Trade Deficit, another look at how
you are not being told the whole story
by
Mike Crane
The April 2007 Trade
statistics were released on June 8 and remain at a very high level.
In fact the trade deficit remains at an unacceptable and
unsustainable level.
|
Month
|
2001 Surplus
(Deficit) |
2002 Surplus
(Deficit) |
2003 Surplus
(Deficit) |
2004 Surplus
(Deficit) |
2005 Surplus
(Deficit) |
2006 Surplus
(Deficit) |
2007 Surplus
(Deficit) |
|
January |
(35.2) |
(29.6) |
(41.4) |
(43.1) |
(58.3) |
(68.5) |
(59.1) |
|
February |
(29.4) |
(32.6) |
(40.4) |
(42.1) |
(61.0) |
(65.7) |
(58.4) |
|
March |
(32.7) |
(31.5) |
(43.7) |
(46.0) |
(55.0) |
(62.0) |
(63.9) |
|
April |
(31.5) |
(34.0) |
(42.5) |
(48.3) |
(57.0) |
(63.4) |
(58.5) |
|
May |
(28.0) |
(34.0) |
(40.8) |
(46.0) |
(55.3) |
(63.8) |
|
|
June |
(29.5) |
(35.4) |
(40.0) |
(55.8) |
(58.8) |
(64.8) |
|
|
July |
(30.1) |
(34.1) |
(40.8) |
(50.1) |
(57.9) |
(68.0) |
|
|
August |
(28.4) |
(36.2) |
(40.2) |
(53.5) |
(59.0) |
(69.9) |
|
|
September |
(30.8) |
(36.6) |
(41.3) |
(51.6) |
(66.1) |
(64.3) |
|
|
October |
(30.8) |
(35.0) |
(41.5) |
(55.5) |
(68.9) |
(58.9) |
|
|
November
|
(29.7) |
(39.7) |
(40.0) |
(60.3) |
(64.2) |
(58.2) |
|
|
December |
(26.6) |
(43.2) |
(44.0) |
(56.4) |
(65.7) |
(62.1) |
|
|
The chart at the right is taken - month by month - from the U.S. Bureau of Economic Analysis
monthly press releases. These are just the numbers reported by the
government. A copy and link to the most recent BEA press release is
always at the bottom of the page.
This remains a track record of failed economic policies, which
apparently are continuing unabated.
|
Excluding Petroleum Products |
|
Month
|
2007 Surplus
(Deficit) |
|
January |
|
|
February |
|
|
March |
|
|
April |
(45.9) |
|
May |
|
|
June |
|
|
July |
|
|
August |
|
|
September |
|
|
October |
|
|
November
|
|
|
December |
|
|
Many of our new age rocket scientists called - economists -
blame our Trade Deficit on petroleum products. But we would have an
unacceptable Trade Deficit even if we did not buy a drop of imported
oil! Facts are facts and when you hear a government official,
whether elected or appointed, tell you that the Trade Deficit is
caused by oil imports - you are being sold a bill of goods!
Beginning this month we are adding another chart. This chart
will track the government's own figures on the Trade Deficit
excluding all petroleum products. Yes - petroleum imports and our
dependency on foreign oil is a major problem - but the Trade Deficit
resulting from our flawed economic polices goes way beyond oil!
Apparently these economists do not read the governments own
figures.
These are staggering numbers. These are signs of failed
economic policies! But don't take our word for it. These came from
the government's
own figures and are easily available at:
http://www.bea.gov/newsreleases/international/trade/2007/xls/trad0407.xls
The trade deficit problem is much
more than oil!
It is a case of a multi-year deterioration in our
international trade position and it will have long term negative
effects upon our country if the failed policies are not changed.
In the last few months we have documented some of the effects
of our failed trade policies: The declining value of the dollar, creeping globalization
and accumulated debt. Each of these are a major problem and are
continuing unabated.
