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Let's Think Big Again: A Growth Program to Put America Back to Work

America faces a historic collapse of our economy. A former Asst. Sec. of Commerce explains how it happened and how we can put America back to work.

Let's Think Big Again: A Growth Program to Put America Back to Work

Ken Davis Jr. interviewed by Will Wilkin

Part 1 of 2

The recent "fiscal cliff" obsession in Washington DC is hardly America's biggest problem.  Our real problem is the historic collapse of our economy, the loss of half of our manufacturing jobs since 1979, and the mass unemployment and poverty now spreading through the USA. 

Former U.S. Assistant Secretary of Commerce Ken Davis predicted big trouble for the U.S. 40 years ago, when he resigned his position to protest the one-sided new U.S. "free trade" policies that were then just taking shape under President Nixon.  Those new policies were intended to help America’s position in the new world of globalization, but instead they have backfired terribly.  The results are deindustrialization and huge trade deficit, totaling more than $8 trillion since then!  That is the biggest transfer of wealth from one nation to other nations in all world history! 

The chart tells the story. Through trade deficits, we now lose about 4 percent of our GDP every year and $600 billion in national income.  Shockingly, this disastrous U.S. economic performance wasn’t discussed at all in the presidential campaign or in the “fiscal cliff” meetings. 

Today Mr. Davis offers not only the historical perspective to explain how we got into this mess, but even more importantly, a PLAN TO MAKE OUR COUNTRY GROW AND PROSPER AGAIN.

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WW:  Ken, what did you think of the "fiscal cliff" discussions?

KD:  They showed very limited and pessimistic thinking.  There was a TV interview where Alan Simpson, of Simpson-Bowles, said "there's no way we can grow our way out of these 'fiscal cliff' difficulties."  Well I disagree, we CAN grow if we make a real effort.  Let’s think and act big again!  That way we can stop having the fights we’re having now between the haves and the have-nots, between the 1% and the 99%, or between reducing the debt or keeping social benefits.  If we create a bigger income pie to share, it will be far better than this battle over dividing up the pie now.  We should all be growing together rather than playing “beggar thy neighbor!” Instead say "We’re going to grow and be great again!” 

WW:  Why are our leaders so pessimistic?  What should we be most worried about?

KD:  Right now, our domestic industries are collapsing and China wants to replace us as world leader.  At our peril, we are literally de-industrializing America!  We are more and more dependent on cheap imports from China and other nations, and cheap labor by moving manufacturing over there.  We lost 56,000 manufacturing companies in the last 10 years, and 6 million manufacturing jobs.  W can't do that.  We can't have all these people unemployed.  We've got to put them back to work, and they want to go to work. 

WW: At some level, everybody must see it but they don't offer solutions.  Are there any? 

KD:  Yes, of course we can turn it around.  We can do it with a high-priority, well-run Growth Program.  Our country has a real need to get on a sustainable growth track again, like after WW2, which we are not on today. 

WW:  What would be the objectives of your Growth Program? 

KD:  The first is to balance our trade.  Return $600 billion of annual production to the U.S. to replace excessive imports with American-made goods, At 7,000 jobs for each billion dollars of production, that’s more than four million jobs we can directly create with millions more to come as U.S. industry returns to its historic normal growth.  Don't you agree that growing our GDP and wages and our income and tax base would make any future “fiscal cliff” discussions much easier to handle? 

WW:  But could we replace imports to balance our trade?  Is there a policy or strategy that would do it?  Are we suffering a necessary natural decline or can we do something about it?  Don’t Americans want all the cheap imports they can get? 

KD:  Oh, what we’ve done is not natural at all.  No other industrial country runs trade deficits, not one.  Why should we?  Especially when we’ve always been strong.  What we must do is enact legislation to restore balanced trade as the law of the land and put in place a system to enforce it by limiting the amount of imports each year to roughly equal the total amount of our exports.  Some goods may cost a little more, but we won’t have a shattered economy that’s hurting everyone badly. 

WW:  How would you do it?

