We have reached a policy tipping point as we will see below the bump. I posted Ultimately "jumpstart" will fail five months ago complaining of the lack of direction and over a year ago that then Mr. Obama was withdrawing from his own trade / jobs beliefs.
Krugman calls for a second stimulus in That 30s Show. But in the Great Depression it was a matter of putting people who grow and build things back to work. That economy was a car with no gas. Our US economy now is a car with no engine. Roubini comes closer to the point
Industrial production remains weak. The housing market, in terms of price adjustment, remains weak... you could stop producing new homes for almost a year to get rid of that inventory. Moreover, about 50% of existing home sales are distressed sales
Without housing what jobs making something in this country are left? People in the 30s did not have manufacturing outsourcing breathing down their necks and agriculture employed many more people. Look at the census data from 1930 - one quarter of all employed working in "Agriculture, forestry, and animal husbandry" and another over a quarter working in "Manufacturing and mechanical industries". (2000 census doesn't seem to have categories to make it easy.) BLS June puts 19,826,000 Goods-producing / 141,578,000 employed = 14% and farm employment at 141,578,000 - 133,662,000 = 7,916,000 which is less than six percent. So where making something in 1930 employed over half the country, currently it occupies one fifth.
I am now even more extremely frustrated with the silence coming from all quarters on any kind of new plan for America other than throwing money at corrupt bankers and military occupations - Meteor Blades says it better than I can
...as the oligarchs in charge have soothed us with the claim that what is happening to us is the natural order of things. Be patient! Everything will be good again if you just wait for the crew of superannuated and greedy urchins who got us into this mess to spend our tax money recklessly to get us out of it.
Before any more stimulus is passed America needs to be told what will be done about "That 70s Show". Decisions made in the 70s to fiat the dollar, balloon debt and trade deficits, de-regulate, dramatically increase standing military size, globalize and not take seriously oil independence still stand in the way of Americans going back to work. Declare a new system or let us go back to the one that served us well in the 40s, 50s and 60s.
Declaring a direction does not take the full weight of congress. Gordon Chang explains in a Forbes article today
This Monday, the U.S. International Trade Commission, in a 4-2 vote, recommended the imposition of punitive duties on Chinese-made tires. This "Section 421" case now goes to the desk of President Obama. If he gives his OK and the special duties go into effect, some foresee a trade war with China. One analyst, Daniel Ikenson of the Cato Institute in Washington, called the case "High Noon for U.S. Trade Policy."
and
For one thing, economies around the world are delinking. In March, the normally optimistic World Bank said global economic output will contract this year for the first time since World War II, and that international trade will decline the most it has in 80 years. Globalization, which once seemed irresistible, is going into reverse.
How many jobs would ending the trade deficit provide? According Trade Ticker the trade deficit this year is already $329 billion. Now I'm no economist (hey how many economists to plug in a light bulb - just one but he has to kill all the other economists first) but seems like maybe if that money were staying in the country instead of flowing out it might create a lot more jobs then it does returning to us in the form of foreigners buying treasure bills - which reduces our interest rates and causes bubbles and depressions.
Now some of you might be saying, "Hey I heard trade wars made the Great Depression worse." Well sure if you have one quarter of the country working in manufacturing and the domestic sales dry up then you hope to still sell to the rest of the world. But that is not America this time around - its China. What Americans need now is the leadership from President Obama to know it is safe to build factories and hire Americans and that regulations will prevent competition from competitors manipulating currencies or hiring illegal immigrants. President Obama has to put his foot down hard to make those investments safe for at least the next 8 years. Cause the leadership will come from someone - if he doesn't step up someone else will.
Obama to Paulson: Defend American Workers and Businesses by Challenging China’s Currency Manipulation
Wednesday, June 13, 2007
FOR IMMEDIATE RELEASE
Contact: Ben LaBolt
Asks him to reconsider refusal to classify China as a currency manipulator
WASHINGTON, DC – U.S. Senator Barack Obama (D-IL) today sent a letter to Treasury Secretary Paulson asking him to reconsider the decision not to classify China as a currency manipulator:
Dear Secretary Paulson,
The People’s Republic of China has manipulated its currency for years in order to gain an unfair advantage over the United States in trade. Unfortunately, the Administration has failed to effectively challenge or change China’s behavior. And today, the Department of the Treasury has refused yet again to declare that China is manipulating its currency. I call on the Treasury Department to reconsider today’s decision.
Your department’s refusal to take action against China raises serious questions about the Administration’s commitment to protecting the interests of American businesses and American workers. At least partially as a result of the Administration’s failure to address Chinese currency manipulation, the U.S. imported more than $232 billion in goods from China than we sold to it last year. That constitutes an annual growth in the imbalance in trade of 73 percent.
Refusing to acknowledge the problem will not make it go away. As a result, I will work with colleagues in the Congress to force action and strengthen the ability of Americans losing out from Chinese currency manipulation to bring forward complaints for remedy through increased duties on Chinese goods.
The Administration’s refusal to take strong action against China’s currency manipulation will also make it more difficult to obtain congressional approval for renewed Trade Promotion Authority, as well as additional trade agreements. Treasury’s refusal even to acknowledge the costs of Chinese currency manipulation, justifies the fear of many Americans that this Administration lacks the will to stand up against trade abuses and labor or environmental violations that create an unfair playing field for American workers.
As a result, I will work with my colleagues in the Senate to ensure that any trade agreement brought before the Congress is measured not against Administration commitments but instead against the rights of Americans to protection from unfair trade practices including currency manipulation and the violation of international labor and environmental standards.
Again, I urge you to reconsider today’s decision not to take action against China for currency manipulation. Thank you.
Sincerely,
Barack Obama
United States Senator