A primer on why America's economic future is screwed

by batvette | August 18, 2011 at 05:34 pm

388 views | 2 Recommendations | 20 comments

This is relative to those wondering why we shouldn't tax the heck out of the rich. I'm pretty close to the bottom tier but know enough about economics to realize:
(a)You cannot "tax" your way to financial solvency when government spending is an equally large problem- let's not forget Obama's initial economic stimulus package was little but increase the federal payrolls and award contracts for hastily drawn up public works projects.
(b)I've worked for enough rich people to understand if you put the screws to them they will move their money to places where there is less of a bite taken out by the government who socialists seem to feel knows how to better spend our money than we do.
Case in point, what was the trendy thing for British rock stars to do in the 70's? Move to the US to avoid heavy taxation in the UK.
(c) There seems to be some misconception that if billionaires aren't taxed enough they take all that extra money and hide it under their mattresses or bury it in jars in their yards.
The economy is like a big dinner table. The vast majority of us come to it hungry, with fork and spoon ready to dig in. The wealthy come with the bird and all the trimmings. We need them to feel comfortable bringing their investments and keeping it in the market to roll over without feeling like the vultures want it all.
(d) All this is really just useless rhetoric because everything we knew before is OVER, it's DONE. The 8 years of "Beijing" Bill Clinton saw him relax every commerce obstruction to China, facilitate US factories closing with production being resumed in China with US manufacturing know how handed to them wholesale. It wasn't the jobs that were transferred overseas, it was the technical aspects of the manufacturing- stuff that used to be called "industrial espionage" if you left one company and took it to another. As the exodus transpired American companies actually sent engineers to Asia to correct mistakes on samples from the Chinese factories because they knew consumers would not buy too shoddy of a product. I knew a guy in the car audio industry whose job was doing that, he even sent broken samples to US analysis labs to identify material faults and forwarded the results to the Chinese to correct them. His company was buying up struggling US brands they competed with, shut down their factories, and replaced the product with Chinese made substitutes- buying the brands got them the distribution channels and dealer floorspace. The agreements with the Chinese were basically handshakes, yeah they profited for a few years whoring out the once respected brand names until consumers figured they were no better than other imports, but now the Chinese can sell the equipment they taught them to make to the rest of the world and their own competitors here by just putting a 50 cent badge on it.
In summary those jobs aren't coming back unless we are willing to work at Chinese living and environmental standards.

As shareholders took their fast profits, the capital gains and dividends taxes they paid helped balance the budget by 2000. Yet all the while Clinton was fighting for their human rights on the international stage due to Gobal Socialist sentiments. You can't get back knowledge, 1.3 billion people and others now know how we live and can manufacture it with techniques we developed over generations in the marketplace. The real estate bust was simply Wall Street searching for a vehicle of investment because of the dearth in new manufacturing, the mortgages were bad because people were trying to stay afloat after trading good paying factory jobs for service jobs.
The worst news is that America has almost NO exports anyone wants, if you invent something today it pops out of a Chinese factory tomorrow at half what you could make it for. We're far from rock bottom, that will be when we can no longer fool the world with the ponzi scheme Kissinger forged with the Saudis in '73, preservation of which required the vital invasion of Iraq in 2003.
And on that I ask you to thank a war veteran or his fallen comrade for the fact we aren't all in soup lines this minute, google "petrodollars Saddam use oil as a weapon" and understand why most of Congress voted for "Bush's War".

The only questions are how far is bottom and is it slow enough to adapt- or so fast we have civil unrest. One thing to note is anyone talking about RECOVERY is delusional. What we had will never again be.

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The 1

at 18:09 on August 18th, 2011

Good article batvette ! Would have been interested hearing any ideas you might of had for how we could at least try and turn this economy around. America's way of life may not be through just yet. This lower and middle class jobs issue must be addressed somehow. Taxing the rich may not be the answer, but when 90 plus percent of the economy is owned by 2% of the population, a truly 'capitalist driven economy' can't function as it should. That wealth needs to be in more hands to fuel and drive this economic engine. Global markets and currency valuations aren't really terminating factors in America's way of life economic engine. It's the squeezing of the middle class hands to fuel and drive this economic engine that's hurting us most imo.

