Do Republicans think it helps to have such radical spokespeople?

[V8 Ford]

In response to a couple of assertions on economic principals

Demand side determines only short term output. Supply side is technology, resources, facilities. That changes long run output. Demand side doesn't, it only affects short run output. This is macroeconomics in a nutshell, and it is exploited by both parties to their economic goals.

 

GDP per capita absolutely correlates to economic wellbeing (like everything else, in the longrun). If you don't believe me, compare standard of living in China to the US and GDP per capita between the two countries, or compare the 1850's US and present US.

Also, income distribution is irrelevant to wellbeing (unless your Utility function depends on keeping up with the Jones). Wellbeing is an aboslute quantity, not a relative quality. If you want to talk about income distribution and what's right, I can't argue with that.

 

edit: (stupid opera posted when I hit tab, I'll continue my responce in another post)

 

In response to your economic analysis,

 

When comparing growth across eras you have to use the principal "all things equal". Obviously, that's not the case since many factors are at work. Also, the periods you used were too short to quantify long run growth and you assumed that long run policies have an almost instant effect (which they don't).

examples of what was going on :

 

New Deal Era-Post WWII. Short term Growth will be above long term rate. Recovery from a depression and massive deficit spending assure this

 

Great society. Short term Growth numbers were inflated by inflationary policy undertaken by the fed (and almost all banking systems in the world, Friedman won a noble prize for his criticism of this policy 2 years ago)

 

Reagan: Growth numbers were deflated by a recession caused by deflationary policy undertaken to abate the inflation caused in the 60's and 70's

 

 

On the middle class. Ford's policy might have allowed manufacturing jobs to become middle class, but middle class jobs, like doctors, engineers, teachers, managment, accounting, skilled tradesmen, merchants; they're the result of long term growth, supply side growth

Edited April 22, 2009 by V8 Ford

[RangerM]

I agree with your analysis that it all boils down to labor (as you evidently agree with my assertion that this is the root of all real wealth). At the very least, I am talking about the dreaded 'R' word: re-distribution within our own economy - let those who earn it keep more of it. And the dreaded 'P' word - protectionism within the world economy - protect the system from exposure to failed models. Our economy is built not just on the industry (industriousness) of our ordinary people, but on collective culturally inherited organizational skills (some of which in their genius, unfortunately tend toward globalization, and thus our own eventual decline). Quit taking our individuals and pitting them willy-nilly against the economies of less successful (or even failed) cultures for their livelihood (I am talking about economies with zero labor or environmental standards) and expecting us not to be diminished by it. That is not a realistic expectation.

Would you say that because all men are are created equal, it follows that "all labor is created equal",

therefore all men are entitled equal wealth?

 

I'd say no, for the simple fact that all men aren't created equal; in that they aren't born with equal intellect, ability, or industry.

 

If labor is the sum total of those three attributes, then I'll agree that the source of all wealth is labor-based. BUT, the distribution of wealth will tend to be determined by the distribution of those attributes.

To me it would be unrealistic to assume it would be any other way.

 

I certainly have no problem with letting those who earn it keep more of it, which is why I favor the FairTax. It is the only form of taxation (consumption-based) that is not based on labor. I believe I'm justified in saying income taxes are based on labor, because (generally) along with the greater degree of labor, comes the higher income, and the higher your taxes, making it a direct relationship.

(remember labor is made up of intellect, ability, and industry)

 

I don't necessarily disagree with the idea that it's unreasonable to expect the workers in different countries to compete equally, if they aren't on equal playing fields, but protectionism isn't necessarily going to solve the problem.

 

I guess it depends on your perspective. Going back to our "components" example above, what would you do when a commodity isn't available? For example, if I own a bread company, and this was a bad year for wheat, do I have the option of purchasing my wheat from a foreign source? If so, are you going to control where I must buy it from? And if it isn't available at a comparable price (if at all), then what (and what of my workers)? Basically, it we're going to implent controls on our trade, how far are you prepared to go, and what are you willing to (possibly) give up? Are we really a free society when we tell our population that they may not be able to obtain (or afford) something, because we can't produce it here (and no other country with comparable labor/environmental law can/will sell it to us)?

 

Unfortunately, if any society is going to progress from agrarian to industrial to post-industrial, there are inevitably going to be those left behind. And what has become of them? Have they become uncompetitive because of their circumstance, or could it be complacency?

Probably the biggest competitor to the American left behind isn't the worker in the foreign country, but the foreign worker in America. Certainly holds true in the housing industry (around here, anyway).

Edited April 22, 2009 by RangerM

[Roadtrip]

1.) That's a great website - I've used it myself before. Let's widen the timeframe a little and look at some 27 year periods:

1933 - 1960: The New Deal and WWII periods - Real GDP growth of 5.21% / yr

1963 - 1980: The Great Society and waning days of the New Deal, including the Carter "Malaise" years - real GDP growth of 3.42% / yr

1980 - 2007: The Reagan Revolution - the heyday of supply side economics - real GDP growth of 3.02% / yr

 

Glad you enjoy the Web site!

