BUYING AMERICA BACK TO PROSPERTITY

An excerpt from Patrick Buchanan's riveting piece about the "Buy American" movement, and the legislative push we need to pull this country back from the disaterous free trade deficits it has accumulated under the misguided tutelage of our last three presidents. We need this on so many levels. Let's just begin with financial solvency and homeland security.

WE MAY BE AT AS TURNING POINT in history. For we are about to choose whether to fully and finally cast our lot with globalism, or to become again a nation and people who put Americans first.

We are about to decide, perhaps for all time, whether we believe in a deepening interdependence leading to one world government, or we restore the independence won for us by the men on Mount Rushmore: Washington, Jefferson, Lincoln and Theodore Roosevelt.

All four were economic nationalists. All would today be decried as protectionists. For all believed that the nation's independence and prosperity hung upon its ability to stand alone in the world, and that foreign goods should never enjoy as privileged access to America's markets as American goods made in the U.S.A.

All four put America first. And it was they who created out of 13 rural colonies the greatest manufacturing power in history. Is not their record superior to what Bush-Clinton-Bush left us: a hollowed-out industrial nation dependent on foreigners for the needs of our national life and for the loans to pay for them?

Even John Maynard Keynes came around in 1933 to believe in "national self-sufficiency."

Those who prattle about the perils of protectionism need to be asked: What has free trade produced, but a bankrupt America that must go hat-in-hand to Beijing to borrow the money to rebuild our crumbling infrastructure? Are we also to use Chinese iron, steel and cement because they, with their Third World wages, will work for less than our fellow Americans?

As for Europe's threat of a trade war, bring it on!

We would eat their lunch. As analyst Charles McMillion writes, in eight years of Bush, Canada ran up $500 billion in trade surpluses at our expense, Japan ran up $600 billion, the European Union $800 billion.

These three trading partners, often by imposing value-added taxes on U.S. imports, and rebating those taxes on goods sold here, racked up $1.9 trillion in trade surpluses, sucking jobs, factories and technology out of the United States. These trade deficits, and the even larger ones with China, says Paul Volcker, are behind our present crisis.

America is bust. It is shameful to have to go to China and Japan to borrow the money to rebuild America. But to go to China and Japan and borrow billions, and not spend the money here, makes zero sense.

We have indulged in free trade for a quarter century. And look where it has gotten us.

Read it all. And don't neglect to read the comments including this opposing viewpoint:

Pat is making a common logical fallacy of assuming that because x failed then y would have worked. In reality there is no proof that we would be better off had we practiced protectionism for the last quarter century. The science of economics shows that we would actually be far worse.

One hundred years ago 98% of the population worked in food production, now 2% are getting the same job done, and little of it has to do with imports. Technological advances drastically reduced the needed manpower. The 96% who lost their jobs weren't happy, I'm sure, and yet 96% of the US population today isn't unemployed. The menial jobs of food production were passed down to machines while the humans moved on to higher skill jobs.

Today we are seeing a similar shift. The third world is taking over the lower skilled jobs, forcing Americans to improve and evolve.

Pat, for example, by saying "Canada ran up $500 billion in trade surpluses at our expense" is making it seems like we just wrote Canada a check in that amount when it reality we have received $500 billion worth of goods and services in return. Goods and services that would cost more to American consumers had they been produced domestically.

Which brings me to my next point, where is Pat discussing the higher level of living enjoyed by Americans thanks to lower priced goods and services? During Communism, Russians had lots of cash, but nothing to buy. Even with the latest economic earthquake, us American still enjoy a higher standard of living than other countries—why isn't their trade surplus saving them?

Ultimately, Pat is ignoring the most fundamental part of free trade—FREEDOM. Who is Pat or anyone to tell another American who he can or can not buy from? Its my money and I want to have the freedom to buy from whomever I want to--including non Americans. And for our government to have a policy to only buy American forces each of us to pay more for the same. And looking at how well we fared in the War on Drugs, do we really think we can prevent illegal imports into this country?

Ultimately Pat's problem is that he is clueless about economics. Rather than carefully studying it he lets his emotions dictate whats right and whats wrong. Economics is a science. You can't force its laws to change anymore than you can force the law of gravity to change.

Free trade works. It us Americans, who have gotten lazy and complacent, who are the problem. Flipping houses is not a day job. We need to improve ourselves. We need a smaller government that doesn't regulate and tax us to death. And we need to leave free trade alone.

The fact is that we live in a world that is constantly trying to destroy the USA since we are at the TOP, so when academics use the theories based upon the artifical world of FREE TRADE we get HAMMERED. FAIR TRADE IS A TWO WAY STREET!

U.S. TRADE DEFICIT WORSENING

RIGHT UP UNTIL THE COMMODITY bubble burst this summer, there was the ridiculous theory going around that the world was now "decoupled" and that European and emerging markets would somehow avoid being affected by the US slowdown. These decoupling theories disappeared as oil dropped like a rock, only to be replaced by an equally ridiculous idea: that the world's economic pain would be spread evenly. This is wrong. Although the entire world is going into a recession as a result of the credit crisis, some economies are better prepared than others to weather the storm.

Durable and capital goods
The US's manufacturing sector is concentrated in industries most vulnerable to an economic downturn, durable and capital goods. Durable goods are products that last for more than three years like SUVs, motor/sail boats, et cetera. These items are the first areas where consumers cut back spending, which is why the big three are in so much trouble. Capital goods are equipment and machinery used in creating other goods, and the biggest demand for these products has come from emerging markets with their growing manufacturing sectors. With emerging market manufacturing now in contraction, demand for these capital goods is set to disappear, which leaves the US in a disastrous situation:

We make mining equipment at a time when commodity prices are crashing and mines are shutting down.

We make construction equipment (caterpillars, pickup trucks, etc…) at a time when global construction is grinding to a halt.

We make civilian aircrafts at a time when global trade and travel is quickly contracting.

Cheap consumer goods
At the other end of the spectrum from durable and capital goods are the cheap consumer goods found in retailers like Wal-mart. Demand for these lower-end consumer products tends to hold through the severest of recessions, because they are absolutely essential to our modern standard of living. While some current shoppers at Wal-Mart might be forced to cut spending on these essential items, new spending from shoppers who are downgrading from higher end stores will pick up a lot of this shortfall. For example, as more American's lose their jobs, there will be a lot of consumers downgrading from designer clothes to Wal-Mart's cheaper clothing. The resiliency of Wal-Mart is bad news for the US, as virtually all the retailer's cheap goods are imports from Asia.

The trade deficit
A quick look at where the US's trade deficit is concentrated reveals just how grim the outlook is. We are running huge deficits in consumer goods and industrial supplies (oil), which we desperately need, and the only category with a sizable surplus is capital goods (civilian aircrafts, mining equipment, etc), for which global demand is crashing. This explains why the US trade deficit grew in October.

Implications for the dollar
While imports to the US are falling, US exports are falling even faster. Exporting nations still have to finance our massive trade deficit, but are now getting less benefits from it. If this trend continues and the US economy keeps shrinking, Asian nations will begin abandoning their dollar pegs and start focusing on stimulating domestic demand instead. The dollar will quickly lose all its value when this happens.

by Eric deCarbonnel