PeaceFrog

at 12:11 on November 1st, 2011

JOHN A. LUCIER, A.K.A. BATVETTE, IS ONE OF THOSE "RICH PEOPLE" YOU HAVE KNOWN AND WORKED FOR BILLIONAIRE GREGORY T. LUCIER, ALSO OF SAN DIEGO, CA??????

batvette

at 13:11 on November 1st, 2011

there are many thousands of people in the US with my last name. you are still either a bald faced liar or the most incompetant boob to ever pass the NY bar. now be gone before I own you again. tell your boss success for your program is more dependent upon having the judgement to know which ones you should walk away from as they were actually on your side before working for free- than it is foolishly insisting no one slips through your grasp.

Captain America (not verified)

at 19:41 on August 18th, 2011

I have suggestions. Roll back the budget to pre-2001 levels by getting rid of DHS, TSA, pulling out of most overseas bases, and eliminating contracts wtih all corporate mercenary soldiers like Xe. Get the US's big nose out of Iraq, Afghanistan, and Libya -- and the Far East.

"thirty-aught-six" (not verified)

at 19:42 on August 18th, 2011

Middle class in American went out with the it's ability to produce and compete in the global market. Just because your Daddy made 50,000/yr. in the union don't make you middle class. Middle class comes from the word mercantile. Those in local trade. No local trade, no middle class. No goods production, no trade. The myth that the middle class is being squeezed is just that. Myth. You can't squeeze what has was systematically destroyed by liberal ideology and it's demonization of indusry as a social evil. Those with large wealth are the only people in America with money sufficient to restart the return of the middle class and the liberal mindset is to tax them out of existence. Under the guise that they now owe "us" as we now blame them for the liberal policies we demanded that destroyed not only the frame work of "private" capital investment, but also the structural framework of industry and our ability to produce goods that could comete in a global market place.

kellen (not verified)

at 22:17 on August 18th, 2011

the rich are the only people in America with money enough to restart the return of the middle class and the liberal mindset is to tax them out of existence.the <a href="www.laptopbatteryoff.com/" title="battery for laptop, replacement battery"><b>laptop battery</b></a> have limited battery life.

batvette

at 12:53 on August 19th, 2011

30-06 is right about "the myth" but it's bigger than that even... all that prosperity we had while "dad" made 50k a year was really false, we lived on the backs of the world. The deal Kissinger made with the Saudis meant any nation buying OPEC oil needed dollars to purchase it with, as the Saudis used their power as top petroleum exporter to ensure the market stayed trading in dollars.

In effect it allowed us to print money out of worthless paper and trade it to other countries for real goods and services. It kept going and going but the world has diversified enough now and has the Euro and Chinese currency we compete with it lost steam, we don't have that purchasing power any more. Worsening that is we have little to export.

If you are of wealth, what would you invest it in? Used to be someone had an idea, invention, whatever, something they marketed, you put the money into building a factory and hopefully it paid off. As the markert was controllable through patents and such your competition had to come up with a better idea.

That is not the case now, patents are wholly irrelevant as is copyrighted material outside the US. The instantaneous nature of information means there is no safe investment in manufacture of any product when the Chinese can duplicate it overnight.

The only investment vehicle there is is rolling over investments- like mortgages-not sustainable at all. The only way we're going to stabilize as a player in trade in the world market is when our standard of living and the real value of our currency equalizes with the Chinese, Europeans and other major players.

This was the great danger of technology based globalization. There is no closed, protected market, no reason for me to buy your US made widget when I can get one sent from China for 1/4 of the price. The Chinese are so industrious they're advancing in leaps and bounds anyway. Example:

The other day I received something I ordered:

http://cnqualitygoods.com/goods.php?id=1177

Not only does America not make something similar at ANY price, I can't even purchase something like that at any store in my large city. And if Clinton hadn't helped jumpstart their industries, today the best light I would be able to buy would still probably be a 3d Maglight.

This is 20x brighter. It's brighter than both your car headlights together.

But we can't compete if we tried and if you had a better idea they'll beat you in cost and will continue to do so until we are willing to work for 50 cents and a bowl of rice a day and pollute with impunity.

While I hate to get partisan about it the liberals did have a lot to do with this situation. Fighting against sweatshops overseas, not wanting polluting factories here in America, feeling sorry for all the swarthy third world masses, telling the world we were evil villains for invading countries ruled by despots.

Well ya got your wish kiddies, we suck now. We're DOWN like the poor folks in the world. Happy?