 

In addition to what "grbeck" posted earlier, I would add the following: The period from 1933 - 1960 started from a very low baseline. According to the data set, GDP in 1933 was $635.5 billion - its lowest point since 1922, when it was at $628.2 billion. So, in a sense, there was nowhere for GDP to go but up.

 

And up it went: to $2.502 trillion in 1960. Millions of veterans returning from the war gave rise to increased economic output (as well as reproductive output), and there was new demand for housing, household goods, durable goods (such as cars), and the list goes on... This continued through the 60s and 70s, when the narcissistic baby-boom generation began to mature. The baby-boom generation (as a whole) was born into prosperity, and thus it never really shared the same work ethic and values of frugality and patriotism of its predecessors who survived the Great Depression and World War II. It seems that a significant majority of members of the baby-boom generation simply expect prosperity without actually having to work for it. And as bad as that is, so many of their successors actually seem to expect even more! In the last few decades, it seems that people seem to feel that they are entitled to wealth and prosperity, yet they don't want to get their hands dirty to achieve it. (Edit: I admit to not having empirical data to support the latter assertions.)

 

The enhanced GDP growth and productivity in the first two periods you listed can also be attributed to fewer regulations and lower taxation. It was only in the latter third of the twentieth century when government regulations on business grew significantly, probably beginning with the EPA during Richard Nixon's tenure. Don't get me wrong: I'm not saying all regulations are bad; all I'm saying is that they exact a cost.

 

And not to be petty, but the period of 1933 - 1960 is not a 27-year period. It is a 28-year period since it is inclusive of the starting and ending years. Same with the 1980 - 2007 period. The period between 1963 and 1980 is an 18-year period.

 

2.) I find it ironic that you narrow the timeframe to the 8 years of Reagan's presidency alone. I find this ironic for a couple of reasons: a.) The conservative view on here often seems to be that the economic calamity set in motion in the last years of 'W's administration is actually the lingering effects of the New Deal and the Great Society (and throw in Clinton for good measure) come home to roost - that Bush is not responsible for economic troubles that started during his presidency. By this logic, we should credit Carter (or Johnson or Kennedy) for the economic successes of the Reagan years. Which way will you have it - is the President responsible for what happens on his watch, or not? b.) The "Reagan Revolution" colored the political and social climate of every presidency since - and forced even Clinton well to the right of Nixon and Ford. Supply side (or, as the elder Bush called it "voodoo") economics reigned supreme for the 28 years since Reagan. Looking at the statistics above, from your own website, they weren't that great of a 28 years.

 

I narrowed the timeframe to the eight years before, during, and after Reagan's presidency for two reasons: (1) "methos" in post #84 had this to say:

The end result of Reagan's supply side theory was an actual decline on investment; hence the supply side by 0.9%. Look for any macroeconomic textbook or Google it. There is a ton of papers on its failure. Like I said, it's the reason they dropped the term.

So I googled it - upon his suggestion - and found a worthy link on the first page of returns that (2) provided data for the three timeframes. (Not just the eight years of Reagan's presidency alone, as you claim.) But to answer your question, although it is an absurd question, yes, the president is responsible for what happens on his watch.

 

I am not one of the conservatives on here who blame the current economic calamity on the lingering effects of New Deal or the Great Society. Well actually, Great Society programs did help to reinforce, foster, or foment (choose your verb) the

that seems to be so prevalent in our society. Fifty years ago, this mentality would have been unheard of. But no, I blame the current economic calamity on a number of factors, including, but not limited to, the Clinton Administration giving teeth to the Community Reinvestment Act, thereby forcing bankers to approve mortgages for questionable applicants; the mere existence of Fannie Mae and Freddie Mac, whose government sponsorship implied government guarantees of risky mortgages; the Federal Reserve bank under Alan Greenspan, which held interest rates too low for too long; utterly inept government regulators who didn't understand the underlying securities they were supposed to regulate; and our society itself, many of whom greedily bought into the notion of their home values rising in perpetuity, taking on home equity loans, etc., and living beyond their means. Oh, and of course, the whole thing was pushed past the tipping point by four-dollar-a-gallon gas last summer.

 

In 1994, House Republican Leader Newt Gingrich and his "Contract With America" led to the first Republican majority in the House and Senate since 1953. That, more than anything - not Nixon nor Ford - forced Clinton to the right. Ford was so inconsequential that I'm surprised you would even suggest that he influenced Clinton.

 

George H. W. Bush employed the "Voodoo Economics" theme when he was running against Ronald Reagan during the primaries in 1980. It was nothing more than campaign rhetoric, with no substantive basis in fact, but the press loved it. Candidates tend to say all kinds of strange things in primary campaigns.

