The Populist Podcasts on Political Finance

The Forgotten Deficit

Fri September 01 2006

A. Scott Piraino Last year the United States posted a trade deficit of 726 billion dollars, that's an astronomical, outrageous amount of money. Our cu... read more

A. Scott Piraino Last year the United States posted a trade deficit of 726 billion dollars, that's an astronomical, outrageous amount of money. Our cumulative trade deficits since 1980 add up to over six trillion dollars. That's the second largest transfer of wealth in history, second only to our national debt.Nowhere is this transfer of wealth more apparent than in East Asia. Over the last twenty five years growing trade surpluses with the US have fueled an unprecedented economic expansion. In key industries such as computers, electronics, and automobiles, the US is now dependent on Asian imports. China has grown from an agrarian backwater into the world's third largest economy in the last twenty five years. While our yearly trade deficits with China have risen from zero to over 200 billion dollars a year, their country has been the world's fastest growing economy. China has become a colossus precisely because of these trade deficits. The global economy has been very good to China. Their country has been industrialized with someone else's money, ours. Throughout the 1990s US corporations increased their factory investments in China, seeking an endless supply of cheap labor. Our trade deficit with China grew by 25% last year, and is now the largest international deficit in history.Empty cargo containers are our largest export to China. Over 60% of the cargo containers that come into the U.S. from Asia return empty. Of the top fifteen U.S. exports to China, three are "waste and scrap" that is - scrap metal, scrap paper and cardboard. Four are raw materials or agricultural products such as soybeans and seed oils. Six are parts, most of which will return as finished products.By contrast, China now leads the world in the production and export of televisions, refrigerators, cameras, bicycles, motorbikes, computers, and computer components, microwave ovens, DVD players, cell phones, cotton textiles, and countless other manufactured products.Even last year's trade gap doesn't tell the whole story. Our merchandise trade deficit totaled a whopping 782 billion dollars. This larger deficit was offset by surpluses in agriculture and "services", which is a very broad category that includes tourism and foreign student tuition.What happened to our country while we traded food, vacations, and college degrees for goods, and lost six trillion dollars in the process? While the Pacific Rim was booming, corporate downsizing, factory closures, and mass layoffs became an economic way of life for American workers. Per capita incomes have soared throughout the Pacific Rim, while wages in the US have stagnated.Even the record economic expansion of the 1990's failed to raise hourly pay for Americans. Our wages have been squeezed by the loss of millions of manufacturing jobs since 1980. The Federal Reserve Bank of New York calculated that 3.8 million jobs were displaced by U.S. trade in manufactured goods as of 2003.Those jobs have been replaced, but with lower paying work in the service sector.Now even those service sector jobs are leaving the United States. The evidence can be seen in the rapid growth of "outsourcing", or transferring information jobs to foreign nations. US service industries such as finance, healthcare, and software development are rapidly expanding in lower wage nations. As this trend continues, these high-tech careers are being exported just as manufacturing jobs have fled in the past.Despite the preponderance of evidence that we are losing a trade war, there is simply no public dialogue about our skyrocketing trade deficits. And this issue is certainly not being discussed like the impending economic crisis that it is.Most of the damage is already done. Detroit Michigan is a wasteland, while Shanghai China is booming. Yet there are few "mainstream" politicians or news programs that will even acknowledge the problem, much less speak out against our trade policy. Protectionism remains out of fashion in the United States. Our political establishment refuses to connect our trade deficits with stagnating wages and a beleaguered middle class. Instead voter's insecurities are assuaged with vague promises of prosperity in an emerging "global economy".Our national managers assure us that free trade will raise our standard of living. Technology and information industries will link the world into one giant market for goods and services. Expanding markets overseas will create millions of jobs for American workers. But this begs an obvious question: Has the global economy created our trade deficits, or have our trade deficits created the global economy?The world is wealthier than ever because the world has spent our money, six trillion dollars of it. For some parts of the world the global economy means new investment, new jobs, and rising prosperity. For Americans globalization is a kinder, gentler word for the export of jobs, factories, and technology. A small elite of investors and multinational corporations profits most from the global economy, while the American people sacrifice their incomes to create it.So what is the true cost of our trade deficits? It's how much wealthier we would be if the economic boom that enriched East Asia had enriched our country instead. Ultimately, it's the difference between America today, and the America that could have been if we had spent six trillion dollars here instead of exporting it. ... read less

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