This month we are going to begin going though how components
of our failed economic policies are not accounted for in some of our
government statistics, such as GDP. Now many will look at that and
ask what the blazes is GDP?
To put this in redneck terms, Gross Domestic Product is the
sum of economic activity in the entire country - if it is going up
at a reasonable rate- it is supposed to indicate that all is well.
Politicians brag, "the economy is growing and doing well!" and "we
have a strong economy!"
But what if the GDP figures are a bit misleading. For example
economists blame the Trade Deficit on petroleum, but as the new
chart above will show, month by month, the Trade Deficit is
unacceptable excluding petroleum! If the GDP figures are not
representing the impact of negative economic polices then perhaps
all is not so well!
This month we will look at the "fudge factor" on outsourcing
or offshoring and how it leads to misleading GDP figures.
Offshoring
Offshoring is a recently invented term for the transfer of
functions and facilities from our country to a foreign country. Whenever critics of
offshoring complain about sending American jobs to low-cost countries such as China and India,
politicians of both parties and especially President Bush counter by
saying the U.S. economy is growing. This is the basis for the "A
rising tide lifts all boats" slogan that is repeated over and over.
Then it is repeated some more.
To justify this statement the growth of GDP is quoted. Official statistics show that America's economic output has grown at a solid 3.3% annual rate since 2003.
In addition it is claimed that domestic manufacturing has grown at a
decent pace.
This all sounds so good, and the government has the figures to
back it up. But we have wondered about how these empty facilities (ie.
moved to a foreign country) are showing an increase in output? I
haven't seen a single 18 wheeler loading stuff at a closed
manufacturing plant in a long time. Nor have I seen many traffic
jams at closed facilities parking lots at shift change.
Well apparently we were not the only ones wondering about
these strange contradictions. Business Week (June 18, 2007)
for one has recently published a featured investigation into
these contradictions and come to the conclusion - that GDP is
overstated.
Quoting from Business Week:
Excerpt from Business Week (JUNE
18, 2007):
But new evidence suggests that shifting production overseas has inflicted worse damage on the U.S. economy than the numbers show. BusinessWeek has learned of a gaping flaw in the way statistics treat offshoring, with serious economic and political implications. Top government statisticians now acknowledge that the problem exists, and say it could prove to be significant.
The short explanation is that the growth of domestic manufacturing has been substantially overstated in recent years.
That means productivity gains and overall economic growth have been overstated as well. And that raises questions about U.S. competitiveness and "helps explain why wage growth for most American workers has been weak," says Susan N. Houseman, an economist at the W.E. Upjohn Institute for Employment Research who identifies the distorting effects of offshoring in a soon-to-be-published paper.
|
So when you hear President Bush, leading Republicans and
Democrats discount the effects of mushrooming trade deficits,
national debt, offshoring and value of the US Federal reserve note
known as the Dollar - take a deep breath and remember:
That means productivity gains and overall economic growth have been overstated as well.
Now if this redneck can dig this info up, can you believe that
these politicians on your payroll can not do the same? Either they
don't care or they are not telling you the truth. Neither should be
rewarded by returning them to office - that is unless you want more
of the same!
At this point the Doubting Thomases are already sending the
inevitable emails that are less than flattering. But for the
Doubting Thomases the following is a Business Week detailed
example of one such case of overstating the books. It is complex and
only if you are a Doubting Thomas do we recommend reading this next
box:
Excerpt from Business Week (JUNE
18, 2007):
Let's walk step
by step through an example. Suppose that in 2000 a North
Carolina factory made a dining room table for $1,500. At the
time, a factory in China could make the same table, but not
cheaply enough or quickly enough to take business away from
the American factory.
Fast-forward to today. The owners of the Chinese factory have
invested in new equipment, boosting productivity. They've
learned how to apply better finishes, and they've bought new
software for taking orders from abroad. Now the Chinese
factory can sell the table for $1,000 in the U.S., including
shipping. The American company closes its factory and starts
buying from China. U.S. consumers are still buying the same
tables as before, but domestic production has ceased.
