Villainous Company

Our new slogan:
"Better than Italy, and France and Germany (The Axis of Weasels), but not as good as Botswana (huh?)."
Cass, everything you say is reasonable and I agree to a point, but right now the economy is going along fairly well, good growth, fairly low interest rates, fairly low unemployement, BUT:

1) A balanced Federal budget is nowhere in sight. The R-party (of which I am a member) dutifilly abused the Clinton administration in the '90's for not being "serious" about a balanced budget. What happened to these yahoos since then?

2) Our balance of trade is still going south. I hate to sound like that nameless fellow from TOB, but really, this can't go on forever.

"Blaming Bush" or "Blaming Clinton" isn't the answer, but really, what should be our middle to long term strategy (5 - 15 years out) be for solving the "twin" deficits?

The tough thing with economics (with any complex subject, really - law anyone?) is separating out the arguments.

Saying that our debt is neither unmanageable, catastrophic, nor unprecedented is NOT the same as saying is is a desireable state of affairs.

Not by any means. And Steve makes a very good point - during the '90's we briefly ran a surplus - on the back of DOD. There was a price to be paid for that, and I will be writing about that, shortly.

Again, perspective is all. You can't get myopic about this crap. That's what Krugman is always doing - he's like Karnak the Magnificent: "Look at me: at no time do my fingers ever leave my hands!"

It's always the numbers with him. But numbers are essentially dimensionless - they have no real significance, per se. WHAT DID THEY BUY? What do they mean, in relation to other numbers? *That's the real story* - that's what I do for a living, so I guess that's what I focus on.

And on the balance of trade issue, an oft-overlooked aspect of that debate is that goods are cheaper for the American consumer - that is a net tax of protectionism that everyone wants to overlook, but I guar-on-tee you that if NAFTA and all those other lovely free trade measures went the way of the dinos tomorrow and your COSTCO and Sam's club went away, you'd be screaming bloody murder because you'd be working twice as hard to buy the same things you can easily afford now.

And in the end, as long as people have jobs and can make a decent living in a sustainable economy, you have to ask yourself, does it matter whether we make the noodles or China does? Comparative advantage.

I actually favor some protectionism of core industry from a national security standpoint. The whole idea of Jeffersonian democracy (which I've never been a fan of) falls completely on its arse in an interdependent global economy, a fact that's totally lost on the eggheads at Foreign Affairs and asshat dilettantes like John Kerry.

*you'd be working twice as hard to buy the same things you can easily afford now*

Tangent: I'd like to live in the days when a family had one income and could easily afford things. It sucks to HAVE to work so much just to get by...

Now, I am not against work. I think that it keeps me otherwise occupied and busy so that I do not get bored and then into trouble. But I do think that *people of goodwill* not wanting to *strike it rich* should be able to have more time to do as they like versus helping some other company, for whom they work, *strike it rich*.

/tangent

I guess that my main contention is this:

While many people (including yours truly) have daytime jobs and are doing all right, a lot of people with marginal skills and education, are struggling to keep their heads above water.
In my town, (Columbus, Ohio) there has been much whining in the newspaper about the recenct loss of several large manufacturers and the related jobs, etc.
In the town that I grew up in (Dayton,Ohio) This same phenomenon happened 20-25 years ago (imagine that?).
Local, state and national political tax policies and regulation have gone a long way to promoting the flight of manufacturing to Mexico, China and elsewhere. I know. My company profits from importing cheap materials from all over Asia. and nothing the government can do will change that economic anytime soon.

But really? I own two German made cars (one is 18 years old, and is actually paid for!), and you can't say that is because labor there is cheap, can you? And why can't we bring in more domestic oil and natural gas to spur the economy.
There are huge deposits of Methane hydrates off the coast of the Carolinas (ooh, can't touch that!).
And the disappearing nature of that sector of the people employed in manufacturing hurts tax revenues (that deficit again) and our trade imbalance.
We have to choose now, whether we are going to be this "white collar, new collar" service sector, post-industrial society, or whether it is still in our best interest to manufacture things and actually create wealth the old-fashioned way, by creating value (this takes some effort and work).
I perceive that most of the political class (D's and R's) actually prefer the former.
I prefer the latter.

