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TechnoratiAs US Income Stagnates, Democrats Reject Free Trade
WASHINGTON - The Democratic-led Congress won't give President Bush the special authority he needs to negotiate future free-trade deals. The Senate is moving on retaliatory trade legislation against China. The House of Representatives won't approve deals with three small neighboring Latin American countries. Global trade talks are near collapse.
Washington's mood on free trade hasn't been this negative in at least two decades, and a pullback is evident. Whether this becomes a full-blown return to protectionism remains to be seen. But for now Americans, and the politicians they elect to represent them, are in no mood to expand international trade.
"For decades we took for granted that everyone agreed with us economists that free trade is good, protectionism is bad. Somewhere along the way, that stopped being the conventional wisdom," acknowledged U.S. Trade Representative Susan Schwab, in an interview with McClatchy Newspapers. "And whereas the default vote on a trade bill in Congress used to be a 'yes' vote, the default vote on a trade bill now in Congress is a 'no' vote." Why? Because lots of people are no longer convinced that a rising tide of trade lifts all boats - and there's evidence to back them up.
For three decades, the richest 10 percent of Americans have been growing even richer much faster than everyone else. Over the past five years, real wages for all the rest of American workers have been almost flat. Many blame globalization.
During a mid-July congressional hearing, Federal Reserve Chairman Ben Bernanke contended that education levels largely determine income inequality. But he was angrily interrupted by Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, who declared, "Mr. Bernanke, that's simply not true."
Frank said that the 29 percent of Americans who have bachelor's and even master's degrees haven't seen real income growth, on average, over the past five years. That's what Democrats in Congress are focused on, he said.
"As long as we have the current situation ... you are going to see the kind of gridlock where trade promotion (authority), immigration and other issues don't go anywhere," he warned. "And I just urge people ... help us diminish inequality or you will have continued economic gridlock."
Frank quoted repeatedly from a new report published by the Financial Services Forum, a think tank run by President Bush's close friend, former Commerce Secretary Donald Evans. The report was co-written by Matthew Slaughter, a former member of Bush's Council of Economic Advisers.
The report concluded that "over time, the pressures of global engagement spread economy-wide to alter the earnings of even those not directly exposed to international competition."
Since 2000, the report said, most American workers have seen meager income growth. Only "a small share of workers at the very high end has enjoyed strong growth in incomes." This occurred despite strong productivity growth, which in the past raised wages and salaries.
"Real income growth for workers has not been evenly distributed across all workers. That economic reality has an important political" consequence, Slaughter said in an interview.
Small but already negotiated trade deals with Panama, Colombia and Peru are being held up. While those deals wouldn't affect the U.S. economy greatly, given how small those economies are, they're important to those countries and their blockage sends signals worldwide about changing U.S. attitudes.
Meanwhile, Asian nations continue integrating into the fast-growing Chinese economy's sphere of influence.
For now, the only trade-related legislation moving on Capitol Hill tends toward protecting U.S. domestic interests at the expense of opening markets more to competition from overseas.
Last week, the Senate Finance Committee passed, by a 20-1 vote, bipartisan legislation to force the Commerce Department to weigh whether another country is deliberately undervaluing its currency when considering whether to impose unfair trade penalties against foreign goods. The target was China, but that standard could be applied to other Asian nations too.
By the end of September, Congress is expected to pass bills that would expand federal trade-adjustment assistance to a wider array of U.S. workers whose jobs have been lost to overseas competition. These could include engineers, software designers, accountants, call-center agents, even computer-aided architectural designers.
This shift in opinion against a long-dominant presumption that free trade provides broad net benefits to the U.S. economy is rooted not only in the experience of stagnant incomes, but it's also gaining intellectual respectability as economic theory. Alan Blinder, a Princeton economist and a former vice chairman of the Federal Reserve, was a lifelong free-trader, like most economists, until he began looking hard at how globalization is evolving.
Recently he shocked free-trade orthodoxy by warning that modern technology and trade practices will put at risk as many as 40 million American jobs within a decade or two.
Blinder doesn't champion a return to protectionism in the form of tariffs and trade barriers. Instead, he believes that government must do far more to help workers displaced by trade, that the U.S. education system must aim to train people for jobs that can't be performed abroad and that the tax code should give incentives to firms to produce here.
The Financial Services Forum report backs similar solutions as necessary to head off a turn toward outright protectionism, which helped prolong the Great Depression in the 1930s.