KD: Strong legislation is the only way to succeed in a national program of this size and impact.  Draft legislation already exists to use a system of tradable Import Certificates (ICs).  To import into this country you'd have to have an import certificate.  How would an importer get it?  They’d purchase them at nominal cost on an open trading market with the total amount of I.C.s available set by the U.S. government each year, which after a few years of incrementing down would be equal to the amount of our exports.  That would balance our trade.  There’s excellent draft legislation ready -  based on a proposal by CEO and financier Warren Buffett.  It’s bill S3899, the "Balanced Trade Restoration Act of 2006."  [See attached bill]  It went as far as the Senate Finance Committee, but was not pursued by President Bush, or President Obama so far. 

WW:  Would that be a good plan today? 

KD:  Yes, definitely, with a few minor changes to simplify its operations.  Here’s a little more on how it would work.  We have a current annual trade deficit of $600 billion in goods and services, based on annual imports of $2.2 trillion and exports of $1.6 trillion.  If we reduce total imports by 10% each year, that would reduce the annual trade deficit by $220 billion each year and take less than 3 years to cut $600 billion from the trade deficit.  It would thus be a phased gradual reduction.  Total annual U.S. imports would only be cut by 25% and we’d still be the world’s biggest importer. 

WW:  Would a system of Import Certificates to balance our trade be legal under the trade treaties to which we are now a party?  Would it be legal under the terms of our membership in the World Trade Organization? 

KD:  Yes it would be perfectly legal.  The Balanced Trade Restoration Act of 2006 states explicitly that "Article XII of the General Agreement on Tariff and Trade (GATT 1994), annexed to the Agreement Establishing the World Trade Organization entered into on April 15, 1994, permits any member country to restrict the quantity or value of imports in order to safeguard the external financial position and the balance of payments of the member country." 

WW:  OK, so why do you advocate tapering down imports gradually? 

KD:  So as not to be disruptive to trade activity, and to give domestic producers time to ramp up and rehire needed workers.  10% this year, 10% more next year, on that basis within a few years we could get rid of the trade deficit altogether.  This would give time for everybody to adjust - the importers, the manufacturers, US factories could be retooled and hire people back. 

WW:  "Buy American" campaigns aren't enough? 

KD:  You can't just work on encouraging people with "Buy American" campaigns, those are very nice and good for morale but it offers no assurance of getting the results we need.  So we need to pass a balanced trade law and enforce it.  Even eliminating the trade deficit is itself just a means to put America back to work, to get out of debt.  We want a prosperous growing nation, and we can't have it now because that $600 Billion annual trade deficit anchor holding us back.  Every year it its costing us 4% points in our GDP. 

WW:  Is the whole Growth Program as simple as just balancing our trade? 

KD: No!  But that's where it starts, that's how we grow the national income for all the other aspects of the Growth Program.  Once we’re growing again, we will then be able to afford to modernize our infrastructure, strengthen our scientific and technological capabilities, and fund other essential growth activities like education and training. 

WW:  What would be some important objectives along the way? 

KD:  To start, take a look at our national security situation.  We have lost technologies that we can't afford to lose.  We're getting to the point where we couldn't make the weaponry we need for war, we're losing key capabilities, we don't even make printed circuit boards in this country now, and they’re needed in all electronic military gear. 

WW: How effective is the cooperation between government and business now? 

KD:  There are some good programs now, but more are needed, such as in education and training, better health care, the National Network for Manufacturing Innovation, and supporting technology development, infrastructure - all the things that contribute to a strong nation.  But there’s no overall framework now.  The Growth Program we need would provide that coordination by putting the national interest at the heart of a cooperative relationship between government and industry, to strengthen our manufacturing industries and workforce, our infrastructure and our technologies. 

WW:  How would a U.S. Growth Program compare to what the rest of the world is doing now? 

KD:  In former vice presidential candidate Pat Choate's book Saving Capitalism, the main idea is the arrival of economic statism in competitive nations.  China has it, Germany  and Japan have it, as do many smaller nations like South Korea.  There’s very heavy involvement of government in their industrial programs.  Many view that as another form of mercantilism.  Look at China’s whole command economy and Germany's successful public-private cooperation in technology centers geared to commercial production.  German government involvement includes the Max Planck network of 80 institutes of science, and the Raunhofer Society with a network of 60 technology centers, co-financed by the government and businesses.  Here in the USA, the tendency is to say the government shouldn't pick or back winners.  The Republicans especially have objected to the money that was spent on solar, and even the bail out of the auto industry is still getting a lot of criticism.  But many countries have much more aggressive policies than the US in their international dealings and in helping their industry, supporting industries they want to keep, and limiting what imports they allow in. 