How does this look to the government statisticians? They
attempt to calculate the "real" value of consumption by
measuring how much consumers spend on tables at different
times and adjusting for the changes in price. Then they do the
same for "real" imports. In this example, real domestic
production is more or less the difference between the real
value of consumption and the real value of imports.
Let's stop here to explain some economic jargon. To tally the
real value of things like consumption, economists sometimes
use what they call "inflation-adjusted" dollars, measured
against a base year. So if a gallon of gas costs $1 in 2000
and $3 in 2007, economists would say the real value of the
gallon of gas was still $1 in "2000 inflation-adjusted
dollars." It still propels your car the same distance.
Now, back to the dining room table. Between 2000 and 2007, the
statisticians see that consumer spending on tables has dropped
by one-third and that the price has dropped by one-third
(assuming all savings are passed along to consumers with no
markup for profits). "Aha," they say to themselves, "The price
drop accounts for all the change in spending, so the real
value of consumer spending hasn't changed." They type in their
spreadsheets that the table is worth $1,500 to consumers in
2007, measured in inflation-adjusted 2000 dollars. After all,
it's the same table as the ones made in 2000.
Here's the rub. The statisticians need to apply their
inflation-adjustment magic to the imported table as well. But
the folks at the BLS import price office are stuck: They have
never seen that table before and don't know about the domestic
table it's replacing, or the previous table from the Chinese
factory not cheap enough or high-quality enough to be imported
to the U.S. So instead of figuring in a price drop of
one-third for the imported table, they assume a much smaller
price decline, or perhaps no price drop at all. When they
tally it up, they give the imported table a value of about
$1,000, measured in inflation-adjusted 2000 dollars.
Their method leads to a serious mistake. The real value of
imports looks less than the real value of consumption, by
$500.
After applying an arcane statistical adjustment, the
government would report domestic production of roughly $250,
even though no furniture production has taken place in the
U.S.
This happens over and over as production of new types of goods
and services moves offshore. It's not just the shift from
domestic to foreign production that creates problems. Anything
that changes the nature of the import--a shift in the country
of origin or a change to a more advanced model--can lead to an
undercount of real imports.
Consider the fast-changing television market, where consumer
prices have plummeted by 42% in the past three years and
imports of liquid-crystal display and plasma sets have soared.
The BLS says the import prices of TVs fell only 15% in the
same period. That's odd, given improving technology and the
intense price wars in the industry. Indeed, the "landed cost"
or import price of a 32-inch LCD television has fallen 69%
during the past three years, reports DisplaySearch, a
flat-panel market research firm. This apparent mismeasurement
of television import prices ends up creating phantom GDP,
perhaps as much as $10 billion over the past three years.
Government statisticians will have trouble catching up with
the problem. As the global economy changes, "capturing the
shift from domestic to foreign production [or vice versa] and
its associated impact on prices is at the forefront of
methodological challenges we face," says Michael Horrigan,
associate commissioner at the BLS. One impractical solution
would be to have the BLS track prices directly at Chinese
factories as well as U.S. factories. That's good in theory,
but it won't happen anytime soon.
By Michael Mandel |
In this complex example of a furniture table selling for
$1,500.00 - the government would claim domestic production of
$250.00 from a closed and empty furniture
factory. Those are very productive employees to say the
least!
Most will say "that's stupid!"
Well it is!
Over the next few months an additional piece of the pie will
be covered each month. We urge, beg, plead and pray that you will
give this some thought and then begin to take some action to stop
these flawed economic policies based upon cheap labor for the elite
few. If you the citizens do not force a change - your and my
grandchildren will be that cheap labor.
In closing this month:
Warren Buffett - hardly a Southern Party member - has come to
the same conclusion:
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.
What you can do.
If you are concerned about these economic policies, at some
point you need to ask yourself the question, "what am I going to do
about it?" Go back and look at either the chart at the top or other graphs
and the previous articles. Month after month, year after year, there can be very little question what
the trend is and what you can expect if nothing changes.