 

Statistics can be awfully deceptive. For example, real GDP growth during Roosevelt's Depression era, from 1933 to 1941, was a whopping 8.39 percent annually. This suggests almost unheard-of prosperity, when it was actually a time of economic despair. Go figure.

 

3.) Per capita GDP is not a good measure of general well-being, because it does not reflect the redistribution of wealth towards the top during the last 28 years. The income of the top 1% has soared dramatically - giving a misleadingly strong average, while incomes of the vast majority of people have stagnated or declined as they put up with steadily eroding benefits, a declining sense of security and stability, and sent their spouses off to work in a losing bid to make up the difference. Census and DOL statistics bear this out. The 28 years since Reagan have been disastrous for the American middle class.

 

I agree. That's why I chose the qualifier "maybe," when I said "Maybe a better measure is GDP per capita." To your point, median GDP per capita would be a better measure, but unfortunately, median GDP per capita is impossible to measure. I admit that it was stupid of me to even bring it up.

 

You can complain about the income of the top one-percent "soaring dramattically," and the fact that the income of unskilled wage earners lagged the CPI by 14 basis points per year from 1980 - 2007, but that statistic is also misleading. Unskilled wage earners go home to watch TV on their flat-panel TVs (which they purchased at a lower price than the 19-inch Magnavox TVs they might have purchased in 1980 - in relative dollars), and talk long-distance to Mom or their girlfriends on their cell phones (or their land lines, for that matter) for hours on end - which would have been extremely expensive in 1980. Today, however, the expense of such a phone call is so minimal that it's an afterthought. The point is, the basket of goods that represents the CPI changes over the years, and with it, so does the affordability (and availability) of goods that we now take for granted, when in previous times, many of those goods were considered luxuries. Air conditioning is a good example.

 

The income of the top one percent of income earners may have soared dramattically over the years, but so have the living conditions of those who exist at the lower end of the income spectrum. (Perhaps thanks to the Great Society.)

 

The subject of income disparity is a straw man: Regardless of how rich the rich are, the U.S. has the richest "poor people" in the world. And this explains why people from poor countries in Latin America risk their lives (and sometimes whatever fortunes they can muster to give to the "coyotes" to enable their illegal immigration) and are so desperate to come here. Here is a place to which they can escape from real poverty (the likes of which is not even remotely seen in the U.S.), and enjoy some semblence of prosperity - as well as the rule of law. While poor people in this country are sending text messages, poor people in other countries have good reason to be concerned about whether they're gonna be alive tomorrow, or next week, or next year.

 

Income and quality-of-life disparity is purely a matter of perspective.

Edited April 22, 2009 by Roadtrip

[Versa-Tech]

Wow, that's incredible, you start off by stating you have no idea of what I am referring to regarding what is actually the "supply" of supply-side economics and end up educating me at the end with what you think it is, go figure?

Actually, he doesn't have to write what he thinks about it. He actually knows and cites sources. You on the other hand haven't a clue what you're talking about and cite excuses for your lack of sources.

 

In the end, none of what you said has ANY bearing on the argument at hand. All the while you're quibbling about my grammar and the lack of cogency in my argument, again go figure?

I'm not even going to dignify that statement with a response...

 

You like facts? That's great, I do as well. But what I really like is facts that are pertinent to the discussion at hand.

Who are you talking to? Your posts are so lacking of validity that it's almost impossible to respond without defaming one's own intellectual standing.

 

I have not posted any facts because I have none to post, now. I don't have access to my school library until next week. I could post endless articles and some descriptive papers but it means nothing unless I can post real numbers. What I did try to do was post relevant material until I get such access. Such as the CBO budget proposal and the fact that they tried creating a more dynamic model to measure the curve better, which it failed. I will post all the data by Thursday of next week – sooner if I get the chance.

Like it matters. You obviously have no understanding of macroeconomics. People who understand something can post facts offhand, and cite sources to support them. You don't even know the facts. So what good are sources?

[Trimdingman]

It costs a billion dollars (give or take) to build one car. The more you build, the less it costs per car. It is the same with components. The higher the volume, the closer the cost per unit goes to zero. The first car loses piles of money. The millionth car may be 50% profit.

 

Ford's workforce is only a shadow of what it once was. The great bulk of Ford's former workforce is now contracted out. The small number of workers that Ford still employs directly, compose such a small fraction of the total cost of producing a vehicle that they are irrelevant to any discussion of the health of the industry. However, they are valuable as a propaganda tool because people are easily manipulated to see things out of proportion. Ford has loaned us to the government, so they are now dumping on us, also. We have no choice but to just keep taking it and turning the other cheek. This is our main function now. If the people start to see through the bull, we will have no further usefulness, and they will outsource us, also.

[methos]

Actually, he doesn't have to write what he thinks about it. He actually knows and cites sources. You on the other hand haven't a clue what you're talking about and cite excuses for your lack of sources.

 

Really? My point was the sources he cited had little if any bearing on the subject at hand. They were anecdotal at best.