WW:  The U.S investor seems to be doing very well, but much of these profits are earned abroad. The stocks of multinational companies have done well despite our weak economy at home.  What’s our problem with our domestic industries? 

KD:  A big part of that is the long-running conflict between our multinationals and our domestic industries on such basic issues as trade policy and severe import competition.  A major goal has to be getting them both to recognize that business has a big job to do to bring our country back.  We can't just ship jobs overseas to help company bottom lines, we can't afford to lose thousands of manufacturing businesses every year.  There are varying ways that our successful multinational companies can directly help our domestic industries recover.  All of our business establishment, both domestic and multinational, must work together to fix the trade deficit if we’re going to restore growth and prosperity in America. 

WW:  Does American business need a new kind of thinking? 

KD:  The best overall way to approach it is to restore patriotic thinking in America, in our lives and in the way we run our companies.  Always ask, "what are the implications for our country?"  Aircraft is probably the best example in business now, where deals are being made to transfer our technology in return for access to their market. 

WW:  Put Boeing and General Electric in China, is that what we're talking about? 

KD:  I guess you could say “Sort of, except the airplane company in China will be owned by China, not by our Boeing or our GE."  Both companies are apparently doing that, they've already agreed to give up a great deal of technology.  They defend it by saying "we're going full bore for the Chinese market." 

WW:  Is there any benefit to the USA in that? 

KD:  Not in the long run, as far as I can see.  And that is where the need to keep our nation strong should influence the way our companies are run.  That’s where the White House Jobs and Competitiveness Council could be very important.  It’s not the kind of thing each company should decide in a vacuum with their own standards, as to when they might agree to produce something at home that their numbers might say to do abroad.  The Council should be reminding them of their obligation to our country, and trade policy should make sure it happens.  That’s part of that missing framework I'm talking about.  The rebirth of more active patriotism is a key element in this Growth Program for America. If you ask people "Are you patriotic?" most say "Yes, of course," but the higher up we go the less it’s there and the more it is only about making the best financial decisions for one’s company and one’s self. 

WW:  How would you get that ethical transformation of management to become more patriotic again?  How can a policy make sure that we get patriotic results?  Being patriotic might not trump what executives do with billions of dollars.  Will they tell their investors "I was patriotic and therefore we're going to make less money?" 

KD:  A lot can be done with tax incentives and penalties.  Having a precise executive decision policy would be really hard to develop, as in setting standards for how to make decisions.  But certainly at the very beginning of this Growth Program it would be very important for the President to bring into Washington a group of top people to tell them the President’s objectives and to get their ideas. 

WW:  Top executives from both domestic and multinational companies?

 KD:  Yes, bring them in for a day or two of discussion.  Lay out what we've got to do to get back on a real growth track, and what the consequences are if we don’t succeed. 

WW:  Let's talk more about that Growth Program.  Is that something the U.S. has ever had? Did we have one after WW2, when our economy grew so dramatically? 

KD:  It would be unprecedented here, but we had a very successful Marshall Plan to rebuild Europe after WW2 .  We didn't need one here because we had a strong industry, opportunities were everywhere, up up up, we just had growth everywhere.  We had diverted all our consumer activity into the war, so we had to redirect that to consumers.  We also had the resources to lead a Marshall Plan to help the shattered countries of the rest of the world recover and get back into production.  And there was plenty of money around to fund growth, if there was a plant to build or rebuild. it wasn't that difficult. 

WW:  It was a completely different world economy then? 

KD:  Absolutely.  Those 20 years I had with IBM, 1949 to 1969, were wonderful years, it was great fun getting out and selling new technology, I was selling data processing, first with punched cards, then computers, everything was very positive.  No one had trouble getting jobs, there were plenty available and a lot of companies looking for people.  One can’t compare that to today’s job situation. 

WW:  So it would be an unprecedented Growth Program because we are in an unprecedented economic situation? 

KD:  Yes.  What's mainly different is there are a lot more strong countries out there now, with their own development programs.  They are economically and industrially strong.  They all have export programs aimed at us, because ours is the biggest market and we have fewest trade barriers.  The best  intelligence data for trade strategy Is published by a firm named PIERS.  They are the standard in trade export and import intelligence data.  Their reports show there are something like a half million exporters around the world aimed here.  That  a huge difference from the situation after WWII. 