Are you concerned enough to consider some things that you can
very easily do to begin raising awareness of the future
problems? If so please consider:
1) We need your help in passing this information on to others.
How many people do you know that would be concerned or interested?
If everybody that reads this page - finds one new
person a month, in two years we could retire every US House
Representative or US Senator up for election across the country that
is selling your grandchildren's future. That is a lot of results for
very little effort. Last month the list receiving these updates only
grew by just over 150, perhaps too many were relying on the other
person to find their new person or only 10% are concerned. But that
is better than the previous months!
Email
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2) Consider joining the Southern Party of Georgia or one of the
Southern Parties springing up in other States (Southern
Party of North Carolina,
Southern Party of
Mississippi and soon Southern Party of Virginia, Texas and
Tennessee) and helping our efforts
to expose the dangers of creeping globalism.
Southern Party of Georgia
725 Ridgeview Road
Morganton, Georgia 30560
Credit card contributions can be made at
877-903-0996.
Paypal contributions:
chairman@spofga.org
Georgia Campaign Finance
Reporting requires we ask for your name, address, occupation and
employer.
These are simple steps, require very little effort and even the
financial request is not a burden. When Republicans and Democrats
call you (they can afford telemarketing, many cases using call
centers in India to help stabilize salaries in India while they fall
in our country) they ask for much more. We need your help more than
they do and when you help Republicans and Democrats you get more of
the same thrown in.
“Nobody
made a greater mistake than he who did nothing
because he could only do a little.”
―
Edmund Burke (1729
- 1797)
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|
U.S. Census Bureau
U.S. Bureau of Economic Analysis
NEWS
U.S. Department of Commerce · Washington, D.C. 20230
IMMEDIATE RELEASE
8:30 A.M. EDT FRIDAY, JUNE 8, 2007
CB07-81
BEA07-25
FT-900 (07-04)
For information on goods contact:
U.S. Census Bureau:
Nick Orsini (301) 763-6959
Vanessa Ware (301) 763-2311
For information on services contact:
U.S. Bureau of Economic Analysis:
Technical: Christopher Bach (202) 606-9545
Media: Ralph Stewart
(202) 606-2649
U.S. INTERNATIONAL TRADE IN GOODS AND SERVICES
April 2007
Goods and Services
The U.S. Census Bureau and the U.S. Bureau of Economic
Analysis, through the Department of Commerce, announced today
that total April exports of $129.5 billion and imports of
$188.0 billion resulted in a goods and services deficit of
$58.5 billion, $3.9 billion
less than the $62.4 billion in March, revised. April
exports were $0.2 billion more than March exports of $129.2
billion. April imports were $3.6 billion less than March
imports of $191.6 billion.
In April, the goods deficit decreased $3.7 billion from March
to $67.1 billion, and the services surplus increased $0.2
billion to $8.6 billion. Exports of goods were virtually
unchanged at $91.1 billion, and imports of goods decreased
$3.6 billion to $158.2 billion. Exports of services increased
$0.2 billion to $38.4 billion, and imports of services were
virtually unchanged at $29.8 billion.
In April, the goods and services deficit was down $3.8 billion
from April 2006. Exports
were up $12.8 billion, or 10.9 percent, and imports were up
$8.9 billion, or 5.0 percent.
Source:
http://www.bea.gov/newsreleases/international/trade/tradnewsrelease.htm
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About the author:
Mike Crane is the 2nd vice chairman of the Southern Party of
Georgia and a candidate for the 51st Senate District in Georgia.
Despite gathering over 7,000 petition signatures in 2004 and 2006
combined - he was denied ballot access both elections. While
70% of the Georgia State House districts and 56% of Georgia Senate
districts had one candidate in
November, Georgia tax dollars were used to prevent political
competition.
Has the time has come to end Banana Republican style elections
in Georgia? Has the time come to have some real political
competition?
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