Church Lady (not verified)

at 19:49 on August 19th, 2011

I agree with your econ assessment completely, battyvette. Now, keep thinking about how all this pillage of our economy came about and to whose ultimate benefit? Think bailouts. Who really runs America? And do you think that these people are going to let YOU "vote" them out of running the country. But you might wise up and rebel against their thievery. Think, think. And now you're ready to understand what the Torture Matrix is all about.

batvette

at 20:55 on August 19th, 2011

Well I don't like the bailouts but I understand why they were necessary.

As costly as they were they did not begin to actually "bail" anything out. They were necessary to continue the illusion that the US is solvent enough to do so if necessary. If they hadn't consumer confidence and the world's trust in the dollar would be lost, creating a landslide of divesture of dollar assets.

Your assessment about us keeping our nose out of the business of Iraq and Afghanistan show a complete detachment from reality. Afghanistan? Like we were supposed to let Bin Laden just keep training Al Qaeda operatives there? F that. The big mistake we made, despite the fact Al Qaeda's grievances against America are somewhat just, is not just nuking that cesspool once and for all. Lucky for the world I'm not in the White House.

As for Iraq you missed the part where I said "Google "petrodollars Saddam use oil as a weapon""

If we hadn't gone into Iraq the economic situation we'd be in now would be incalculably worse. The dollar would have already crashed, Saddam would directly control the straits of hormuz and most of the persian gulf petroleum exports, we'd be paying $10 or $20 a gallon for gas at TODAYS dollars' value, post crash could be $100.

It wasn't just Saddam who was scheming to **** us. Try France, Russia and China, the three countries with oil contracts about to be consumated when Blix found no WMD.

As they all went in with their combined exploration and drilling resources (imagine how many people China alone would send in) all that oil goes onto the world market in Euros in the oil for goods pipeline to Paris Saddam had already established with oil for food. Many countries have been itching to dump the dollar as the unit of trade in oil- like Venezuela, Iran, etc. Once it got going you couldn't stop it.

If this sounds like a fantasy how do you think we finished off the USSR?

We used oil as a weapon. Conspired with Arab nations to keep oil dirt cheap. Oil was pretty much the only thing the Soviets had to export as source of revenue. Saddam conspiring with Russia and France would have been payback.

"thirty-aught-six" (not verified)

at 16:24 on August 19th, 2011

We won the race to the bottom. And now we don't want to live with the reality or accept the blame for our ideological demise. When you destroy your own manufacturing potential you must then learn to live with in the rubble. Not expect you can still afford to live as you did prior to it's destruction. We can no longer afford the upkeep on our earned standard of living. We must adapt to the decline in standard of living and expand our agricultural base. Back to the beginining. 300 years of effort to become the industrial giant thrown away. Let us hope that those nations taking our place are as generous as we were. That generosity must sustain us until a new generation comes forward with the intestinal fortitude to achieve in the face of hard work and little reward.

batvette

at 20:18 on August 19th, 2011

You seem to have a good grasp of this, and have probably heard of this guy's book:

http://en.wikipedia.org/wiki/The_Long_Emergency

While it's mostly focused on the peak oil issue, which is probably overstated by some (who forget reserves are recalculated when geological surveys are redone with new extraction techniques considered) his point about regions doing well when they have strong local agriculture is very important.

Places like Las Vegas are screwed. If most of your food has to be shipped in from 1000 miles away, when fuel gets expensive, look out.

But as it turned out, the information technology revolution was not the rosy picture we thought it would be.

The 1

at 18:08 on August 19th, 2011

All this doom and gloom..lol

America is this greatest nation on earth. The most powerful and equally important, the largest economic force on earth. Just because our growth factors have currently slowed doesn't mean we won't turn this around. America's current economic condition is still three times the size of China's. China is still far smaller and poorer than the U.S. The belief China has become the world’s leading economy is not accurate.

As I stated above, America is still going through a rebalancing effect from previous financial markets failures. These rebalancing effects will mean a smarter, more focused approach with better efficiency factors at all market levels.

batvette

at 20:12 on August 19th, 2011

What you're glossing over is China has exports that are wanted and distributed all over the world, currently the US still has a higher living standard and more brick and mortar assets per person- in the form of homes, etc, but outside of that our corporate wealth is becoming largely paper as factories disappear. The infrastructures of our communities are also crumbling.

