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Trade Deficits - product of failed economic policy 

Bush Economic Policies - Another $57,000,000,000 of debt for April ...
by Mike Crane

The Commerce Department has released the April 2005 Trade statistics and the deterioration of our country's international trade position continues its downward trend. So far 2005 is on track to to establish another record breaking year of failure. Never before in the history of our country has dismal failure been so well received.

The truth is that the economic policies of the Bush Administration and Congress are failing - failing badly and no amount of wishful thinking is going to change the results. Take a look at the Trade Deficit summary chart on the right.

The international trade position of our country continues to deteriorate at a steady rate. Month by month the trend continues.

If the year to date average is maintained for the rest of the year, our country's 2005 trade deficit would be  $694,000,000,000.00. This would be another record breaking year in the wrong direction.

There have been some media reports of the April Trade Deficit deteriorating less than expected.

This is sad when a deteriorating international trade position is labeled a positive because it did not deteriorate as mush as expected. More than anything else this should concern citizens, it shows that the "pundits" and "taking heads" are satisfied with failure.

Even while the Bush Administration and leading Congressional leaders push for CAFTA (Central American Free Trade Agreement) agreement the administration has shown that their policy of "Free Trade" is a failure. They have re-imposed some quotas on selected textile imports from China and are "pressuring" China to "float" their currency. In fact what they call "Free Trade" is misnamed, it is "Expensive Trade" and since this idea narrowly passed Congress in 1992 our country's international trade position has steadily deteriorated.

We have proposed a solution that is based upon FAIR Trade, one in which economic policy is geared toward making international fair and equitable to both sides and eliminating the abuse of the current polices by the large multi-national corporations (See: A Southern Party of Georgia Position on solving our country’s Trade Deficit).

To repeat the basics:

Trade in Goods

Factories are moving to foreign countries. Empty factories do not produce goods to be exported, even if President Bush, Congress and other elected officials tell us this is good for us, empty factories just do not produce much! When Americans need the products those factories used to produce they have to buy imports. As long as more factories move to foreign countries than move to our country, we will export less and import more!

Trade in Services

Every time an American company outsources jobs to a foreign country, those services are no longer available to sell to foreign companies and are now imports. While we still have a trade surplus in services it is shrinking and at the current trend will be a deficit around the end of this year.

Agriculture

Agriculture has been producing a positive trade balance for decades. But even this mainstay of American Trade is sliding toward a negative balance. American companies are shunning agriculture products grown in our country under high standards to import food stuffs grown with much lower standards.

In conclusion every component of international trade is on a downward trend. There is one category that shows the extent to which President  Bush's economic policies are destroying our international trade position - advanced technology. Now most would believe that our country leads the world in advanced technology, which at one time we did. But no longer:

Advanced technology products (ATP) exports were $14.9 billion in February and imports were $18.3 billion, resulting in a deficit of $3.4 billion (See: Bush Economic Polices - Screen doors on submarine - same concept).

Advanced technology products (ATP) exports were $19.5 billion in March and imports were $21.0 billion, resulting in a deficit of $1.5 billion.

Even in advanced technology products  - empty factories and development centers do not generate much! And the trend continues.

Now this is a lot of facts and figures to digest. As long as you are gainfully employed and everything seems to be going well it is so easy to just say "Ho hum" and turn on the football game. But the odds are increasing that you are going to face the music some day.

American jobs that are sent to another country have something in common with empty factories, call centers and development centers. A lot of Americans who used to think every thing was going well  - used to work there.

Today they do not!

Even if you are still gainfully employed you may be feeling the impact and if you are waiting for the Republican and Democratic leadership to tell you - you have a long wait coming.

Example of continuing Trade Deficit impact on your wallet

One of the impacts of the failing Bush economic policies is the decline of the dollar versus other currencies. "Ho hum" say most people. The complexities of international currency exchange rates is not very exciting. But if you are inclined to just "Ho hum" the subject you ought to be grabbing your wallet at the same time.

Lets give an example: To pick a round number lets use 30% as the amount that the dollar has declined against major currencies such as the Euro and Yen. It is actually higher but 30% will do for this example. Every time you pull in to a gas station and fill up your tank you are paying a price for the failed economic policies.