 

 

Who are you talking to? Your posts are so lacking of validity that it's almost impossible to respond without defaming one's own intellectual standing.

 

This coming from the ignoramus that used Ancient Egypt as an example of the success of supply-side economics.

 

 

Like it matters. You obviously have no understanding of macroeconomics. People who understand something can post facts offhand, and cite sources to support them. You don't even know the facts. So what good are sources?

 

It's not about throwing out names or sources' at least to me. Like I said, when I have access next week I'll post them. There are a ton of so-called papers and websites, but I prefer more scholarly sources. Don't let your panties get in a bunch. Really, I thought it not even necessary. Like I said, I thought most folks did realize its failure. I already posted sources as to its failure, but it required some basic inductive reasoning. I see you lack that, after all, you cite ancient Egypt as a shining example, LMAO. What a tool.

 

Inductive reasoning would be if they are developing new models to test the theory regarding long-term implementation then it might make you wonder. Let me help you, they already implemented this under Reagan, right? Well it failed, so the argument then became it takes longer and had it been in place more long-term then it would have succeeded. They used conventional static models to test it long-term, and it failed. So, they then developed a "dynamic" model to test it. Yet again, it failed. Hence the reason prominent supporters such as the WSJ and others finally threw in the towel - sort of speak.

 

So, with Bush, they no longer called it supply-side. It was the same type of focus, but they used the second school of thought. Reagan’s was based in which the evolution of output depends on the accumulation of labor, capital, and know-how, and Bush’s was based on the newer approach of the smaller percentage oft a bigger pie. Even though economic models, including the newer “dynamic” model showed it an abysmal failure.

[stephenhawkings]

It costs a billion dollars (give or take) to build one car. The more you build, the less it costs per car. It is the same with components. The higher the volume, the closer the cost per unit goes to zero. The first car loses piles of money. The millionth car may be 50% profit.

 

Ford's workforce is only a shadow of what it once was. The great bulk of Ford's former workforce is now contracted out. The small number of workers that Ford still employs directly, compose such a small fraction of the total cost of producing a vehicle that they are irrelevant to any discussion of the health of the industry. However, they are valuable as a propaganda tool because people are easily manipulated to see things out of proportion. Ford has loaned us to the government, so they are now dumping on us, also. We have no choice but to just keep taking it and turning the other cheek. This is our main function now. If the people start to see through the bull, we will have no further usefulness, and they will outsource us, also.

thats kinda funny cause i only cost $8000-10000 to build the car in the garage.

although it get single digit MPG.

[Roadtrip]

People building stuff - creating real material prosperity - pay for it. (People getting rich off of financial Ponzi schemes don't.) That's who pays for everything. Let them live here in this country. They ought to have their labor and its fruits. Like Robert Reich says" "Quit blaming people for living beyond their means. Give them the means!" Investor-driven globalization has deprived them (us) of the means. When labor is off-shored, look who gets rich. "adding shareholder value": my favorite phrase. Killing the goose that laid the golden eggs is more like it.

Things may not be as bad (in terms of labor being offshored - specifically manufacturing jobs) as you portray them to be. Here's an article from MSNBC.com, which is not exactly a propaganda organ for the Republican party (although the article was orginally published in Business Week).

 

'Made in the USA' still means something

 

Two key paragraphs:

As Stephen Manning of the Associated Press acknowledged in a rare "just the facts" story in mid-February, the U.S. "by far remains the world's leading manufacturer," producing goods valued at a record $1.6 trillion in 2007 — nearly double the $811 billion produced a decade earlier. Indeed, the AP writer noted,

"For every $1 of value produced in China's factories [in 2007], America generated $2.50."

Not bad for a country that doesn't produce anything anymore.

 

Not only is the U.S. still the world's leading manufacturer, but there are many good reasons that companies will continue to manufacture here and invest in new plants and equipment. According to the Census Bureau's 2007 Annual Capital Expenditures Survey, released on Jan. 22 of this year, U.S. nonfarm businesses invested $1.36 trillion in new and used structures and equipment in 2007, a 3.9 percent increase over 2006. More than $484 billion was spent on new structures alone.

Two more key paragraphs:

But the U.S. leads the world in many high-value fields, producing more than half of the $175 billion in health care technology products purchased worldwide each year, for example. The U.S. also ranks as the world's largest producer of chemicals, selling 11 percent of the global total. And, as the AP reported, we "sold more than $200 billion worth of aircraft, missiles, and space-related equipment in 2007."

 

In fact, even in the midst of a global recession, the U.S. exported an estimated $1.377 trillion worth of goods last year, according to the authoritative CIA World Factbook. Nearly half of the exports were capital goods: aircraft, computers, electric power machinery, office machines, telecommunications equipment, and the like. Industrial supplies, such as organic chemicals, accounted for another nearly 27 percent. And consumer goods, including pharmaceuticals, and agricultural products accounted for 15 percent and 9 percent, respectively.