Yet with the 2008 presidential election looming and polls showing widespread public anxiety about globalization, neither party's candidates are trumpeting free trade.
"I think we definitely see evidence of anxiety. We see evidence unfortunately of a politicization of trade and increased partisanship about trade. ... It is unfortunate and it does present real challenges," said Schwab, the U.S. trade representative.
Ironically, all the anguish about trade is occurring when U.S.-made exports are booming. The strong global economy and the dollar's slumping value helped U.S. exports to grow by 6.4 percent from April through June, which is definitely good for U.S. business.
Commerce Secretary Carlos Gutierrez said last Friday that U.S. exports have grown since 2004 at about an 8.3 percent annual rate, thanks in no small part to the Bush administration's free-trade policies. But Democrats are focused more on the lack of income growth among ordinary Americans, and therein lies the rub when Republicans and Democrats seek to set economic policies.
To read the Financial Services Forum report, go to Financial Services Forum , then click on "issues," then on "trade and globalization."
2007 McClatchy Newspapers
23 Comments so far
Show Allwhy are there fewer dollars in your pocket?
thats not a bug, its a feature. its not an
accident, its an intention.
americans are largely clueless when it comes to basic
economics, and that ignorance translates directly into being fleeced via very sophisticated subterfuges. but dont feel bad, even the highly intellectual are mostly easy prey.
as someone once said, "economics is a fig leaf for the rich"
more info..
see a paper I wrote called "fractional reserve banking as economic
parasitism"
endorsed by two phd economists. printed in nexus
magazine, 60k world circulation. #1 top downloaded
economics paper. used by economics
teacher in australia as standard classroom material.
more info on request.
"fractional reserve banking as economic parasitism"
http://econpapers.repec.org/paper/wpawuwpma/0203005.htm
recent supporting material: "confessions of an economic hit man"
http://www.democracynow.org/article.pl?sid=04/11/09/1526251
Free trade is not the problem. Economic growth in the US has been remarkably steady over the past couple of decades and there is no doubt the economy has grown.
The problem is the distribution of wealth. The fastest growing sector has been in retail, but a lack of regulation and lack of collective representation has meant that this segment of the population is paid a misery. Additionally the minimum wage has been frozen for years, while executive pay has skyrocketed.
To change this we need to insist on better conditions for all workers. We need to accept slightly higher prices for goods and services and we need to boycott exploitative companies.
We also need to accept that our competitive advantage is not in manufacturing but in higher level thinking, designing, creating, and intellectual services. This means a renewed commitment to education and ensuring we are leading the game in new technologies. There is tremendous demand for energy, environmental and health technologies.
The last time we tried protectionism was in the early 30's and this was one of the fundamental drivers of the depression. If you think a more equitable distribution of wealth is difficult in a growing economy, think about how difficult it would be in a contracting economy.
In the '70's, this was dubbed "stagflation," and it seemed to be a mystery -- something happening almost of its own volition.
Only upon reflection do we realize that the stagflation of the '70's had one cause only: energy prices. Modern society is so utterly dependent on energy, that civilization may well come crashing down as fossil energy begins to go away.
Want to see what the next decade will be like for the entire world? Look to what the US was like as it passed domestic peak oil production and OPEC held it hostage over imports. Only this time, there's no OPEC to negotiate with. Mother Nature is not going to put more oil in the ground if we beg, grovel, and supply armaments.
"Ironically, all the anguish about trade is occurring when U.S.-made exports are booming. The strong global economy and the dollar's slumping value helped U.S. exports to grow by 6.4 percent from April through June, which is definitely good for U.S. business."
The only reason exports have increased is because of the dollar's slumping value. That may benefit some, but it sure as hell doesn't do anything for the average American who is losing "purchasing power" with every slumping dollar.
"But Democrats are focused more on the lack of income growth among ordinary Americans, and therein lies the rub when Republicans and Democrats seek to set economic policies."
This statement from Commerce Secretary Gutierrez clearly expresses this administration's contempt for "ordinary" Americans. And as Commerce Secretary, you can be certain he will do everything in his power to advance Bush's NAFTA highway and open border policies, both of which will further erode opportunities and safety for "ordinary" Americans.
My own analysis indicates that US wage income has been stagnant for forty years, despite the dramatic increases in productivity.