WW:  Yes, I can see that must be an immense difference! 

KD:  It really is and we haven’t dealt with it effectively at all!  The change has come along gradually, aided by the whole liberalization and expansion of global trade - the birth of the World Trade Organization (WTO), and all these Free Trade Agreements like NAFTA.  The rest of the world and many of our own trade policy people always look on the U.S. as the golden goose - we were the place to turn to make the whole new world trade system work.   But the way its gone, the golden goose will be killed if we can't keep a viable industry and share of the business in our own U.S. market.  That's why we need balanced trade as the foundation of our Growth Program. 

WW:  Does the President see that?  Does Congress? 

KD:  Some in Congress do.  But I don't think the President spends much time on trade, and that’s a huge mistake.  If we've got one big thing that's killing us it is the $600 Billion a year trade deficit, $6 Trillion over a decade.  We just cannot afford that loss of national wealth.  In a way its a shame that that doesn't get reflected immediately in the budget deficit, so when you look at the $16 Trillion national debt, that trade debt isn't there, its taken care of separately but its mostly still handled by separate US Treasury bond debt. 

WW:  Is President Obama doing anything about it? 

KD:  No!  Its getting worse but the President is still pushing more free trade deals.  He says he wants them for more exports, but we're not going to get more NET exports.  We'll get some exports, but we give up a lot more through more imports.  The last free trade agreements he pushed through before the election were with Korea, Colombia and Panama.  Now the Trans-Pacific Partnership (TPP) is going to be bigger and worse than NAFTA, it involves 10 low wage Pacific Rim countries, plus Canada and Mexico, Japan I think is going to come into it too.  And in this case the business lobbyists have an inside track in contributing terms to it, but he hasn't even let Congress have a look at it, the President has instructed the Special Trade Representative to permit all of that! 

WW:  That sounds like he’s allowing corporations to write our trade policy.  Is there any justification for that, do they have some specially well-qualified people to be in these negotiations? 

KD:  No, the only qualification they have is they are registered lobbyists.  So they have a right to make their calls and, if an agency gives them a chance, to present their comments on a planned policy.  But when they are invited to do it, as in this case, it says, on one hand the President doesn't seem worried about our trade deficits, and on the other, he’s using lax free trade deals for his world diplomacy agenda.  That says he isn't thinking very much about our trade deficit as it gets worse and worse, not better. 

WW:  Have you tried to reach the President or his staff? 

KD:  Yes, I’ve tried to reach him by registered mail, but I don’t even get the receipt back.  When we have tried to take this trade problem to the White House Jobs and Competitiveness Council, they don't want to hear about it, because they're not getting any pressure from the White House for ideas for rebuilding domestic industry and jobs. 

WW:  Who's in charge of the Jobs and Competitiveness Council?  What are they doing? 

KD:  It is run by Jeff Immelt, CEO of GE, and has been very multinational-company-oriented.  The Council is mostly made up of multinational CEOs, so what they think about mostly was "what do we need as multinational companies?"  They want less regulation of course, but give no thought at all about "How can we rebuild a strong secure domestic industrial base that puts America back to work?" 

WW:  They don't sound serious about American jobs and American competitiveness!  Is the Council misnamed, are they really about something else?  Are they making big mistakes or are they just mis-managed? 

KD:  The best way I can come at that is to say when the President created the Jobs and Competitiveness Council, it was a good idea, we need one.  But then who did he put in charge of it?  Should he have picked a busy CEO of a big multinational company and expected him to do much about our struggling domestic industry and jobs?  The results speak for themselves.  The Council's staff assistant refused whenever I kept trying to see her.  She said over the phone "you must understand Mr. Davis these are all multinational companies represented on the Council, and they're not much interested in domestic industry."  I said "well they're supposed to be looking for job opportunities here."  She said " I’m sorry, but that's the way it is." 

WW:  It seems like a bad failure of priorities. 

KD:  One of the things that we're not doing in this country now is building for the future.  How could we permit prime big industrial cities like Cleveland and Detroit to disappear?  Doesn’t the Jobs Council care? 