This makes sense. I may be inclined to buy a cheap Chinese-made TV, but I would shudder at the thought of my doctor using Chinese-made medical devices (if such things actually exist) if, God forbid, he needs to conduct a heart-valve procedure. And there is no way I'm gonna get on an airliner that was manufactured in China. It's not gonna happen!

 

The Chinese are very shrewd about which goods they can and cannot successfully market.

 

This paragraph may (partially) explain your sentiments:

A third reason for our collective funk (and there are certainly other reasons) may be the nostalgia factor, particularly prevalent among the baby boomers: the fact that much of what was "Made in America" in the past — think clothing, radios, televisions, telephones, sewing machines, toys, tools, housewares, small appliances, baby furniture, bicycles, even the legendary Oldsmobile "Rocket 88" that was so much a part of the America in which many baby boomers came of age — isn't made here anymore. (The Rocket 88, in fact, isn't made at all.) Seeing so many iconic Made in America brands disappear seemingly overnight has caused pain and anxiety for many Americans.

I'm a baby boomer myself. Although I never owned an Oldsmobile "Rocket 88," my very first car was a 1967 "Hurst Olds 442," which I bought used upon graduating from high school in 1975. I really loved that car, even though it proved to be a money pit. So, to some extent, I share your sentiments.

[RangerM]

Nearly half of the exports were capital goods: aircraft, computers, electric power machinery, office machines, telecommunications equipment, and the like. Industrial supplies, such as organic chemicals, accounted for another nearly 27 percent. And consumer goods, including pharmaceuticals, and agricultural products accounted for 15 percent and 9 percent, respectively.

 

.....much of what was "Made in America" in the past — think clothing, radios, televisions, telephones, sewing machines, toys, tools, housewares, small appliances, baby furniture, bicycles, even the legendary Oldsmobile "Rocket 88" that was so much a part of the America in which many baby boomers came of age — isn't made here anymore.

 

You see clothing, radios, televisions, telephones, sewing machines, toys, tools (etc) everyday, so it's easy to dwell on them, and ignore those things you don't see. Also, if all you ever hear on the news is bad news, you start to believe that's all there is.

 

Many in society also seem to have "obsessive-anxiety". (for lack of a better term) They aren't "happy" if they aren't worrying about something.

[Trimdingman]

thats kinda funny cause i only cost $8000-10000 to build the car in the garage.

although it get single digit MPG.

 

 

You built a car, did you? You designed it, designed every part, made every part, and put it together, tested it, tested every part for wear, for different climates and terrain? That is why it costs a billion or more dollars to build one car.

[retro-man]

thats kinda funny cause i only cost $8000-10000 to build the car in the garage.

although it get single digit MPG.

He means if you start from dirt - not if you run out and buy a crate engine and a junkyard chassis.

[retro-man]

I am not one of the conservatives on here who blame the current economic calamity on the lingering effects of New Deal or the Great Society. Well actually, Great Society programs did help to reinforce, foster, or foment (choose your verb) the

that seems to be so prevalent in our society. Fifty years ago, this mentality would have been unheard of. But no, I blame the current economic calamity on a number of factors, including, but not limited to, the Clinton Administration giving teeth to the Community Reinvestment Act, thereby forcing bankers to approve mortgages for questionable applicants; the mere existence of Fannie Mae and Freddie Mac, whose government sponsorship implied government guarantees of risky mortgages; the Federal Reserve bank under Alan Greenspan, which held interest rates too low for too long; utterly inept government regulators who didn't understand the underlying securities they were supposed to regulate; and our society itself, many of whom greedily bought into the notion of their home values rising in perpetuity, taking on home equity loans, etc., and living beyond their means. Oh, and of course, the whole thing was pushed past the tipping point by four-dollar-a-gallon gas last summer.

 

In 1994, House Republican Leader Newt Gingrich and his "Contract With America" led to the first Republican majority in the House and Senate since 1953. That, more than anything - not Nixon nor Ford - forced Clinton to the right. Ford was so inconsequential that I'm surprised you would even suggest that he influenced Clinton.

 

George H. W. Bush employed the "Voodoo Economics" theme when he was running against Ronald Reagan during the primaries in 1980. It was nothing more than campaign rhetoric, with no substantive basis in fact, but the press loved it. Candidates tend to say all kinds of strange things in primary campaigns.

 

Statistics can be awfully deceptive. For example, real GDP growth during Roosevelt's Depression era, from 1933 to 1941, was a whopping 8.39 percent annually. This suggests almost unheard-of prosperity, when it was actually a time of economic despair. Go figure.

 

 

 

I agree. That's why I chose the qualifier "maybe," when I said "Maybe a better measure is GDP per capita." To your point, median GDP per capita would be a better measure, but unfortunately, median GDP per capita is impossible to measure. I admit that it was stupid of me to even bring it up.