This "largest economic force on earth" only came about because of Kissinger's ponzi scheme and it's fizzling. If you really want to compare the US and China look at their exports to the world VS ours. Now understand the mechanism that built our wealth isn't sustainable. That's why there's been QE1, and QE2.

It's not "rebalancing" and learning from failures, it's a whole new ball game. We're like a community that eats food other communities bring in. We also produce food, but haven't been sending any out and we haven't been paying the invoices on the food the others have been sending in. Pretty soon they're going to stop sending food as they get sick of our empty promises and bounced checks. Then we're left with only the food we're producing internally to go around.

The 1

at 07:15 on August 20th, 2011

Interesting article:

The United States vs. China—Which Economy Is Bigger, Which Is Better

By Derek Scissors, Ph.D.

batvette

at 02:37 on August 21st, 2011

Thanks for the link but he's making some very irrelevant points there.

Who cares if their unemployment is twice ours? (its less)

Who cares if per capita income is much less? They have 4.5x the workforce.

He acknowledges trends will have them possibly eclipse us.

He has a point about resources. He neglects they are expanding their wings now to solve this ( a recent nowpublic article touting the US real estate commercial market upswing mentioned just that)

He does not mention their lax environmental standards, or that global warming legislation schemes exempt them. He can't say we can go head to head with them in factory production.

Heritage Foundation..... he's a football coach of a team of 200lbers about to play a team of 300lbers. Just like the Prez. It's his job. "We'll do GREAT guys, now go get 'em!" (quietly calls for an ambulance on station)

Kudos for the positive outlook.

I'm not buyin. :-)

The 1

at 03:54 on August 21st, 2011

lol..Keep the faith ! We'll get through it. We have before and we can still do it again. America still has what it takes. China's growth will slow and level off as did Japans. America is still the 700lb gorilla in global financial markets. China needs America's economy strong as much as we want there cheap products.

"thirty-aught-six" (not verified)

at 13:23 on August 20th, 2011

Scissors frames the question to suit his desired outcome. The numbers are changing for both China and the US. Chinas numbers are improving as the individual Chinese earns disposable income and begins purchasing Made in China. The US numbers are going down hill fast as we loose more and more disposable income to high unemployment and a high cost of living. There is no Made in the USA. So the stores are selling made in China. And those US dollars go back to China and not to furthering the economic development of the US. What's hurting the Chinese is inflation but that is diminishing as more and more people spend their new found wealth. Right now the Chinese can't build cars and new homes fast enough.

The 1

at 03:55 on August 21st, 2011

Derek Scissors focuses his studies on the economies of China and India as research fellow for economics in Heritage's Asian Studies Center. He also analyzes and comments on broader economic trends in Asia, as well as related challenges facing the United States.

Scissors has testified before the U.S. Senate on exchange rate disputes between America and China and to the U.S.-China Economic and Security Commission on Chinese investment in the United States.

Scissors analysis and commentary have appeared in Foreign Affairs, National Review, The New York Times, The Wall Street Journal’s Asia edition and Indian news outlets such as The Hindu. Scissors and his work also have been featured in The Financial Times, The Washington Post, The Economic Times of India and by news agencies such as the Associated Press, Dow Jones, Reuters and Xinhua.

Television audiences know Scissors as a guest commentator on Bloomberg, CNBC, CNN, Fox and Fox Business, MSNBC and China’s CCTV, among other major cable and broadcast outlets. His appearances on radio include Fox Radio, National Public Radio and Public Radio International.

Scissors also is adjunct professor at George Washington University, where he teaches a course on the Chinese economy.

Before joining Heritage in August 2008, Scissors was China economist at Intelligence Research, a global consulting firm. He wrote its China Weekly Bulletin, China Watch and China Quarterly Forecast, and counseled clients --primarily Fortune 500 executives -- concerning their China operations.

batvette

at 09:32 on August 21st, 2011

I'm not doubting his credentials but you DO understand Heritage Foundation is not an objective analysis source on US policy... as a think tank they "sell" the government policy philosophy and have every interest in ensuring its success. They are as good as the government speaking, any negative gloom and doom would be hand delivered to the White House in sealed reports while they are playing cheerleader publicly.

It almost sounds as if you don't understand think tanks ARE the government. With that in mind, do you recall Carter's "crisis in confidence" speech? Look it up if you don't, 1979 I believe. That's one of the few times in history a president told us the bitter truth. The people rejected it and it was political suicide for Carter.