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We all know that the nation’s annual trade deficit is figured by deducting our total exports to the rest of the world from our imports from the many exporting nations.  Our current exports are about $1.6 trillion, with imports of about $2.4 trillion, for a U.S. trade deficit of $800 billion annually.

Those deficits are so great that the U.S. government must borrow about $2 billion abroad every day to cover them.  Most U.S. economist are “free traders” who ignore this problem or discard the idea of introducing critically-needed balanced trade legislation. Instead they foolishly want to go on repeating failed efforts like jaw-boning China to raise the value of its currency.

For the decade that ended on 12/31/09 our total trade deficit and related borrowing was a shocking $6 trillion! It’s a ticking time bomb. When it explodes and America’s world financial position crumbles, the ensuing chaos will make the recent financial crisis seem like child’s play. Beyond even more massive unemployment and a shattered economy, we’d undoubtedly lose our status as a reserve currency, and with it lose the freedom for the U.S. to print money to cover our national debt the way we can now.

What’s the best and only effective way to recover a fair share of our own domestic market and create millions of jobs?  Answer:  Enact balanced trade legislation based on “The Balanced Trade Restoration Act of 2006” drafted by  Senators Byron L. Dorgan and Russ Feingold, but not passed under President Bush. Under this legislation, $800 billion of annual production would come back to U.S. companies while creating 5 million jobs.

That’s far more than any new stimulus program can do, especially with the current limits on deficit spending. No deficit spending at all is needed here, and the plan is fully in accord with all WTO Rules. Best of all, our ruinous trade deficits and borrowing will be eliminated!

Kenneth N. Davis, Jr.
President, Economic Strategy Associates, Inc.
Stamford, Conn.
Former U.S. Assistant Secretary of Commerce

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The fall elections are less than three months away, and the economy is signaling that America  is in deep trouble in earning its way in the world and providing jobs for our people. We’re piling up huge foreign debts but don’t have any plans for repaying them or putting people back to work.

I’ve been trying to present a proposal based on an idea from Warren Buffett in 2003. It became a Senate  bill, “The Balanced Trade Restoration Act of 2006.”  It could be updated and submitted to Congress in a few weeks.

It would create a system to assure that imports to our rich market will not exceed our exports. This balanced trade would strengthen U.S. industry, bring much  business back to American companies and provide millions of jobs for our workers. No deficit spending would be needed. It would also eliminate our ruinous trade deficits and related foreign borrowing. And it would be fully in accord with all GATT/WTO rules.

I am seeking reconsideration of this proposal by the Administration’s top trade executive. The goal is to get as fast a decision so that the plan can be presented to the public  before election day and ready for Congress soon after.

Kenneth N. Davis Jr.
President, Economic Strategy Associates, Inc.
Stamford, Conn.

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To submit a blog to Free Speech Zone, e-mail it to bstack@usw.org. Keep it to 250 words or fewer. You MUST include your full name, hometown, and state. You may attach a photograph of yourself. Please include a phone number. This WILL NOT be published. Posting any given blog is within the discretion of the USW.  No blog using foul language (this is a family site), false information (we don’t want to get sued), or unnecessary personal attacks (again, we don’t want to get sued) will be used. Wait a reasonable period of time, then blog again! This is a Free Speech Zone. 

Robert Borosage

 

By Robert L. Borosage
Co-Director Campaign for America’s Future

Last year we worried about homes below water; now it is the economy itself that is sinking. Warren Buffett says the US economy has “fallen off a cliff.” And, as bad as the US is, the rest of the world is worse. Germany’s exports have collapsed; Japan is in free fall; much of Eastern Europe may join Iceland in bankruptcy. The Asian Development Bank estimates the loss to financial assets worldwide at $50 trillion dollars – the equivalent of a full year of annual global output. It’s not for nothing that National Intelligence Director Dennis Blair announced that the economic collapse trumps terrorism and catastrophic climate change as the greatest threat to US security.

After slogging through the stimulus, the banking mess and the foreclosure crisis, our besieged president now must turn his attention to organizing global cooperation to lift the world economy. Finance ministers of the group of 20 countries (G-20) meet near London this week; the heads of state gather on April 2. The agenda: whether to expand national stimulus plans, how to forestall a banking collapse, and help for the weaker countries that can’t help themselves. Rhetoric won’t cut it; real commitments have to be made. As the anti-Bush, Obama has been celebrated by much of the world as if he walks on water. Now, we’ll see if they will follow the savior rather than crucify him.

We need every major economy – particularly those like Germany, Japan and China in the best position to do so – to help boost the global economy with bold national, deficit financed, recovery plans. We can’t do this alone. Our own stimulus – about 2% of GDP in 2009 – is too small even to lift this economy. Everyone has to grab a bucket and start bailing.

Moreover, gaining this consensus will help put the world on notice that the old ways are gone. We’re not going back to an economy in which the US borrows $2 billion a day from abroad, while serving as the world’s consumer of last resort. The Chinese, Japanese, Germans and other nations have to move away from export-led growth. The unsustainable trade imbalances – with the US absorbing 70% of the world’s savings – provided the flood of cheap capital that eventually capsized the global economy.

That world is over. US consumers are already tightening their belts. Exports have collapsed. If we ever begin a recovery, the US should seek more balanced trade. That means we will have to sell stuff beyond toxic financial paper to the rest of the world. Obama anticipates this with his drive for new energy, an industrial policy that may allow the US to gain an edge in the green markets of the future.

At the same time, China, Germany, Japan and the mercantilist nations will have to stop relying on exports for their growth. For Germany, the world’s largest exporter, exports made up an estimated 41% of GDP last year. That can’t go on. The first step is for the countries to stimulate internal demand to help get the global economy going once more, and thereby begin the wrenching journey they will have to make to more balanced growth.

Here as elsewhere in this economic debacle, the leaders remain behind the curve. On Monday, the European finance ministers announced that they had no plans to add to recent stimulus plans, dismissing US pleas for expansion as, in the words of the European Chair, “not to our liking.”

The Chinese initially trumpeted a large internal public works stimulus, much of which turned out to already be in the five year plan. Now Chen Deming, the commerce minister, declares China plans to subsidize exporters and lower export taxes, saying that we “should increase our share of the global market. We must transform ourselves from a big export nation to a strong export nation.” Nightmare.

G-20 conferences have generally been for show. The stakes are real this time – and the odds going in are against the president in gaining the bold action needed. And once more he’ll be out there virtually on his own, taking on the real deal in stark contrast with his opposition here at home. The conservative claque is ranting about socialism. Blue dog Democrats like Sen. Kent Conrad are mobilizing to defend agribusiness subsidies, while the Republican leaders simply don’t get it. Rep. John Boehner, the perpetually tanned House minority leader, last week called for a freeze on all spending over the next year, something like putting a pillow over the mouth of someone suffocating to death. And Sen. John McCain, the party’s nominee, woke to deliver one of his dyspeptic lectures against earmarks; the patient is hemorrhaging blood, but the Senator is worried about the pimples on his face.

The Europeans want to wait and see. The Chinese are subsidizing exporters. The Republicans are railing about earmarks and socialism. Obama’s call for a new responsibility hasn’t exactly taken hold.