 

You can complain about the income of the top one-percent "soaring dramattically," and the fact that the income of unskilled wage earners lagged the CPI by 14 basis points per year from 1980 - 2007, but that statistic is also misleading. Unskilled wage earners go home to watch TV on their flat-panel TVs (which they purchased at a lower price than the 19-inch Magnavox TVs they might have purchased in 1980 - in relative dollars), and talk long-distance to Mom or their girlfriends on their cell phones (or their land lines, for that matter) for hours on end - which would have been extremely expensive in 1980. Today, however, the expense of such a phone call is so minimal that it's an afterthought. The point is, the basket of goods that represents the CPI changes over the years, and with it, so does the affordability (and availability) of goods that we now take for granted, when in previous times, many of those goods were considered luxuries. Air conditioning is a good example.

 

The income of the top one percent of income earners may have soared dramattically over the years, but so have the living conditions of those who exist at the lower end of the income spectrum. (Perhaps thanks to the Great Society.)

 

The subject of income disparity is a straw man: Regardless of how rich the rich are, the U.S. has the richest "poor people" in the world. And this explains why people from poor countries in Latin America risk their lives (and sometimes whatever fortunes they can muster to give to the "coyotes" to enable their illegal immigration) and are so desperate to come here. Here is a place to which they can escape from real poverty (the likes of which is not even remotely seen in the U.S.), and enjoy some semblence of prosperity - as well as the rule of law. While poor people in this country are sending text messages, poor people in other countries have good reason to be concerned about whether they're gonna be alive tomorrow, or next week, or next year.

 

Income and quality-of-life disparity is purely a matter of perspective.

Thank you for the thoughtful reply. I agree that "both sides" played into the current calamity - the side that wanted to extend home-ownership to anybody and everybody (background theme here is the thought that "ownership" itself might ameliorate some of the lamentable social conditions - i.e. instill a sense of responsibility - that contributed to the poverty to begin with. Perhaps that thought was a bit optimistic) and the side that deregulated everything and fomented the fantasy that financial instruments - especially ones completely beyond the purview of regulation - somehow constitute "productivity". I am glad we have been disabused of that notion.

 

Regarding the growing income gap, as juxtaposed to overall growing wealth: a couple of points (and to you too grbeck): there are numerous studies that show that in some sense "keeping up with the Jones's" although we might not want to admit this of ourselves, does have a utilitarian function, just as surely as does rest and recreation. (See Juliett Schorr "The Overspent American" for reference). Just as surely as you can't work people every single one of their waking hours without breaking them, you also cannot have successive generations falling further and further behind what is presented (by the media, by advertising) as the ideal norm, while a small percentage at the top pull further and further ahead. There is a correlation between the GINI coeffient and quality of life. (By which measure, incidentally, the US is closer to Mexico now than it is to Canada, Western Europe or Japan - that wasn't true 40 years ago.) Other studies go so far as to recognize growing disparity, and the permanent underclass as a threat to democracy. Why would we set up a system that enables an ever-shrinking percentage of the population to have hope for a better future, while an ever-increasing percentage do not? Because that is what we have done. I don't agree with those who can look at the statistics and keep saying that it's ok because "everybody has equal opportunity". If everybody has equal opportunity, why is an ever shrinking portion of the population actually "making it", compared to the previous 2 generations? Why is the balance shifting? Have the majority suddenly become congenitally torpid? I don't think so. I think we have stupidly allowed a system to develop that is undermining our social and economic health.

 

Regarding the work ethic of the Baby Boom generation: speaking for myself: in 1978 I spent my entire college fund - $1,800.00 - to take my first trip to Japan. After returning, I worked graveyard shift as a riveter at the Boeing 747 plant, and later (after the Boeing overtime demands became excessive) for near minimum wage at a roof truss factory, and attended classes in the daytime - sometimes showing up for class in my dirty work clothes without time to change - then sleeping 3 or 4 hours in the afternoon / evening. Didn't help my grades, but I made it through my BA that way. Then I worked a few years in a cabinet shop, and went back for my Masters with help from my wife. I don't buy the notion that baby boomers are lazier than other generations. I will readily agree that the union movement reached a stage of decadent excess during the 60s and 70s - the pendulum swung too far with stupid work rules, and excessive pay during unproductive times. But now we have let it swing too far the other way.

[retro-man]

You see clothing, radios, televisions, telephones, sewing machines, toys, tools (etc) everyday, so it's easy to dwell on them, and ignore those things you don't see. Also, if all you ever hear on the news is bad news, you start to believe that's all there is.

 

Many in society also seem to have "obsessive-anxiety". (for lack of a better term) They aren't "happy" if they aren't worrying about something.

My only reply to that is the numbers:

1961 balance of trade: +$5,700,000,000.00 (goods only, against a GNP of $520,000,000,000.00) Total international trade was around 3% of GNP

2008 balance of trade: -$820,825,000,000.00 (goods only, against a GDP of $14,330,000,000,000.00) Total International trade was around 25% of GDP

 

1961 is the earliest year for which I have a contemporary source (World Book Year Book) at my fingertips. Medical equipment exports and all are nice, but they are not making up for the outflow. Not by a long shot. Nor are exports in services, which were a surplus of $139,695,000,000.00 in 2008. Still leaves a balance of -$681,130,000,000.00. No getting around that number.

