By Kenneth Davis
President, Economic Strategy Associates, Inc.
Last week, President Obama declared: “America has its groove back! The recovery is moving ahead!” Oh, really? Will he support balanced trade legislation to cut the huge flow of imports that cause our costly trade deficits and job losses? And will he withdraw his premature backing of another NAFTA-like “free trade” deal, the Trans Pacific Partnership (“TPP”)? If he will, he can reassure the nation that he’ll solve our trade problems and recover millions of lost jobs. He should listen again to his friend, Warren Buffett, “The Oracle of Omaha,” this time on the extreme danger of our ever-growing trade deficits.
Ever since late 2003, Mr. Buffett has warned of severe trouble coming, first in a Fortune Magazine lead article headed “Our trade deficits are selling America out from under us. We’ve got to stop it now, and here’s how to do it!” He presented a strong case for returning to a national policy of earning as much as we spend in world trade. If we don’t, he said, we’ll be forced into ruinous debt and borrowing – exactly what happened when his advice was ignored in Washington
American businessman and investor Warren Buffett was quoted in the Associated Press, Jan.20, 2006: “The U.S trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to political turmoil.”
And then in 2008, he produced a YouTube video to tell the story of “Thriftville” vs. “Squanderville” as in his landmark Fortune article. Here’s a link to the video.
What Mr. Obama’s advisors haven’t solved is that the huge flow of imports has turned our whole domestic industry into a leaking boat! Whatever new hi-tech companies we create are fair game for intense import competition or foreign takeover. The last thing we need now is another NAFTA-style trade agreement like TPP. Here’s Mr. Buffett’s comment: “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.” The recovery actions to date are mostly small “patches” except for the big success for the auto industry. One-sided trade agreements like NAFTA and TPP tear huge new holes in America’s trade “boat.”
There’s still a good chance to save the day – for America to have a winning future! A “strike force” is being formed to fix the import problem with balanced trade legislation and to seek changes in new free trade agreements like TPP!
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Kenneth N, Davis, Jr. also is a former U.S. Assistant Secretary of Commerce/International and former IBM vice president and chief financial officer.
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Posted March 5, 2012 at 1:08 pm, in Free Speech Zone
March 6th, 2012 at 12:55 pm
The International Trade Deficit is the basic structural economic foundation problem that will destroy the US economic miracle because title to US located assets are also leaving the USA to pay for the things that we import in addition to US government expenses.
March 6th, 2012 at 12:55 pm
The US International Trade Deficit must be corrected by any means possible in order to generate more NATIONAL WEALTH in the USA instead of continuing the flow of title to US located assets (privately owned businesses, factories, casinos, hotels, farms, land, ports, refineries, forests, ports, breweries, distilleries, and other NATIONAL WEALTH) leaving the USA to pay for the things that we import from foreign manufacturers, and also to pay for increasing government expenses, such as stimulus for infrastructure expenses that destroys a nation’s NATIONAL WEALTH and does not increase or create any new NATIONAL WEALTH.
March 6th, 2012 at 12:57 pm
The US government borrows money from individuals in the industrialized manufacturing countries of the world and then spends that money on government activities that does not create any new NATIONAL WEALTH that would be available for that some of that new wealth to be CONFISCATED via taxes to pay for economic stimulus such as bureaucratic government jobs, infrastructure improvements, government contracts, unemployment benefits, social security benefits, welfare benefits, National Healthcare, wars, police, firefighters and various other tax paid government activities that do not create any new NATIONAL WEALTH. This deficit spending policy will soon destroy the US Economy.