying dividends
from their residual net profits.
Gleefully jumping on this financial bonanza bandwagon were
the major commercial banks, the major insurance companies, and
again the S & L's.
Now the results of these financial shenanigans are coming
due. A $500 billion bill to redeem the insured deposits of the
failed savings and loan banks. Chapter 11 bankruptcy for the
failing corporations. No taxable revenues for the federal
government.
A remedy for this farce would be legislation to disallow
proceeds from a "bond" sale to be used to purchase "stock".
This would funnel investment and enterprise into new
businesses and jobs, not re-structuring old businesses and
saddling them with debt, with the interest payments tax deductible on
their profit and loss statements.
A sensible economic policy for the U.S.
1) begin to generate $100 billion federal surplus rather than
$300 billion deficits, and apply to the federal debt of $3.5
trillion. A $100 billion surplus over 35 years would pay off our
national debt, and reduce the incomes-transfer of poor-to-rich
interest payments of $330 billion a year to zero. Senator Pat
Moynihan has made the point that all personal income taxes are
now being used just to pay the interest on the federal debt.
2) reduce inflation to zero
3) set interest rates at the post World War II level of 5%
4) full employment, with an unemployment rate of 3.5%
5) begin to generate foreign trade surpluses rather than $101
billion deficits
Business talks of the low saving rate, of the need for more investment,
more productivity, more jobs.
What are we going to invest in? More retail malls? The
service sector has been laying off workers by the tens of
thousands.
New jobs in what? The obvious answer is staring us in the
face.
Domestic manufacture of the goods we consume.
The bottom, bottom line
It is all very nice to be concerned about the economic
welfare of foreign countries, but after all charity really begins
at home, and the working, unemployed, underemployed people of
America are suffering greatly under the currently popular "free
trade, laissez-faire, robber baron" policies of the government.
The bottom, bottom line is that either we change our free
trade policies to fair trade policies to create a truly level
playing field for the benefit of all, or continued global “free” trade
will continue to destroy our country.
--30 -
References
The Bush (Vannevar) Symposium, held in Washington, DC, March 18, 1991
concluded that a revival of manufacturing here is essential to the future
of American science and technology.
--NYT 3/22/91
40% of personal income going to all levels of government
--Milton Friedman 12/14/88 WSJ
80% of women say they would quit their jobs if they did not need the
money. 59% of women over 20 are working.
--NYT 6/18/91
30-40 million Americans live in poverty.
-- NYT 6/12/91
Consumer spending equals two-thirds of total Gross National Product
activity. First quarter of ’91 at $4.12 billion GNP rate. --NYT 6/27/91
Health care costs $600 billion in ’89; or 11.5% of the GNP.
Military spending – 5.5% of GNP. –NYT 3/3/90
One million bankruptcies in ’91. –NYT 6/27/91
For the trade deficits of ‘80-’90, we owe Japan alone $350 billion.
--NYT 4/4/91
Trade deficit with China $10.4 billion in ’90.
--NYT 3/30/91
The deficit forecast for fiscal ‘91-’92 is $282 billion. For ‘92-’93, $348
billion. –NYT 7/16/91
This stagnant personal income means that even jobholders cannot afford
cars and homes. 71% of families under 34 cannot afford median-priced
homes where they live. The average new car price is equal to 47% of the
medial annual income of American families.
-- NYT 6/18/81
The consumer price index increased 55% between 1980 and 1990, while
corporate profits increased 103%, i.e. 7% a year.
--NYT 7/5/91 (Statistical Abstract of the US)
7 million people hold a 2nd job. -–NYT 7/25/91
Interest payments on the federal debt were $240.9 billion in ’89.
-–NYT 7/24/91
S&L bailout estimate $500 billion. -–NYT 7/31/91
Business activity at 51.8%. -–NYT 8/2/91
“Turkish textile quotas” -–NYT 3/29/91
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