It breaks my heart to see 50-ish guys who spent most of their working lives at Bell Labs/Western Electric/Lucent (whatever) where they made good money, now flippin' burgers at McD's because their former employers were such crooked, stupid jerks and crashed the company. And there's 20 more stories like that happening right in front of me.
I'm sorry to rant on your band width, Cass, but I've been seeing this all my life (since I was 12 in 1968), and it just doesn't get any easier to watch, especially as it accelerates. Lou Dobbs is another crying ranter about this, and he really ticks me off because he's coming at this from the wrong angle, IMHO.
It's not about limiting imports and raising the cost of goods and driving down our "standard of living", it's about getting government policies and taxes off the back of the productive and encouraging the growth of the manufacturing base.

It can be done, but won't be.

Weeeeeell.....

If -- by "getting government policies and taxes off the back of the productive and encouraging the growth of the manufacturing base" you mean eliminating all the ridiculous wage supports and mandatory leave policies and collective bargaining that made us uncompetitive in the FIRST PLACE and drove those jobs overseas, then I'm with you, David. Like you, I would prefer to see a more balanced economy. However, the price of that may also be, unfortunately, driving down the "standard of living" in real terms: how we live and what we can buy with our paychecks, because you can't turn back the clock. But I'd like to try.

I still think it would be a net gain if we went back to the way we were, but we won't.

And this addresses part of Lisa's point: working too many hours to "get by". Our definition of "getting by" has changed. I still believe you can make it on one salary, but you have to adjust your lifestyle (and it does depend on where you live - some areas are so high-cost you can't live there, but then that why, for instance, my son and his wife didn't settle in San Jose: they couldn't afford to live there).

My kids both make WAY more than their Dad and I did, starting out, yet to hear them talk (and they really don't complain a bit) they have no money. They're fiscally conservative though, and man-oh-man, by the time we had their kind of money we also had kids and were buying real estate.

But they have much more "things" than we did. They eat out more. They spend more. They have credit cards - we didn't. The "cost" of that lifestyle, of "getting by" is higher, even though it's hardly extravagant by any means.

Young people these days don't wait for anything - they have it right away. My parents didn't own a car until they'd been married for years. They took the bus.

We didn't have two cars until we'd been married ten years at least and then our 2nd was a hand-me-down. Our first car had no rug, no radio, and was a manual. My son's first car had all the std. options - it wasn't a luxury car, but there's a difference.

Both my kids had a TV right away. We didn't for 2 years, then we had a black & white for years.

We waited and saved for things. My kids are married 6 years this year. At 5 years, we had bought our first house already and had 2 kids on one job and man did we scrimp to do it, but it was an investment in our future.

They have two jobs and no kids. In real terms they still make more than we did and they have no kids.

Bah! I am sickened by your lack of collectivist spirit! When the Revolution comes, you all will be made to pay for your crimes.

-- Commissar AFE

Balance of trade doesn't measure services, only goods, if I understand correctly. We don't export TVs, but we "export" the services of a whole buttload of petrochem workers, pilots, etc. And yes, the total amount of services "export" we do is HUUUGE.

I'm a bit rusty on my macro, but I thought the balance of trade was composed of tangible goods (exports), or the "visible" balance and the "invisible" balance (services), which is always harder to measure. I passed all my tests on this part of my macro classes, but I don't pretend that I really understood all the balance of payments stuff. I really could have used a good review on it.

We did it first, before I really started to understand economics and got my brain working in that mode - it was my first semester in college and I really was still trying to get up to speed. Plus this is 15 years ago now. I wish now that I'd had it later, or had micro first. I guess they teach macro first because they think it's easier, but it seems more intuitive to me to go from the specific to the general.

Balance of trade includes goods AND services, capital income (and outflow) on investments and onwnership overseas (and in the US by foreigners). Lemme tell you, it's BIG.

Present US (2004) Exports (goods, services, etc.) were just shy of 1.6 Trillion dollars
US 2004 imports (goods,services, etc.) were about 2.11 Trillion dollars.
Wow. That's a way lotta dough.

Good (boooorrrring) data to be found at:
http://www.bea.gov/bea/newsrel/transnewsrelease.htm

No magic dingus on the horizon to fix our trade deficit, but what should our long-term strategy be to narrow it, say 5-15 years out?
Wow,was I in a crappy mood yesterday, or what?