[V8 Ford]

We import more than we export now. That isn't a problem (it doesn't change output within the US), and it has nothing to do with outsourcing since a trade deficit indicates net foreign investment within the US.

[retro-man]

The interesting fact is that the best growth occurred when there was essentially no foreign competition (or, up until 1960), because we had either bombed our competitors to rubble, or they had bled their economies dry (Great Britain, for example). When Japan and Europe came back, our firms no longer had a monopoly on key markets. And they were forced to invest more in improving production processes than in wages and salaries. As one executive said, "We simply gave in to the unions because there was no real competition. After all, our major competitors were unionized, too. We passed the costs on to the customer."

Oy! Again with the devastated competitors. I refer again to 1961 information from the 1962 World Book Year book. Keeping in mind that our International trade was a tiny fraction of what it is now: Japan's economy was growing at a rate between 10% and 11% per year - which was considered a problem, 9% or so being considered the "safe" maximum. Imports had increased 30% over the year before, while exports had increased only 5%. Their trade balance was running at an annualized rate of -$1,200,000,000.00. They had Toyota, Mitsubishi, Nissan, Isuzu, Mazda, and some smaller players all manufacturing automobiles - the vast majority of which were selling in the domestic market, and well developed optics, chemical, shipbuilding, and electronics industires. Trade with the U.S. - both directions - amounted to a total of $1,500,000,000.00 (or about 0.03% of U.S. GNP) By 1968, Japan had become the 2nd largest economy in the world. Show of hands: how many people had a Japanese car in their driveway or a Japanese TV in their living room in 1968? We were still living in (relatively) splendid isolation. Obviously, Japan was able to build a lot of prosperity working regionally, and within their own domestic market. Of course, being a resource poor nation, they have to rely somewhat on exports - but only enough high-added value exports to pay for low-added value commodities. (Scarcity may turn this equation on its head.)

 

Likewise, if you had travelled to France in 1961, you would have seen Citroen, Peugeot, Renault, Simca, Facel Vega and a few smaller makers cars on the streets. Germany: VW, Porsche, Audi, Mercedes, NSU (Wankel), Lloyd, Borgward, Messerschmidt, and a few others. Sweden: Saab and Volvo - locally owned and healthy. Italy: Fiat, Maseratti, Ferrari, Iso Grifo and a few other exotics. I'll leave it to the Anglophiles to list how many cars were being manufactured in England at the time.

 

By the mid-60s, the Nordic countries had achieved a standard of living that, taking social welfare into account, compared quite favorably with our own (it still does). We were all getting prosperous together, for the most part without stepping on each others feet.

[retro-man]

We import more than we export now. That isn't a problem (it doesn't change output within the US), and it has nothing to do with outsourcing since a trade deficit indicates net foreign investment within the US.

I'm all ears. Tell me more about why it isn't a problem, and how a deficit indicates net foreign investment.

[V8 Ford]

It's easy to grow quickly like Japan did or China is doing right now. It's called the catch up effect; simply put, it's easier to grow when you're behind the curve because it's easier to impliment existing technologies than it is to develop new ones.

[retro-man]

Our chief competitors are still Japan and Europe (specifically, Germany.) They don't use slave labor, and they have enacted environmental protections, too.

Japan: -$72,669,000,000.00

Germany: -$42,820,600,000.00

China: -$266,332,700,000.00

 

What gets really interesting though (if you have too much time on your hands, which evidently I do), is to take population into account: e.g. How many dollars of U.S. goods did each German purchase for 2008, vs. how many dollars of German goods did each American purchase for 2008?:

 

2008 balance of trade per capita with:

 

Japan: $64.74

Germany: $343.39

China: -$1,058.06

 

Ok - who are our chief competitors again? And who doesn't use slave labor and have non-existent environmental protections?

[V8 Ford]

I'm all ears. Tell me more about why it isn't a problem, and how a deficit indicates net foreign investment.

It's not a problem because trade deficit/surplus doesn't affect output, it's just a distribution of who's buying more foreign goods. It isn't something that can be done away with because any efforts to forcibly change it would result in conditions worse off than they were before.

 

The foreign exchange market ensures that Net Capital Outflow (net investment abroad) is equal to Net Exports. ie, running a trade deficit means negative net capital outflow; negative net capital outflow

 

Derivation:

American goods must be bought in dollars, and foreign goods must be bought in foreign currencies.

 

Outflow: Dollars are supplied abroad when an American investors exhange dollars for foreign currency for dollars in order to buy foreign assets, and vice versa for foreign investors exhanging foreign currency for dollars to purchase american assets.

 

Export: Foreign firms buy American goods with dollars, those dollars obtained from American investment abroad (outflow) and vice versa.