WW:  Free houses.  Abandoned neighborhoods. 

KD:  Yeah, and there is so little national concern shown over that.  When I cite those examples, some people say "that was bound to happen, the auto industry and so on," but I say "no, we let it happen." 

WW:  Let's get back to that Growth Program.  What if President Obama invited you to the White House to talk about jobs and competitiveness, and asked your advice about how to create a Growth Program?  What would you say to him? 

KD:  I’d say: "Our main operative goal must be to restore the country's trade balance and eliminate our annual trade deficits.  We can do it with a fair system of Import Certificates to keep imports from exceeding our exports each year.  We must return to where we’re earning our way with the rest of the world.  We cannot be a strong nation and world leader while we’re so terribly in debt." 

WW:  Is the trade deficit really the key to this debt problem?  And aren't our problems bigger than just debt? 

KD:  The trade deficit isn't the only way to work on the debt problem but it is the biggest single thing that we know we can do something about.  A balanced trade policy would inject $600 billion a year into America’s economy without costing the Treasury a dime and without adding costs to consumers.  Our plan would return some production and millions of jobs to the U.S. by reducing excessive imports, and it would rebuild our weak domestic industries.   $600 Billion more in wages, jobs, GDP and tax base would make a major contribution to this country.  It wouldn't just decrease debt, it would make prosperity and national economic strength.

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Ken Davis Jr. was born in 1928.  He earned his B.S. from the Massachusetts Institute of Technology and his MBA from Stanford University.  He had a 20-year career with IBM Corporation, serving as Vice President and Chief Financial Officer for five years until 1969.  He then was US Assistant Secretary of Commerce, serving on trade policy and negotiations during the Nixon administration.  Then he joined Syntex Corporation, a multinational pharmaceutical firm, as Senior Vice President and Chief Financial Officer.  Mr. Davis first became an investment banker with White, Weld & Co. in 1975.  Later, he managed merger and acquisition departments at Tucker Anthony and at Advest, and also had his own firm, Corporate Development Associates, for five years.  In 1988 he joined Bentley Associates at its founding and was a Managing Director until 2008.  Currently Mr. Davis is founder and President of Economic Strategy Associates, Inc., in Stamford CT.  As an investment banker, he has specialized in working with high technology growth companies, both in raising capital and in mergers, acquisitions, and strategic partnering assignments.

