Just when the Obama administration thought that they could start to claim victory about the economy, it seems to be headed in the wrong direction again.
The Kiplinger Letter of April 8, 2011 made these comments:
“Though US exports continue to grow …. the nation’s share of global trade is waning… In 2000, 35% of the world imports and exports originated or landed in the US. This year’s share: about 11%. … While law makers in the USA dally … Other countries are racking up trade deals.”
Let me add that if the USA grew exports by 100%, that would only take us to 22% which would still be a far cry from 35% in 2000. Also, the world competitors are not about to allow the USA to grow 100%. They will adjust.
So who are those law makers who dally? Democrats were in control of Congress from the end of 2006 until 2011 and are still in control of the Senate, the State Department, and the White House.
From Kiplinger: “US economic prowess … China overtakes it in 2020…. GDP growth in the US appears to be slowing… 1.5% if exports drag … on the heels of a 3.1% uptick during the final 3 months of 2010.”
So why is this happening?
GDP growth in the last quarter of 2010 was an aberration. Even at 3.1%, it was not the 5% minimum needed to come out of this economic slump. 3.1% is much less than the traditional minimum of 10% that followed most other recessions. The 3.1% was artificially created by government spending. So now we are paying a price for not curing the root causes to our economic problems.
What are those root causes? Soaring oil prices. Costs to Implement Obamacare. Uncompetitive pricing of US products because of high labor rates and roll up of taxes throughout the manufacturing supply chain. Only one quarter of the engineers per capita as in the countries with growing export business. A birth rate too low to sustain the distribution of consumers and workers in our society. Too much dependence on immigrants to fill low paying jobs.
Many Americans miss this point: there is no amount of service revenues that can offset the loss to the economy from a diminished manufacturing industry. The multiplier effect from manufacturing is 15 times greater than from service industries. And the USA has reduced the impact of manufacturing on the GDP by more than two thirds in the last 40 years. Service industries have grown while manufacturing has shrunk which is the exact opposite of a thriving economy.
What does the USA have to export? Lawyers? Accountants? Government bureaucrats? Sociologists? Bankers?
Who wants them? No one. No one will trade their manufactured goods for services from these “professional” industries.
The Obama administration is trying to convince us that the USA can replace the lost consumption from the low birth rate in the USA with more product exports. China, Korea, Brazil, Germany, and all the others will react to increased competition from the USA. Those competitors make better products at lower prices. They will not give up any of the advantages that they gained while the USA let costs get out of hand. If the USA tries to get more competitive, then those other countries will react by getting more competitive also.
So what can the USA do?
1. Get this current group of liberal arts intellectuals out of our government and put some street wise business people in charge who will cut the effects of unions, cut the corporate taxes that are rolled up in the end products, and increase the amount of engineers graduating from our universities.
2. Breed. Make more internal consumers and workers so immigration is not necessary and so exports are not as necessary.
3. Drill for oil and build more nuclear sites and dig for more coal.
4. Reduce spending by our government on services because that adds very little to the multiplier effect for our economy. And put the money in the hands of the private sector because it consumes manufactured products with much greater multiplier effects.
Michael Master is the author of “Save America Now!” It can be ordered at http://www.amazon.com/gp/product/1616235756 [2]