 

Running a trade deficit requires that less dollars in foreign lands than foreign currency in the US, therefore there must be a net capital inflow to the US.

 

 

edit: well, you can change short term net exports and output through currency manipulation and deficit spending, but those have costs of their own

Edited April 23, 2009 by V8 Ford

[Critic]

Japan: -$72,669,000,000.00

Germany: -$42,820,600,000.00

China: -$266,332,700,000.00

 

What gets really interesting though (if you have too much time on your hands, which evidently I do), is to take population into account: e.g. How many dollars of U.S. goods did each German purchase for 2008, vs. how many dollars of German goods did each American purchase for 2008?:

 

2008 balance of trade per capita with:

 

Japan: $64.74

Germany: $343.39

China: -$1,058.06

 

Ok - who are our chief competitors again? And who doesn't use slave labor and have non-existent environmental protections?

Eh.., one thing about this site. you can get some good info. Intelligent people try to find the truth out there somewhere. Doesn't make it right, but It's still their if you dig.

[RangerM]

My only reply to that is the numbers:

Still leaves a balance of -$681,130,000,000.00. No getting around that number.

I'm not a macroeconomist, but I'd like to think we actually got something for that money didn't we?

 

And if we traded our cash for goods, didn't we then have $681,130,000,000 in goods? In my business, when I put down capital expenditures on my books, I have gained an asset as well. I'm not saying that purchasing so many foreign goods is necessarily something to be disregarded, but it may be more indicative of our overconsumption, than one country's imbalance with another.

 

Speaking for myself, I'd be more worried about our debt. The extra $10 Trillion in 10 years, is going to result in moneys spent (on interest) that we aren't trading for something of value.

Edited April 24, 2009 by RangerM

[retro-man]

I'm not a macroeconomist, but I'd like to think we actually got something for that money didn't we?

 

And if we traded our cash for goods, didn't we then have $681,130,000,000 in goods? In my business, when I put down capital expenditures on my books, I have gained an asset as well. I'm not saying that purchasing so many foreign goods is necessarily something to be disregarded, but it may be more indicative of our overconsumption, than one country's imbalance with another.

Oh sure, we got something for all that money:

Speaking for myself, I'd be more worried about our debt. The extra $10 Trillion in 10 years, is going to result in moneys spent (on interest) that we aren't trading for something of value.

Absolutely. I am definitely uneasy about it myself, and fully expecting a nasty fever (inflation) in the aftermath.

[Roadtrip]

Japan: -$72,669,000,000.00

Germany: -$42,820,600,000.00

China: -$266,332,700,000.00

 

What gets really interesting though (if you have too much time on your hands, which evidently I do), is to take population into account: e.g. How many dollars of U.S. goods did each German purchase for 2008, vs. how many dollars of German goods did each American purchase for 2008?:

 

2008 balance of trade per capita with:

 

Japan: $64.74

Germany: $343.39

China: -$1,058.06

 

Ok - who are our chief competitors again? And who doesn't use slave labor and have non-existent environmental protections?

 

The National Bureau of Economic Research has a publicly accessible database, one that is far richer in content than the "Measuring Worth" Web site.

 

I read somewhere that the U.S. actually had a trade surplus for nine out of 10 years during the 1930s. I figured that the NBER database is a good place to find data that can prove this right or wrong, since they use statistical data obtained from the government. In Chapter 7, I copied data from U.S. Total Exports and U.S. Total Imports for the 120-month period from January 1930 to December 1939, and pasted the data on a simple table on a Word doc with each respective month's results side by side, for easy comparison, and checked off the months for which there was a trade deficit. (I would invite you to do the same. It's about a 20 minute exercise.)

 

The results? The U.S. ran a trade deficit for only 18 of the 120 months during the 1930s; it ran a trade surplus for 102 of those months. If you think a trade surplus is the key to domestic prosperity, then why is it that the decade of the 1930s was so depressed?

 

And what are we to conclude from this? Absolutely nothing. Rather, there are two facts to consider: (1) The U.S. has a tradition of running trade deficits throughout the course of its history, only to become the wealthiest economy in the world; and (2) when people and nations are free to trade with one another, everyone prospers. (An added bonus is that nations who trade with one another tend not to drop bombs on each other.)

[retro-man]

Well, we also had a positive trade balance all through the 50s and 60s, when our growth was unprecedented, and much higher than it has been over the past 2 decades (as we slipped further into a deficit), so I don't think I'd attribute any causality to that. The Depression itself distorted everything.

[V8 Ford]

60's growth around the world was grossly inflated by monetary policy. Following an economic fad, central banking systems around the world ran inflationary policy to reduce unemployment and raise output. Unfortunately, it was only a short term relation, and the direct result was high inflation and high unemployment in the 70's and early 80's. In order to curb the mal effects of the inflationary policies pursued from the 60's onwards, the Fed was forced to make significant contractions in money supply, causing the large recession in the 1980's.