In constant 1982 dollars, the national average hourly wage in January 1973 was $9.08/hour. In December 2005 (latest available) it was $8.20/hour.
http://www.bls.gov/webapps/legacy/cesbtab4.htm
The data clearly show that all of the benefit of productivity improvements have gone to capital, and none at all to labor. People who work for a living have basically been getting screwed for decades.
Globalization is a return to our Aryan Slave Empire roots. That's how we got our start in the USA. That's how the first fortunes for our Ruling Caste were formed. And our richfilth have been doing it to the rest of the planet ever since.
Anyone who spoke up, stood up, or resisted in any meaningful way - got their head beat or worse (how about 25 years in a federal hell hole because the monsters blocked and hid exculpatory evidence). That is also how we have always done business here. You know this. And now we've arrived.
Speak up all you want. Nobody gonna listen. Master owns the RepubliCrats, the MSM, the White House, the Federal Courts, the Supreme Court, and of course, Wall Street. We're f**cked.
We're so screwed that you can protest and march all you want - because you are entertainment, at least until Hillary declares Martial Law under the MCA along with Bush' Executive Orders, to wit:
E.O. 10999 (allows the government to take over all food resources and farms.)
E.O. 10998 (allows the government to seize all means of transportation, including personal cars, trucks or vehicles of any kind and total control over all highways, seaports, and waterways.)
E.O. 11000 (allows the government to mobilize civilians into work brigades under government supervision.)
E.O. 11921 provides that when a state of emergency is declared by the President, Congress cannot review the action for six months.
Tell me any Dem filth won't use the tools Georgie left them, that is if Georgie doesn't use them himself. This is the man who liked to put firecrackers inside the rectums of frogs and light them - and laughed and laughed.
Welcome to Feudal America. Bon apetite. The American frog, slowly cooking in the pot for the last 35 years, is now done and ready for slicing and dicing. How can they resist? Besides, richfilth are always hungry for MORE.
P.S. We're the frog.
Piece.
We need to work with all people right, left or center
who oppose these trade agreements. NAFTA and CAFTA must
repealed and replaced with fair trade politices that
mutually benefit the majority of people in the US
and in the 3rd World. Keep up the good work.
Who says nothing escapes a black hole? This one makes a Giant Sucking Sound!
Spartanladkenny
Educate yourself about the H1B visas
http://www.zazona.com/
http://www.zazona.com/ShameH1B/
"In the year 2001, 9 out of every 10 new job openings for computer/IT were taken by H-1Bs, and despite record unemployment the INS issued 312,000 visas in 2002."
The USA workers displaced by all the cheaper (that's their real qualification) foreign workers were also educated and trained.
The thousands of foreign students subsidized in the USA are not only subsidized by "private" research projects. MOST (almost ALL) research projects ARE from the USA Government, and ALL State Universities in the USA use STATE money for EVERYTHING.
Who cares if the H1B visas quota now is lower than before, USA Workers do not need or want ANY foreign people taking their jobs and allowing corporations to flood the market with CHEAP (that's the real reason they are here)workers from ANYWHERE.
The real solution for me is Socialism and wish the best to everyone on this little planet, I do not blame the foreign workers and students; but the corruption of our political system by the corporatocracy that is running our country and our government now.
"Corporations bring in thousands of foreign workers under H1B visas to be trained and learn the know how, no wonder US workers are so unskilled today."
Foreign workers are not "brought in" under H1 B visas to be trained and learn the knowhow. People working under H1B visas are already skilled and trained. Most of them have Bachelor's degrees and many have Master's and Phd's.
As far as bringing in "thousands" is concerned, the Congress has reduced the yearly quota to 65000. It used to be in excess of 150,000 a few years back.
The problem lies in the fact that college education is extremely expensive in this country and everybody has accepted it. This is leading most of the American youth into dropping out after high school and settling for low wage jobs. The government reduces funding to public universities every year which increases the burden on these universities resulting in bumping up tution fees every year. However, master's and Phd education has a large amount of funding from private sources for research purposes which results in free or almost free higher education. Foreign workers go through 2 years of master's (like I did) funded completely by research projects and secure good jobs. Unfortunately, most american students are overburdened with college loans by the time they finish their bachelor's.
Blaming foreign workers isn't the way to go. Americans have this weird misconception that investing in Public services is a form of socialism. We all know how that word scares the crap out of people. So lets start working towards a government which funds public health care, education, mass transportation, environmental conservation, etc. instead of wars!