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jon watson January 24, 2013 at 08:30 PM
This is a go figure economy. One group complains education wasn't worth it :http://money.cnn.com/gallery/news/economy/2013/01/24/masters-degree-debt/index.html?iid=A_PF_News ; another argues you need education: http://money.cnn.com/2013/01/24/news/economy/college-degree-jobs-recovery/index.html?iid=H_PF_News. Obvious no one knows the what or wherefore anymore.
Paul Alexander January 25, 2013 at 02:59 PM
Will, Spend some time reviewing the Energy Return on Energy Invested (EROI) and BTU equivalent stats for all the carbon based and "green" energy sources. You seem like a bright guy. You'll figure it out that "green" or "renewable" energy sources will never be a significant player for large scale base power requirements...unless you wish to force the issue which will REALLY crash the world economy. Renewables will work great in small scale, niche applications, and that should be encouraged and developed. But "Renewable Energy" will NEVER replace "Traditional Energy” in any significant way in a market based economy. And before you go off on the "ecological consequences" of US energy policy, why don’t you work on getting China and all the EM countries under control first. They are out of control and we all share the same atmosphere bro.
Will Wilkin January 25, 2013 at 03:25 PM
Hi again Paul, I'm wondering why you seem to completely dismiss ecological consequences of the energy sources you advocate. Do you not think they are real? You might find this article interesting, published just today by Dr. Paul Craig Roberts, former Asst Sec of the Treasury in Reagan's administration, and author of the book (and policy) "Supply Side Revolution": http://www.paulcraigroberts.org/2013/01/24/natures-capital-is-the-limiting-resource-paul-craig-roberts/ Many scientists and engineers see the viability of converting virtually the entire globe's energy sources to renewables, eliminating fossil fuels. It CAN be done, the existing technologies are already viable and will only improve as scale ramps up. What is lacking is the political will. http://www.amazon.com/Clean-Break-Transformation-Americans-ebook/dp/B00A4IEJ5K/ref=cm_cr_pr_product_top Finally, it seems irresponsible to me to say we will not do anything greener than China. That is a cop-out, another sign of America losing our leadership position, the attitude shows the decline has permeated our public psychology. We must all do what we can do, as citizens of the USA, American policy is our realm of control and responsibility. Do not underestimate the power of example and the power of leading, do not doubt that the rest of the world will take lessons from success and vision, which America can still achieve if we will reach for it. Read Dr. Roberts' article I link, he has the vision we need.
Paul Alexander January 25, 2013 at 03:36 PM
Will, I am not dismissing Ecological Consequences. You ever been to Beijing? Go. Your ecological consequences focus will re-zero instantly. You whine about leveling the international business playing field to help the US economy but at the same time you wish to saddle the US economy with more costly “ecological consequences” costs. Why don’t you spend some bandwidth focusing on bringing the Emerging Market economies ecological standards to the same current level the US has? That would address two of your big issues; making the US more competitive as (ecological consequence) costs rise outside the US and cleaning up the biggest polluters on the planet. The marginal return for focusing your "Ecological Consequence" efforts is mush higher outside the US. China's pollution doesn't stop at the Chinese border.
Veritas vos liberabit January 25, 2013 at 03:44 PM
Yo Cap'n, Green Energy stocks sailing with this Bull Market? http://www.reuters.com/article/2013/01/25/us-markets-stocks-idUSBRE90L0DA20130125
Paul Alexander January 25, 2013 at 03:47 PM
Jim Sullivan/McMurphy/El Rushbo… Jim, Do you have Tourette’s?
Veritas vos liberabit January 25, 2013 at 03:55 PM
Paul, are you STILL IN DENIAL over the Bull Market?
Paul Alexander January 25, 2013 at 03:58 PM
Jim, Looks like you DO have Tourette's.
Veritas vos liberabit January 25, 2013 at 04:01 PM
Someone at RJ says.............. The WilderHill New Energy Global Innovation Index (NEX), which tracks 94 clean-energy stocks, has gained 4.6 percent since the start of the year after a worldwide slump in the solar industry pulled it down in 2012. The NEX, as it’s called, rose 1.6 percent to $125.56 at the close in New York, after a 2.9 percent increase yesterday. It lost 5.5 percent of its market value in 2012, while the NYSE Arca Oil Index (XOI) rose 1 percent and the Standard & Poor’s 500 Index climbed 13 percent. Last year was marked by a risk-averse market, and speculative investments in renewable energy were “inherently out of favor,” said Pavel Molchanov, an analyst at Raymond James & Associates Inc. in Houston. Those sentiments are shifting, and the index may rise in 2013, he said. “When risk appetite is stronger, such as the past two days, the stocks tend to act much better,” Molchanov said today in an e-mail. “If the macroeconomic situation gets better, which seems to be happening,” investors may show more interest in renewable energy and clean technology.
Will Wilkin January 25, 2013 at 04:09 PM
