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View Diary: "An Elaborate Charade" - Dean Baker on the Debt Ceiling Crisis (251 comments)

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  •  It is a good clip BUT .... (1+ / 0-)
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    MindRayge

    and before I get to the BUT, I agree with a bunch he said. The debt problem largely came about with Bush/GOP handling of the economy on their watch (the wars, the drug plan, the Bush tax cuts, etc) because it burnt a lot of dough very quickly. I also agree that rolling back the taxes on the wealthiest Americans would go a long way to helping the debt problem without hurting the economy much.

    BUT:

    There was a problem going back to Reagan and arguably before: the trade deficit. As Americans were cashing in on the American dream decades ago, US labor rates got uncompetitive with the rest of the world. As the US got very wealthy, the divide between the HAVE country (the US) and the rest of the world got larger. That also became a national security problem because eventually, a bunch of the world would get sick of being poor and do something to the obvious rich country to attempt to even things up a little - when they've got little to lose.

    Between Reagan and now, the US trade deficit is around $6 Trillion dollars. Think about that. What they did was implement things like free trade. That was fine with the corporations who could continue to charge close to the same price with cheaper labor - and so they boomed under Clinton as free trade got implemented. But the middle class sunk because all their value add jobs that used to bring in export dollars went overseas and the middle class have suffered badly. This is not just a Bush II problem - it started before that

    The advice given to Bush One was that free trade had to be implemented after the US had a head start on making the transition to a new economy - to help prevent the middle class from getting lambasted with job losses. Clinton charged ahead and tried to parallel it but the GOP cut off his funds to make that transition (which was late anyway) - so the two parties screwed it up when the US was in a much better negotiating position to get fairer trade deals and could afford the transition over time.

    US labor used to make steel, cars (from the raw steel right through to the finished product), computers, telephones, etc. Now, a lot of that stuff is made overseas and in the best case, just assembled in the US.

    A $6 Trillion dollar trade deficit means the US gave $6 trillion dollars more to other countries like China than they took in. It's a gigantic problem if you want to try to pay for entitlement programs, high speed rail, fix bridges, etc because you don't have enough labor doing value add to balance off the trade cash gush.

    The US has been thriving on the massive accumulated wealth they acquired over prior decades and the top few percent that continue to make the big corporate bucks while the labor force has turned into more of a service industry because there are so fewer value add jobs that produce products and services that can be sold to other countries.

    For the long term security of the US and all these wonderful entitlement and health care needs, the US HAS to fix this problem.

    Obama understands this. When he talks about the need for R&D and education bucks, that is your future. Don't let the GOP take it away from you like they did in Bill Clinton's years.

    The debt squabble is a serious skirmish that can hurt the economy at a fragile time. But don't lose sight of the longer term as spending has to happen now to correct it in the years to come.

    Obama gets this and the GOP don't and won't. I know the past few years have been tough and some of you haven't got everything you wanted from Obama. But surely what you've seen with the behavior of the House GOP recently underscores who you have to support and how hard you'll have to support them going forward because those House GOP don't give a shit about you and the middle class.

    Sorry for the rant.

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