Lack of education is a barrier to good jobs for many, but jobs or short for those with education. The foreign PhDs are imported to saturate the market to drive down labor costs.
TANSTAAFM: There ain't no such thing as a free market, jus't like there ain't no such thing as a perpetual motion motion. (Acronym adapted from Robert Heinlein.) In a true free market, there is no lying, transaction costs are zero, there are no forced public subsidies, and all costs are accounted and paid for explicitly (among other characteristics.) What we have are Free Markets, not free markets. (Communism is not communism, Justice is not justice, etc.) Thus, rarely are corporations punished for lying, transaction costs are often high (for the consumer), subsidies dominate many markets (e.g. agriculture), and "externalizing" costs is key to profit (such as sticking others with the cost of cleaning up.)
*Most PhD students in the USA in technical fields are from India and China*
What's worse is that most businesses and academic institutions in this country won't hire native-born PhDs anymore. I know this all too well, as I've gotten nothing but rejection letters since I completed my degree.
"Instead, he believes that government must do far more to help workers displaced by trade, that the U.S. education system must aim to train people for jobs that can't be performed abroad"
So on top of having a Masters in Engineering that cost an average of 100K, we need to get even more expensive education??
Just who the hell is paying this chump?
So the hacks in Washington finally got one right. As Bogart once said, "Pardon me if I don't jump up and click my heels."
Using campaigns spending limits to get America better politicians is the only way to solve America's problems enough.
"A labor camp without fences?"
Yep, it's a race to the bottom, globally, for the lowest wages possible.
"store clerks, waiters, janitors, construction trades, nurses and medical technicians - but no unions, of course"
I agree completely.
What staggers me, though, is what a good job corporate America has done to convince workers that unions are bad for workers. I mean, some of the people I've met who could most use one reject unions utterly, swallowing corporate lies completely.
I've got to give the economic elite in this country credit, they've done a bang up job suckering the bottom 98% into believing what's good for them is good for everybody.
Perhaps Susan Scwab can explain how US trade policy that is stacked against trading partners can be defined as "free trade". For example; NAFTA allowed the US to put the Mexican corn farmers out of business by selling subsidized corn in Mexico. The unemployed Mexican corn farmers, unable to find work in Mexico, come to the US and become drywall hangers, cooks, carpet layers, assembly-line workers, etc., lowering wages and resulting in health and safety conditions that are marginal at best. NAFTA is just one example of many trade deals that hurt workers.
The American working class would not object to FREE trade.
We do object to trade policy that favors American business at the expense of American workers and the trading "partners".
I believe the real numbers are much worse than what this article presents. You need to compare wages, adjusted for inflation, against the single greatest expense anyone encumbers -- putting a roof over his head. Check out this website. National Housing Conference: http://www.nhc.org/chp/p2p/
It's astounding how in 1862 with the Homestead Act that poor immigrants could obtain 40 acres at a pittance, the foreclosures of the Depression, followed with modern-day foreclosures, seem to have put the cost of housing out of reach of many occupations. But more importantly, it's putting equity out of reach. A return to the landless serfdom of the middle ages?
A labor camp without fences?
Good on you, Barney Frank. Now, all you gotta do is stop this new version of NAFTA-on-steroids that's gonna give us North American Union and crush both Canada and Mexico---not to mention the entire American middle class.
"What are those jobs, NASA Astronauts ?"
No, store clerks, waiters, janitors, construction trades, nurses and medical technicians - but no unions, of course.
...all work and no pay makes Americans go something something...
"Instead, he believes that government must do far more to help workers displaced by trade, that the U.S. education system must aim to train people for jobs that can't be performed abroad"
What are those jobs, NASA Astronauts ?
Most PhD students in the USA in technical fields are from India and China
Are we subsidizing with US tax dollars the education of foreign people to do the jobs that can't be performed abroad ?
Corporations bring in thousands of foreign workers under H1B visas to be trained and learn the know how, no wonder US workers are so unskilled today.
Free trade policies are great for shareholders only, the 47 million Americans without health care insurance are not the owners of those shares for sure.
Free trade and trickle down economics only trickled down job insecurity, actual unemployment, lower salaries and benefits (if any) for the average worker in the USA and sweatshops in under-developed countries.
Go Crazy?