Hi once more, Paul, You whine about the need to ignore the human and environmental costs of the ecological consequences of the energy technologies you advocate, such as fracking gas and its dangers to aquifers from which your fellow American's drink. I have already spent some bandwidth explaining that emerging market economies are not subject to the authority of the US government, which is the polity my citizenship makes me party to. How do you propose to bring China etc up to whatever ecological standards you might have?
jim laguardia January 25, 2013 at 05:14 PM
Yay Will you came back to the circle I am sure you friends all missed you, BTW characterizing peoples opinion as continued whining.... That's not a personal insult??
Paul Alexander January 25, 2013 at 05:25 PM
Jim, In all fairness, I dropped the "whine" bomb on Will first. And Will...I appredciate you engaing on the issue. I think your focus is misdirected, but at least your're in the fight.
Will Wilkin January 25, 2013 at 07:47 PM
Hi Jim, you are an alert reader, and yes, I regretted taking that bait, I'm eating my hat now, pass the tabasco please.
SuperDave January 25, 2013 at 09:10 PM
Anyone using the stock market as an indication of financial health of the nation needs their heads examined. Financial health can be gained by sending US jobs off shore and increasing profits, thus share prices.. So unemployment can be high and companies post big gains. Obama, buy and large, is not a caplitalists as he openy talks about redistribution of wealth. Just by that measure, he is not a capitalist. And, a capitalist would never influence markets by pouring in government funding, just as Obama did with the solar industry and GM, that led to a HUGE loss for taxpayers as well as GM continues to shrink in the market due to churning out inferior products. Everything Obama does is socialistic, not capitalistic. And before you start blaming Bush, TARP was supposed to bail out banks and financial institiutions only. But Obama and the spend thrift Democrats got their hands on that money and, as Democrats will do, spent it all in private businesses. TARP was not supposed to be used for that.
Citizen X January 25, 2013 at 09:30 PM
This thread is mixing too many issues (employment, the environment, the stock market, the economy, green energy, & the relationship between the economy & the stock market. And at the end it appears that someone threw in education, though I haven't looked at the links yet. Oh yes, & we also tossed China into the mix, along with some Thomas Friedman). This would be difficult even for Paul Krugman to figure out. There are a couple of points I would make about what I think the article has to do with, which is employment. The stock market, I could argue, in fact has nothing to do with the 'economy'. It is sentiment driven, manipulated & institutions can generate manufactured & self serving outcomes (if you somehow disagree with this, please look back at the 2007 financial crisis). On one hand, Obama supporters point to the stock market as evidence that Obama is great for the economy. On the other, the biggest reason markets are up is that corporations are in a position where they can & do employ fewer people but generate the same revenue. Even at lower revenue, with fewer employees or more contractors, coupled with extended unemployment benefits, there is a situation where high employment is actually a bad idea. The unemployment figures don't lie, & when coupled with how the stock market is performing this seems to tell an accurate story. The government is subsidizing the stock market & thereby stifling growth. Obama supporters should think twice about the president.
Citizen X January 25, 2013 at 09:55 PM
SuperDave, I missed this post. You'll see that I agree but I would argue that it isn't just the idea of sending jobs overseas. There is an environment where more employment for companies is bad, & for those who are unemployed not having a job isn't that bad. Employment & home buying are both keys to the economy & long term stability. Obama has done horribly on both, & I would not be surprised if under Obama the rich have gotten richer, the opposite of what he claims he's in favor of.
The Economist January 25, 2013 at 11:06 PM
http://www.forbes.com/sites/adamhartung/2012/10/10/want-a-better-economy-history-says-vote-democrat/
Citizen X January 26, 2013 at 12:35 AM
That's an interesting read; thanks for posting it. However it isn't new information, despite the fact that it is a new book. Economies are cyclical, so it is easy to make the argument that Clinton benefited from Reagan/Bush, while Reagan was left with the mess he inherited from Carter (which all seems very obvious). It is difficult to believe that Obama made any sort of difference in the economy, don't forget that we are 6 years removed from the financial crisis. The Great Depression lasted for a decade, & improvements didn't happen over night In terms of corporate profits, see my previous post. Housing is sill abysmal, & real unemployment is equally atrocious. The biggest issue is that we are not meeting any of these issues head on, such as the dilapidated infrastructure & the awful housing situation. We are going to disagree on this, & I will always believe that incumbent presidents have little effect on the economy unless they are 2nd term presidents close to the ends of their second term, & even then it would be difficult to feel any effects of economic policy unless timing were perfect. We will see how things are in 3 years, but my guess is we will still have housing & employment issues. Those two points will continue to drag the economy down, the largest issue is most likely unemployment but housing does not help & higher employment won't excess easily fix that any time soon. I assume we will also disagree about the new Deal.