The dollar is worth 30% less (the percentage used for this example) and when this decline started oil was selling at $33.00 per barrel. So a drop of 30% in the value of the dollar means that the value of a barrel of oil is now $42.90. So the first $9.90 of the increase in a barrel of oil does not have anything to do with being ripped off by Arabs, it is a hidden charge compliments of the failed  economic policies.

In April the average cost of a barrel of oil was just over $44.00. Most of the recent increases you have seen at the pump are the result of the failed economic policies and the drain on your wallet will continue to increase until the current policies are changed.

Of course this applies to virtually all imports, as the dollar declines imports will become more expensive, this comes directly from your wallet.

As factories, development centers, call centers, etc. continue to move to foreign countries an increasing number of products and services have to be imported, they are no longer made or produced here in our country. As the dollar continues to drop against international currencies you will be forced to pay more or do without if possible.

In another short sighted response to the failed policies, the Administration under strong pressure from your Congress is pressuring China to "float" their currency. If they do, the dollar will decline against the yuan, as it has other currencies and this will raise the price of imports from China. So that increase will come from your wallet since many of those products are no longer made in the empty factories here.

The problem is that our country is exporting factories, call centers, development centers, jobs and expertise to foreign countries, not goods and services. The problem is that multi-national corporations are exporting investments to foreign countries, not exporting products and services.

These actions are the result of the failed economic policies of our government and until the policies are changed, the downward spiral of our international trade position will continue to deteriorate. As long as massive trade deficits continue, the trend on the dollar will be downward.

The continuing downward trend of our Trade Deficit is a formula for disaster.

A couple months ago the new age rocket scientist, Alan Greenspan stated that we had a problem, that ever increasing Trade deficits can not continue forever. Then Warren Buffet echoed our claim that the Bush policies are destroying your grandchildren's future

Instead of moving toward an "ownership society," Buffett suggested, with admitted hyperbole, that the economic burden ahead is more likely to result in a "sharecropper's society" dependent on foreign landlords.

Meanwhile the Bush Economic Polices continue their march into our country's history. Seemingly oblivious to the long term effects of these economic policies the Bush Administration continues to feed the public one crisis after another while using the power of the government to build "political capitol" (see: Bush Trade Policy - a look behind the scenes of a failed economic policy - its ugly!).

We no longer have the capacity to produce enough goods to balance the Trade deficit. This was recently confirmed in a report in a Chicago paper (http://www.suntimes.com/output/business/cst-fin-hale10.html):

But what pundits have failed to notice is that the U.S. lacks adequate manufacturing capacity to eliminate the external deficit.

U.S. manufacturers currently produce about $1.5 trillion a year in goods, and have a capacity utilization rate of nearly 79 percent. The current account deficit is equal to 40 percent of American manufacturing output.

Until the failed policies are changed - there is nothing to stop the downward trend!

Lets repeat that statement, it is very important:

Until the failed policies are changed - there is nothing to stop the downward trend!

There should be little question about the effects of the current economic policies. The trends are so obvious that you do not even need to be a rocket scientist to figure out where they are headed. Do not be misled by small month by month fluctuations. Our international trade position is steadily deteriorating.

It is up to you the American citizen to decide how long - you - are going to let it continue. In fact in the next few months unless you do something it is going to get worse. The Bush Administration is lobbying very hard for an expansion of his defunct trade policy - the CAFTA treaty. The Central American Free Trade Agreement will only accelerate the free trade benefits to another whole set of foreign countries. Perhaps you should consider urging (or better - demanding) that your US Senators and Congressman vote against CAFTA.

The Southern Party has released a position statement that would change the failed free trade to one of FAIR Trade (See: A Southern Party of Georgia Position on solving our country’s Trade Deficit). If you are concerned about the information presented above we hope you will take a few minutes to read this position statement. We also appreciate any help in passing this information on to others.

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Excellent Reference site:

The Grandfather Economic Reports - http://mwhodges.home.att.net/

Several of the charts and graphs that are used on the Southern party web site are from this excellent web site. We recommend that you visit it frequently and spend some time reading the variety of economic reports available.