Citizen X January 26, 2013 at 12:37 AM
'Excess' should not be in the second to last line. Not sure where that came from.
Paul Alexander January 26, 2013 at 03:56 PM
The Fed’s obscene balance sheet expansion, which began shortly after the 2008 election, (see link below) will need to un-expanded/unwind at some point. It just went over $3B. WTH! That unwinding will either take DECADES of Japanese style economic stagnation, OR crushing short term economic pain. Which do you think the politicians believe will keep them in office? The effects of either option...and without rapid and deep REAL economic growth in the US they are the ONLY two options…and one or the other MUST happen…will dwarf any of the proposed DC policy lever pulling outlined in the article above. Only organic US growth, on the level of the original American Industrial Revolution, will be adequate to put the Fed’s recent money printing to bed without causing extremely painful economic consequences. And the only chance for the US to experience a 2nd American Industrial Revolution is for the US to tap into the massive conventional energy supplies that technology advancements have made available. That is the future. The US as a dominant conventional energy producer and exporter, yes…exporter. It is coming and be thankful it is. http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/01/Fed%20Balance%20Sheet.jpg
Paul Alexander January 26, 2013 at 03:59 PM
...and for some perspective…the very small blip in the Fed’s balance sheet expansion at the far left of the graph was the Fed’s preemptive response to the Y2K hysteria. And the blip in late 2001 was the Fed’s response to 9-11. So if that’s what the Fed did then, and the right side of the graph is what they’ve done now….Yikes! Oh…and as a side bar…this same Fed balance sheet expansion over the past four years is largely responsible for your 401(k) balance expansion. When the Fed’s balance sheet reverts to its mean…watch out home gamers! http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/01/Fed%20Balance%20Sheet.jpg
Paul Alexander January 26, 2013 at 04:06 PM
...and Willl...if the UN Wizards can conspire to ban guns in America...certainly they can conspire to "ban" pollution in China...
Paul Alexander January 26, 2013 at 06:03 PM
...That should be "It just went over $3T"..as in TRILLION...not "$3B"...even my typing fingers have a hard time believing the size of the Fed balance sheet...
Paul Alexander January 28, 2013 at 01:06 PM
This pretty much sums up my position. Thanks to Charles Hugh-Smith via the hardworking Tylers at Zero Hedge. “Why Employment Is Dead in the Water” http://www.zerohedge.com/news/2013-01-27/guest-post-why-employment-dead-water
Ali Abdulah January 28, 2013 at 03:24 PM
It's not that difficult to find someone who agrees with just about anything, but here's what real economist are saying: 9:05a.m. EST January 28, 2013 (Photo: John Bazemore, AP) STORY HIGHLIGHTS More than 50% of economists upgrade 2013 GDP growth forecasts to 2% to 4% Three months ago, just over one-third expected GDP growth that strong More than half of economists surveyed expect hiring pick-up, up from 36% NEW YORK (AP) — Economists are increasingly, but still cautiously, optimistic about growth in the year ahead with the hiring expected to pick up in coming months. A quarterly survey by the National Association for Business Economics released Monday shows half of the economists polled now expect real gross domestic product — the value of all goods and services produced in the United States — to grow between 2 %and 4% in 2013. That's up from 36% of respondents who felt the same way three months earlier. About half expect sluggish or negative performance, down from 65% in October.
Paul Alexander January 28, 2013 at 03:29 PM
Yeah Sully...those Federal Reserve charts can be sooo inconvienent...
Ali Abdulah January 28, 2013 at 03:41 PM
Charles Hugh Smith, this is your economic guru? http://www.oftwominds.com/ppoh.html
Ali Abdulah January 28, 2013 at 03:50 PM
ps: what do these guys know? http://www.economist.com/blogs/newsbook/2013/01/world-economic-forum-davos-0
Paul Alexander January 28, 2013 at 10:14 PM
Will, Spend some time plowing through the link below. It’s long. The author is excruciatingly thorough. “Renewable Energy: The Vision and a Dose of Reality” Nicole Foss October 27, 2012 http://theautomaticearth.com/Energy/renewable-energy-the-vision-and-a-dose-of-reality.html Here’s a bit on Nicole’s background. She’s the real deal. http://www.financialsense.com/contributors/nicole-m-foss
Paul Alexander January 29, 2013 at 04:12 PM
Will, Before you advocate saddling US industry with any further environmental costs…let’s get the emerging markets up to US standards. The costs they incur to do so will make our markets more competitive (ignoring the environmental impacts of industrialization is a HUGE competitive advantage), and the planet gets cleaner. Win-Win. Beijing Smog: Before And After Pictures Submitted by Tyler Durden on 01/29/2013 09:59 -0500 “... or we could just show these two pictures of Beijing before and after the smog: both taken at the same time, at the same place, with the only difference being the latest onslaught of what is now becoming a weekly occurrence of the worst breathing conditions recorded in any industrialized country.” http://www.zerohedge.com/news/2013-01-29/beijing-smog-and-after-pictures

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